Tag Archives: Credit

UK loses top credit rating

Posted February 23, 2013 21:41:22

Ratings agency Moody has downgraded the UK’s credit rating from AAA to Aa1.

It is the first time since the 1970′s that Britain has not had the top rating…

The downgrade is a huge political blow for the government, especially chancellor George Osborne who said it was a stark reminder of the debt problems facing the country.

Moody’s said the government’s debt reduction program faced big challenges ahead as the British economy struggles with recession and unemployment.

The UK has enjoyed a AAA rating since 1978 and Moody’s said economic growth would remain sluggish, but added the country ‘s credit worthiness remains extremely high.

Shadow chancellor Ed Balls said it was a “humiliating blow” to the chancellor and the prime minister who had said the AAA rating was a mark of economic and political credibility.

Topics: world-politics, business-economics-and-finance, economic-trends, united-kingdom

Record loss at Credit Agricole

Credit Agricole sign Credit Agricole has reported its worst loss since going public in 2001 French bank Credit Agricole has reported a record loss for 2012 after an unexpected tax charge relating to the sale of its Greek business pushed it deeper into the red.

Losses for last year totalled 6.5bn euros ($8.7bn; £5.6bn).

The worsening economic downturn also led to losses at the bank’s Italian and investment banking divisions.

The bank is now planning a three-year turnaround plan to try to revive its fortunes.

Credit Agricole sold Emporiki Bank for one euro at the end of 2012 as a result of the Greek economic crisis. However, unexpected taxes of 838m euros related to the sale meant that Credit Agricole’s full-year loss was larger than expected.

Earlier this month, the bank said it had taken a big writedown on the value of its assets – including those in Portugal and Italy – to reflect the worsening eurozone economy and new tighter regulations.

Continue reading the main story “In 2012, we turned the page and profoundly transformed the group,” said chief executive Jean-Paul Chifflet.

“Leaving Greece cost us dearly, but it was a necessary decision,” he added.

On the bank’s new business plan, Mr Chifflet said: “There will be two main priorities governing the undertaking: the acceleration of improvements to our universal customer-focused bank and a deepening of changes that we’ve already begun on specialised financial services.”

Credit Agricole is a semi co-operative bank, controlled by 39 regional French banks.

Shares in the bank are up about 5% to 7.7 euros.

“Things are looking up from here on. Now that they’ve got rid of Greece, they’re coming back to being a plain retail business,” said John Raymond, banking analyst at the research provider CreditSights.

Credit unions call for banking inquiry

There are finance sector calls for the Federal Government to conduct an independent inquiry into the banking industry.

A survey of a thousand people by Abacus, which represents building societies and credit unions, has found 80 per cent of people think the big banks make excessive profits.

It also found 65 per cent of people think there is not enough competition in the banking system.

The organisation’s chief executive Louise Petschler says two out of three people surveyed want an inquiry.

“It’s been 17 years since we had an independent assessment of how our regulatory system was working, whether it was working in the best interests of consumers or whether there were better ways to bring more competition into banking,” she said.

“We think that 2013′s the right year to to have another inquiry to bring some independent perspectives around.”

Louise Petschler says there is an imbalance that prevents real competition and value for consumers.

“We’ve seen since the global financial crisis really hit hard in 2008 that Australia’s banking market has become even more concentrated,” she observed.

“While the government has introduced policies that have aimed to promote different elements of competition, in fact we’ve got one of the more concentrated banking markets in our history.”

Topics: business-economics-and-finance, consumer-protection, consumer-finance, banking, federal-government, australia

First posted February 18, 2013 08:55:18

ASIC cancels rental company’s credit licence

An appliance rental company in north-western Victoria has had its credit licence cancelled by the Australian financial regulator for deliberately targeting vulnerable people in remote aboriginal communities.

Zaam Rentals was renting household goods to poor indigenous people near Mildura that they were to pay for with their Centerlink benefits.

The Australian Securities and Investments Commission (ASIC) launched an investigation into the company after families dealing with Zaam spoke out on 730 Victoria late last year.

ASIC has now banned the company’s director and former director from credit activities for at least the next four years and has cancelled Zaam’s credit license.

The investigation found the company failed to make inquiries into the financial circumstances of its customers and did not make necessary disclosures in its contracts.

ASIC commissioner Peter Kell says Zaam targeted people with a limited understanding of contracts and a minimal capacity to make repayments.

Topics: consumer-protection, aboriginal, mildura-3500

Credit Suisse to cut costs further

 Credit Suisse will cut spending by 400m Swiss francs by the end of 2015 Swiss bank Credit Suisse is to cut costs further after announcing disappointing results.

It reported a profit of 397m Swiss francs ($437m; £278m) in the fourth quarter – lower than most analysts had forecast.

That was mainly due to a poor performance from its investment banking business.

Chief executive Brady Dougan said the latest measures would lead to an improvement in 2013.

Mr Dougan said: “Going into 2013, revenues have so far been consistent with the good starts we have seen to prior years, with profitability further benefiting from the strategic measures we took in 2012, including our strengthened capital position and our significantly reduced risks and cost base.”

Credit Suisse will cut spending by 400m francs by the end of 2015, in addition to the 4bn francs in planned reductions announced since 2011.

It is not clear yet how many jobs will be affected.

In contrast to its bigger rival UBS, Credit Suisse is attaching a lot of importance to its investment banking business for future earnings. UBS has dramatically scaled down its operations in the industry.

“It’s a mixed bag of results ” said Bank Sarasin’s analyst Rainer Skierka. “It’s certainly not what the market was hoping for, but it’s not an entirely bad set of results.”

Credit Suisse net profit drops 24pc in 2012 to $1.5bn

credit-suisse 400ZURICH: Swiss banking giant Credit Suisse said on Thursday its net profit fell 24 percent last year to 1.4 billion Swiss francs (1.2 billion euros, $1.5 billion) despite its investment bank unit rebounding into profit.

The result was below the 1.7 billion francs pencilled in by analysts surveyed by the Swiss financial news agency AWP.

In the final quarter of 2012, however, the bank posted a net profit of 397 million francs, compared to a loss of 637 million francs in the same period the previous year.

The private banking and wealth management division posted an operating profit of 3.7 billion francs for 2012, up from 2.9 billion the previous year.

The investment bank unit, which posted a loss of 593 billion francs in 2011, rebounded in 2012 with an operating profit of 2.0 billion francs.

“2012 was a year of transition,” said chief executive Brady Dougan in a statement.

“We took significant steps to adapt our businesses and our organisation to new regulatory requirements, changing client demands and the current market environment,” he added.

These measures should lead to an improvement in 2013, he said.

“Going into 2013, revenues have so far been consistent with the good starts we have seen to prior years, with profitability further benefitting from the strategic measures we took in 2012, including our strengthened capital position and our significantly reduced risks and cost base,” said Dougan.

The bank’s board recommended keeping the annual dividend unchanged at 0.75 francs per share.

Copyright AFP (Agence France-Presse), 2013

Credit Agricole hit by writedown

Credit Agricole Credit Agricole says the writedown will have “no impact on its solvency or liquidity” Credit Agricole has warned it will make a huge writedown of the value of its assets to reflect a worsening eurozone economy and new tighter regulations.

France’s third largest bank said its fourth quarter results due later this month would be hit by 2.68bn euros (£2.3bn) of charges.

These include writedowns on the value of operations in Portugal and Italy.

The bank stressed that the charge would have “no impact on its solvency or liquidity”.

Credit Agricole is due to unveil its full year figures on 20 February. In November, the bank reported a third quarter loss of 2.85bn euros for the July to September period, mainly due to the cost of selling its Greek operation Emporiki.

Last month, the European Union’s markets watchdog said it had told companies and their accountants they would be named publicly if they failed to properly write down goodwill impairments in their latest results.

Credit Agricole is controlled by 39 French regional banks, The company expanded rapidly before the financial crisis, including in southern European through the acquisition of France’s Credit Lyonnais bank.

Taking your credit card to the limit?

Credit card image Many credit card providers will not give prior notice before lowering a customer’s spending limit How much notice should your credit card provider give you if it decides to lower your credit limit?

Many banks give prior notice before raising limits, but not before lowering them. That can cause serious problems if you spend on your card just as the bank has decided to decrease your limit, but a letter informing you of this has not yet gone out.

Changing limits Peter from Somerset experienced this with his Halifax credit card. He had had some problems making repayments in the past, but for the past few months had been repaying more than his minimum payment on time.

His last statement gave a limit of £2,000, so he thought he was safe to increase his spending to £1,200 the next month, as he told Radio 4′s Money Box programme: “I knew I was well within my limit so just thought nothing of it, I would pay it off eventually in the course of a year like I normally do.”

But the day after his balance reached close to £1,200, he was sent a letter by Halifax saying his credit card limit had been reduced to £750: ” We have taken this action to make sure your credit limit is at a level that we, as a responsible lender, think is appropriate.”

Peter was alarmed that the new limit was below his current balance. He was even more alarmed when he received a letter dated the very next day from Halifax demanding he repay the outstanding £400 immediately or they would instruct debt collectors: “Your account is seriously over your credit limit. To avoid us instructing a recovery agent to collect the amount you owe us, you must immediately pay the amount shown above.”

Fair treatment?

Peter thought Halifax was not treating him at all fairly: “I thought this was ridiculous. I don’t mind them reducing my credit limit, but they really should not reduce it to below a level I have already spent.”

Peter was still in discussion with Halifax about what his credit limit should be and over what time frame he should pay off his balance when Money Box contacted the bank on his behalf.

Halifax said it would never intentionally set a new credit card limit below an existing balance, but this could sometimes happen if a customer spent while their limited was being changed: “Unfortunately, as a result of this crossover, Peter exceeded his limit through no fault in his own.

“To help him through this situation we have subsequently decided to increase his limit to cover his current balance and any related fees will be waived.”

Barclays said it gives three days’ notice prior to lowering a limit, but most other credit card providers Money Box contacted said like Halifax they also did not give prior notice to people. They said this might encourage customers who might already be in financial difficulties to then spend up to the old limit, increasing their debts.

Advance notice The Office of Fair Trading currently regulates consumer credit. It told Money Box in its view credit card providers should notify customers in advance if they were intending to lower their card limit. But it said there were some exceptions, such as when to do so would significantly increase the risk of the borrower being unable to fulfil his obligation to repay.

Debt counselling agencies say they understand why a bank would lower the credit limit of some customers, but that this should never be below the current balance.

Peter Tutton is head of policy at the debt counselling charity Step Change: “I think that’s pretty unfair practice. It’s creating a situation where someone could be put in potential default and under financial stress solely through the actions of the bank.”

Money Box is broadcast on Saturdays at 12:00 GMT on BBC Radio 4 and repeated on Sundays at 21:00 GMT.

You can listen again via the BBC iPlayer or by downloading Money Box podcast.

Credit Agricole to cut costs by up to 200mn eur by 2015-paper

credit-agricole-bank 400PARIS: Credit Agricole is working on a cost-cutting plan of 150-200 million euros ($199-266 million) through 2015 at its corporate and investment banking unit, according to France’s l’Agefi newsletter.

A job-cut programme will not be included in the plan, which comes after the bank laid off 1,750 staffers last year, the newsletter said without citing its sources. The group will seek to get rid of certain functions, continue outsourcing efforts, and encourage some workers to take early retirement.

France’s third-largest bank could not immediately be reached for comment.

Similar to other banks, Credit Agricole has been selling assets and streamlining its business to meet stricter regulations after the 2008 financial crisis. It was forced to take a 1.96 billion euro in writedowns on the sale of its Greek unit, Emporiki Bank, in November.

Copyright Reuters, 2013

Credit Suisse to cut bonus pool by 20pc

Credit-Suisse---ZURICH : Credit Suisse will cut its bonus pool for 2012 by 20 percent to around 2.3 billion Swiss francs ($2.52 billion), the fourth year in a row the Swiss bank has slashed payouts, a newspaper reported on Sunday.

Citing unnamed sources, Der Sonntag newspaper said the 20,000 employees of Credit Suisse’s investment bank were allocated significantly over 1 billion francs, while the 14,000 staff of the private bank would get some 400-500 million francs.

A Credit Suisse spokeswoman declined to comment.

The expected payout of 2.3 billion francs compares to 3 billion francs the bank allotted to bonuses in 2011 and 5 billion it paid in 2010. Der Sonntag said the bonus pool was likely to sink another 20 percent this year to 1.8 billion francs.

Credit Suisse, which like other global investment banks has suffered from sluggish markets in the wake of the financial crisis, is axing jobs as it seeks to make 4 billion francs of cost savings by 2015.

Reuters reported earlier this month that the bank is preparing to offload more risk exposure to investment bank staff in its 2012 bonus giveaway but significantly fewer managers will be allowed to join the scheme.

The creation of a new Credit Suisse scheme comes as banks bow to the demands of shareholders and regulators to move away from cash bonuses in favour of alternatives that are more aligned with the risks bankers are taking.

Two earlier schemes have helped the bank to transfer $17 billion of troubled loans and derivatives off its balance sheet and have also allowed the bank to save about $1.4 billion on cash or share-based bonus payments.

Further details of the Plus Bond, which will have a “similar” structure and composition to the 2011 scheme, will be announced to staff later in January, a spokesman has said.

Copyright Reuters, 2013

Tax credit debt collection fears

6 December 2012 Last updated at 13:22 GMT Tax credits document Changes to claimants circumstances can affect their tax credits award Campaigners have called on the government to ensure debt collectors have high standards when collecting tax credit overpayments.

The Autumn Statement documents reveal that the collection will be outsourced on a payment-by-results basis.

The pilot scheme, which will see debt collectors retrieving money that may have been claimed in good faith, has sparked some worries.

Overpayments are common as claimants’ circumstances change.

‘Great care needed’

Tax credits are payments from the government to those on low incomes.

People who are responsible for at least one child or young person may qualify for child tax credit. Those who work, but are on a low income, may qualify for working tax credit, or both.

The system is based on an assessment of what each individual may receive in income. If they get a better paid job, or another income boost, then tax credits may be overpaid and so the money may be clawed back.

At present, this is done by HM Revenue and Customs (HMRC), but the government wants to test to see whether private companies can take the job on. This has concerned the Low Incomes Tax Reform Group.

“Overpayments and underpayments often arise naturally as an integral part of the system. They are an inevitable feature of the design of tax credits,” said Robin Williamson, the group’s technical director.

“We must seriously question whether dealing with tax credit overpayments just like any other debt, by outsourcing recovery to commercial debt collectors, is an appropriate or proportionate response to the problem.

“If HMRC persist in this course of action, they must take great care to impose the same standards and safeguards as they would themselves when recovering these highly sensitive and untypical debts.”

The Autumn Statement documents also reveal that old tax credit debt may be recovered with lower current tax credit awards. Claimants might also have to provide evidence of any high childcare costs as part of their tax credits claim.

IMF renews $73b credit line for Mexico

Washington: The International Monetary Fund renewed a $73 billion standby credit line for Mexico on Friday, with the aim of giving the country a backstop amid global financial turbulence.

The new two-year “flexible credit line” is mainly precautionary, the IMF said as it renewed the facility for the third time since 2009.

“Since the global crisis, Mexico’s economic growth has been resilient, supported by both external and domestic demand,” said IMF deputy managing director David Lipton.

“However, important risks to the global economic outlook remain, particularly from still unsettled international financial markets.”

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“A successor FCL arrangement with the Fund, which the (Mexican) authorities again intend to treat as precautionary, will continue to support the authorities’ overall macroeconomic strategy, providing insurance against tail risks and bolstering market confidence.”

Bank of England credit scheme sees moderate initial take-up

LONDON: British banks and building societies drew down 4.36 billion pounds ($7.0 billion) from a Bank of England programme to boost lending in its first two months, in what analysts said was a moderately encouraging start.

Net lending by the banks involved rose by only 496 million pounds, but the BoE’s executive director for markets, Paul Fisher, said it was too early to use Monday’s data as a guide to the scheme’s success – a view largely shared by economists.

The Funding for Lending Scheme, which opened at the start of August, offers banks cheap finance if they in turn lend on to households and businesses, and is aimed to boost the economy in ways that the BoE’s 375 billion pounds of quantitative easing bond purchases has failed to.

“Quite whether it kick starts the chain reaction that is required to get the economy going is less clear. Nonetheless, it is a case of so far so good,” said Alan Clarke, an economist at Scotiabank, which is not directly involved in the FLS.

Economists estimate that banks and building societies can access just under 70 billion pounds of cheap funding via the FLS, and they have until the end of January 2014 to do so.

The BoE and the government say a lack of lending is partly responsible for Britain’s very slow recovery from the 2008-09 financial crisis, though firms’ unwillingness to invest in an uncertain economic climate is also a factor.

Net lending figures since the scheme’s launch vary widely across major British banks.

Barclays was the only one to report an increase, with an extra 3.8 billion pounds of lending. Santander and state-backed Lloyds Banking Group and Royal Bank of Scotland reported net falls of 3.5 billion, 2.8 billion and 0.6 billion pounds respectively.

RBS said its fall in lending was mostly due to it scaling back commercial property loans, while Lloyds said it intended to draw down an extra 2 billion pounds of funds to support small business and mortgage lending.

The National Federation of Small Businesses said it was concerned that it would be home-buyers not businesses who got the bulk of the benefit of lower interest rates and increased credit availability.

Some analysts said the more visible impact on mortgage lending to date is because business lending has longer lead times.

The BoE expects it to be 6-12 months before the FLS’s full benefits are clear, though others are more critical.

“There is a deep tension at the heart of the government’s policy mix, where banks have to be less leveraged and at the same time lend more,” said Darren Sharma, chief executive of credit analysts Frontline Analysts.

“The FLS is a considerable improvement on (previous government lending scheme) Project Merlin, which was flop, but it remains fundamentally limited in what it can achieve.”

Copyright Reuters, 2012

Credit Suisse boss under pressure despite outsmarting rival

ZURICH: Credit Suisse boss Brady Dougan has outmanoeuvred an internal rival with his recent revamp of the Swiss bank and management shake-up but is still on borrowed time, senior banking sources say.

Dougan might have played his last hand with an overhaul that strengthens the investment bank where the American made his career before taking over as chief executive in 2007 while also promoting two more executives to join the race to succeed him.

“The latest reorganization shows clearly that Dougan remains under immense pressure,” a former high-ranking Credit Suisse banker says. “He will be replaced as soon as a suitable successor is found.”

The Credit Suisse reorganisation contrasts with hometown rival UBS, which is abandoning most fixed-income activities in favour of its flagship private bank as tough Swiss capital rules begin eating into investment banking profits.

Instead, Dougan, who has long defended the unit he used to head from calls for a dramatic scaleback, announced a raft of measures that confirm his desire to keep Credit Suisse at the top table of investment banking.

In an affirmation of his commitment to the fixed income business that UBS is shrinking, Dougan promoted French debt banker Gael de Boissard as investment bank co-head alongside American Eric Varvel, who will also run the Asia-Pacific region.

The asset management business will be integrated into the private banking unit and its American head Robert Shafir appointed co-head alongside private banking boss Hans-Ulrich Meister.

Meister originally pushed for the asset management integration to strengthen his own unit, but Dougan outfoxed him by stalling the move and making his ally Shafir joint head, according to several sources close to the bank.


The private bank that caters to the financial needs of the wealthy had only just engineered a merger of Swiss retail and private banking arms to cut costs but is the “net loser” of the shake up, sources close to the bank said.

“They have been relegated to a supporting role and Meister’s effectively been demoted,” by having to accept a co-head for the unit he ran alone, a former senior Credit Suisse executive said.

The one Swiss banker among the four division heads, Meister had made no secret within Credit Suisse of his ambitions for Dougan’s job. But Americans and investment bankers have gained in influence with the overhaul, deepening a cultural tug-of-war between Credit Suisse’s US-focused investment bank and its less risky and more traditional Swiss-based private bank.

Dougan won praise for steering Credit Suisse through the financial crisis without resorting to a government bailout like UBS but has been criticized for squandering that advantage, drawing an unusual call from the Swiss central bank earlier this year to urgently bolster capital.

He has also drawn fire in Switzerland for spending much of his time in New York and failing to learn German but cemented his position when he marshalled support from key shareholders for a package of measures to boost capital by 15.3 billion Swiss francs in response to the central bank rebuke.

Credit Suisse’s stock is little moved on the year at 22.05 Swiss francs – lagging a 20 percent rise in the European bank index and a jump of 30 percent for UBS shares – albeit it up a third from a trough of 15.97 francs hit in August.

“Management is under pressure to deliver,” said JPMorgan & Chase analyst Kian Abouhossein.

He says 2013 is a “make or break” year for Dougan, in which the CEO must cut costs and scale back capital-intensive areas of fixed income such as foreign exchange and commodities.

While Dougan has bought some time with the revamp, his future is still uncertain despite recent public backing by Chairman Urs Rohner, according to sources close to the bank.

Privately, Rohner has been more openly critical, two sources said: “Rohner would’ve replaced Dougan already had there been a suitable alternative,” said one person familiar with Rohner’s thinking.

Though the move raises the profile of Shafir and de Boissard, the four co-heads are considered either too inexperienced or not well enough connected in the Swiss financial establishment, and will need time to prove themselves.

Dougan managed to outmanoeuvre Meister in part because the private banking head has not covered himself in glory since taking over the unit last year, according to a senior banker at Credit Suisse.

Meister is perceived as botching the integration of 250-year-old independent boutique Clariden Leu as well as Eurom, an information technology harmonization effort.

Though Meister, a corporate banker who rose through the ranks in a 24-year career at UBS before jumping ship in 2008, has the crucial Swiss connections needed to succeed in Zurich, he lacks experience in international financial centres such as New York, where Dougan, Shafir and Varvel made their mark.

That is still Dougan’s trump card: Rohner noted recently that he is one of the most experienced CEOs in the industry.

Rohner and Dougan, once rivals for the CEO job, have now settled into a “marriage of convenience,” according to the person familiar with Rohner’s thinking.

A lawyer who made his name as head of German media group Pro Sieben and general counsel of Credit Suisse before taking over as chairman last year, Rohner weighed a slew of alternatives including what one person familiar with the matter described as “the unthinkable”: a UBS-style winding down of fixed income.

But Dougan ultimately convinced Rohner not to take the axe to the investment bank because the chairman was reluctant to make a bolder move, the person close to Rohner said.

“For all his intelligence and acumen, Rohner finds decision-making difficult and hasn’t shown himself to be a visionary thinker,” that person said.

Rohner and Dougan also declined to comment to Reuters.

Though Credit Suisse executives reject the comparison, a key to the bank’s future lies in UBS’s decision to abandon capital-heavy areas of fixed income, a move which has ratcheted up the pressure on European rivals including Barclays to make similar moves.

“The fact that Credit Suisse constantly references UBS says it all: they’re not coming at this from a position of strength at all,” the former Credit Suisse executive said.

Copyright Reuters, 2012

Forest peace deal carbon credit warning

Updated November 28, 2012 13:30:28

It is predicted the Federal Government could see a $7 billion windfall from Tasmania’s forestry peace deal.

The chance for the windfall comes after the Commonwealth committed $300 million to the deal which reduces native forest logging.

Climate law expert Andrew MacIntosh, from the Australian National University, believes the deal could raise billions for the Commonwealth through international carbon credits.

He has told Radio National that new rules come into effect when Australia signs the second commitment period of the Kyoto Protocol.

“The one that’s relevant here is that any reduction in native forest harvesting below the levels in the 2000′s results in the Australian Government getting credits,” he said.

He says the Commonwealth credits can then be auctioned for more carbon units in the emissions trading scheme.

Under the deal to end forestry conflict, 500,000 hectares are flagged for reserve.

Mr MacIntosh says the Tasmanian Government is likely to miss out on any money.

“In this case, I’m concerned that so much has been focused on what does the industry want and so much has been focused in what the green groups want in terms of lines on the maps in order to preserve areas, that the Tasmanian Government has not paid sufficient attention to what is the main gain here; and that is the carbon credits.”

Tasmania’s Climate Change Minister is uncertain about the exact benefits that will flow from any carbon credits earned from the peace deal.

Cassy O’Connor says Mr MacIntosh is wrong, but conceded there was no guarantee money would flow to the State Government.

“Well there’s no guarantee, that’s true,” she said.

“But Mr MacIntosh is absolutely wrong because if he looks at the Tasmanian Forests Agreement legislation, it’s very clear that we are seeking to capture the carbon benefit of forests protected under the Inter-Governmental Agreement.”

“And the reason that we included it in the legislation, was on advice from the Commonwealth.”

The forestry peace deal legislation still needs to pass Tasmania’s Upper House.

Topics: timber, federal—state-issues, forestry, forests, tas, hobart-7000, launceston-7250

First posted November 28, 2012 09:30:37

Credit Agricole CEO blasts draft French bank curbs

Monday, 26 November 2012 16:29 Posted by Shoaib-ur-Rehman Siddiqui

credit-agricolePARIS: Proposed rules to curb French banks’ risky trading will go further than anywhere else in Europe and will make it harder for them to lend, Credit Agricole’s chief executive told the daily Les Echos newspaper.

The comments came as Les Echos reported on Monday that lending to hedge funds and private equity will be part of the risky activities French banks will have to house in a separate entity from July 2015.

“The banking reform proposals currently have no equal anywhere in Europe,” said Jean-Paul Chifflet, head of Credit Agricole and also of the French Banking Federation lobby group.

“It is going to become extremely difficult for French banks to lend to the economy.”

Les Echos, citing France’s draft bank reform law due to be unveiled next month, said high-frequency trading and proprietary trading of commodity derivatives would be forbidden in those separate units. Banks’ market-making activities will be spared, as Reuters reported on Nov. 15.

Chifflet criticised the crisis resolution section of the law, flagged by French Finance Minister Pierre Moscovici earlier this month, which he said would call on all banks to suffer the cost of rescuing a rival if it collapsed.

He also warned the rules would come on top of a raft of additional taxes charged to the banking sector and the post-crisis package of capital and liquidity rules known as “Basel III”.

Commenting on the US decision to delay application of Basel III, which has sparked ire in Europe, Chifflet said: “I hope European Internal Market Commissioner Michel Barnier will be attentive to what is being done in the United States before applying the Basel III rules to avoid penalising Europe.

Copyright Reuters, 2012

Moodys warns Queensland on credit rating

Updated November 26, 2012 12:29:50

The international ratings agency Moody’s has downgraded its outlook for Queensland’s credit rating.

Moody’s says the change from Aa1 with a stable outlook, to Aa1 with a negative outlook, reflects the state’s deteriorating financial performance since the 2007-08 financial year and high debt levels.

The ratings agency says the state has faced high infrastructure costs in recent years due to rapid population growth in the south, and demand from the resources sector in the north.

Moody’s says the severe floods of early last year also hit Queensland’s budget.

In a statement, the agency welcomed the state’s new budget plan, but it says the measures face several headwinds.

“The state government has implemented a new fiscal redress plan that aims to restore budgetary balance by 2014/15, largely through constraining growth in expenditures to 2.5 per cent on average over the next four years compared to the 8.7 per cent registered over the past four years,” Moody’s says.

“This more prudent fiscal approach is a positive development, but actual improvements would take a few years and will be challenged by upward pressures on expenditures related to rapid population growth.”

But it says the state’s Aa1 rating reflects its strong budget flexibility and diverse economic base, as well as support from the Federal Government.

Moody’s says the state must reach a sustainable surplus for its outlook to return to stable.

Topics: business-economics-and-finance, economic-trends, government-and-politics, australia, qld

First posted November 26, 2012 11:25:31

French downplay credit rating cut

Pierre Moscovici said the downgrade was motivation to pursue structural reforms The French government has downplayed the importance of rating agency Moody’s decision to deprive the country of its top triple-A credit rating.

Moody’s downgraded France’s debt from Aaa to Aa1, and kept its negative outlook, meaning it could be cut again.

Moody’s blamed stalled economic growth, the risk of a Greek euro exit and the risk that France has to contribute to bailing out other eurozone countries.

“Judge us on our results,” French Finance Minister Pierre Moscovici said.

Rival ratings agency Standard & Poor’s downgraded France from AAA in January. Of the big three agencies, only Fitch still gives France its top rating.

‘Second place’

“The rating in no way places a question over the fundamentals of our country’s economy – neither the reforms undertaken by the government, nor the quality of the signature on our debt,” said Mr Moscovici.

He pointed to the fact that Moody’s had only downgraded its rating of the country’s long-term debts by one notch, and still gave France’s short-term debts its top rating.

Continue reading the main story

Ordered by Moody’s rating; eurozone in bold

The finance minister said Moody’s decision reinforced the need for the government to pass a package of economic reforms that is proving unpopular with voters.

The ratings agency’s move had not affected sentiment on the financial markets, which still held French debts in high regard, the government claimed.

“France still represents sound value. It is in second place just after Germany,” said government spokesperson Najat Vallaud-Belkacem, speaking on French radio.

“Even today, investors lend to France in very favourable conditions. For example, we make short-term borrowings at negative rates, and that is going to continue.”

Moody’s said the primary reason for the downgrade had been France’s “persistent structural economic challenges” and the threats they pose to economic growth and the government’s coffers.

“These include the rigidities in labour and services markets, and low levels of innovation, which continue to drive France’s gradual but sustained loss of competitiveness and the gradual erosion of its export-oriented industrial base,” Moody’s said.

Mr Moscovici said the downgrade was motivation to pursue structural reforms.

He also blamed the downgrade on the economic management of previous governments and added that France was still committed to cutting its public deficit to 3% of output next year.

‘Time bomb’

Data released last week showed that France had narrowly avoided falling into recession during the third quarter of 2012, registering 0.2% economic growth from the previous quarter.

Over the course of the 12 months, however, the French economy has more or less stagnated.

Continue reading the main story
The Moody’s decision may not matter very much to the French government’s cost of borrowing on world markets – at least in the short run. In the grand scheme of things, it may not matter very much at all, given how many other countries have also lost their triple A”

End Quote As well as the latest downgrade, France’s new Socialist government has also had to put up with criticism from the financial community and the press, particularly in light of President Francois Hollande’s decision to reinstate retirement at 60 for some workers.

The latest edition of the Economist magazine dubbed France “the time bomb at the heart of Europe”, claiming it had an under-competitive economy and over-dependence on government spending.

French Prime Minister Jean-Marc Ayrault accused the Economist of “excess” saying that “France is not at all impressed”.

Nonetheless, the French authorities’ reaction to criticism has been notably more sanguine under the current government than under former President Nicolas Sarkozy.

When Standard & Poor’s indicated that it intended to become the first rating agency to knock France off the triple-A top spot last December, French policymakers sought to deflect attention to the UK, whose top credit rating was reaffirmed.

The head of the French central bank, Christian Noyer, demanded that the UK should be downgraded first, while the then Finance Minister Francois Baroin poked fun at the UK, saying: “Great Britain is in a very difficult economic situation, a deficit close to the level of Greece, debt equivalent to our own, much higher inflation prospects and growth forecasts well under the eurozone average.”

Q4 2011 Q1 2012 Q2 2012 Q3 2012

Source: Eurostat; figures show % change compared with previous quarter

Credit card has built-in keyboard

8 November 2012 Last updated at 11:22 GMT  The card may eventually display a holder’s remaining balance and other information A credit card with an LCD display and built-in keyboard has been launched in Singapore by Mastercard.

The card has touch-sensitive buttons and the ability to create a “one-time password” – doing away with the need for a separate device sometimes needed to log in to online banking.

Future versions of the card could display added information such as the remaining balance.

The card will be available from January before being rolled out globally.

Many of the world’s banks require customers to log in to online banking by using a small security device to generate a one-off password.

Bulky token

While considerably more secure than typical static username and password log-in systems, many people find using security tokens cumbersome given the need to keep it with them in order to use online banking.

Mastercard’s interactive card aims to solve that issue.

“We brainstormed on ways to make it convenient and yet secure for customers,” said V Subba from Standard Chartered Bank, which is collaborating with Mastercard.

“The question was: instead of sending customers another bulky token, could we replace something which already exists in the customer’s wallet? That was when credit, debit and ATM cards immediately came to mind.”

Eventually, the card could display information such as loyalty or reward points or recent transaction history.

Improving the portability of secure banking is a continuing priority for the world’s credit card firms.

Last year, Visa announced a similar card with interactive functions.

However, smartphone manufacturers will be hoping that enhanced credit cards will be quickly replaced by NFC – near-field communication – alleviating the need for physical payment cards altogether.

Labor takes credit for economic report card

Posted October 22, 2012 16:30:22

The Northern Territory Opposition says a new report on the performance of the economy is proof that Labor made the right financial decisions when it was in government.

The CommSec State of the States report has named the Territory as the country’s second best economic performer, thanks to the Inpex gas project.

The Opposition’s business spokesman Michael Gunner says Labor deserves credit for its sound investments.

“We made a deliberate decision to invest into the Territory economy with infrastructure spend which kept Territorians in jobs and businesses open,” he said.

“And we also made the effort to go out and get major projects.

“They don’t come easy, you’ve got to do the work.

“We went out and got Inpex.

“And we are very worried that with the public service cuts and the reduction in services that the CLP are looking at that those opportunities are going to be lost.”

Topics: economic-trends, darwin-0800

Credit Suisse Mideast co-CEO quits

Dubai: Bassam Yammine, a managing director and co-chief executive of the Middle East at Credit Suisse, is resigning from his post but will stay on until the end of the year, according to a person familiar with the matter. Yammine joined Credit Suisse in 2007 from Audi Saudi Arabia, an investment banking business of Lebanon’s Audi Saradar Group that he founded and led. He had previously served in various positions at Lebanese financial institutions and in the Lebanese government. He “has resigned but will continue until the end of the year,” the person said. Credit Suisse’s plans after the resignation are unclear; Yammine’s co-chief executive is Bruno Daher, and both men are based in the Dubai International Financial Centre. Yammine could not be immediately reached for comment.

Saudi-based Jarir Marketing Co., the bookstore chain and computer distributor, said on Wednesday it will distribute dividends to the value of 138 million Saudi riyals at 2.3 riyals a share. The dividend distribution represents 23 per cent of the company’s capital and comes as its third quarter net profit rose 5.1 per cent reaching 160.7 million riyals compared to the year earlier. Jarir is “committed to its policy for distributing cash dividends to its shareholders supported by the good profits and strong cash position,” said Abdul Karim Al Agil, chief executive officer, in a statement on the Saudi bourse website. Jarir distributed cash dividends of 2.2 per share for the first quarter and 1.4 per share in second quarter of 2012 bringing the company’s total cash dividends to 5.9 riyals a share for the nine months ended September 30, it said.

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Saudi Arabian food company Savola Group said Wednesday it is acquiring additional shares in Almarai Co., the Gulf’s largest dairy producer, for a value of 2 billion Saudi riyals. Savola’s stake in Almarai company will rise from 29.95 per cent to 36.52 per cent as result of the transaction which was completed on October 16, the company said in a statement posted on the Saudi bourse website. The acquisition was financed through a combination of the company’s operational cash flow and Islamic banking facilities from local banks, Almarai said. “The acquisition of additional shares in Almarai Co. is in line with the Group’s strategy of further growing its exposure in its core sectors,” Dr. Abdulraouf M. Mannaa, the Group Managing Director, said. Savola last hiked its share holding in the dairy producer from 26.5 per cent to 29.95 per cent in 2010. Earlier this week, the company reported a 32 per cent jump in third quarter net profit, boosted by stronger sales, and said full year profit should beat its original forecast.

Saudi Arabian Mining Co., or Maaden, said on Tuesday it has signed two financing agreements with the Saudi Industrial Development Fund for a combined value of $320 million. Maaden Aluminum Company and Maaden Rolling Mill Company-subsidiaries of Maaden, which is 21.5 per cent owned by US-based Alcoa Inc signed the agreements for the first phase of the joint venture’s $10.8 billion aluminum complex. A $160 million agreement was signed with Maaden Aluminum Company to be repaid in 12 semi-annual instalments starting in February 2015 for a period of six years, the company said in a statement posted on the Saudi bourse website. A second agreement of the same value was also signed with Maaden Aluminum Company, to be repaid in 13 semi-annual instalments starting in February 2016 for a period of six and a half years. Maaden said the agreements now complete the financing for its aluminum project. Maaden reported a significant rise in its third-quarter net profit to 311 million riyals ($82.9 million), which it attributed to an increase in the price and quantity of products sold.

State-giant Saudi Arabian Oil Co., or Saudi Aramco, said on Tuesday it has completed, ahead of schedule and below budget, the kingdom’s first offshore non-associated gas field, to meet growing domestic needs. The firm managed to raise output from about 1 billion standard cubic feet of fuel a day earlier this year to about 1.8 billion standard cubic feet, it said in a statement posted on its website. It did not give a value of the project. The Karan field, originally scheduled for completion in 2013, has helped Saudi Arabia boost its gas production by 18 per cent, Aramco said. The gas from Karan is being transported to the onshore Khursaniyah Gas Plant via subsea pipeline, Aramco has previously said. Karan and other offshore non-associated gas field projects are aimed at quenching the kingdom’s soaring demand for energy, which is needed to fuel electricity stations and industrial complexes in the rapidly growing economy. But the country hasn’t yet discovered non-associated natural gas in sufficient quantities to replace oil as the fuel for its planned electricity plants and guarantee cheap feedstock for new petrochemical factories. “Saudi Aramco is planning to increase our conventional and unconventional gas supplies by almost 250 per cent over the coming couple of decades,” the firm’s executive Khalid Al Falih said in remarks posted on the firm’s website Monday. One of the gas development Aramco is working on is the Wasit gas project, expected to be completed by mid-2014, the firm said. It will be the kingdom’s largest gas plant with a capacity to process 2.5 billion cubic feet a day of gas and will increase Saudi Arabia’s production capacity by 21 per cent. Saudi Aramco, fully owned by the Kingdom of Saudi Arabia, is one of the largest oil and gas companies in the world with activities in exploration, production, refining, distribution, shipping and marketing.

Credit Agricole takes 2bn euro hit from Emporiki sale

Wednesday, 17 October 2012 12:27 Posted by Shoaib-ur-Rehman Siddiqui

PARIS: French bank Credit Agricole said on Wednesday that its sale of Greek lender Emporiki to Alpha Bank would impact its third-quarter net income by 2 billion euros ($2.6 billion).

Credit Agricole, which confirmed in a statement that it had signed a contract for the sale, announced on Oct. 1 that it intended to pay Alpha 550 million euros to take Greek lender Emporiki off its hands.

Analysts said at the time that the transaction would lead to a 2 billion-euro hit to earnings.

Copyright Reuters, 2012

US corporate credit risk climbs

New York: A gauge of US corporate credit risk increased, reversing a decline from the lowest level in four days.

The Markit CDX North America Investment Grade Index, a credit-default swaps benchmark that investors use to hedge against losses or to speculate on creditworthiness, increased 0.7 basis point to a mid-price of 98 basis points at 4:15 p.m. in New York on Friday, according to prices compiled by Bloomberg.

The swaps measure rose as JP Morgan Chase & Co. and Wells Fargo & Co. reported shrinking net interest margins, a gauge of the profitability of lending. The index had earlier reached as low as 95.2 basis points after the Thomson Reuters/University of Michigan preliminary October consumer sentiment index increased to 83.1 from 78.3 the previous month, the highest since September 2007.

“Part of it has to do with some uncertainty with respect to earnings: things will pop in one direction and then fade,” Marc Pinto, head of corporate bond strategy at Susquehanna International Group LLP, said in a telephone interview. “Next week we should get a fair amount of data so that we can see more discernible trends.”

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The credit-swaps index typically rises as investor confidence deteriorates and falls as it improves. The contracts pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.

The cost to protect against losses on the debt of Wells Fargo rose 1 basis point to 84.5 basis points at 4:07 p.m., according to data provider CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

Contracts tied to Sprint Nextel Corp. widened, a day after Japan’s Softbank Corp. confirmed it’s in talks to take a stake of as much as 75 per cent of the third-largest US wireless carrier. Sprint’s swaps rose 25.9 basis points to 388.3 basis points at 3:30 p.m. in New York, CMA data show.

Gulfport Energy Corp. sold $250 million of eight-year, dollar-denominated bonds to repay borrowings and prefund drilling expenditures, according to a person familiar with the offering, who asked not to be identified because terms aren’t set. The 7.75 per cent notes were priced to yield 672 basis points more than similar-maturity Treasuries, according to data compiled by Bloomberg.

The average relative yield on investment-grade debt fell 2 basis points, led by communications and energy companies, whose spreads narrowed 2 basis points, according to data compiled by Bloomberg. The relative yield on speculative-grade debt was unchanged, the data show.

State credit rating stable, for now

Posted October 02, 2012 16:09:16

Tasmania has retained its AA-plus credit rating from the independent agency, Standard and Poor’s.

The agency says the Tasmanian Government continues to demonstrate fiscal discipline but says limited budgetary flexibility is a ratings constraint.

The Premier, Lara Giddings, says it is a pleasing result.

“They acknowledge the strength of the decisions that have been made by this Government and the strong financial management that we are showing,” she said.

“They in fact also highlight the fact they do not see the minority government as a problem at all, in fact to the contrary.”

While she welcomes the result, the Premier says she is not confident of a similar result from a second agency, Moody’s.

“Moody’s has recently downgraded South Australia and Queensland has also been under some pressure.”

“So we are very concerned in that respect about the mood of Moody’s, so to speak.”

Topics: economic-trends, states-and-territories, tas, hobart-7000, launceston-7250

Moody’s downgrades Tas credit rating

Updated October 03, 2012 19:54:36

The Tasmanian Premier, Lara Giddings, has refused to rule out further budget cuts amid Moody’s downgrading of the state’s credit rating.

The credit agency has Tasmania’s on Aa1 but is stable.

In a statement, the agency says the ratings downgrade reflects persistent large deficits which first emerged in 2008 and the likelihood the debt burden will not show any significant decline over the medium term.

It cites slow growth in GST receipts despite weakness in the local economy and spending outpacing revenue.

Moody’s also blames the high Australian dollar and global uncertainty for the downturn in the woodchip, manufacturing and tourism industry, resulting in the state’s slow growth nationally by less than one per cent in 2010-11.

However, the agency says the stable outlook reflects the Government’s commitment to reducing the budget deficit.

The credit rating influences the interest rate Tasmania pays on state debt, impacting on the budget.

It could also have a further impact on business confidence.

The Premier, Lara Giddings, has admitted the downgrading will mean the government will pay more interest on loans, but could not say how much.

“That does, in fact, impact on the cost of borrowings for the state,” she said.

“It will cause a little more pressure on our state budgets, in that respect, where there are borrowings and we have to find the increased interest as a result of that.”

Ms Giddings left the door open over whether it means further budget cuts.

“Obviously any impacts on the budget we have to take into account in the lead up to the next budget.”

The Opposition Leader, Will Hodgman, says it is further proof of budget mismanagement.

“This will be a very serious blow to Tasmania’s economy and our financial situation.”

Economists say the downgrade reinforces the need to return the budget to surplus.

Moody’s recently downgraded South Australia and Queensland.

Topics: states-and-territories, economic-trends, tas, hobart-7000, launceston-7250

First posted October 03, 2012 11:40:17

S&P cuts Spain’s credit rating

10 October 2012 Last updated at 22:31 GMT Spanish protesters Government austerity measures have proved deeply unpopular with the Spanish people Ratings agency Standard & Poor’s has downgraded Spain’s credit rating, highlighting a deepening recession and mounting pressure on Madrid’s finances.

S&P cut Spanish debt from BBB+ to BBB-, one level above junk status, and warned of possible further downgrades.

Spain is struggling with high debt levels and the highest rate of unemployment in the eurozone.

Madrid has introduced drastic spending cuts and tax rises, but many think it will have no option but seek a bailout.

“The downgrade reflects our view of mounting risk to Spain’s public finances, due to rising economic and political pressures,” S&P said.

“The deepening economic recession is limiting the Spanish government’s policy options.”

Rising debt

Last month, the government unveiled its latest budget designed to make savings of around 13bn euros ($16.7bn; £10.4bn) next year, by cutting public sector wages, education, health and social services.

The cuts were the latest in a series of austerity measures that have sparked angry protests across Spain.

Despite the cuts, tax rises, labour market and pension reforms, the Spanish government has said the country’s overall debt levels will rise next year to more than 90% of total economic output.

The country’s borrowing costs have remained high for months, leading many analysts to argue it is only a matter of time before Madrid is forced to ask its eurozone partners for financial assistance.

However, last week, Spanish Economy Minister Luis de Guindos denied his country would be asking for help.

“Spain does not need a bailout at all,” he said.

Fitch affirms Britains AAA credit rating, negative outlook

PARIS: Fitch Ratings on Friday maintained Britain’s “AAA” credit rating with a negative outlook, warning that weak economic growth and a rising debt level was increasing the likelihood of a downgrade.

Fitch said “weaker than expected growth and fiscal outturns in 2012 have increased pressure on the UK’s ‘AAA’ rating”.

With Fitch estimating that Britain’s debt in 2015-2016 may approach 100 percent of gross domestic product (GDP), the limit for a top “AAA” rating “the likelihood of a downgrade has therefore increased.”

It said the negative outlook reflects Britain’s “very limited fiscal space, at the ‘AAA’ level, to absorb further adverse economic shocks in light of the UK’s elevated debt levels and uncertain growth outlook.”

Fitch had put Britain’s rating on negative outlook, or subject to downgrade, in March.

Given the uncertainties of the fiscal and economic projections Fitch said it did not expect to resolve its negative outlook on Britain’s rating until 2014.

However it warned a downgrade was likely if Britain’s medium-term growth outlook worsened, there were indications that government debt would exceed 100 percent of GDP, or an easing of fiscal policy that pushes back a reduction in debt levels.

“Global economic headwinds, including those emanating from the on-going Eurozone crisis, have compounded the drag on UK growth from private sector deleveraging and fiscal consolidation as well as from depressed business and consumer confidence, weak investment, and constrained credit growth,” said Fitch.

The ratings agency said it now expects Britain’s economy to contract by 0.3 percent in 2012 compared to an expectation of growth of 0.8 percent when it last formally reviewed the country’s rating in March.

Credit Agricole to pick Alpha Bank

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asedr2ATHENS: France’s Credit Agricole is expected to pick Alpha Bank as the preferred bidder for its ailing Greek unit Emporiki Bank, a banking source close to the talks said on Sunday.

“They picked Alpha as the preferred bidder,” the source said, citing information from one of the other bidders in the sale. National Bank and Eurobank had also bid for Emporiki.

Credit Agricole is looking to pull out of Greece after Emporiki was hammered by the country’s debt crisis.

Hungary seeks 12-15bn euro IMF credit line: paper

Saturday, 22 September 2012 19:09 Posted by Muhammad Iqbal

aszx54BUDAPEST: Hungary hopes to sign a precautionary credit deal of 12-15 billion euros with international lenders, similar to the agreement which Poland has with the IMF, Hungary’s minister in charge of talks with lenders said on Saturday.

Hungary, which has the highest state debt as percentage of economic output in central Europe, started talks about a financing backstop in July af ter seven months of delays.

Analysts expect tough talks with the International Monetary Fund and the European Union due to Prime Minister Viktor Orban’s unconventional economic policies, including cuts to personal income tax and a new windfall tax on big businesses.

The government, which sent a reply to IMF recommendations earlier this month, is now waiting for lenders to set a date for a resumption of negotiations, probably next month.

“It may happen that they do not find our reply reassuring but I see little chance for that,” Mihaly Varga, who leads the government’s team in talks, told daily newspaper Magyar Nemzet.

“It is more likely that they will announce that talks would continue, and then a delegation will come.”

Varga said Hungary was seeking a 2-3 year agreement, similarly to the flexible credit line (FCL) for Poland, which has a much stronger economy.

“If we proceed according to a normal scenario, we could have a deal in November and then we can close the (2013) budget as well,” Varga said.

According to the IMF’s website, countries “with very strong economic fundamentals and policy track records” can apply for the Polish type IMF credit. The IMF has so far talked about a standby arrangement for Hungary, which comes with stricter conditions.

Most analysts do not expect a deal before next year, if at all. Varga said Hungary maintained its 1.6 percent growth forecast for next year, which the IMF and analysts consider too optimistic, but said it could be modified if it becomes necessary. The economy slipped into recession this year.

Varga said that in July there was “very heated debate” between lenders and the government about the banking system, as the IMF wants Hungary to abolish a windfall tax on banks and reconsider a new tax levied on financial transactions.

“They believe banks need to be supported because an expansion of lending is essential for kickstarting economic growth,” Varga said.

But he said foreign parent banks were cutting down on funds for their local subsidiaries and there was no point in providing additional support for them.

He said the government had proposed cuts in bureaucracy, which would affect the number of those working in the public sector, but it “of course does not mean that masses of people would be sacked.”

Another newspaper Nepszabadsag reported on Saturday, citing a source close to the government, that 6,000 to 8,000 jobs could be axed in central state administration.

Indian banks’ credit growth marginally up in first half

Thursday, 20 September 2012 19:18 Posted by Asad Naeem

indian-stockMUMBAI: Credit growth in Indian banks grew 1.2 percent as of Sept. 7 from the start of the financial year in April, picking up marginally from the muted growth seen in previous months, central bank data showed.

“There is slight improvement on retail loans, as banks had cut lending rates on vehicle and home loans, so the consumption credit has gone up,” said a senior official with a public sector bank.

Banks’ loans grew 1.2 percent as of Sept. 7 since the beginning of April, while deposits were up 3.7 percent, according to data released by the Reserve Bank of India on Thursday.

Loans from banks have picked up since the 0.6 percent growth from the begining of April to Aug. 24, according to Reuters calculations of the previous RBI data.

The RBI, in its mid-quarter review of the monetary policy on Monday, cut the cash reserve ratio, or the share of deposits banks must park with the central bank, by 25 basis points, to inject about 170 billion rupees ($3.1 billion) into the banking system.

“The CRR cut will lead to multiple credit expansion and we should see further pick-up in loan growth,” the official with the state-run bank said.

On Wednesday, the country’s largest lender, State Bank of India, cut its base rate, the minimum interest rate at which it lends, by 25 basis points to 9.75 percent, effective Thursday.

“SBI’s 25 basis points lending rate cut strengthens our call that the RBI’s CRR cuts/OMO (open market operations) will soften lending rates to revive growth,” said Indranil Sengupta, India economist at Bank of America-Merrill Lynch, in a research note on Wednesday.

The central bank forecast a credit growth of 17 percent and deposit growth of 16 percent for the full fiscal ending in March 2013.

Last week, the government announced big bang reforms as part of package of measures, which included opening up the supermarket sector to foreign chains, and hiking diesel prices, aimed at reviving economic growth.

Bankers expect these measures to revive investment sentiment, but credit growth may not see a significant pick-up in the rest of the year due to the ongoing political uncertainty, they said.

Typically, banks see higher demand for credit in the second half of the fiscal year, but bankers expect the credit growth to fall short of the RBI projection this year due to the slowdown in economic activity.

As of Sept 7., banks’ credit stood at 47,496.94 billion rupees, marginally higher than 47,217.92 billion rupees two weeks ago, while deposits were at 63,210.26 billion rupees, up 0.5 percent.

Brazil cuts reserve requirements to bolster credit

Saturday, 15 September 2012 05:23 Posted by Abdul Ahad

Brazil central bankBRASILIA: Brazil’s central bank on Friday lowered reserve requirements for banks, freeing up 30 billion reais ($15 billion) in liquidity for the financial system at a time when many banks have become more cautious over lending.

Additional reserve requirements of six percent on demand deposits will be scrapped effective immediately. An additional requirement on term deposits would be lowered 1 percentage point to 11 percent, effective Oct. 29, the central bank said in a statement.

The move aims to spur lending by private-sector banks and may help put an end to a year-long rate-cutting cycle by the central bank.

The government of President Dilma Rousseff has demanded that private-sector banks increase lending and slash interest rates to help bolster the Brazilian economy, which is slowly recovering after a year of near zero growth.

“The reduction of reserve requirements is a stimulus for financial institutions to increase lending,” Aldo Mendes, the central bank’s monetary policy director, told reporters in Brasilia.

“We are trying to bring Brazil’s reserve requirements more in line with international standards. Reserve requirements in Brazil are about 9 percent of the economy and with this change goes to 8.4 percent,” Mendes added.

Mendes said the move does not reflect concerns over the health of the financial sector and that it was not related to the liquidation of troubled lender Banco Cruzeiro do Sul .

Earlier on Friday the central bank shut down Cruzeiro do Sul, a small lender that it seized in June after accounting irregularities triggered a $700 million shortfall.

“This should give further reason to believe that the (bank’s) committee has indeed finished the easing cycle last month,” said Alexandre Schwartsman, a partner with Schwartsman & Associados and a former central bank director.

The central bank cut its benchmark Selic rate for the ninth straight time to an all-time low of 7.5 percent on Aug. 29, leaving the door open for a final rate cut in October.

Brazilian private-sector banks have slowed the pace of lending amid worries that near record-high loan delinquencies rates could hit their earnings.

Non-government local lenders trimmed disbursements by 0.1 percent in July, compared with a 0.4 percent expansion in June. State banks disbursed 1.5 percent more credit in July on a sequential basis, below June’s 2.6 percent, according to central bank data.

Rousseff has repeatedly called on banks to hike lending and has used state lenders Banco do Brasil and Caixa Econ?mica Federal to bring down the cost of credit to businesses and consumers, and boost access to credit.

The central bank also said that half of the requirements on time deposits can be met through the purchase of financial notes or credit portfolio effective immediately.

Moody”s downgrades EU credit rating outlook

NEW YORK: Ratings agency Moody’s on Monday lowered the European Union’s credit rating outlook from “stable” to “negative,” saying it reflected negative outlooks assigned to the bloc’s key budget contributors.

“It is reasonable to assume that the EU’s creditworthiness should move in line with the creditworthiness of its strongest key member states,” it said, citing negative outlooks for Britain, France, Germany and the Netherlands.

Banks surpass agri credit finance target

Lend Rs293.8b to farmer­s agains­t target of Rs285b.  Achievement of the target was difficult in the backdrop of continuous decline in private sector credit and high agriculture non-performing loans. PHOTO: FILE/REUTERS


Banks have surpassed the agriculture credit disbursement target for last fiscal year 2011-12 as they extended loans amounting to Rs293.8 billion to the farmers, which was Rs8.8 billion or 3% more than the annual target of Rs285 billion.

The loans were 11.7% higher compared to Rs263 billion disbursed in 2010-11, shows data released by the State Bank of Pakistan (SBP) on Friday.

Five large banks – National Bank, Habib Bank, MCB Bank, Allied Bank and United Bank – collectively gave agriculture loans amounting to Rs146.3 billion, higher by 4.3% compared with Rs140.3 billion loaned in the preceding fiscal year.

Zarai Taraqiati Bank lent Rs66.06 billion or 94.2% of its annual target of Rs70.1 billion while Punjab Provincial Co-operative Bank (PPCB) disbursed Rs8.5 billion or 11.8% more than its target of Rs7.6 billion.

Fourteen domestic private banks as a group lent Rs60.9 billion, 12.5% higher than the target of Rs54.1 billion.

Five microfinance banks gave Rs12.1 billion in farm loans, close to the annual target of Rs12.2 billion.

In a press release, the SBP said the banks had been missing the agriculture credit disbursement targets since 2008-09, adding the achievement of the target in 2011-12 was extremely difficult in the backdrop of continuous decline in private sector credit and high agriculture non-performing loans due to devastating floods of 2010 and heavy rains of 2011 in Sindh.

These efforts included swift settlement of crop loan insurance claims, close coordination with provincial revenue departments to facilitate one-window operation in agriculture-intensive districts for timely completion of revenue formalities, holding of farmer awareness and financial literacy programmes at grass roots level and follow-up of targets with the top management of banks.

Published in The Express Tribune, July 21st, 2012.

Dictum meum pactum: S&P reaffirms Pakistan’s sovereign credit rating

Mainta­ins long term credit rating, upgrad­es short term rating. ” Debt servicing and other expenditure rigidities against a narrow revenue base of 12.5% of GDP result in ongoing fiscal slippages,” S&P credit analyst Agost Benard.

S&P, one of the three largest credit rating agencies in the world, appeared to have been looking at much the same data as Moody’s, but arrived at a different conclusion. In a statement released to the press, the company said: “The sovereign ratings on Pakistan take into account the country’s weak fiscal profile and associated high public and external leverage, low income level, as well as the underlying weak political and policy setting. These constraints are balanced against strong remittance inflows that help sustain a still-adequate external liquidity position.”

The agency appeared to have analysed in depth Pakistan’s ability to pay its own electricity bills, but ultimately judged that its existing rating captured the risks of the delayed payments that many power companies have currently been facing.

“Our ‘B’ rating category considers the potential of administrative weaknesses to result in payment delays from ministries to agencies,” said S&P credit analyst Agost Benard.

Local analysts broadly concurred with the views expressed by S&P. “Our view is that the S&P rating is a more accurate reflection of Pakistan’s creditworthiness. We feel that Moody’s is overly pessimistic in their outlook on Pakistan,” said Atif Zafar, an economic analyst at JS Global Capital, an investment bank.

Others felt that while Moody’s may not be wrong, S&P seems to have delivered a more balanced view. “At the end of the day, while it is not entirely a subjective call, it does depend to an extent on the analysts’ own views of things. Both Moody’s and S&P are looking at the same variables, though we feel that Moody’s was harsh in not taking into consideration the recent improvements. S&P is not saying that things are great, but they are saying that they have not gotten materially worse,” said Imtiaz Gadar, an economist at KASB Securities.

S&P certainly did highlight several challenges faced by the Pakistani economy, not least of which is the high debt servicing burden faced by the government.

“The interest burden on this debt poses a great constraint on discretionary spending, given already sparse fiscal resources,” said Benard. “The large interest bill and other expenditure rigidities against a narrow revenue base of about 12.5% of gross domestic product (GDP) result in ongoing fiscal slippages.”

The agency nonetheless did upgrade Pakistan’s short-term credit rating to B, from C. However, analysts cautioned against getting excited over this seeming upgrade.

“S&P recently revised its criteria for short-term ratings to link it directly to long-term ratings. Hence, the raising of the short-term rating does not reflect an improvement in Pakistan’s short-term creditworthiness,” said Burj Capital, in a note issued to clients on Friday afternoon.

The New York-based rating agency reaffirmed its stable outlook on Pakistan’s sovereign credit ratings. However, it did warn that the ratings may be revised downwards “if major slippages in policy occur, resulting in rising public debt, or if the balance-of-payments position deteriorates and external liquidity comes under greater stress.”

Unlike Moody’s, S&P also seemed more open to the possibility of raising Pakistan’s credit rating, provided that the country “shows progress in its fiscal consolidation efforts, manifested in moderating deficits and a steady reduction in the public debt burden.”

Some observers were more cynical in their assessment of what the rating meant for Pakistan’s economy.

“A junk bond is a junk bond. The difference between B- and CCC+ is simply one of semantics,” said one former investment banker in Karachi, who wished to remain anonymous.

Published in The Express Tribune, July 21st, 2012.

Credit Suisse bullish on Pakistani equities

Swiss giant says improv­ing liquid­ity, capita­l gains tax have made the market attrac­tive. Besides liquidity, Credit Suisse believes there are several other reasons why Pakistan is a highly attractive market. PHOTO: AFP


Swiss banking giant Credit Suisse appears to be optimistic about the prospect of rising equity prices on the Karachi Stock Exchange and is advising its global clientele to consider investing in Pakistan.

In a detailed report issued to clients on Monday, analysts at Credit Suisse said that they believed that the new rules on capital gains tax and the exemption from documenting source of income for the next two years will improve liquidity and trading volumes in the market and allow stock prices to rise to their historical levels of valuations from their currently highly depressed levels.

“Liquidity in 2012 has been concentrated in stocks offering positive earnings surprises (e.g., United Bank, Lucky Cement, DG Khan Cement and Bank Alfalah), enabling them to be strong outperformers,” said Farrukh Khan, a research analyst based in Credit Suisse’ Asia Pacific headquarters in Singapore, in his report. “With further improvements in liquidity, we expect a broad-based price discovery to take hold in attractively valued oil and fertiliser stocks as well.”

Besides liquidity, however, Credit Suisse believes there are several other reasons why Pakistan is a highly attractive market.

It notes, for instance, that Pakistan’s sovereign risk is declining. Yields on Pakistan’s Eurobond have fallen 3% over the past 90 days, which Credit Suisse believes is justified. “A few months back, it seemed imminent that the current government’s altercation with the army would lead to early elections. The crisis has been averted, and for the first time in Pakistan’s history, a democratically elected government looks likely to complete its term in office” Khan stated.

In addition, Khan points out that Pakistani stocks are undervalued by their own historical valuation levels. The seven-year average for the 12-month forward price-to-earnings (PE) ratio (a key valuation metric) is 9.0, but the MSCI Pakistan index is currently trading at an average forward PE ratio of 6.3, which Khan argues is too low.

“Although Pakistan’s macros and politics remain challenging, there is an increasing realisation that this comes with the territory, and should not deter strong bottom-up investing. A large part of the weak politics and macros is built into historical valuations as well,” said Khan.

Credit Suisse also points out that corporate profitability in Pakistan is back to the 2007 pre-crisis levels. The average return on equity for the stocks in the MSCI Pakistan index is expected to hit 30% this year. Earnings yield averages 16% and dividend yields a healthy 7.3%.

The final advantage for international investors, Credit Suisse says, is that Pakistan is highly uncorrelated with the broader global equity markets, especially Europe. This lack of correlation holds both on the upside as well as the downside, meaning investors who are looking to diversify out of their exposure to the weakening European economy should be investing in Pakistan.

The report was issued as part of the run-up to Credit Suisse’s 16th Asia Investment Conference, to be held in Hong Kong over five days in March 2013. In the 2011 conference, Water and Power Minister Naveed Qamar, who then also held the portfolio of privatisation minister, had been invited to speak at a session titled “Pakistan: Long-term growth perspectives”.

It is nonetheless ironic that Credit Suisse is touting Pakistani equities, considering that the Swiss bank tried launching a capital markets business in Pakistan in July 2008 – starting with equity research – and ended up winding up its solitary office in Karachi, moving its staff back to Singapore in early 2010.

Credit Suisse is a Swiss multinational financial services company headquartered in Zurich, with more than 250 branches in Switzerland and operations in more than 50 countries. It has one of the world’s largest private banking and asset management businesses and has a consolidated balance sheet with over $1.3 trillion.

Published in The Express Tribune, May 23rd, 2012.