banks

Pound tumbles, gilts rally after BoE nods at rate cut ahead

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Pound tumbles, gilts rally after BoE nods at rate cut ahead

– The Bank of England (BoE) kept its benchmark interest rate at 5.25%, the highest since 2008.
– The decision followed data showing inflation fell to its lowest in almost two-and-a-half years but remained high.
– After the BoE’s decision, the pound fell by as much as 0.48% to a session low of .2726 and was down 0.3% against the euro at 85.63.
– Two-year gilt yields dropped by as much as 12.8 basis points to 4.103%.
– The BoE’s interest rate-setters voted 8-1 to keep borrowing costs at 5.25%.
– Britain’s headline inflation rate fell to 3.4% in February from 4.0% in January, the highest in the Group of Seven.
– Money markets were pricing a 75% chance of a BoE rate cut in June after the decision.
– The Swiss National Bank delivered a surprise quarter-point rate cut, the first major central bank to dial back tighter monetary policy aimed at tackling inflation.
– The Bank of Japan raised rates for the first time in 17 years, and the Federal Reserve indicated it might cut rates three times this year.
– A survey showed British businesses continued to recover from recession, with inflationary pressures persisting.

Turkey central bank stuns market with 500-point rate hike to 50%

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Turkey central bank stuns market with 500-point rate hike to 50%

Turkey’s central bank raised interest rates by 500 basis points to 50% due to a deteriorating inflation outlook and may tighten further if inflation worsens significantly and persistently. This decision, seen as a demonstration of the central bank’s independence, occurred 10 days before nationwide local elections. Following the rate hike, the lira appreciated by up to 1.5% against the dollar, and Turkey’s dollar bonds rallied. Since last June, the central bank has increased the key one-week repo rate by 4,150 basis points from 8.5%, following a shift towards more orthodox economic policies after President Tayyip Erdogan’s election victory in May. The central bank also adjusted its policy operational framework, setting the overnight borrowing and lending rates 300 basis points below and above the repo rate. Inflation in Turkey rose to 67% last month, higher than expected, despite a series of rate hikes since June. A Reuters poll showed that while most respondents expected the rate to remain steady in March, a majority anticipated further hikes later in the year. The central bank has also taken steps to tighten credit, including adjusting reserve requirements and raising the maximum rate on credit card cash withdrawals. Tighter fiscal policy is expected after the upcoming elections, which could increase credit costs and exacerbate the cost-of-living crisis in Turkey.

Cyprus banks to maintain stability, but lower profits, says Moody, ’s

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Cyprus banks to maintain stability, but lower profits, says Moody, ’s

– Risks associated with loans for Cypriot banks are expected to decrease due to economic growth, declining inflation, and unemployment rates.
– Moody’s predicts a decline in bank profits from recent highs.
– A gradual decrease in net interest margins is anticipated due to rising deposit costs and falling interest rates, influenced by competition and high levels of private sector debt.
– Stricter loan criteria and loan restructuring efforts are improving loan quality and reducing problematic loans.
– Asset quality risks from foreclosed properties are diminishing, supported by a strong real estate market.
– The banking sector in Cyprus is characterized by a low loan-to-deposit ratio and ample liquidity reserves.
– Cyprus’ GDP is forecasted to grow by 2.8% in 2024 and 3.2% in 2025-27, outpacing the euro area by 0.8% in 2024.
– Economic growth is supported by diversification in the services sector and significant foreign direct investment projects.
– Moderate growth in the loan portfolio is expected due to the banking system’s saturation, high private sector debt, and elevated interest rates.
– Monetary policy is expected to remain restrictive, even with interest rate reductions by the European Central Bank.
– The NPE ratio is expected to decrease below 3% this year.
– The proportion of foreclosed assets relative to bank equity is decreasing, supported by the real estate market.
– Capital risks are declining, with banks completing risk release and balance sheet restructuring.
– The Common Equity Tier 1 ratio for assessed banks increased to 18.8% at the end of 2023.
– Moody’s assessment focuses on Cyprus’ two largest domestic banks, Bank of Cyprus and Hellenic Bank, which represent a significant portion of the banking system’s assets.
– The weighted average Baseline Credit Assessment of the two major banks is ba2, with a weighted average asset-based deposit rating of Baa3.

Goldman Sachs digital asset head says crypto rally driven by retail investors

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Goldman Sachs digital asset head says crypto rally driven by retail investors

The recent surge in cryptocurrency prices has been driven primarily by retail investors, with institutions beginning to participate, according to Goldman Sachs’ head of digital assets, Mathew McDermott. Bitcoin reached an all-time high of ,794 last week and has seen a 50% increase this year. Goldman Sachs launched a crypto trading desk in 2021 and has observed a significant change in client types and trading volumes this year. Analysts suggest that the influx of funds into US spot bitcoin ETFs, which launched this year, may be contributing to bitcoin’s gains. The cryptocurrency market experienced a boom during 2020 and 2021, driven by low interest rates, but faced a downturn in 2022 following a series of bankruptcies among major crypto firms, leading to a trillion loss in market value. McDermott mentioned Goldman Sachs’ interest in bankruptcy claims and investment opportunities in the crypto sector. Despite the volatility and risks associated with bitcoin, there is interest in the blockchain technology behind cryptocurrencies for trading assets other than cryptocurrencies. McDermott anticipates that more asset classes will be tokenized in the future, potentially gaining scale within one or two years.

Article 23: what you need to know about Hong Kong’s new national security laws

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Article 23: what you need to know about Hong Kong’s new national security laws

Hong Kong’s 90-seat legislature passed a new national security law, known as Article 23, which updates or introduces laws to prohibit treason, sabotage, sedition, the theft of state secrets, and espionage. It includes sentences of up to life imprisonment for several offenses and up to 20 years for espionage. The law aims to tighten control over foreign political bodies and organizations in the city and includes provisions against “external interference.” The need for these laws is stipulated in Article 23 of the Basic Law, which has guided Hong Kong’s relations with China since 1997. A previous attempt to enact Article 23 in 2003 was halted after significant public protest. The law also introduces a new offense related to endangering national security through the unlawful use of computers or electronic systems, with a penalty of up to 20 years in prison. Concerns have been raised about the broad definition of state secrets and the potential impact on research and information gathering. Hong Kong’s leader, John Lee, claims the laws meet international standards and protect rights and freedoms. Additionally, Beijing imposed a national security law on Hong Kong in 2020, addressing some offenses and allowing mainland national security officers to operate in the city. China updated its own state secrets laws in 2023, with Hong Kong’s legislation aiming to be compatible with the standards of British-based common law.

Spurs slump to heavy defeat at Fulham

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Spurs slump to heavy defeat at Fulham

Rodrigo Muniz scored twice in Fulham’s 3-0 victory over Tottenham Hotspur at Craven Cottage, significantly impacting Tottenham’s hopes for a top-four finish in the Premier League. Muniz’s goals, along with another from Sasa Lukic, secured Fulham’s first league win against Tottenham in their last 10 meetings. This victory also marked a notable home double for Fulham over Tottenham, having previously knocked them out of the League Cup. Following this match, Tottenham remained in fifth place with 53 points from 28 games, while Fulham was in 12th spot with 38 points from 29 games.

Bank of England set to play for time before first rate cut

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Bank of England set to play for time before first rate cut

The Bank of England is expected to maintain uncertainty about when it will start reducing interest rates, awaiting clearer evidence that inflation pressures are diminishing. Despite other central banks moving towards cutting borrowing costs post-COVID pandemic and inflation projected to decrease to the 2% target soon, the BoE has labeled its high rates as “under review.” Governor Andrew Bailey expressed a cautiously optimistic outlook, noting inflation expectations appear controlled and concerns over a price-wage spiral are lessening. However, Bailey indicated no rush to lower the Bank Rate from its 16-year peak of 5.25%, citing labor market data uncertainties and geopolitical risks. In February, the decision to keep the Bank Rate steady was supported by six rate-setters, with two advocating for an increase and one for a reduction. Analysts anticipate a similar 6-2-1 vote split in the next decision, potentially influenced by upcoming inflation data. The BoE forecasts inflation to slow to 2% in the second quarter following a decrease in regulated energy costs but expects a rise to almost 3% later in 2024. Inflation reached a high of 11.1% in October 2022. The central bank remains concerned about the risk posed by fast-growing wages, with Britain’s minimum wage set to increase by nearly 10% and employers offering pay settlements of about 5% since the start of 2024. Former BoE deputy governor Charlie Bean highlighted that Britain’s pay growth is roughly double the level consistent with 2% inflation. The BoE is seen as moving more slowly towards rate cuts compared to other central banks, with the British economy showing signs of recovery from a short recession. Finance minister Jeremy Hunt announced tax cuts to moderately boost consumers. The European Central Bank and the US Federal Reserve are contemplating rate cuts, potentially placing the BoE behind. Economists at HSBC predict inflation could drop to as low as 1.2% in May and June before rising later in the year, challenging the BoE’s communication on maintaining its current stance. A Reuters poll shows economists mostly expect rate cuts to begin in the third quarter, with 40% anticipating a move in the second quarter. Investors do not fully expect a quarter-point cut until August. The BoE’s March monetary policy decision will be announced without a press conference, as no new economic forecasts are due to be published.

UBS, ’s rescue of Credit Suisse creates new risks for Switzerland, OECD says

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UBS, ’s rescue of Credit Suisse creates new risks for Switzerland, OECD says

The Organisation for Economic Cooperation and Development (OECD) has stated that UBS’s rescue takeover of Credit Suisse has introduced new risks and challenges for the Swiss economy, despite stabilizing financial stability. The merger, which was the largest bank merger since the global financial crisis, has significantly increased UBS’s size, making it a more dominant force in the Swiss banking sector. The OECD has raised concerns about UBS’s domestic dominance and the potential need for stronger financial regulation. The Financial Stability Board has also highlighted the risks posed by UBS’s failure to Switzerland and has called for stronger bank controls. The Swiss government is considering proposals to enhance regulations for big banks. The OECD report also mentions that the merger could lead to significant job losses but believes the Swiss labor market can absorb these losses. Additionally, the report notes that the Swiss housing market, while showing signs of cooling, still has vulnerabilities with properties being overvalued by up to 40%. The average price for an apartment in Switzerland has risen to over 1 million Swiss francs, with prices in Zurich reaching 1.8 million francs. The OECD forecasts that the Swiss economy will grow by 0.9% in 2024 and 1.4% in 2025, which is below the country’s long-term average growth rate.

FCA signals watchdog open to ending to free banking in Britain

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FCA signals watchdog open to ending to free banking in Britain

Britain’s Financial Conduct Authority (FCA) CEO, Nikhil Rathi, stated the FCA would not oppose changes to the UK’s free banking model if banks decide to introduce fees for account holding to offset rising regulation costs. Rathi emphasized the importance of protecting retail customers through the Consumer Duty rules and acknowledged concerns about regulation increasing pressure on banking business models and margins. He clarified that the current free banking model is a market choice, not a regulatory requirement, except for basic bank accounts. Consumer groups criticized Rathi’s comments, with Simon Youel from Positive Money highlighting banks’ record profits and opposing the reduction of free services. Rathi, leading the FCA since October 2020, mentioned the Consumer Duty could reduce compensation levies on financial firms and stressed a pragmatic approach to enforcing these rules. He highlighted the focus on the cash savings market and certain insurance products, and mentioned the FCA’s investigation into potential overcharging in motor finance, which could lead to significant redress costs for banks. Rathi also mentioned a cautious approach to regulating AI advancements in financial services.

Eurobank growing into a regional powerhouse , — Cyprus central to its plans

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Eurobank growing into a regional powerhouse , — Cyprus central to its plans

– Eurobank’s financial results for 2023 exceeded initial expectations.
– Eurobank has a business plan for 2024-2026 aiming to become a regional banking powerhouse.
– The bank has a strong presence in Cyprus, which is expected to deepen.
– The bank’s board of directors will meet in Cyprus on March 20-22.
– Eurobank’s 2023 financial highlights include a per-share net profit of €0.31 and a return on equity of 18.1%.
– Earnings per share increased by 21.1% compared to 2022, reaching €2.07.
– 37% of net profits came from international activities.
– The Capital Adequacy Ratio (CAD) was 20.2% and the Common Equity Tier 1 (CET1) ratio was 17%.
– Non-performing exposures (NPEs) were at 3.5%, with a coverage ratio for non-performing loans of 86.4%.
– The loans-to-deposits ratio was 72.3%, and the liquidity coverage ratio was 178.6%.
– The business plan for 2024-2026 includes integrating Hellenic Bank in Cyprus and expanding in the region.
– About 50% of profits are expected to come from international operations.
– The plan targets a capital return of about 15% on a recurring basis and a dividend payout ratio of nearly 50% by 2026.
– Net interest income increased by 46.9% compared to 2022, reaching €2.17 billion.
– Fee and commission income grew by 4.2% in 2023, totaling €544 million.
– Organic revenues increased by 35.8% annually, reaching €2.71 billion.
– Operating expenses increased by 5.2% compared to 2022, reaching €902 million.
– The cost-to-income ratio improved to 33.2% in 2023.
– Organic pre-provision operating income increased by 58.6% annually, totaling €1.816 billion.
– Provisions for impaired loans increased by 24.7% compared to 2022, reaching €345 million.
– Organic pre-tax operating profits surged by 69.4% in 2023, totaling €1.47 billion.
– Adjusted pre-tax profits amounted to €1.55 billion, with adjusted net profits increasing by 6.6% to €1.256 billion.
– Adjusted net profits from international activities increased to €468 million in 2023.
– Operational performance in Cyprus and Bulgaria showed substantial improvement.
– Eurobank acquired a majority stake in Hellenic Bank and completed the acquisition of BNP Paribas Personal Finance in Bulgaria.
– Eurobank’s regional presence is significant, contributing approximately 37% to its profitability in 2023.
– Eurobank Cyprus began operations in 2007 and is the third-largest bank on the island.
– Eurobank Cyprus operates in five core business pillars.
– Eurobank has no intention of using Hellenic Bank’s excess liquidity elsewhere in the group.
– Eurobank and Hellenic Bank will continue to operate separately until conditions are met for their merger.
– Eurobank signed a Memorandum of Understanding with NPCI International Payments Limited to enhance remittances from Greece to India.