Habib Bank deal requires Gordhan nod

Finance Minister Pravin Gordhan must sign off Vardospan’s contentious buyout of Habib Overseas Bank’s South African assets

Vardospan’s buyout of Habib Overseas Bank’s South African assets has to be approved by Finance Minister Pravin Gordhan, who is involved in a legal dispute with the controversial Gupta family.

Entrepreneurship and Banking in the Nigerian Economy Growth.

Entrepreneurs occupy a central position in any market economy. They serve as the spark plug in the economy’s engine, activating and stimulating all economic activities. The economic success of nations worldwide is the result of encouraging and rewarding the entrepreneurial instinct.

economy

A society is prosperous only to the degree to which it rewards and encourages entrepreneurial activities because it is the entrepreneurs and their activities that are the critical determinant of the level of success, prosperity, growth and opportunities in any economy.

“The most dynamic societies in the world are the ones that have the most entrepreneurs, plus the economic and legal structure to encourage and motivate entrepreneurs to greater activities”, said an analyst.

Countries go to great lengths to promote entrepreneurs because they realize that the best way to tell the story of their business environment competitiveness is by using the entrepreneurs themselves to tell the story.

Skye Bank 2014 pretax profit falls to N10.47 billion

Skye Bank said on Friday its 2014 pretax profit fell 46.6 percent to 10.47 billion naira ($53 million), compared with 19.64 billion naira in the previous year.

Boosting liquidity to expand operations the Skye Bank way

Skye Bank plc is strategically positioning for market leadership going by its recent activities in the banking industry, in terms of capital raising.

Last week, the bank was reported to be making plans to raise as much as N50 billion ($250m) by selling stock this year, as it seeks to boost liquidity and fund operations.
As explained by Timothy Oguntayo, managing director/chief executive of the bank, the fund would be raised in second to third quarter of this year. “Details will be announced after our annual meeting,” he told Bloomberg in an interview.

Retail banking helps FCMB boost earnings

Few lenders in Africa’s largest economy, Nigeria, are as innovative as First City Monument Bank (FCMB) Limited, a bank that uses diversification to reduce risk and also maximise profit. In this time of high interest environment, FCMB’s 2014 full year result is worth emulating by other Nigerian lenders.

For the year ended December 2014, FCMB’s profit after tax surged by 38 percent to N22.13 billion from N16 billion the same period of the corresponding year (FY) 2013.

Gross earnings were up by 13 percent to N148.63 billion in the review period compared with N140.0 billion as at December 2013.

Bank Risks loss of 50,000 Home Loans after Ratings Move

Ulster Bank is at risk of losing control of almost 50,000 Irish mortgages to bondholders as a result of credit rating downgrades by Moody's.

Individual mortgages would not be affected if the accounts – which were bundled together by the bank to be used to borrow on the markets – were taken over by bondholders acting through trustee Deutsche Bank.

But homeowners would get a letter telling them of the change.

Ulster Bank borrowed against the Irish mortgages during the boom through a process called securitisation.

That process saw as much as €10bn raised by the bank on the market using the mortgages as collateral. As part of that scheme the bank committed to protect the value of the security for the life of the deals – which run until as late as 2047 and 2055 in some cases.

Six separate notices were issued on the Irish Stock Exchange on Friday night warning that Ulster Bank had fallen outside the terms of its securitisation agreements which included to "maintain ratings on its long-term unsecured, unsubordinated, unguaranteed debt obligations equal to or greater than BBB by S&P or Baa2 by Moody's".

That happened after Ulster Bank's parent Royal Bank of Scotland's (RBS) credit rating was cut from A3 to Baa1 in March.

Consequences

However there are strong indications Ulster Bank will remain in control of the loans.

Managers of the Celtic Residential Irish Mortgage Securitisations – the financial structure holding the Ulster Bank home loans – warned that any decision made to try and "perfect" the problem created by the ratings cut – including taking the loans off Ulster Bank – could be disruptive and have adverse consequences.

Fears include that borrowers might stop making payments if they were formally notified that their account had been taken away from the bank.

In a message to bondholders concerns were raised that writing to the 48,423 homeowners whose mortgage is affected would also be likely "to generate unfavourable media attention and comment which could materially impact both the timing and amount of collections on the mortgages".

Even if legal ownership of the mortgages were to be transferred from Ulster Bank to the Celtic vehicles – any movement would not impact on the customer's relationship with Ulster Bank, which would still manage the accounts.

A spokesman for Ulster Bank said the notices issued on Friday were required due to the change in Ulster Banks' credit rating in March 2014.

"Our mortgage customers are not impacted as a result of the issuance of this notice," he added.

ECB cuts interest rate to 0.15%

The European Central Bank (ECB) has lowered its benchmark interest rate to 0.15% from 0.25% in an effort to stimulate economic growth and avoid deflation in the eurozone.
 

                    Vanishing interest rates. ECB President Mario Draghi squeezes rates close to zero - and below

It has also reduced its deposit rate below zero, to -0.1%, which means commercial banks will have to pay to lodge their money with the central bank, rather than receive interest.

The idea is to incentivise the banks to lend to businesses, thereby stimulating growth.

The ECB is the first of the "Big Four" central banks (the ECB, the US Federal Reserve, the Bank of Japan and the Bank of England) to do this.

Howard Archer, chief UK and European economist at IHS Global Insight said: "Despite being widely anticipated and in some quarters criticised for occurring too late, it is still a bold and unusual move by the ECB to take its deposit rate into negative territory."

"There has to be considerable uncertainty as to how effective negative deposit rates will turn out to be," he added.

It has been tried before in smaller economies. Sweden and Denmark, who are both outside the Single Currency, attempted to use negative rates in recent years with mixed results.

Analysts said in Sweden it had little discernable impact; in Denmark it did have the effect of lowering the value of the currency, the Krone, but according to the Danish Banking Association it also hit the banks' bottom line profits.

Unconventional measures

The ECB's president, Mario Draghi, also announced other measures.

Long term loans are to be offered to commercial banks at cheap rates until 2018. These loans would be capped at 7% of the amount that the individual banks in question lends to companies. Thus, the more the banks lend to companies, the more money they can borrow cheaply from the ECB.

It's also doing preliminary work that would lead to buying bundles of loans that are made to small businesses in the form of bonds. This is being seen as a step towards providing companies with credit through the financial markets.

Mr Draghi said the ECB's policymakers unanimously agreed to consider more unconventional measures to boost inflation if it stays too low. He insisted that more would be done, if necessary.

"Are we finished? The answer is no. We are not finished yet," he said.

Shares jump, euro falls 

Even though some of the measures, like the more to negative rates on deposits, were expected European shares moved higher on the ECB announcements.

The benchmark German DAX 30 index jumped about the 10,000 level for the first time. The CAC 40 in Paris gained 0.77% shortly after the ECB's comments.

Meanwhile, the euro plunged to $1.3558, its lowest level in four months.

Deflation fears

Although the danger of deflation in the eurozone is limited, the ECB is concerned that growth is very sluggish and bank lending weak - both of which could potentially derail the fragile economic recovery.

The eurozone economy is only growing at 0.2%. Consumer spending, investment and exports are all growing at a slower pace than this time last year. 

Inflation in the Eurozone fell to 0.5% in May, down from 0.7% in April. This is well below the European Central Bank's 2% target.

Unemployment 

If the eurozone slips into deflation, consumers would spend even less because they'd expect prices to fall in future months. For the same reason investors stop investing.

Growth would then grind to a halt and demand would be severely constrained. The large debts amassed by the eurozone's countries, companies and banks would take longer and be harder to pay off.

Unemployment, which is already at nearly 12% in the eurozone, and much higher in places like Spain, Portugal and Greece, would get even worse.

It's a picture that prompted today's moves by Mario Draghi and the 23 other members of the governing council at the European Central Bank.