Financial

Hard-hit online lender CAN Capital makes executive changes

The biggest online lender to small businesses in the US has pulled down the shutters and put its top managers on a leave of absence, in the latest blow to an industry grappling with mounting fears over credit quality. Atlanta-based CAN Capital said on Tuesday that it had replaced a trio of senior executives, after […]

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Banks

BoE stress tests: all you need to know

The Bank of England has released the results of its latest round of its annual banking stress tests and its semi-annual financial stability report this morning. Used to measure the resilience of a bank’s balance sheet in adverse scenarios, the stress tests measured the impact of a severe slowdown in Chinese growth, a global recession […]

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Property

Zoopla wins back customers from online property rival

Zoopla chief executive Alex Chesterman has branded rival OnTheMarket “a failed experiment”, and said that his property site was winning back customers at a record rate. OnTheMarket was set up last year, aiming to compete with Zoopla and Rightmove, the UK’s two biggest property portals. It allowed estate agents to list their properties more cheaply […]

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Currencies

Asia markets tentative ahead of Opec meeting

Wednesday 2.30am GMT Overview Markets across Asia were treading cautiously on Wednesday, following mild overnight gains for Wall Street, a weakening of the US dollar and as investors turned their attention to a meeting between Opec members later today. What to watch Oil prices are in focus ahead of Wednesday’s Opec meeting in Vienna. The […]

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Banks, Financial

RBS emerges as biggest failure in tough UK bank stress tests

Royal Bank of Scotland has emerged as the biggest failure in the UK’s annual stress tests, forcing the state-controlled lender to present regulators with a new plan to bolster its capital position by at least £2bn. Barclays and Standard Chartered also failed to meet some of their minimum hurdles in the toughest stress scenario ever […]

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Archive | November, 2016

DNB rally ends on dividend concerns

Posted on 28 November 2012 by

A recent rally in DNB
came to an abrupt halt on Wednesday after investors speculated that the Norwegian lender might not be able to pay future dividends.

Their concerns were prompted by a report from the Norwegian central bank warning the country’s lenders should be obliged to hold more capital in order to reflect risky loans.

    DNB’s shares fell 5.5 per cent to NKr68.50. Analysts at SEB cut their recommendation on the shares to “hold”.

    More widely, European markets were mixed, with the FTSE Eurofirst 300 gaining 0.2 per cent to 1,109.27. Banks were among the worst performing stocks and the banking sub-index fell 0.4 per cent to 435.93.

    Investors reacted with scepticism to an announcement from Raiffeisen
    that it expected non-performing loans in Hungary to improve next year.

    The Austrian lender booked €190m in writedowns on its Swiss franc-denominated mortgage loans in Hungary last year. The shares lost 5 per cent to close at €31.51. Investors also sold out of rival lender Erste Bank
    , sending its shares down 2.2 per cent to €21.43.

    Spain’s Bankia
    , the lender at the centre of the country’s banking crisis, said it had put its 15 per cent stake in insurer Mapfre
    up for sale as part of its restructuring plans.

    Shares in Mapfre slid 3.7 per cent to €2.10 as investors took fright. The wider Ibex 35 index fell 0.3 per cent to 7,837.6.

    Thyssen Krupp
    , the German steelmaker, lost ground as investors digested news that a deal in Italy had fallen through. Sogefi
    , the Italian car parts maker, on Tuesday walked away from talks to buy Thyssen Krupp’s suspension business.

    Shares in Thyssen Krupp fell 2.5 per cent to €15.62, against a 0.2 per cent rise on the benchmark Xetra Dax index to 7,343.41.

    Swedish Match
    was among the best performing stocks as analysts at Credit Suisse flagged the company higher. “Short-term pain, but long-term value once the dust settles,” they wrote.

    The shares rallied 2.7 per cent to SKr232.10.

    Quintain to sell a third of its iQ stake

    Posted on 28 November 2012 by

    Quintain has launched the sale of part of its student housing business as the property group tries to raise capital for its London regeneration projects and to reduce its debt.

    The company, which on Monday said it would refocus on the London market, has approached Lazard to help it find a buyer for a third of its 50 per cent stake in the £337m iQ student housing arm, according to people familiar with the process.

      Quintain, which co-owns iQ with the Wellcome Trust – one of the UK’s largest institutional investors – is understood to be mulling over the possibility of selling more of its stake.

      The move marks a change in strategy by Quintain as the company’s recently installed management team seeks funds to build its 85-acre regeneration project in Wembley, the first phase of which opened earlier this year, and its 150-acre project in Greenwich.

      Quintain, which also said this week that it would cut its net debt by more than £65m by April 2014, has been trying to sell the 361-bed Wembley Hilton since late 2011 to raise capital. It is yet to agree a deal, however, despite receiving offers of close to £60m.

      iQ operates 13 student accommodation properties in London, Bristol, Leeds and Edinburgh. Quintain is expected to maintain its role as asset manager for the properties, irrespective of how much of a stake it retains.

      The properties are 96 per cent occupied and produced £14.3m rent in the year to March 31. In the six months to October, the portfolio generated total returns of 14.8 per cent.

      In the UK, student housing funds have returned close to 12 per cent since the start of the year, compared with 1.2 per cent for all property, 8.2 per cent for equities and 4.9 per cent for gilts, according to IPD, the benchmark property index.

      In London, 35 per cent of all student housing is provided by the private sector – a figure property analysts expect to rise dramatically during the next decade.

      In Manchester, Leeds and Nottingham – three leading university cities – the role of the private sector is similar, while in Birmingham almost half of all student accommodation is privately operated.

      Quintain, the Wellcome Trust and Lazard declined to comment.

      Taiwan in $3bn bailout of Kuo Hua Life

      Posted on 28 November 2012 by

      Taiwan has launched its biggest taxpayer-backed bailout to rescue a failing life assurer as regulators seek to stabilise an industry battling low interest rates and stiff competition.

      The government will spend NT$88.4bn (US$3bn) supporting TransGlobe Life Insurance as it takes over Kuo Hua Life, which last year had a negative 2.4 per cent return on its assets, according to Fitch Ratings.

        Many foreign insurers have left Taiwan, driven out by the tough market. In 2011, AIG, after protracted negotiations, sold its operations for $2.2bn to a local company. Britain’s Aviva plans to exit its joint venture there.

        Jerry Yang, an analyst with Daiwa, said Taiwan’s life assurance industry had been challenging because a weak economy had meant low interest rates.

        Competition is high, and the population is not growing fast enough to boost sales. The industry on average, Mr Yang said, guaranteed 6 per cent return on policies but could generate only 3 per cent return on their assets.

        Three companies, Cathay Life, Fubon Life and Nan Shan, the former AIG operation, accounted for 50 per cent of premiums last year, according to Fitch, though at least 30 life assurers are in the market.

        Kuo Hua, with 1.7 per cent of the market, was tenth largest by assets last year, according to Fitch.

        It had been struggling for years and the rescue had been dragged out by challenges from shareholders and hopes a private buyer could be found, according to market participants.

        “Finally, this kind of problematic life insurer – they have been bailed out by the ones who are able to resolve this problem [and] they get some cash from the government,” he said. “They might get a chance to turn round, but I have to say this remains challenging.”

        Joyce Huang, a director with Fitch in Hong Kong, said the problems in Taiwan’s insurance sector were more pronounced than in the rest of Asia, but its difficulty matching its liabilities with its investment return reflected a region-wide challenge.

        “Insurance companies want to have some sort of guaranteed rates, but in Asia there are some structural issues. There are not many . . . long-duration bonds for them to match the duration of their liabilities,” she said.

        Kuo Hua’s problems were more severe than most of the industry’s, in part because of management, according to analysts and people familiar with the company. A former head of the company spent time in jail for violating local securities law.

        But it is not the only insurer to face a negative return on assets or low investment yield. Some analysts said the government might find it difficult to raise the money, if needed, to bail out any others.

        “The regulator has been asking [weaker life insurers] to inject new capital, but the amount has not been significant enough to enhance their net worth significantly, so there are still some marginal players out there in the market,” said Serene Hsieh, an insurance analyst with Taiwan Ratings, a subsidiary of Standard & Poor’s. “Luckily their size is not big as Kuo Hua.”

        Additional reporting by Jason Liu

        Swiss Life takes SFr576m hit over AWD

        Posted on 28 November 2012 by

        Swiss Life is to write down the value of its German advisory business, AWD, by SFr576m in a move that is likely to cut its net profits for the year to the “double-digit millions”, a decline of more than 80 per cent from the SFr606m it made in 2011.

        Switzerland’s biggest life assurer said that the writedown would be accompanied by a rebranding and job cuts. AWD will in future operate under the name Swiss Life Select, while about 300 jobs will be lost in Germany and about 90 in Switzerland as part of an effort to cut costs by as much as SFr160m by 2015.

          The moves represent the latest effort by the company to contain the problems stemming from its ill-starred €1.12bn acquisition of AWD in 2007.

          “Strategically speaking, the expansion of the Swiss Life group through the acquisition of a complementary financial distribution company like AWD was, and still is, an important development. Professional distribution organisations working closely with the customer are a crucial success factor in our industry,” said Bruno Pfister, chief executive.

          “Nevertheless, we must stand up and acknowledge that we overestimated the growth opportunities in eastern Europe and Austria,” he added.

          Despite the setback, Swiss Life said that it would “significantly expand” its asset management business under the new brand Swiss Life Asset Managers. It is also proposing an unchanged dividend of SFr4.50 per share for 2012.

          Shares in the company closed down 1.52 per cent at SFr123.40.

          US new home sales disappoint

          Posted on 28 November 2012 by

          US new home sales fell slightly in October while the previous month’s numbers were revised sharply lower, disappointing industry watchers who have championed the housing market as a bright spot in an otherwise sluggish US economic recovery.

          Sales of new single-family houses fell 0.3 per cent last month to a seasonally adjusted annual rate of 368,000, down from the revised September rate of 369,000, the commerce department said on Wednesday.

            Government data for new homes sales are subject to strong revisions. It was initially reported that sales rose to 389,000 in September – the highest rate since April 2010, when a federal homebuyer tax credit inflated purchases. Economists surveyed by Bloomberg expected an October level of 387,000.

            Even so, recent housing data have pointed to rising home prices, a jump in sales and growing positive sentiment from homebuilders as demand for new homes and apartments increases. Economists hope a revival of the US housing market will fuel the country’s economic growth.

            “We are inclined to take the stagnation of new home sales in October and the preceding months with a grain of salt. Other indicators, such as homebuilder confidence and housing starts have been improving of late,” said Teunis Brosens, an economist at ING.

            “Taken together with the slow but steady improvement in existing home sales and prices, it is clear that the US housing market is slowly but surely on the mend,” he added.

            New home sales are up 17.2 per cent from October 2011’s estimate of 314,000 while the median price of a new home rose 5.7 per cent from a year ago.

            Home prices have risen as the glut of unsold homes on the market has begun to peter out. The excess supply of homes that were built during the housing boom has declined while the amount of previously owned homes available for sale has fallen to a 10-year low.

            This has been partly driven by individual and institutional investors, such as private equity groups, who have snapped up foreclosed and distressed properties at depressed prices, spotting an investment opportunity.

            The Standard & Poor’s/Case-Shiller home price index, released on Tuesday, found that prices rose in most big cities in September compared with August. The index rose by a seasonally adjusted 0.3 per cent in September and is up 3 per cent over the past year.

            Some analysts said new home sales have benefited from record-low mortgage rates and from a decline in new-build price premiums, as the gap between the cost of a new and previously owned home narrows, driving more Americans to make purchases.

            Others, such as Ian Shepherdson, chief economist at Pantheon Macroeconomics, were less optimistic.

            “The trend in new home sales now looks flat, despite the continued surge in the National Association of Home Builders index,” Mr Shepherdson said.

            “This disparity likely reflects market share gains by larger, well-financed homebuilders, who seem to be over-represented in the NAHB survey while smaller, bank-dependent developers continue to struggle,” he said.

            The seasonally adjusted estimate of new houses for sale at the end of October was 147,000. This represents a supply of 4.8 months at the current sales rate.

            Aside from speculative construction remaining at low levels as many developers find it difficult to get credit from banks, a number of other factors continue to hamper the housing recovery, including stagnant income growth, high unemployment levels, lingering uncertainty about the macroeconomy and the still large number of homes in the foreclosure pipeline.

            Asian countries face healthcare shortfall

            Posted on 28 November 2012 by

            Asians face a dramatic rise in the shortfall of money available for their healthcare costs over coming years, which will grow from US$9bn in 2011 to $197bn by 2020, according to a study from Swiss Re.

            China will make up the biggest chunk of this shortfall at 37 per cent, or $73bn by 2020, with India second at $44bn and Japan third at $28.7bn. However, the fastest growth in the shortfall will be for Indonesia with a 63 per cent compound annual growth rate to $8bn by 2020, according to the study.

              The forecast gap between how much people are likely to need for healthcare costs and how much is available is based on continued current spending and saving patterns by governments and individuals.

              However, the real gap may be much larger than this because current spending patterns in many countries include significant upfront, or out-of-pocket, costs that people must pay to be seen at hospitals or to buy medicine. The World Health Organisation says these costs are often catastrophic events resulting in extreme financial hardship for people in the developing world.

              “An estimated 100m people [worldwide] are pushed under the poverty line each year simply because they use health services for which they are forced to pay out of their own pockets,” the WHO said in its 2012 annual statistics report.

              For example, in India, more than 60 per cent of current healthcare spending is directly out of people’s pockets, according to Swiss Re. A WHO study in 2010 found that among Indian families with healthcare bills, this spending was catastrophic in 44 per cent of cases.

              In China, where almost 40 per cent of healthcare spending is out-of-pocket, according to Swiss Re, it caused financial catastrophe in more than 27 per cent of cases on average, according to the WHO. Meanwhile, in Malaysia, where out of pocket costs are about 35 per cent of spending, financial catastrophe befalls only about 6.5 per cent of cases.

              Swiss Re said the growth in the financing shortfall highlighted the need for more spending on health insurance and more efforts from the industry to develop suitable products for different markets. “A number of companies in Asia are on to this already, but certainly not all,” said David Alexander, head of business development, Asia at Swiss Re.

              Companies such as AIA and Prudential have been pushing sales of health insurance in many Asian countries as a profitable extra on top of lower margin savings products. However, individual health insurance payouts account for less than 10 per cent of healthcare spending in all Asian countries except for Taiwan, according to the Swiss Re study.

              While poorer countries face the most acute problems of access to healthcare, it is in mature countries where the cost gap per person will be biggest by 2020, because of the higher level of overall spending, according to the study.

              South Korea faces the greatest per capita gap, followed by Australia, Japan, Hong Kong and Taiwan.

              Megafon shares fall after $1.7bn IPO

              Posted on 28 November 2012 by

              Megafon shares made a disappointing debut in London and Moscow after pricing at the bottom end of the range on Wednesday in another setback for the prospects of a revival in the London initial public offering market.

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              The Russian mobile operator raised $1.7bn in the largest London offering of the year, giving Megafon a market capitalisation of $11.1bn at the start of trading. But the shares lost as much as 3 per cent during the day, closing at $19.60, with the banks having to intervene to stabilise the shares.

              The deal had been plagued by weeks of negative publicity after Goldman Sachs pulled out as a lead bank on the IPO shortly before the company was due to start its roadshow, and bankers had to work right up to the wire just to fill the order book before trading began.

                Investors looking at the deal told the Financial Times that they had been spooked by news of Goldman pulling out. “When you get a bank pulling out of an IPO like Goldman, that tells the story,” said one portfolio manager at a UK institution, which did not invest in the IPO as a result.

                Another senior European portfolio manager said it tapped into wider concerns about Russia. “I would not touch a Russian company with a bargepole. You do not know what you are buying. In terms of governance and proper standards, these companies do not work for me.”

                One banker said that other major institutions were waiting in the sidelines to buy the stock in the aftermarket depending on what happens, adding that the owners at the moment were not fast-money investors but that most shares were held by around two dozen long-only institutions.

                Another person close to Megafon played down any disappointment with the opening day performance, pointing to a low discount to peers such as MTS even at the lowest end of the range as well as the dividend that was reflected in the group at close to 10 per cent.

                “It did not have that pop in the aftermarket of other recent deals in Europe, but given all the negative publicity over the last couple of weeks it was major success to get it away at that level,” said one person close to the deal.

                The order book was filled on Monday partly thanks to the help of one large fund that placed orders for more than $170m worth of Megafon shares, say people close to the deal.

                The completion of the deal marks the end of a torrid few months on the back of the exit by Goldman. Following the move the UK Listing Authority – an arm of the Financial Services Authority– took three weeks longer than expected to review the deal, forcing the listing to be postponed.

                People close the bank said Goldman had been concerned about an upcoming restructuring of the assets of Alisher Usmanov, the Uzbek-born oligarch and Megafon’s owner, which would put his Megafon stake within a bigger umbrella holding and under the co-ownership of two partners.

                Mr Usmanov, one of Russia’s richest men and a shareholder in Arsenal Football Club, has since pledged to keep overall control in the new group through a shareholder agreement.

                Additional reporting by Daniel Thomas, Alexandra Stevenson and Michael Hunter

                Call for more homes on green land

                Posted on 28 November 2012 by

                A third more of England should be built on to help solve the housing crisis, the planning minister will warn on Wednesday night, confronting campaigners who want to protect the countryside from further development.

                There is a need to build on more than 1,500 square miles of green land, increasing the percentage that has been built on from 9 to 12 per cent, Nick Boles told the BBC’s Newsnight programme in the pre-recorded interview.

                  The Conservative minister – who before his appointment described countryside campaigners as “scaremongering latter-day Luddites” – reprimanded people who oppose development for not thinking of future generations.

                  “It’s my job to make the arguments to these people that if they carry on writing letters, their kids are never going to get a place with a garden to bring up their grandkids,” he said. “The built environment can be more beautiful than nature and we shouldn’t obsess about the fact that the only landscapes that are beautiful are open – sometimes buildings are better.”

                  Mr Boles said owning a decent home was a “moral right” like healthcare and education but said he doesn’t want “pig ugly” buildings built by “lazy” developers.

                  “Land is expensive but to some extent [developers] are just lazy,” he said. “They didn’t talk to local people or get involved enough. But also it’s just bloody expensive to build because land is expensive.”

                  Mr Boles’ comments follow a pledge last week from Nick Clegg, deputy prime minister, to create “garden cities and suburbs for the 21st century”. The Lib Dem leader argued Britain had to build its way out of the housing crisis.

                  The coalition has already streamlined planning by revising the national planning policy framework but in recent weeks George Osborne and the Treasury have been pushing ministers to find more ways to relax the rules to benefit builders.

                  The government has temporarily enabled people to extend their homes without planning permission and the chancellor has been pressing communities secretary Eric Pickles to be more flexible over greenbelt rules.

                  But an alliance of councils and developers have warned Mr Osborne that an attempt at a shake-up could cause further uncertainty and have an adverse impact on development.

                  Alpha Plus seeks £40m to pay debts

                  Posted on 27 November 2012 by

                  Sir John Ritblat, the veteran property investor and Conservative party donor, has turned to retail bond investors in a bid to raise money for his portfolio of fee-paying schools and nurseries.

                  Alpha Plus Holdings, the private education group of which Sir John is chairman, said on Tuesday that it wants to raise £40m to pay down debts to existing shareholders. The bonds will be secured against the company’s central London schools, including Wetherby School, a pre-prep for boys that educated princes William and Harry, and actor Hugh Grant.

                    The launch of the seven-year notes, which pay an annual coupon of 5.75 per cent, is the latest example of a company underpinned by valuable real estate turning to the capital markets to raise finance.

                    European property groups have raised €15.4bn in the first nine months of this year, compared with €8.3bn in the whole of 2011, through a combination of corporate bonds, private placements and smaller-denomination retail bonds, according to research provided to the Financial Times.

                    Sir John, 77, is recognised as an elder statesmen of the UK property industry, having been the chief executive and chairman of British Land, the country’s second-largest property group my market value, for 36 years.

                    “Education is at the root of all civilisation and our path to progress,” he said, adding that Alpha Plus had allowed him to create the corporate “holy trinity” of “delivering a premium education service which generates a stable cash flow and which is also backed by a high-quality real estate portfolio.”

                    Having built British Land into a listed giant, Sir John stepped down in 2006 and is now chairman of the real estate advisory board for Delancey, the investment company headed by his son Jamie, where he has a hand in decision-making for the company’s billions in private investor funds.

                    He is honorary president of British Land, is chairman of Colliers CRE, the international property consultancy, and holds a string of positions on various boards and charitable organisations.

                    Alpha, which owns schools across the UK, had revenue in the year to August 31 of £57.9m and earnings before interest, tax, depreciation and amortisation of £8.2m. It ended the period with net debt of £57m.

                    The group’s property portfolio is valued at £131m. The value of the six London schools and one nursery that the bonds will be secured against is £84.4m.

                    S Korea tightens derivatives limits

                    Posted on 27 November 2012 by

                    South Korea has tightened limits on banks’ exposure to currency derivatives in an attempt to stem volatility in the rapidly appreciating won.

                    The finance ministry on Tuesday said domestic banks would be allowed to hold foreign exchange derivative positions up to a maximum of 30 per cent of their equity from January 1, down from the current level of 40 per cent. The limit for foreign bank subsidiaries will be reduced from 200 per cent to 150 per cent.

                      Following the announcement, the won rose 0.14 per cent to Won1084.4 against the US dollar. The South Korean currency had weakened last weak after Choi Jung-gu, deputy finance minister, indicated that such measures were likely.

                      “We expect capital flows to expand in the future, given the country’s relatively strong economic fundamentals and abundant global liquidity. We need to act preemptively on this possibility,” the finance ministry said on Monday.

                      The move is the first regulatory intervention aimed at curtailing excessive currency volatility since August 2011. The won fell sharply following the 2008 global financial crisis, reaching a trough of more than Won1,500 to the dollar the following year. But it has since risen strongly because of current account surpluses and net capital inflows to South Korea.

                      “What concerns us is the volatility,” Mr Choi told the Financial Times last week. “We’ve experienced it several times, in 1997, in 2008, and we were close to another crisis in 2011. We’re not worried about exports or imports.”

                      The won has strengthened by 9.3 per cent against the dollar over the past six months despite efforts by the authorities to check its rise. Previous measures have included direct intervention in the currency market and the reintroduction of a withholding tax on foreigners’ bond holdings.

                      Lee Jung-gu, a director at the Financial Supervisory Service, South Korea’s financial regulator, said the new restrictions on currency derivatives would not cause severe disruption in the banking sector.

                      “A handful of banks have forex forward positions above the new ceiling but most banks are managing their positions within the limit,” Mr Lee said.

                      The FSS and the Bank of Korea are currently conducting an investigation into whether some banks may have breached the existing limits.

                      Kookmin Bank, the country’s largest lender, was already “way below” the new ceiling, said Ha Jung, a manager in the bank’s trading department.

                      “We have enough foreign currency liquidity at the moment so no big impact from the new regulations is expected,” he said. “But it could reduce arbitrage trading using foreign currency derivatives in the long run.”