|Bid||5.65 x 43500|
|Ask||5.80 x 29200|
|Day's range||5.63 - 5.79|
|52-week range||4.52 - 12.44|
|Beta (5Y monthly)||1.70|
|PE ratio (TTM)||4.27|
|Forward dividend & yield||N/A (N/A)|
|Ex-dividend date||09 Aug 2019|
|1y target est||N/A|
(Bloomberg) -- India’s central bank cut interest rates in an unscheduled announcement on Friday and kept the door open for further easing to help an economy it expects will contract for the first time in more than four decades.Governor Shaktikanta Das reduced the benchmark repurchase rate by 40 basis points to 4%, the lowest since the measure was introduced in 2000, and pledged to take “whatever measures are necessary” to support the economy. The monetary policy committee, which met ahead of its scheduled meeting in early June, retained its “accommodative” stance, implying it could ease policy further.The rate cuts along with the central bank’s move to allow borrowers more time to repay loans are expected to provide relief to India’s stressed businesses and consumers, many of whom were left disappointed with the fiscal stimulus announced recently. Companies are struggling in the face of a collapse in demand, with millions of jobs already shed in an economy where consumption is the backbone of growth.“Going forward, we will continue to be vigilant and we will take whatever measures are necessary to meet the Covid-related challenges which are ahead of us,” Das said. “The RBI will continue to remain vigilant and in battle readiness to use all its instruments and even fashion new ones, as recent experience has demonstrated, to address dynamics of the unknown future.”The central bank now expects the economy to contract in the fiscal year through March 2021, Das said, after activity was brought to a virtual halt amid the coronavirus pandemic and measures taken to contain the outbreak. Goldman Sachs Group Inc. is predicting a 45% annualized decline in GDP in the quarter through June from the previous three months, which it said will result in the economy shrinking 5% for the full fiscal year.The yield on the most-traded 2029 bonds fell 11 basis points to 5.93% as of 1:23 p.m. in Mumbai, while that on the new 10-year notes dropped 3 basis points. The rupee weakened and stocks reversed gains to halt a three-day rally ahead of a long weekend.Read More: Bonds Rally in India After RBI Announces Emergency Rate Cut“The off-cycle move may have caught the markets off-guard, but it shouldn’t be a total surprise given recent dismal activity indicators,” said Prakash Sakpal, an economist at ING Groep NV in Singapore. “GDP is headed for a sharp contraction, as much as 5% year-on-year on my estimate, in the current quarter.”Das’s comment that the RBI could turn to new policy instruments signals his willingness to do more to bolster growth. The central bank has already pumped in more than $50 billion into the financial system and announced targeted liquidity operations to support some sectors of the economy.What Bloomberg’s Economists SayThe Reserve Bank of India’s surprise 40 basis point cut to its policy repo rate at an unscheduled meeting on Friday isn’t much in the context of the massive disruptions to economic activity as a result of the virus-induced lockdown. We doubt it will do much to spur a faster recovery in demand.Click here to read the full report.Abhishek Gupta, India economistCalls are also rising for the RBI to buy government bonds directly from the government to help finance a widening fiscal deficit and surging borrowing. The RBI has been prevented from monetizing the deficit since a law was passed in 2006 banning its participation in the primary market.Shilan Shah, a senior economist at Capital Economics Ltd. in Singapore, said there’s likely to be further interest rate cuts and liquidity steps, like long-term repo operations, and perhaps a reduction to the cash reserve ratio. Deficit financing was an option “as long as the boundaries of it are very strict and well-defined so that it doesn’t spook markets,” he said.The RBI has now lowered its benchmark rate by a cumulative 115 basis points so far this year after also cutting rates at an emergency policy meeting on March 27.Das also outlined the following measures on Friday:The reverse repurchase rate was cut to 3.35% from 3.75%The moratorium on bank loans was extended for another three monthsRules for withdrawal of funds by states were relaxedLimit on banks’ group exposure to companies raised to 30% from 25%Pre- and post-shipment credit rules for exporters easedForeign portfolio investors given an additional three months to meet investment needsOn inflation, the central bank expects the headline number to ease in the second half of the year and revert toward its medium-term target of around 4%. Core inflation, which strips out the volatile food and fuel prices, is likely to stay subdued, it said.With fiscal pressures mounting and a credit rating downgrade looming, the central bank may have to shoulder more of the stimulus burden. While Finance Minister Nirmala Sitharaman last week announced an economic package of about 21 trillion rupees ($277 billion), or 10% of GDP, the actual fiscal cost amounted to just about 1% of GDP.“With limited space for fiscal expansion, the central bank will have to do the heavy lifting,” said Manish Wadhawan, founder at Serenity Macro Partners.(Updates market reaction in sixth paragraph and adds comment from economist in 10th.)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) -- The Bank of England is studying how low U.K. interest rates can be cut amid the coronavirus crisis and isn’t excluding the idea of taking borrowing costs below zero, according to Governor Andrew Bailey.“Given what we’ve done in past few weeks, it should come as no surprise to learn that of course, we’re keeping the tools under active review in the current situation,” Bailey told lawmakers on Wednesday when asked about negative rates. “We do not rule things out as a matter of principle. That would be a foolish thing to do. That doesn’t mean we rule things in either.”The comments come amid a growing debate about the possibility of negative interest rates in the U.K., which intensified Wednesday after a report showed inflation slowed to the lowest level since 2016 and the nation sold debt with a sub-zero yield for the first time. Bailey said his position on going below zero had changed since entering the pandemic, but the policy had received “pretty mixed reviews” elsewhere.While officials have repeatedly emphasized such a move isn’t imminent, and would be tricky to implement in the U.K., they’ve also stressed nothing is off the table in their efforts to fight the impact of coronavirus. The fallout could push the economy into the deepest recession in three centuries.Interest-rate swaps, which are used to gauge where the benchmark may be, are just below 0% for December, and get progressively lower in 2021.Still, a full 10 basis-point cut below zero is yet to be fully priced in. That means that rather than outright bets on a negative rate, those moves might represent traders hedging against the prospect of a worsening economic situation making easier policy more likely.“In investors’ minds even a small probability of negative interest rates in the dollar and pound is a big change”, said Antoine Bouvet, rates strategist at ING Groep NV. “That the possibility remains open, even if small, and might cause some investors to pre-hedge.”Read More:U.K. Inflation Rate Drops Below 1% Amid Negative Rate Debate Negative Interest Rates Are Last on BOE List, Barclays SaysU.K.’s First Negative-Yielding Bond Sale Fuels Debate Over RatesBailey said the BOE was keen to observe the impact of its previous U.K. rate cuts, bearing in mind arguments that they become less effective the closer to zero they are. It’s also examining the experience of other central banks that have cut below zero, he said, adding the financial system in an economy is an important factor.The governor has previously expressed a stronger opposition than other policy makers to the tool, saying they would present a communications challenge and prove difficult for banks. Others have been more sanguine, with Silvana Tenreyro saying they’ve had a positive effect elsewhere and Chief Economist Andy Haldane noting they were something officials were examining among other unconventional tools.Cutting interest rates below zero is the last policy option that BOE officials would currently choose to further stimulate the economy, according to Barclays, which sees more asset purchases as the most likely next step.What Our Economists Say:“Would negative rates really be a game changer if the economy needed a lift? Probably not. The reality is the BOE is at the limits of its powers to boost spending. If demand did need a lift further down the line, we think a more potent policy mix would be for the BOE to continue with QE while fiscal policy does the heavy lifting.”\-- Dan Hanson, U.K. economistAnother side effect would be to further weaken an already beleaguered pound, making imports more expensive. While exports would typically get a boost, the impact of the pandemic on trade means that’s less likely this time.“I can’t think of an economy where negative rates are a worse idea than the U.K.,” wrote Kit Juckes, a strategist at Societe Generale. “How on earth does it make sense to even consider adding negative rates to the mix?”(Adds further comments from Bailey in third 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) -- Britain sold bonds with an average yield below zero for the first time, intensifying a debate on negative rates hours before testimony from the head of the Bank of England.The U.K. Debt Management Office raised 3.75 billion pounds（$4.6 billion) by tapping existing bonds maturing in 2023. While the yield at minus 0.003% is little surprise to market watchers -- given that the existing bonds were already trading at roughly the same level -- what makes the auction precarious is the timing.That’s because if Governor Andrew Bailey repeats his opposition to negative interest rates when testifying before Parliament’s Treasury Select Committee Wednesday at 2:30 p.m. in London, buyers could see the value of their gilt holdings plummet.“If he was overtly hawkish, yields on short gilts would be likely to rise,” said John Wraith, head of U.K. and European rates strategy at UBS Group AG. “But I suspect whatever he says will be aimed at reassuring the market and wider public that the BOE stands ready to do anything and everything it thinks could help if the economic situation worsens.”Gilts have rallied this week after BOE policy makers Andy Haldane and Silvana Tenreyro raised the prospect of further easing, with Brexit fears and the coronavirus lockdown pushing Britain toward its worst recession in three centuries. Yet Bailey has pushed back against negative rates, saying last week that although nothing should be ruled out forever, they were not under consideration.In March, the BOE announced it would add 200 billion pounds of gilts and corporate bonds to its asset-purchasing program, expanding it by 45%. Barclays Plc, which sees negative rates as the last policy tool the BOE would choose, expects a further 100 billion pounds of quantitative easing in June.Economic WoesAdding fuel to the fire, U.K. inflation in April fell to the lowest since 2016 amid a drop in energy prices and an economic slowdown induced by the lockdown.“This morning’s release of the U.K. CPI inflation data shows that price pressures are way below where the Bank of England would like them to be,” Jane Foley, a strategist at Rabobank. “This adds interest into the debate about negative interest rates.”While the nation’s economic outlook is bleak, the sale highlights that the government’s huge spending plan to support the U.K. hasn’t spooked investors. That’s largely thanks to the BOE’s asset-purchase scheme, which has kept the cost of borrowing close to historically low levels.It’s one reason why demand outstripped the amount of bonds on offer more than two fold. Even though existing bonds due July 2023 saw their yield fall more than 60 basis points this year to 0%, Citigroup Inc. strategists including Jamie Searle say the issue looked cheap compared to peers with similar maturities.“If anything, this also shows that despite the additional gilt issuance, there is still a structural shortage,” said Antoine Bouvet, senior rates strategist at ING Groep NV.On Tuesday, investors piled into the U.K.’s syndicated bond sale, with orders for the 7-billion-pound offering exceeding 53 billion pounds.Negative RatesOvernight interest-rate swaps are pricing in sub-zero rates by December’s BOE meeting, yet are only just below 0%. The contracts fall progressively lower through 2021, reflecting caution in the market about how to interpret the BOE’s messaging, concern about the consequences of lifting the lockdown too soon and the risk of a messy divorce from the European Union.Sterling traders are also watching Bailey for clues, with the currency snapped two days of gains ahead of his testimony. The price of insuring against a swing in the pound against the dollar overnight is hovering near regular highs seen since early April, as traders position for turbulence after he speaks.“I can’t think of an economy where negative rates are a worse idea than the U.K.,” Kit Juckes, a strategist at Societe Generale, wrote in an emailed note. “How on earth does it make sense to even consider adding negative rates to the mix? The economic benefits are dubious but the power of a cocktail of negative rates and massive QE to weaken the currency seems clear.”(Adds inflation data and Rabobank comment from 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.
The Ing Groep Nv (AMS:INGA) share price has risen by 4.88% over the past month and it’s currently trading at 4.9915. For investors considering whether to buy,...
(Bloomberg Opinion) -- Large institutions resist change, and nowhere more so than in the way they pay their bosses.Despite scandals and crises, executive compensation has remained too generous, too opaque and too loosely linked to long-term goals. The upheaval wrought by the Covid-19 pandemic provides the opportunity for a remake: Simpler, smaller packages with a more significant non-financial component would mark a welcome shift.The figures are stark. Inflation-adjusted pay for chief executives at the largest U.S. companies climbed 940% between 1978 and 2018, the Economic Policy Institute found, using the more conservative of two methodologies, in a report published last year. The S&P rose about 700% over the same period. Worker wages, meanwhile, increased by less than 12%.The size of pay packages is only the most eye-catching part of the problem: Far more important is how corporate leaders are remunerated, and whether that lines up with long-term goals, financial and otherwise. As a gauge, consider the increase in attention paid to environmental, social and governance, or ESG, targets. This has permeated incentive plans in only a minority of cases. A mere 9% of FTSE All World companies link executive pay to ESG criteria, mostly occupational health and safety concerns, according to Sustainalytics. Even for those, only a tiny proportion of total remuneration is affected.The good news is that the current cataclysm is prompting better behavior than we saw during the 2008 financial crisis, with at least some leaders moving swiftly to share the pain of employees. Qantas Airways Ltd. Chief Executive Officer Alan Joyce, whose airline has furloughed most of its workforce, won’t take any salary until the end of the financial year in June. Elsewhere in aviation, Ryanair Holdings Plc CEO Michael O’Leary has taken a steep pay cut, along with staff. General Electric Co.’s Larry Culp will forgo his full wage for the rest of 2020.Granted, they have better cushions than most employees and there is self-interest here, given the outsize importance to corporate valuations of intangible assets like reputation. Yet these are welcome gestures, not least when compared to those who have rushed to cut costs and take government help without trimming at the top. They aren’t markers of real change, though. It will be far more significant to see how boards manage short- and long-term incentive decisions for 2020. Shareholder advisers are already warning against excesses in variable pay. There is one bigger reason to anticipate substantial change: timing. The coronavirus has hit at a critical moment for shareholder capitalism. It’s been two years since BlackRock Inc. co-founder Larry Fink told CEOs to contribute to society. The Business Roundtable last year had executives pledge to build companies that serve “all Americans.” ESG demands are louder, as seen at last month’s annual general meeting of Australian oil and gas outfit Santos Ltd. It was happening already; now it’s happening faster.Xavier Baeten, professor in reward and sustainability at Vlerick Business School in Belgium, says companies are likely to see pressure from at least two quarters. First, shareholders may well balk at remuneration that rises when dividends dissipate. Second, governments could make aid dependent on firms not paying bonuses. Society may also find hefty bonuses more unpalatable after months of clapping to support underpaid nurses and carers.So what are the changes to aim for? Pay is inherently complex, and investors can make multiple and often competing demands of one board. It’s also true that despite plentiful research demonstrating that pay isn’t a significant motivating factor for chief executives, the quantum is unlikely to change dramatically. There is, though, plenty of scope to improve structure.Most obviously, a post-pandemic world could do with a stronger push from board members (and investors) for increased transparency and simplicity, with fewer, more individually tailored goals. Then, we need share allocations that encourage executives to think over longer time-frames, and don't just result in colossal pay awards in boom years. This could mean more restricted stock that has to be held for a period even once employment has ceased. It could mean extending ownership requirements. There are plenty of pitfalls: Proxy advisers will need convincing, and long holding periods can mean executives discount the perk. The advantages are significant, though.A third step could be to increase the non-financial portion of targets to as much as half of the total. Again, these aren’t popular with advisers who dismiss what they see as soft goals. Still, as compensation consultant Seymour Burchman of Semler Brossy argues, they reinforce strategy if tailored, specific and measurable. Dutch bank ING Groep NV, for example, uses retail customer growth as one measure. Others might use customer satisfaction, investment targets, total recordable injury frequency rate or, as Semler Brossy’s Kathryn Neel points out, corporate reputation, as gauged by a third party. ESG would be part of this, in a testable and appropriate form that measures opportunity as well as risk. For resources companies, that could be a multiplier that nullifies all bonus in the event of an accident. For a drinks company, it might be water management, or reducing plastic. Combined with the obligation to hold shares for longer, the incentives align.Shareholders’ meetings globally have been delayed or moved online because of the coronavirus, but there is plenty more disruption to come. Boards, the ultimate arbiters, will find decisions this year have lasting consequences. In a crisis, underestimate pay at your peril.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Clara Ferreira Marques is a Bloomberg Opinion columnist covering commodities and environmental, social and governance issues. Previously, she was an associate editor for Reuters Breakingviews, and editor and correspondent for Reuters in Singapore, India, the U.K., Italy and Russia.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) -- The Philippine economy contracted in the first three months of 2020 as restrictions to stem the coronavirus outbreak shut most businesses and sapped consumption, a trend seen worsening in the current quarter.Gross domestic product fell 0.2% in the first quarter compared to a year ago, using 2018 as the new base year, the Philippine Statistics Authority said Thursday. That was worse than the median estimate of a 2.9% growth in a Bloomberg survey of economists and was the first contraction since the fourth quarter of 1998, according to the agency.GDP slumped by 5.1% in the three months ended March 31 compared to the previous quarter, deeper than the 2% contraction expected by economists. That’s the worst quarter-on-quarter performance on record, according to data compiled by Bloomberg.“Saving hundreds and thousands of lives has come at a great cost to the Philippine economy,” Acting Planning Secretary Karl Kendrick Chua said at a virtual briefing. The second quarter will be worse because of the lockdown since mid-March that covers the capital and much of the Luzon island that accounts for more than half of domestic output.Last quarter’s print surprised many analysts including Standard Chartered Plc’s Chidu Narayanan and Natixis Asia Ltd’s Trinh Nguyen who both see more policy rate cuts on the horizon.What Bloomberg’s Economist Says:“The surprise contraction in Philippine first quarter GDP underscores the severity of the coronavirus pandemic, and highlights that a deeper slump is yet to come. With the lockdown on Luzon effectively shutting down the country’s main economic engine from mid-March, that is paving the way for a much steeper plunge in 2Q.”Justin Jimenez, Bloomberg EconomicsThe Philippine Stock Exchange Index slid as much as 0.7% while the peso fell as much as 0.2% before trading little changed at 12:02 p.m. in Manila.President Rodrigo Duterte plans to gradually reopen the economy after May 15, possibly allowing construction, manufacturing and other essential services to restart, his spokesman said on April 28. With improved testing capacity and as curbs are lifted in some areas, the economy may see a “good recovery” in the second half, Chua said.Rescue PlanThe Philippines is drafting an economic recovery plan, Chua said, to support hard-hit industries. To raise funds, the government sold a $2.35 billion dollar bond and is negotiating as much as $7 billion from multilateral lenders.The government will “need to beef up the stimulus rescue plan,” said Nicholas Mapa, a Manila-based economist at ING Groep NV. “Monetary policy has done much of the heavy lifting and we look for the government to super size the current recovery bill given that 1Q is but a preview of the steep drop we’ll see in 2Q and 3Q.”Bangko Sentral ng Pilipinas has cut the benchmark rate by 1.25 percentage points and banks’ reserve requirement ratio by 2 percentage points this year. It has also provided the government a $6 billion lifeline, purchased its bonds in the market and had eased regulations to support banks and borrowers.(Updates with comments from economic chief, analysts)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.
The truth is that if you invest for long enough, you're going to end up with some losing stocks. But long term ING...
Sergio Ermotti's total compensation was dented by UBS's underwhelming financial results and an ongoing French tax case against the bank.
(Bloomberg Opinion) -- Standard Chartered Plc may have many failings. At least it has a leader.The London-based emerging markets bank run by Bill Winters hasn’t had the best of years, and the outlook, with so much exposure to virus-affected Hong Kong, is looking grim.It does, though, have a stable team, led by a CEO about to complete five years in the job. That puts the bank in a better place than traditional rival HSBC Holdings Plc, which is undergoing a radical overhaul with 35,000 job cuts under caretaker CEO Noel Quinn.On Thursday, StanChart posted full-year underlying pretax profit of $4.2 billion, slightly behind the consensus forecast of $4.3 billion, and announced a $500 million buyback. That was less than the $1 billion analysts had expected. The bank salved the disappointment by hinting that it will return more capital to shareholders after completing the sale of its stake in Indonesia’s PT Bank Permata. There’s no share buyback in the works at HSBC.Standard Chartered said that the coronavirus outbreak will delay its target of a 10% return on tangible equity by 2021. The epidemic has led to a shutdown of factories in China and wide-ranging travel disruption that has interrupted global trade. Its warning mirrors that from HSBC, which said last week that the outbreak could lead to as much as $600 million in additional loan losses if it continues into the second half of the year.Having Winters at the helm gives StanChart an edge — and not just over HSBC. Several other European banks have new or no heads. Earlier this month, Credit Suisse Group AG named a new CEO after ousting Tidjane Thiam over a spying scandal; UBS Group AG poached ING Groep NV Chief executive Ralph Hamers; Barclays Plc, according to the Financial Times, is looking for a replacement for Jes Staley, who’s preparing to retire from the bank next year amid allegations of links to sex offender Jeffrey Epstein.Winters hasn’t exactly had a chummy relationship with investors. He took a pay cut after shareholders complained about his high pension allowance last year, a revolt that he initially criticized as “immature and unhelpful.” To put that painful episode behind him, the CEO will need to offer a meaningful increase in shareholder returns from last year’s 6.4%, two percentage points lower than HSBC.Unfortunately, this is unlikely to be the year. As with HSBC, Hong Kong is StanChart’s single biggest market. Before the impact of last year’s anti-government protests could fade, the coronavirus has arrived to threaten the economy again. The outbreak will also hurt Singapore, another key market.All the same, if and when he leaves Winters will in all likelihood hand over a more solid franchise than he received. When he joined in June 2015, StanChart was neck deep in bad corporate loans in India and Indonesia. That problem is in the rearview mirror now. Even though the loan loss rate ticked slightly higher last year, it was just over half what it was two years ago. While asset quality pressures may rebuild because of the supply-chain disruption from the coronavirus, at least the bank’s ability to endure as an independent institution is no longer in doubt. Having made a mark as a digital lender in underbanked Africa, StanChart is now in the fray to open an online-only bank in Hong Kong. Given the aging demographics of its existing client base in the former British colony, going after more millennials and Generation Z customers may be a smart move.Asia is the biggest profit pool for banks worldwide. But growth is slowing and competition from fintech is on the rise. With global interest rates once again going limp, there’s little hope for boosting profit margins. While Winters can perhaps keep a tight leash on costs, he may not be able to pare them any further. Having pushed back the 10% return on equity target to beyond next year, even juicy buybacks won’t keep investors from souring on the one CEO who — to borrow from a StanChart advertising tagline — seems to be here for good. Or as close to that as it gets in European banking nowadays.To contact the authors of this story: Nisha Gopalan at email@example.comAndy Mukherjee at firstname.lastname@example.orgTo contact the editor responsible for this story: Matthew Brooker at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Nisha Gopalan is a Bloomberg Opinion columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.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.
(Bloomberg Opinion) -- After being ruled by effectively the same coalition for 61 years, Malaysia just witnessed the alternative collapse in less than two. The crisis sparked by the shock resignation of the 94-year-old prime minister, Mahathir Mohamad, and how it’s resolved will grab all the attention for now. But the arrival of short-cycle politics will cast a long shadow over the Southeast Asian nation and investors will reset their antennae.Mahathir ruled from 1981 until retirement in 2003, only to return 15 years later to cause the biggest electoral upset in Malaysia’s history. But while his latest government did make an early attempt to remove politicians from state-linked companies and disallow “support letters” that help favored businessmen win contracts, institutions in Malaysia remain far too unreformed and weak to withstand prolonged political flux. What happens next is unclear, though an investment recovery this year can be easily ruled out. Mahathir might yet cobble together the 112 lawmakers needed to form the next government. Or, he may back someone other than Anwar Ibrahim, to whom he was supposed to hand over the top job after about two years. But the prime minister obviously didn’t like his new partner and old enemy enough to commit to a transition date. (Mahathir fired Anwar, who was his chosen successor, in 1998 during the Asian financial crisis. Anwar was imprisoned on convictions of corruption and sodomy that he said were a plot to remove him from politics). The 72-year-old Anwar could take a shot at power, though he looks resigned to not becoming the eighth prime minister of independent Malaysia. “Maybe the ninth,” he said at a prayer ceremony at his home as the fall of Mahathir’s government looked imminent. His party, which was allied with Mahathir in an unwieldy coalition, has split. Economic Affairs Minister Azmin Ali, who was also jockeying for the top job, left with a small breakaway faction of 10 other lawmakers.The long-ruling Barisan Nasional regime, which was Mahathir’s political home before he fell out with his successors, is now back in the frame. Backing Mahathir — or his appointee — against Anwar may be the best chance for its elites to revive the old order. The coalition lost its stranglehold on power in 2018 because of popular disgust against then-premier Najib Razak over a scandal in which $4.5 billion was allegedly stolen from the 1Malaysia Development Bhd, or 1MDB, state investment company and laundered around the world. Najib is on trial for a range of related crimes; the former prime minister rejects the allegations against him.Whatever the outcome, it looks likely that the new dispensation will seek legitimacy by aligning itself with the Malay-Muslim majority. The ethnic Chinese and Indian minorities, which had long hoped that Anwar would get a chance to fulfill his promise of making economic entitlements needs-based, rather than centered on race, will be disappointed. Decades of pro-Malay policies forged in great part under Mahathir have encouraged rent-seeking while prompting young, educated and disillusioned minorities to seek their fortunes elsewhere.When it comes to spawning new-age digital companies, the country is lagging behind its neighbors. Smaller Singapore and poorer Indonesia are both doing better, despite Malaysia making an early start to industrialize its traditional oil and plantation economy. Any emerging coalitions will be too vested in the status quo of public construction contracts to seek a course correction. Unstable administrations also tend to be myopic about spending and taxation. One of the first things Mahathir did upon his May 2018 return was to scrap the goods and services tax, which had lowered Malaysia’s budgetary reliance on its aging oil fields. The GST was deeply unpopular because it was perceived to have raised the cost of living. But Malaysia’s high investment-grade rating probably won’t survive the global electric-vehicle revolution without more diversified sources of government revenue. It’s unclear how committed a new finance minister will be to medium-term fiscal goals. What should investors make of this muddle? Most of the reassessment may occur in the price of the currency as foreigners get cold feet. Malaysian government debt, on the other hand, might remain in demand from local retirement funds.A slowing economy, which is already starting to weigh on the under-performing equity market, could support bonds. The coronavirus outbreak in China, which absorbs more than a fifth of Malaysian exports, is threatening to crush gross domestic product growth this year to 3.5%, according to ING Groep NV, its slowest since the global financial crisis.But just as neighboring Singapore rolls out billions of dollars in fiscal relief to mitigate the impact of the epidemic, decision-making in Kuala Lumpur is suddenly imploding, with Mahathtair continuing only as interim prime minister. The economy this year could well become an early victim of Malaysia’s shortening political cycle.To contact the author of this story: Andy Mukherjee at firstname.lastname@example.orgTo contact the editor responsible for this story: Patrick McDowell at email@example.comThis 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.
(Bloomberg Opinion) -- European banks have a problem with their boardrooms.From the Anglo-Asian giant HSBC Holdings Plc to Spain’s Banco Santander SA and Switzerland’s Credit Suisse Group AG, a troubling phenomenon has become apparent at many of the region’s lenders: the weakness of the body tasked with ensuring the company’s success.Bankers are already under pressure because of rock-bottom interest rates and digital disruption, so it’s far from ideal that their boards appear slow, clumsy and overly beholden to their chief executives. Proper corporate governance matters as much now as it did during the financial crisis. While lenders may be simpler and safer by some measures, they’re still impenetrable to the outside world, and new risks are always emerging. Their CEOs need to be chosen, managed and held in check more effectively.An endless series of boardroom dramas has beset Europe’s banks in the past year. Consider HSBC. the continent’s biggest lender has just embarked on its biggest overhaul in decades (its third attempt to adapt to the post-crisis era), a plan that involves tens of thousands of job cuts, scrapping buybacks and reallocating capital to more profitable businesses. It’s hardly the time to be leaderless.Yet six months after ousting CEO John Flint, who only held the job for a year and a half, HSBC’s board hasn’t made up its mind whether it wants to give his interim replacement Noel Quinn the job, or to hire externally.In fairness, finding the right boss for a sprawling bank with a $2.7 trillion balance sheet is the most important task of the board and Chairman Mark Tucker — alongside setting the strategy. It mustn’t be rushed. But a strategic overhaul of this magnitude needs a leader who owns the new plan. The longer the appointment drags out, the tougher it will be for Quinn to execute; and the harder it would be for a credible external candidate to implement someone else’s turnaround story. The board has given itself until as late as August, but time isn’t on its side after the favorite outside candidate, UniCredit SpA’s Jean Pierre Mustier, committed himself to his current employer.HSBC’s board is in fine company when it comes to messy situations. At Barclays Plc, another regulatory probe into CEO Jes Staley — this time looking at his relationship with the disgraced financier Jeffrey Epstein — raises questions about oversight at the top of the firm. Staley was fined previously for attempting to unmask a Barclays whistleblower. The London-based bank took two months to go public on the latest inquiry, and it hasn’t shared details of its own review into the CEO’s relationship with Epstein. While one shouldn’t jump to conclusions, more transparency from the board would have been invaluable to investors.Elsewhere, the Credit Suisse board hardly covered itself in glory during a months-long spying scandal that cost CEO Tidjane Thiam his job. While Thiam was cleared of knowing about the surveillance operations against employees, past and present, it’s pretty damning that neither he nor the board were aware of those activities being carried out by key personnel. The Swiss giant’s directors must share responsibility for an episode that damaged the bank’s reputation and upset employees.In April, Santander faces its own embarrassing showdown in a Spanish court. After withdrawing its offer of the CEO post to Andrea Orcel — the former head of investment banking at UBS Group AG — over a disagreement on pay, Santander is being sued by Orcel for more than 100 million euros ($108 million). Why Santander would have agreed to honor UBS’s generous financial obligations to Orcel, and then withdrew the proposal, is unclear. A detailed account of alleged text messages between Santander Chairman Ana Botin and Orcel and his wife, published by Reuters, points to personal relationships possibly playing a bigger role than they should have in a CEO appointment.For its part, UBS botched its own internal CEO succession plan, and eventually hired Ralph Hamers from ING Groep NV — despite the Dutch bank’s failings over money-laundering and Hamers’s lack of experience in UBS’s core businesses. That was a controversial move by the directors of the world’s biggest wealth manager. In the age of the “purposeful company,” bank boards should be leading the way on properly representing their shareholders, as well as employees and society. It isn’t obvious whose interest they’ll serve by remaining so ineffective. To contact the author of this story: Elisa Martinuzzi at firstname.lastname@example.orgTo contact the editor responsible for this story: James Boxell at email@example.comThis 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) -- If you’re a banker sitting somewhat idle at UBS Group AG, you may be feeling vulnerable today. The Swiss giant has picked Ralph Hamers — an outsider credited with making ING Groep NV one of Europe’s most digitally savvy and cost-efficient banks — as its new chief executive officer. That sets a clear strategic direction for UBS.The lender is turning to an experienced hand in trimming costs and using machines instead of humans. Still, beyond the obvious signals about how UBS intends to defend its bottom line in the future, it’s hard to portray the recruitment of the 53-year-old Dutchman, a lifer in banking, as a truly radical choice at a time when the robots are taking over finance. As Morgan Stanley’s $13 billion acquisition of E*Trade Financial Corp. shows, managing wealth in the future will involve a considerable degree of technology nous and automation. Hamers did well by introducing popular banking apps for ING’s retail customers, but servicing the rich is a different game.Plus, with the boardrooms of some of Europe’s biggest banks mired in controversy, the arrival of the former ING CEO will raise a few eyebrows: The Dutch lender had to pay $900 million to settle an investigation into alleged money-laundering.After successfully turning around UBS by shrinking its trading business and expanding in private banking, outgoing CEO Sergio Ermotti has taken his foot off the pedal somewhat recently. The $2.6 trillion wealth manager hasn’t adapted as swiftly as competitors to negative interest rates and the firm’s bloated costs have hit its profitability.So hiring someone from outside Swiss financial circles will at least bring some kind of break. A focus on operational costs has helped another Swiss bank, Credit Suisse Group AG, and Italy’s UniCredit SpA.While it’s not entirely obvious that Hamers can replicate at UBS what he did in Dutch consumer banking, his laser focus on expenses will be positive. The appointment also ends uncertainty about the leadership of the Swiss bank, where half the executive management team has changed in the past two years.Hamers is certainly experienced, having spent almost three decades at ING, including six as CEO, but he’s never cut his teeth running an investment bank. That unit soaks up 30% of UBS’s risk-weighted assets and is generating returns that even Ermotti deems unacceptable. Nor has the new man run a wealth management business, which makes up about 60% of UBS’s profit. Barclays analysts noted that none of the investors they’d spoken to had named Hamers as a potential Ermotti successor.Then there’s ING’s patchy record of oversight and controls. In 2018, the Dutch lender agreed to pay that $900 million to settle an investigation into corrupt practices by former clients. The bank was also reprimanded by its regulators over the money-laundering scandal. Its chief finance officer had to leave.In fairness, it’s hard to find a senior banker with a question-free past right now: Nordic banks have been embroiled in money-laundering scandals too; Credit Suisse ousted CEO Tidjane Thiam amid a spying scandal; and Barclays Plc’s CEO is being probed by British regulators over his ties to the deceased financier Jeffrey Epstein.Hamers arrives with many of the right attributes for the job, and UBS investors pushed up the share price on Thursday. UBS Chairman Axel Weber says his new CEO will have learnt from the money-laundering debacle. But this is a very big beast to get right. To contact the author of this story: Elisa Martinuzzi at firstname.lastname@example.orgTo contact the editor responsible for this story: James Boxell at email@example.comThis 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.