|Bid||43.20 x 1800|
|Ask||43.22 x 900|
|Day's range||42.20 - 45.59|
|52-week range||32.00 - 83.11|
|Beta (5Y monthly)||1.92|
|PE ratio (TTM)||5.36|
|Earnings date||14 Apr 2020|
|Forward dividend & yield||2.04 (4.96%)|
|Ex-dividend date||30 Jan 2020|
|1y target est||67.00|
The Federal Reserve will backstop the Small Business Administration’s emergency loan program, as lenders continue to work through the Paycheck Protection Program.
Citi announced today it is expanding assistance to U.S. customers impacted by COVID-19 through a range of new measures, including credit card payment deferrals and additional fee waivers. This announcement expands the assistance that Citi announced on March 6th, which included fee waivers for Citibank retail bank customers, hardship programs, and additional small business support.
(Bloomberg) -- Oil recorded its first loss in three days on signals that a glut is growing at America’s biggest storage depot and concern that an upcoming meeting among producers won’t yield large enough production cuts to offset cratering demand.Futures closed 8% lower in New York Monday, after earlier plunging as much as 11%. Industry data provider Genscape Inc. reported a 5.8 million-barrel rise in crude inventories in Cushing, Oklahoma, last week. This would be the largest weekly build at the hub in data going back to 2004 if the U.S. Energy Information Administration confirms it Wednesday.“Cushing is expected to fill up in the next several weeks after the April futures contract expired with a deep contango to May,” said Andy Lipow, president of Lipow Oil Associates in Houston. “Cushing will become operationally full over the next four to six weeks and therefore Cushing prices will be under pressure as producers look to divert ongoing output away from Cushing and toward the Texas Gulf.”The May contract settled at $3.90 a barrel below June, the weakest spread in a nearly week. The spread could widen further as the United States Oil Fund ETF will start rolling its positions out of the front month Nymex West Texas Intermediate May contract from Tuesday. This will finish by April 13. The fund, with $3.5 billion in assets, holds about 20% of the open interest in the May contract as of Friday.Traders are also concerned output cuts being touted so far for Thursday’s OPEC+ meeting won’t be enough to offset the 25 million to 30 million barrel a day decline in demand from the coronavirus pandemic, Lipow said.In three days, the world’s largest oil-producing nations are expected to negotiate a deal to stem the price crash. Russia and Saudi Arabia want the U.S. to join in, and America’s energy secretary said he had a “productive discussion” with his Saudi counterpart over the weekend about the instability in oil markets.“Momentum is building for a supply deal to be reached between the Saudis and Russia that will likely involve unprecedented cooperation between OPEC and non-OPEC oil producers,” said Ryan Fitzmaurice, commodities strategist at Rabobank. “The bar is currently set high at 15 million barrels a day and oil prices risk giving back all if not more of the recent gains if no consensus is reached this Thursday.”As crude futures fluctuate, the market for real barrels shows renewed weakness, trading several dollars below futures prices. Sellers from Russia to Congo are slashing prices in an effort to sell cargoes. At the same time, gasoline -- a premium product in normal times -- is currently unprofitable in Europe and barely profitable in America.Riyadh and Moscow are “very close” to an agreement on cuts, CNBC reported Monday, citing the head of Russia’s sovereign wealth fund. Still, a lack of participation from the U.S. -- the world’s largest producer -- could prove to be a stumbling block. Despite originally calling for a deal, Trump on Saturday described OPEC as a cartel and threatened tariffs on foreign oil.Meanwhile, Saudi Aramco has delayed the release of its closely watched monthly oil-pricing list until Thursday to await the outcome of OPEC+ negotiations, according to people with knowledge of the situation. The U.A.E. signaled the same move on Monday, while also indicating that it had sharply increased production so far this month.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Oil posted a record weekly jump on hopes that global producers will decide to make historic output cuts next week, though optimism was tempered by concern that the curbs won’t avert a glut.The OPEC+ coalition including Saudi Arabia will hold a meeting of its members by video conference on Monday, with the gathering open to even producers outside the group. While it’s unclear who will attend, market watchers are predicting that stockpiles are likely to swell even if global supplies are cut by 10 million barrels a day.Investors will be closing watching the guest list of the meeting -- especially names outside the Organization of Petroleum Exporting Countries and its allies -- after Saudi Arabia made clear it will only cut production if others, including the U.S., shoulder some of the burden.U.S. West Texas Intermediate futures ended the week up 32%, while Brent crude jumped 37%. Still, prices are less than half the levels at the start of the year, with the coronavirus crisis crushing demand.See also: Trump’s Push for Huge Deal to Cut Oil Supply Draws Disbelief“I think Russia, Saudi Arabia and OPEC are coming to the conclusion that if they don’t agree to something, it will be forced on them by the market,” said Brian Kessens, a portfolio manager at Tortoise Capital Advisors. “Any cuts will extend the run way to June instead of May, which is helpful as countries try to work through the coronavirus lockdown. But it only softens the blow.”One delegate from the producer group said a global cut of 10 million barrels a day is a realistic goal. Russian President Vladimir Putin told the country’s top oil executives that producing countries should join together to slash output to reverse the collapse in prices, adding that worldwide curbs of a little above or below 10 million barrels a day are possible.Meanwhile, U.S. President Donald Trump is convening an extraordinary gathering of the nation’s biggest refiners and producers at the White House on Friday. They are expected to discuss possible relief efforts from the administration, including potential American output cuts.Getting countries from all over the world to agree would be a tough task. Even if that’s successful, an output reduction of the size that’s being discussed will be just a fraction of the 35 million barrels of daily demand destruction some traders now see.Citigroup Inc. and Goldman Sachs Group Inc. have argued any supply-reduction deal would anyway be too little, too late as consumption craters due to efforts to stem the spread of the coronavirus.“A near-term return to production cuts still seems unlikely, and we are skeptical that such a large coalition could be put together,” Morgan Stanley analysts wrote in a note. Some of the necessary production shut-ins are likely to occur in the U.S. due purely to market forces.The announcement of a potential supply cut first came from Trump, who tweeted on Thursday that he had spoken to Saudi Crown Prince Mohammed bin Salman, who had in turn spoken with Russia’s Putin.However, the U.S. leader’s goal is purely aspirational and will ultimately hinge on whether Riyadh and Moscow can reach a deal, a person familiar with the situation said.Apart from benchmark futures, hopes for the curbs have boosted every corner of the market over the last 24 hours, from time spreads used to gauge market health, to key North Sea swaps. Those gains are now easing as traders worry that the undertaking may be too fraught with hurdles.The physical oil market of actual barrels of crude continued to remain under pressure, giving producers more urgency to act. Belarus said Russian companies are offering Urals oil for $4 a barrel.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Amid reports of problems with early rollout of the ‘Paycheck Protection Program,’ one of the key negotiators of the deal acknowledged “there will be some glitches.”
Banks were supposed to start processing loan applications on Thursday at midnight from small businesses under the $349 billion Paycheck Protection Program, but they weren't prepared for the onslaught.
(Bloomberg) -- Citigroup Inc. made more than $100 million trading a huge swath of the highest-rated collateralized loan obligations as market turmoil prompted asset managers in need of liquidity to unload securities at steep discounts.Citigroup bought roughly $2 billion of AAA rated CLO bonds in late March at around 90 cents on the dollar from PGIM, the investment management business of Prudential Financial Inc., according to people with knowledge of the matter. The bank was later able to sell them closer to par as prices recovered, said the people, asking not to be identified discussing a private matter.Representatives for Citigroup and PGIM declined to comment.Savvy Wall Street traders are already on the hunt for bargains as the coronavirus pandemic fuels significant price dislocations across credit markets. Eldridge Industries’ Todd Boehly has been scooping up higher-rated CLO debt that others were forced to sell, while investors including Highbridge Capital Management and Varde Partners are preparing funds to capitalize on turbulent markets.Citigroup’s deal helped provide liquidity for PGIM, the people familiar with the trade said. AAA bonds have been used by other sellers to boost capital in recent weeks, pushing spreads to extremes not seen since the financial crisis. Prices on the bonds, which pool leveraged loans, tumbled and spreads almost doubled to 500 basis points in one day alone. Buyers later resurfaced to purchase the beaten-down debt as spreads snapped back following measures by the Federal Reserve to keep credit flowing in the U.S. economy.Citigroup’s trade also comes as the market widely expects banks to use eligible AAA rated CLOs as collateral via another resource designed to prevent a credit freeze -- the Primary Dealer Credit Facility.The PDCF emergency lending program offers overnight and term funding to primary dealers, in exchange for eligible collateral, which also includes commercial mortgage-backed securities and collateralized debt obligations with the same top rating.Read more: Why Leveraged Loans, CLOs Feed Worries in Virus Slump: QuickTakeFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- Banks insist they’re in much better shape than they were during the run-up to the 2008 financial crisis. This time, as the coronavirus lockdowns wreck output, lenders can be “doctors of the economy,” in the words of one industry executive. True, banks have much larger capital buffers and better access to funding than was the case 12 years ago. How smart they've been at running their trading businesses remains to be seen.Some of Europe’s biggest banks have gone into the worst economic contraction since the Second World War sitting on huge piles of complex, risky trades whose fair value is hard to determine. These are the so-called Level 2 and Level 3 assets, the types of instruments that blew up in 2008.Valuations of Level 2 assets — mainly over-the-counter derivatives and illiquid stocks — are derived from using observable external measures, such as the price of similar instruments traded in the market. Level 3 assets are the most illiquid instruments, whose prices depend on inputs that aren’t observable to outsiders. Unlike Level 1 assets, which have easily viewed market prices, investors have to rely on banks’ internal models, and own judgments, to get a handle on the Level 2 and Level 3 exposure. Fair values for the same instrument might easily differ from firm to firm.The absolute size of these risky asset pots — totaling several hundred billions of dollars at many of the largest banks — is eye-watering. They dwarf the lenders’ capital by many multiples. Take Deutsche Bank AG: Its stock of Level 2 and Level 3 assets is more than 11 times its common equity Tier 1 capital. At Britain’s Barclays Plc, it is just shy of 11 times, at France’s Societe Generale SA it’s seven times and at Switzerland’s Credit Suisse Group AG it’s almost eight times. While plenty has been written about the inevitable build-up of bad loans in the Covid-19 downturn, these piles of interest-rate swaps and collateralized debt obligations need to be considered too. In the recent market rout, every major asset class was upended. U.S. stocks fell into a bear market at record speed, the dollar soared and safe-haven assets such as government bonds were rocked. How banks’ risky assets fared during the unprecedented turmoil is guesswork from the outside. All the banks listed in the table above declined to comment for this piece. One bank executive, who asked to remain anonymous, said the balances of banks’ Level 2 and Level 3 assets and liabilities may both have increased in the quarter, which would be a welcome sign that hedges have been working in the turmoil.For example, the decline in long-term interest rates would have increased the present value of years-old derivatives that swapped fixed rates for floating rates. Interest-rate derivatives tend to make up the bulk of the portfolios, and they may have offset declines in the prices of equities and loans. (That said, some hedges would have been for interest rates and inflation to rise, so they could be heavily in the red.)Less welcome is that banks will probably have to start moving things from Level 2 to Level 3 as price discovery becomes more difficult. Some may decide that observable measures through mid-to-late February are sufficient to keep assets in the Level 2 pot for the first quarter. Each bank has its own model. Lehman Brothers allegedly shifted mortgage-backed securities and other assets from Level 2 to Level 3 in 2008 in an effort to prop up their values.The market became hugely skeptical about these instruments during the financial crisis. A 2015 study published by the Journal of Accounting and Public Policy showed that investors valued Level 2 assets at 85 cents on the dollar and Level 3 assets at 79 cents during 2008. More troubling for the banks sitting on large stocks of Level 2 instruments is that an analysis by Wharton Research Scholars shows they were discounted even more significantly during the crisis than the more opaque Level 3 stuff.Investors should look at how frequently banks turn over their Level 3 assets, according to analysts at Berenberg, who published a report this week saying that France’s BNP Paribas SA, Credit Agricole SA and SocGen have the lowest turnover of Level 3 instruments among 12 banks they studied, which means the assets are probably “stickier and harder to sell.” Credit Suisse has the highest turnover among the group.The French banks, Credit Suisse, Barclays and Deutsche each hold Level 3 assets that are as large as, if not larger than, those of Citigroup Inc. and Bank of America Corp., even though the latter have much bigger trading businesses.The European Systemic Risk Board, the European Union body that monitors the financial system’s stability, has also noted the Level 2 and Level 3 threat — particularly the prospect for “opportunistic behavior” by managers and the overvaluation of assets. “If several banks were to be affected simultaneously at a time of acute fragility in the financial system, concerns could spread to the macroprudential domain and affect financial stability,” a February report from the board warned.What’s more, banks no longer have to use the crisis-era filters that protected their capital positions from movements in the fair value of assets they hold for sale. Without these filters, fair-value gains and losses are directly recognized in banks’ income statements even if they’re unrealized. And as my colleague Ferdinando Giugliano noted, significant risks may lie in smaller banks that may not have been as transparent in their Level 2 and Level 3 disclosures.Equally concerning is the faith being placed in banks’ risk management practices, especially since regulators started loosening the rules because of the Covid-19 crisis. In its 2019 review, the European Central Bank’s Single Supervisory Mechanism, its bank oversight arm, observed a worsening of internal governance, especially among the larger lenders. Regulator’s plans to tackle this area of weakness with a new set of capital rules for trading desks — known as the Fundamental Review of the Trading Book — was pushed back a year to January 2023 as part of the response to the coronavirus lockdowns. By then, it could be glaringly obvious how clever banks have been at managing risk.This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Elisa Martinuzzi is a Bloomberg Opinion columnist covering finance. She is a former managing editor for European finance at Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- Private equity firms are crying foul, fearful that companies they own are largely cut off from the $377 billion of small business loans and grants baked into the U.S.'s $2 trillion coronavirus relief bill. But do they really deserve any part in a bailout?Statistics from corporate loan borrowers that make $50 million a year or less in Ebitda don’t paint a pretty picture. An average middle-market business has a debt-to-Ebitda ratio of 4.8 times and is paying an interest rate of 7.7%, data from S&P Global Market Intelligence show. Put another way, this company is using about 37% of its operating earnings to pay interest alone(1) — and that was before the outbreak. So if this business were running at, say, one-third of its full capacity because of regional lockdowns, it wouldn’t even be able to cover its interest payments. A cheap loan from the Small Business Administration would certainly help. But before asking Uncle Sam for money, private equity firms should consider their role in this mess. Should they be liable if this virus morphs into a full-blown credit crisis?In the past decade, the sector started urging portfolio companies to tap the loan market rather than issue high-yield bonds, which were largely closed off to businesses their size. Today, roughly half of leveraged loans, or about $1.5 trillion, are issued by sponsors for their holdings.There’s certainly a good case for private equity firms to back leveraged loans. Unlike bonds, these loans can be called immediately — that is, borrowers can redeem them at any time — which allows portfolio companies to refinance more easily. What’s more, these businesses tend to be closely held; the loan market’s opaque reporting standards spare firms from quarterly financial disclosures to the Securities and Exchange Commission.But private equity’s large presence in the market has caused a fast deterioration of loan quality. Roughly half of borrowers are rated B or worse, up from 30% in 2012, data compiled by Citigroup Inc. show. After all, levering up to juice returns is the sector’s forte. Last year, more than 75% of deals included debt multiples greater than six times Ebitda, compared with 25% after the collapse of Lehman Brothers Holdings Inc., as I’ve noted.Everyone suffers in times of distress, private equity firms and corporate issuers alike. In March, the average yield of the S&P/LSTA U.S. Leveraged Loan 100 Index shot as high as 13% from 5.6% just a month earlier, as the Big Three ratings agencies were busy downgrading high-yield issuers at the fastest pace in at least a decade. If the Federal Reserve hadn’t stepped in with new financing facilities, how would Middle America roll over its loans?According to the parameters of the rescue bill, companies with more than 500 employees aren’t eligible for small-business relief. That number includes affiliates, meaning staff at portfolio companies are being added together. To get around this, the industry wants the Trump administration to view their investments as independent entities. In reality, these holdings don’t operate separately, at least not in terms of financing decisions. Private equity firms have teams of lawyers and advisers dedicated to crafting credit agreements that give them as much financial flexibility as possible, such as removing caps on leverage ratios. As a result, the leveraged loan market is now filled with covenant-lite loans, as my colleague Brian Chappatta has written. The wheel of fortune is turning. Banks that agreed to help private equity firms may be too busy with other obligations right now. With blue-chip companies drawing at least $124 billion from their credit lines in the first three weeks of March alone, and dollar funding tight, do lenders have the bandwidth? There are $66 billion leveraged loans mandated, or in the works, and about $10 billion under syndication — that is, marketed but not priced, data compiled by Bloomberg show.There’s good reason to believe the current jitters go beyond a few canceled deals, and could threaten to trigger system-wide margin calls. Leveraged loans aren’t mark-to-market, but the financing facilities that banks provide to asset managers (which allow the latter to buy such loans before packaging and selling them as bonds) tell a lot about the quality of these assets. Goldman Sachs Group Inc. and JPMorgan Chase & Co. already demanded their clients to put up extra collateral, or face the risk of liquidation, Bloomberg News reported last month.It’s unclear if industry titans can convince President Donald Trump to bail out their investments. For its part, the Federal Reserve is loath to make loans to distressed companies. Since the passage of the Dodd-Frank Act in 2010, the Fed isn’t allowed to take big credit risks and can only lend with a high degree of protection.Private equity may be in the eye of the storm, but it certainly doesn’t need a bailout. Last year, capital committed to this sector grew 20% to a record $1.3 trillion, according to data provided by PitchBook, a Morningstar company. So instead of trying to pass off their portfolio companies as small businesses, firms can use that dry powder to shore up the balance sheets of their investments.These firms came out of the collapse of Lehman Brothers fairly unscathed. Perhaps the coronavirus could finally teach them a lesson: Using cheap debt to pay themselves dividends isn’t such a savvy investment model after all. (1) 4.8 times 7.7% comes to 37%.This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. She previously wrote on markets for Barron's, following a career as an investment banker, and is a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Citi today announced the appointment of Anders Fogh Rasmussen, the former Secretary General of NATO and former Prime Minister of Denmark. He joins as a senior advisor in Citi’s European, Middle East and Africa business, with a primary focus on the Nordic region.
Citigroup Global Markets Holdings Inc. ("CGMHI") announced today that it will accelerate at its option, and in full, the two series of exchange-traded notes listed in the table below (the "ETNs").
(Bloomberg Opinion) -- Financial regulators are applying all of the lessons of the 2008 credit crisis at record speed. In the past few weeks, they’ve worked with central banks to pump liquidity into markets and to make it easier for banks to lend. It’s essential now that lenders keep providing money to companies and households whose incomes have evaporated in the Covid-19 lockdowns. If the banks stop functioning, what hope for the rest of the economy?The next chapter in European regulators’ crisis playbook is ensuring that the banks don’t hand much of their excess capital to investors or keep paying hefty bonuses to senior staff. Supervisors are trying to make sure that financial firms remain solid by easing their capital rules, thereby freeing up hundreds of billions of dollars — that places a heavy burden on the banks to act responsibly. Shares in British banks, including HSBC Holdings Plc and Barclays Plc, fell sharply on Wednesday after they halted dividends at the Bank of England’s request.Regulators are also preempting a popular backlash by discouraging cash bonuses to bankers. This makes perfect sense, given the support that lenders have already received by way of looser regulation and state loan guarantees.As we’ve heard from supervisors and banking executives in recent weeks, banks — for now — remain part of the solution to the unprecedented economic shock, rather than the problem. This isn’t 2008.The excessive banker pay that fueled the risk binge in the run-up to the Lehmans meltdown is still fresh in people’s minds. What’s more, during the global financial crisis, banks often took too long to suspend dividends and buybacks, leaving themselves thinly capitalized as losses piled up and hastening the need for government bailouts. Excessive pay during and soon after the crisis, including at bailed-out institutions, rightly infuriated the taxpayers that were left footing the bill.More than a dozen years after the financial crisis, a number of Europe’s biggest lenders — Royal Bank of Scotland Group Plc, ABN Amro Bank NV and Commerzbank AG — are still at least partly state owned. Little surprise then that the U.K. regulator “expects banks not to pay any cash bonuses to senior staff, including all material risk takers,” while the European Banking Authority is urging firms to pay conservative bonuses and consider deferring awards for a longer period and in shares.It could be worse. While bankers won’t be able to cash in on their deferred compensation from previous years’ share awards after stocks plunged, they will have already received their 2019 variable cash compensation by now, and they’ll have plenty of time to prepare for next year.Take the 1,700 traders and bankers at Barclays, who’ll be affected by the measures. About 45% of their average pay of 825,000 pounds ($1 million) consists of fixed pay, 22% comes from share awards, and 23% is a cash bonus (of which 58% is deferred), according to Citigroup Inc. analysts. While cash is king — especially during an economic crisis — getting more of that pay package in shares wouldn’t necessarily be a disaster, even if people had to wait a few years to sell. Assuming stocks don’t bounce back too far from their current levels, bankers might be getting a lot of very cheap stock in 2021.And however painful the hit, regulators are probably just insisting on something that the markets will probably take care of over the rest of the year anyway. The first quarter may have been a bumper three months for trading in financial markets because of all of the volatility, activity could well be subdued over the coming quarters as the recession really hits. That would depress bonuses anyway. The very best financiers will expect to see their fixed pay rise to sweeten the blow, but for most of the thousands of bankers and traders fortunate enough to keep their jobs, lavish compensation will be a thing of the past. The crisis will be as Darwinian for investment banking as it is for every other pocket of the economy. Hanging on to your chair will be your 2021 bonus.This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Elisa Martinuzzi is a Bloomberg Opinion columnist covering finance. She is a former managing editor for European finance at Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Singapore’s central bank said lenders will offer additional relief for consumers and companies battered by the sharp economic slowdown, including a freeze on mortgage and business loan payments and cuts to credit card rates.Banks and finance companies can defer both principal and interest payments on residential mortgages through Dec. 31, the Monetary Authority of Singapore said in a statement late Tuesday. Small and medium-sized firms can opt to defer principal payments on their secured term loans until the end of the year, the MAS said.The central bank’s latest loan relief adds to several other fiscal and monetary measures the city state is employing after the coronavirus pandemic induced the worst economic downturn in a decade in the first quarter. More than S$40 billion ($28 billion) of existing loan facilities to small businesses will likely qualify for the relief plan.“The shock to the economy from the COVID-19 outbreak is unprecedented,” Samuel Tsien, chairman of the Association of Banks in Singapore, said in the statement. “We must take extraordinary measures to address not just a health crisis, but what has developed to become a deep global economic crisis.”Given deep capital buffers, ample liquidity and low leverage, Singapore lenders “are well placed to not only ride out the economic storm caused by Covid-19, but also provide meaningful relief to individuals and SMEs affected by the crisis,” MAS Managing Director Ravi Menon said in the release.Bank ReliefDBS Group Holdings Ltd., Oversea-Chinese Banking Corp. and United Overseas Bank Ltd., Singapore’s three largest lenders, are already taking steps to help small firms and individuals with measures that include deferring principal repayments and liquidity relief.Given the banks’ combined asset books of nearly S$1.5 trillion, “the anticipated impact on the Singaporean banks’ earnings will be small” relative to the estimated S$40 billion for qualifying SME loans, Kevin Kwek, a banking analyst at Sanford C. Bernstein in Singapore, said in an emailed reply to questions. He added the Singapore lenders are unlikely to cut their dividends, as U.K. banks did late Tuesday.“Since the balance sheet isn’t likely at this point to take a big hit and capital ratios are robust, this year’s promised dividends won’t be affected,” Kwek said. “Next year will be a question of how much earnings are affected.”Still, the three major Singapore banks are suffering from the economic slowdown, which has driven down interest rates and increased the risk of loan defaults. DBS shares dropped 2.2% to S$18.16, taking this year’s decline to almost 30%. UOB shares fell by about the same measure, with a year-to-date drop of 28%. OCBC retreated 1.5%, with a loss of 23% in 2020.More MeasuresThe new measures announced by the central bank will also allow life and health insurance policy holders to defer premium payments for up to six months, while customers with property and auto insurance policies can set up an installment payment plan.“Deferring payments increases future obligations and hence borrowers and policy holders should weigh their options carefully,” the MAS said. “Financial institutions will process all applications expeditiously.”International banks operating in Singapore including Citigroup Inc. and Standard Chartered Plc are also joining the relief measures.Other highlights of the new measures:Companies, including SMEs, holding general insurance policies that protect their business and property risks may apply to their insurer for installment payment plans.Banks and finance companies may apply for low-cost funding through a new Singapore-dollars facility for loans granted under Enterprise SingaporeHomeowners can apply for up to nine months relief on principal payments and/or interest payments on their mortgages. Interest will continue to accrue on the deferred principal amount.Consumers with credit card balances whose income has been cut by 25% or more can apply for a term loan of as many as five years. The rate would be capped at 8%, compared with 26% typically charged.Banks can also access the $60 billion of MAS funding established on March 26Deputy Prime Minister Heng Swee Keat last week unveiled a second fiscal support package of S$48 billion to help businesses and consumers hurt by the virus outbreak. Gross domestic product fell an annualized 10.6% in the first quarter from the previous three months, and the government projected a severe recession for the full year.Singapore’s central bank also took unprecedented easing steps Monday to support the trade-reliant economy. The MAS, which uses the exchange rate as its main policy tool rather than a benchmark interest rate, lowered the midpoint of the currency band and reduced the slope to zero. That implies the regulator will allow for a weaker currency to bolster exports.(Updates with estimated size of banks’ assets in seventh paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Citi today announced that, due to the rapidly evolving situation caused by the coronavirus (COVID-19) pandemic, it will postpone its 2020 Investor Day that was previously scheduled for May 13, 2020. The company will continue to assess the situation and follow guidance from health authorities to determine a new date.
(Bloomberg) -- Xiaomi Corp. reported profit that beat analysts’ estimates thanks to robust growth in internet services and overseas business in the quarter before the start of the coronavirus pandemic.Adjusted net income jumped 27% in the three months ended December, to 2.3 billion yuan ($324 million), compared with the 1.98 billion-yuan average of estimates compiled by Bloomberg. Sales increased 27% to 56.47 billion yuan, versus estimates of 54.88 billion yuan.China’s No. 2 smartphone maker said that smartphone sales rebounded quickly in late March, underpinning resilient consumer demand. And its production capacity is already back up to between 80% and 90% normal levels. It warned however that the full impact of the pandemic on its international sales -- now about half its business -- won’t emerge till the second quarter.Xiaomi may be less exposed to the spread of Covid-19 than its competitors. That’s because its focus on e-commerce sets it apart from rivals who depend heavily on revenues from brick-and-mortar stores, Citigroup Analyst Andre Lin said in a recent research note. “Xiaomi also has a strong balance sheet and sufficient working capital to develop its business even with the prevailing headwinds,” he added.Manufacturing of its flagship phone Mi 10 was hit in February due to labor shortages at factories and thousands of its engineers at its newly built R&D center in Wuhan had to work from home for weeks. Just days following the reopening of more than 1,800 of its retail stores in China after a month-long shutdown, Xiaomi was forced to close its factories in India until mid-April. Its smartphone business in Italy, Spain and other European markets may also suffer as economies there grind to a halt.Xiaomi recorded a 31% surge in shipments in the fourth quarter, while others in the top 5 either lost ground or logged single-digit growth, according to research firm IDC. The holiday sales boom in overseas stronghold India, as well as gains from the higher-margin internet services businesses such as online video streaming and advertising, fueled Xiaomi’s growth.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Chinese manufacturing activity rebounded strongly in March, signaling that the world’s second-largest economy is restarting just as it faces a growing threat from slumping external demand.For manufacturing, the official purchasing managers’ index rose to 52.0 this month, according to data released by the National Bureau of Statistics on Tuesday. That’s up from a record low of 35.7 in February and above the 50 mark which signals improving conditions. The gauge covering services and construction was at 52.3.While the rise indicates better sentiment at Chinese factories, output remains a long way from normal. The survey asks firms to state how business was compared to last month, so the data just show that Chinese companies think things have improved from the sharpest contraction since at least 2005, when the series began.China is still expected to have an unprecedented economic contraction this quarter, something that would have been unthinkable before the viral outbreak. The outlook for the April-June period depends both on how quickly domestic demand can rebound now the virus is contained, and the strength of demand from overseas markets like the U.S. which are facing their own spikes in infections.“The number above 50 doesn’t mean that economic activity is fully resumed,” Zhang Liqun, a researcher at China Logistics Information Center, which helps compile the data, said in a statement on its website. “We need to fully understand the unprecedented austerity and complexity, and should pay great attention to the virus shocks on production and demand.”The Second Virus Shockwave Is Hitting China’s Factories AlreadyS&P 500 futures erased gains after hitting their highs Tuesday morning after the data. Asian stocks were mixed.Chinese factories, which endured weeks of work suspensions in February after travel and trade stopped nationwide, are now facing canceled export orders as the pandemic hits the rest of the world.“While manufacturing PMI rebounded rapidly in March, the survey showed companies still face relatively big operational pressures,” the NBS said in a statement, adding that more firms are reporting funding shortages and falling demand than in February. “The global virus spread will hit the world economy and trade seriously and bring new, severe challenges to the Chinese economy.”A sub-index of new export orders rose to 46.4 in March, up from 28.7. A manufacturing employment indicator stood at 50.9, compared with 31.8 in February.What Bloomberg’s Economists Say...“Despite improving conditions, the Chinese economy has not returned to normal, and faces challenges unseen for decades on both domestic and external fronts. Policy support is likely to be stepped up, especially fiscal measures. We also expect more monetary policy easing.”\-- Chang Shu and David Qu, Bloomberg EconomicsSee here for the full noteAround the region data showed a mixed picture for industry. Japanese industrial output rose slightly in February from January, boosted by output of electronics in the period before the virus really started to hit global supply chains. Car production was down and total output is forecast to drop 5.3% this month.South Korean output dropped 3.8% in February from January, with much of that caused by a shortage of auto parts affecting car production, according to Citigroup economists.In China’s services and construction sectors, while the headline number rose above 50, much of the underlying activity was still in contraction, with employment at 47.7 and new export orders at 38.6. That indicates companies don’t want to hire before they can confirm there’s been a solid return of business activities, according to Iris Pang, Chief Greater China Economist at ING NV in Hong Kong.“This won’t change overall policy stance,” according to Zhou Hao, an economist at Commerzbank AG. “I think the government is looking at the hard data to determine the policy steps, which is probably pointing to further economic headwinds and more policy support.”(Adds markets in sixth paragraph, data on Japanese and South Korean output from 10th paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- Stop all the clocks. That’s what the Indian central bank is permitting lenders to do for three months after Prime Minister Narendra Modi announced one of the harshest lockdowns anywhere in the world to arrest the spread of the coronavirus. India isn’t the only country going down the route of payment moratoriums. Malaysia has announced an automatic freeze on ringgit advances for six months for individuals and small businesses, and “strongly encouraged” banks to consider similar requests from larger firms. Loans kept in abeyance won’t count as nonperforming. The Philippines, which has already granted relief to 5 million homeowners on mortgage payments, has authorized President Rodrigo Duterte to order a more sweeping grace period. Australian banks are deferring mortgage and small-business repayments for up to six months.Is putting finance on ice the right strategy, especially in emerging economies? Agustin Carstens, general manager for the Bank for International Settlements, is advising central banks to follow a different approach: Get the last mile right. Make funding available; ensure it reaches distressed businesses and individuals; use monetary authority balance sheets to do so, but with governments guaranteeing credit risks. The recommendation is worth heeding to prevent a big outbreak of another kind: moral hazard.But first, some practical issues. One difficulty is that if a payment holiday is left to banks’ discretion (as it has been in India), the lenders will do all they can to grant it to as few customers as possible without inviting a backlash. Another is that a timeout can’t be efficiently employed when the funds for lending come not just from banks but also from investors.Take India’s microlenders. The $28 billion industry would be unable to collect anything much from the self-employed whose cash flows have dried up. Telling financiers they don’t have to provide for delinquencies sounds like a big relief when workers are fleeing cities to return to villages in what may be the biggest dislocation of lives and livelihoods since the 1947 partition of the subcontinent.But many of the loans that stop earning cash have been packaged and sold. Mutual funds and others holding a piece of the bundle aren’t covered by the moratorium, which applies only to to lending transactions and not investing decisions. Investors would demand to be paid. Asset-backed securities, where the underlying loan is a fleet of commercial vehicles or credit to small enterprises, may be able to cover payouts from the cash collateral over the next two to three months, “but this could be insufficient in the event of prolonged loan collection disruptions,” Moody’s Investors Service said Monday. As the structured obligations default, nobody will give the originating lenders new money to rebuild their broken businesses. They’ll sink.Many bank borrowers will still struggle to repay after three months, or six — the stopped time will mean more or bigger installments later. The Reserve Bank of India isn’t asking lenders to forgo any of the net present value of what they’re owed. But as politicians get involved, the moratoriums may turn into waivers. Institutions like credit bureaus, meant to instill repayment discipline in normal times, will get overwhelmed. That’s the moral hazard problem.Citigroup Inc. analysts have asked the same question about Malaysian banks: What happens in October if individuals or businesses still can’t service their loans? “Will there be a massive spike in nonperforming loans by year end?”Let’s face it. No monetary authority is hoping to replenish lost demand. The goal of the Federal Reserve and every other central bank is to ameliorate pain for borrowers while keeping the financial system alive so that it can support a recovery. Homeowners in the U.S. have been given protection from late fees and foreclosures for 60 days, provided there’s a Fannie Mae, Freddie Mac, Department of Agriculture or Federal Housing Administration backing for the mortgage.There’s plenty that countries like India can do differently. The Reserve Bank of India cut its benchmark borrowing rate Friday by 75 basis points to 4.4%. It slashed the banks’ cash reserve requirements and also promised lenders three years of cheap funding if they buy investment-grade corporate bonds and commercial paper. These are helpful measures, though cheap interest costs and $50 billion in liquidity don’t cover the last mile: borrowers whose dwindling cash flows have become much more uncertain.The BIS is right to ask central banks to focus on supply chains. Hero MotoCorp Ltd., India’s largest two-wheeler maker, has invoked force majeure to delay payments to suppliers, the Economic Times has reported. Before parts makers magnify the crunch, the Modi government should consider guaranteeing vendor debt backed by receivables from highly rated companies. Taking a leaf from Carstens, let the sovereign stand behind all fresh borrowing of firms and financiers equal to the taxes paid by them last year. The central bank can scoop up bundles of these obligations, encouraging more issuance and investment.Eventually, the government may have to make good on some credit losses. To the extent the RBI aggressively buys the notes, it’s money going from one pocket to another. At a time when an increase in fiscal deficit or debt should be the last worry, pumping more funds to people may be the better way. Putting finance on ice will only store up trouble. This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Due to the escalating nature of the coronavirus pandemic and in light of recent guidance from the Centers for Disease Control and Prevention, the World Health Organization, and federal, state and local public health authorities, NOTICE IS HEREBY GIVEN that the location of the Annual Meeting of Stockholders of Citigroup Inc., to be held on April 21, 2020, at 9:00 a.m. Central Time (10:00 a.m. Eastern Time), has been changed to a virtual meeting format only, instead of holding an in-person meeting in Houston, Texas.
Citi announced on Tuesday that it hired women-owned firms as lead managers of a $4 billion bond issuance on behalf of Citigroup Inc. to commemorate Women’s History Month.
Despite the current economic slowdown, strong fundamentals of JPMorgan (JPM) and Citigroup (C) suggest that the companies are well-poised for the future.