STAN.L - Standard Chartered PLC
| Previous close | 570.60 |
| Open | 560.00 |
| Bid | 564.80 x 0 |
| Ask | 565.40 x 0 |
| Day's range | 544.00 - 569.60 |
| 52-week range | 544.00 - 742.60 |
| Volume | 17,293,505 |
| Avg. volume | 5,627,174 |
| Market cap | 17.982B |
| Beta (5Y monthly) | N/A |
| PE ratio (TTM) | 9.98 |
| EPS (TTM) | 56.40 |
| Earnings date | 29 Jul 2019 - 02 Aug 2019 |
| Forward dividend & yield | 0.21 (3.65%) |
| Ex-dividend date | 05 Mar 2020 |
| 1y target est | 8.78 |
- Bloomberg
Commodity Returns Plunge by the Most in Years on Virus Sell-Off
(Bloomberg) -- Returns from commodities are plunging on fears that the spreading coronavirus will crush demand for raw materials, fuel and food across the globe.The Bloomberg Commodity Total Return Index, a measure that takes into account expiry of futures contracts as well as cash collateral invested in U.S. Treasuries, declined has 6.9% this week -- the most since 2011. Another gauge of returns is at the lowest level since 1987.The outbreak is exacerbating a decline that was already underway due to rising supplies and global trade wars. Almost no commodity is being spared from the rout. Global benchmark Brent crude slid below $50 a barrel for the first time since December 2018, a gauge of grain prices posted a second monthly loss, and even gold -- a haven asset -- was hit.The carnage is showing no signs of abating as the virus continues to spread, now more quickly outside of China than within the country where the outbreak began. Major commodity trading houses are keeping employees from going abroad and several events this week at the oil industry’s biggest gathering were canceled. Fear over the economic fallout has savaged markets, sending U.S. equities to a seventh straight loss.“It has a major impact on demand when public life virtually comes to a standstill,” said Carsten Fritsch, a commodity analyst at Commerzbank AG. “Even gold seems not immune to this at the moment.”EnergyU.S. benchmark West Texas Intermediate oil plunged almost 16% this week -- the most since December 2008. Futures settled at $44.76 a barrel in New York.Brent crude for May in London fell to as low as $48.94 a barrel, ahead of a crucial meeting next week in Vienna between OPEC and its allies about whether to extend the current deal to curb output and keep prices stabilized.Saudi Arabia wants the Organization of Petroleum Exporting Countries and its allies to agree to collective production cuts of an additional 1 million barrels a day.Natural gas futures fell 3.9% as forecasts show unusually mild weather spreading across the U.S. east in the first two weeks of March.MetalsSpot gold fell as much as 5% to $1,563.07 an ounce, the biggest intraday loss since 2013. Standard Chartered Bank said the drop in bullion may be driven by investors selling the metal to cover margin calls in tumbling equity markets, although it was positive on the outlook longer term as the U.S. Federal Reserve will ease interest rates.Base metals posted their second monthly drop, with nickel sliding 1% on the London Metal Exchange Friday.Mining shares continued to tumble. The Bloomberg World Mining Index posted the steepest intraday loss since 2016, and Rio Tinto Group, BHP Group and Glencore Plc all declined.AgricultureIn crops, palm oil had its worst week in 11 years in Malaysia.Chicago wheat futures are headed for the worst weekly loss since March. News that China’s edible oil and animal feed factories are running at pre-virus levels has failed to stoke soybean prices.Sugar fell 0.4%, cotton declined 1.6% and cocoa slid 2.7%.\--With assistance from Ann Koh, Atul Prakash, Thomas Biesheuvel, Elena Mazneva, Jake Lloyd-Smith, Megan Durisin, Naureen S. Malik, Yvonne Yue Li and Justina Vasquez.To contact the reporter on this story: Pratish Narayanan in New York at pnarayanan9@bloomberg.netTo contact the editors responsible for this story: Lynn Doan at ldoan6@bloomberg.net, Pratish Narayanan, Joe CarrollFor 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.
- Simply Wall St.
Is Standard Chartered PLC's (LON:STAN) CEO Pay Fair?
Bill Winters has been the CEO of Standard Chartered PLC (LON:STAN) since 2015. This report will, first, examine the...
- Bloomberg
Crude Sinks to Lowest in a Year as Coronavirus Panic Increases
(Bloomberg) -- Oil tumbled to the lowest since early January 2019 on mounting fears of the coronavirus contagion wreaking havoc on economic growth.Futures fell 3.4% in New York on Thursday and are poised for the worst weekly loss since 2014 as the coronavirus spreads further outside of China, roiling financial markets. The S&P 500 sank as much as 10% since last Friday and pushed the index into a correction, while the Dow Jones Industrial Average fell to the lowest in almost five months. California’s governor said the state was monitoring 8,400 people for the virus on Thursday, adding to the alarm of a global pandemic.“We definitely saw some aggressive, panic-like selling,” said Rebecca Babin, a senior equity trader at CIBC Private Wealth Management. “There’s still some room for downside because emotions are running high with the virus. We need a positive catalyst to put the floor in otherwise the direction is just lower from here.”The U.S. benchmark crude has fallen about 23% this year as the virus hits demand for fuels. Investors are assessing whether the Organization for Petroleum Exporting Countries and its allies will be able to agree on deeper production cuts as a response to the coronavirus during a meeting next week in Vienna. Saudi Aramco is already supplying China with 500,000 barrels a day less than normal in March due to the outbreak.OPEC Secretary-General Mohammad Barkindo said the group and its allies are showing a “renewed commitment” to reaching an agreement that will stabilize oil markets when producers meet. “The fast-evolving impacts of the virus mean the challenge is akin to catching a falling knife,” Bill Farren-Price, a director at consultant RS Energy Group, now part of Enverus, said in an email. “Agree too-small a cut and risk undermining credibility, or over-tighten the market and boost oil prices just at the time when the global economy is flirting with a downturn.”West Texas Intermediate futures for April delivery slid 3.4% to settle at $47.09 a barrel on the New York Mercantile Exchange.A measure of oil-market volatility surged to the highest level since September.Brent for April settlement lost $1.25 to end the session at $52.18 a barrel on the ICE Futures Europe exchange, putting its premium over WTI at $5.09.So-called time-spreads further down the futures curve have also weakened, with the closely-watched December 2020-2021 differential at the weakest in more than a year on Thursday, highlighting the market’s demand concerns.Oil could fall below $30 a barrel if OPEC+ fails to agree to a production cut, Standard Chartered Plc analysts Emily Ashford and Paul Horsnell wrote in a report. Russia has so far resisted pressure from Saudi Arabia for an OPEC+ agreement to cut production further as the virus hits demand.\--With assistance from James Thornhill.To contact the reporter on this story: Jackie Davalos in New York at jdavalos10@bloomberg.netTo contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net, Jessica Summers, Catherine TraywickFor 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
Europe Stocks Enter Correction; SocGen Says Half-Way Into Slump
(Bloomberg) -- A sell-off in European equities intensified, pushing the regional benchmark into a technical correction, as more companies warned that the coronavirus would hit profits, while cases of the epidemic outside China increased.The Stoxx Europe 600 Index dropped 3.8%, extending its slump from the record high on Feb. 19 to 10%. Anheuser-Busch InBev NV and Standard Chartered Plc were the latest companies to sound the alarm about the outbreak’s impact on earnings.Equities are plunging this week on fears about the outbreak’s impact on global growth and corporate earnings. The U.S. reported its first instance of coronavirus that doesn’t have ties to a known outbreak, while the World Health Organization noted there were more cases reported in countries other than China for the first time.Societe Generale SA strategists including Alain Bokobza and Frank Benzimra wrote in a note on Thursday that European equity markets remain vulnerable and are only halfway through the pull-back, with autos, oil, mining, luxury goods as well as travel and leisure among the most affected sectors.European equities have now wiped out all the sharp gains made since late October. The Stoxx 600, which now trades below its 200-day moving average, is on track for its worst week since the heat of the euro-area sovereign debt crisis in August 2011.“Given the recent volatility, fear is the dominant factor,” said Guillermo Hernandez Sampere, head of trading at asset manager MPPM EK. “In a very short period, we went from all-time high celebrations to panic mode. It’s too early to ‘buy the dip’ in my view and I expect investors to stay on the sidelines or increase cash.”Travel stocks tumbled yet again on Thursday, leading declines. The sector has plunged the most among industry groups since Feb. 19. AB InBev slid 11% to the lowest since 2012 after the world’s largest brewer forecast the steepest decline in quarterly profit in at least a decade due to the coronavirus. Standard Chartered slipped 3.6% after saying it will miss a key profitability target amid the outbreak.“Investors should minimize their exposure to industrial commodities, luxury goods and European airlines,” said Seema Shah, chief strategist at Principal Global Investors. “We also favor quality stocks, especially large companies. “Defensive sectors such as utilities, real estate and health care are likely to do well in the equity markets compared to the broader markets.”Other corporate news also added to market pessimism. WPP Plc tumbled 16% after forecasting a fourth year with no sales growth. Aston Martin Lagonda Global Holdings Plc fell 9% after saying sales will slump in the first half of the year, before an expected boost from the new DBX SUV in the second half.\--With assistance from Jan-Patrick Barnert and Ksenia Galouchko.To contact the reporter on this story: Namitha Jagadeesh in London at njagadeesh@bloomberg.netTo contact the editors responsible for this story: Blaise Robinson at brobinson58@bloomberg.net, John ViljoenFor 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.
- Reuters - UK Focus
LIVE MARKETS-Closing snapshot: "It's a classic sell-off"
You can share your thoughts with Thyagaraju Adinarayan (thyagaraju.adinarayan@tr.com), Joice Alves (joice.alves@tr.com), Julien Ponthus (julien.ponthus@tr.com) in London and Danilo Masoni (danilo.masoni@tr.com) in Milan. On the bright side, the STOXX 600 which ONLY fell 3.6% after falling close to 5%, is NOT in correction territory anymore.
- Reuters - UK Focus
LIVE MARKETS-Worst week since the sovereign debt debacle
* Asian shares extend losses Welcome to the home for real-time coverage of European equity markets brought to you by Reuters stocks reporters. You can share your thoughts with Thyagaraju Adinarayan (thyagaraju.adinarayan@tr.com), Joice Alves (joice.alves@tr.com), Julien Ponthus (julien.ponthus@tr.com) in London and Danilo Masoni (danilo.masoni@tr.com) in Milan. Things got so bad that European market authorities had to intervene to ban short selling of banks.
- Yahoo Finance UK
Baggage handling firm John Menzies takes £9m profit hit from coronavirus
John Menzies said business in Macau and with Chinese airlines around the world had significantly tailed off.
- Reuters - UK Focus
LIVE MARKETS-Opening snapshot: lots of virus losers, few winners
- Reuters - UK Focus
London stocks slide further as virus risks spread
- Reuters - UK Focus
REFILE-European stocks slide again on pandemic fears
- Reuters - UK Focus
LIVE MARKETS-On our radar: virus damage to profits
- Bloomberg
StanChart Keeps Its Head Amid the Virus Storm
(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 ngopalan3@bloomberg.netAndy Mukherjee at amukherjee@bloomberg.netTo contact the editor responsible for this story: Matthew Brooker at mbrooker1@bloomberg.netThis 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.
- Reuters
StanChart posts strong results but coronavirus, economic headwinds to hamper profit growth
HONG KONG/LONDON (Reuters) - Standard Chartered booked a robust 46% jump in annual profit but warned a key earnings target would take longer to meet as the coronavirus epidemic adds to headwinds in its main markets of China and Hong Kong. Rival HSBC Holdings said last week it could face loan losses of up to $600 million if the virus outbreak persists into the second half of the year. "The outbreak of the novel coronavirus comes with unpredictable human and economic consequences," Chief Executive Bill Winters said in a statement.
- Reuters
StanChart warns coronavirus, economic slowdown to hit growth
HONG KONG/LONDON (Reuters) - Standard Chartered on Thursday warned a major earnings target would take longer to meet and asset quality would worsen in the near-term as the coronavirus epidemic adds to the bank's woes in its main markets of China and Hong Kong. StanChart's warning about the coronavirus impact comes after rival HSBC Holdings said last week it could face loan losses of up to $600 million if the virus outbreak persists into the second half of the year. Without providing specific guidance on the potential impact, StanChart said the epidemic could lead to a rise in bad loans.
- Reuters
Hong Kong banks face coronavirus toll on asset quality, loan growth
Hong Kong's banks face at least two quarters of worsening asset quality and slowing loan growth as the coronavirus outbreak hits trade and consumer banking, analysts and bankers said. Lenders in the Asian financial hub, including HSBC and Standard Chartered , are seeing a drop in demand for mortgages, credit card usage and corporate loans, bankers with knowledge of the matter said. Hong Kong banks have Asia's largest exposure to China, which accounted for 29.4% of banking system assets in the first half of last year, credit ratings agency Fitch says.
- Bloomberg
Virus Damage to China’s Economy Clear From Early Indicators
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world threatened by trade wars. Sign up here. A range of early indicators of China’s economy in February confirm that the coronavirus outbreak has crippled production and consumption, as factories remain below capacity and transport is curtailed.Five of the eight indicators tracked by Bloomberg dropped in February from January, with two indicators of business confidence plunging to the lowest on record.The improvement in the headline South Korea exports in first 20 days of the month hides a drop in shipments to China and was flattered by the distortions from the Lunar New Year. Expectations of fresh stimulus have also kept financial markets more buoyant than real activity would suggest.While businesses are restarting and the official data shows the rise in infections slowing, the virus is not yet overcome, and companies and various levels of governments have to weigh the desire to return to normality quickly with the need to stop the disease. The economy is forecast to grow the slowest since 1990 according to the median of recent economists’ reports, with Goldman Sachs Group Inc estimating it will expand only 2.5% in this quarter, before rebounding later.The Data Show China Is Still Struggling to Get Back to WorkA slowdown of that magnitude could lead to higher unemployment, bad loans, and bankruptcies. Already car sales are plummeting and property developers are being squeezed as people hold back on spending as they wait to see what will happen with the disease, and when they can go back to work.The reaction to the outbreak will be visible in the first official statistics for February -- the Purchasing Manager Indexes due on Feb. 29. The indicator for manufacturing is forecast to drop to the lowest since the global financial crisis, although five economists are forecasting it to be even worse than that.“The earliest business surveys have already shown record declines of demand and output. The overall momentum reversed strength in previous months to weakness in February, as the virus hit industrial production, supply chains and consumption,” according to Bloomberg Economics’ Qian Wan. “We expect activity to start to recover from March. Efforts to contain the virus continue, but the government is clearly shifting” toward pro-growth policies to and help companies get back to work after the extended Lunar New Year break, she said.A monthly survey on the health of China’s small and medium-sized businesses plummeted to a record-low in February, highlighting the negative economic impact of the outbreak. A sub-index from the survey by Standard Chartered Plc evaluating “current performance” dropped even more sharply, while the reading for the outlook was better than the headline number, signaling some hope for recovery once the outbreak is contained.About two-thirds of small- and medium-sized companies only have enough cash on hand to survive for up to three months, according to the report from Shen Lan and Ding Shuang at Standard Chartered. Earnings in the first quarter will fall 43%, according to their survey, with the biggest drops in wholesale and retail industries.One bright spot in the indicators Bloomberg tracks has been Chinese stocks, which took just weeks to recover from a record sell-off earlier this month triggered by the virus. But that almost 10% rally since Feb. 3 is built on little more than liquidity, surging partly on hopes that monetary easing and fiscal support measures would help companies weather economic headwinds. Leverage on Chinese exchanges rose above 1 trillion yuan ($143 billion), the highest since early 2016.Cracks Appear in China’s Most Leveraged Stock Market Since 2016Note on Early Indicator constructionBloomberg Economics generates the overall activity reading by aggregating the three-month weighted average of the monthly changes of eight indicators, which are based on business surveys or market prices.Major onshore stocks - CSI 300 index of A-share stocks listed in Shanghai or ShenzhenKey property stocks - All the constituents of CSI 300 Index that are in the real-estate industryIron ore prices - Spot price of iron ore for shipment to Qingdao port (dollar/metric tonne)Copper prices - Spot price for refined copper in Shanghai market (yuan/metric tonne)South Korean exports - South Korean exports in the first 20 days of each monthFactory inflation tracker - Bloomberg Economics created tracker for Chinese producer pricesSmall and medium-sized business confidence - Survey of companies conducted by Standard Chartered BankSales manager sentiment - Survey of sales managers in Chinese companies by World Economics Ltd.To contact Bloomberg News staff for this story: James Mayger in Beijing at jmayger@bloomberg.netTo contact the editor responsible for this story: Jeffrey Black at jblack25@bloomberg.netFor 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
Singapore Dollar and Korean Won Get Dumped as Virus Cases Rise
(Bloomberg) -- South Korea’s won slumped more than 1% and the Singapore dollar slid to the lowest in almost three years as traders dumped riskier assets amid growing concern about the spread of the coronavirus.No Asian currency was spared in the rout which was triggered by a spike in confirmed virus cases in South Korea and two fatalities in Japan. The yuan retreated and the Australian dollar, which is seen as a proxy to the Chinese currency, slid to an 11-year low.“The sudden sharp spike to 82 cases in Korea -- contrary to slowing new cases in other parts of the world including China -- is a wake-up call to market complacency,” said Christopher Wong, senior FX strategist at Malayan Banking Bhd. The won, along with Asian peers such as the Singapore dollar, may be some of “biggest casualties” as the economic fallout continues to worsen.The Thai baht tumbled to an eight-month low while the Indonesian rupiah and Malaysia’s ringgit depreciated at least 0.5%. The offshore yuan extended a decline past 7 per dollar to trade at its weakest since December.South Korea reported that the number of its confirmed virus cases more than doubled in a day, raising concern about the spread of the disease outside China. Japan said two people who were on a cruise ship off Yokohama, a man and a woman in their 80s, had died after being infected.Yen Weakness May Just Be Beginning Amid Japan Fund Exodus FearMarket participants warned that regional currencies could be vulnerable to further losses, with policy makers having little room to act.“The reality of an economic slowdown has hit home,” said Alan Cayetano, foreign-exchange trading head at Bank of the Philippine Islands. “A further deterioration in emerging Asia currencies should be expected as central banks are boxed into a corner with lower rates.”Even stimulus from China -- which had previously helped to stabilize sentiment -- wasn’t enough to allay concerns. Analysts questioned the effectiveness of a move by Chinese banks to cut benchmark borrowing costs for new loans.Infection ThreatThe Singapore dollar fell as low as S$1.4083, the weakest since May 2017, before paring losses to trade 0.3% down. The won sank more than 1% to 1,201.95 per dollar, a level where policy makers may have previously intervened. The baht, the most sensitive in Asia to tourism, dropped 0.7% to 31.406.A gauge of three-month implied volatility for the Bloomberg-JPMorgan Asian Currency Index rose 12 basis points to 4.36%.Singapore Dollar Vulnerable to 2017 Low on Surprise Easing RiskThere could be “further downside pressure on Asian currencies in the near-term as investors assess the negative economic impact from the coronavirus outbreak,” said Divya Devesh, head of Asean and South Asia FX research at Standard Chartered Bank in Singapore.\--With assistance from Kartik Goyal.To contact the reporters on this story: Ruth Carson in Singapore at rliew6@bloomberg.net;Chester Yung in Singapore at kyung33@bloomberg.netTo contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net, Liau Y-SingFor 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.
- Reuters - UK Focus
StanChart commits $75 bln toward sustainable development goals
- Fool.co.uk
Forget gold! I’d buy these 2 FTSE 100 dividend stocks to get rich and retire early
These two FTSE 100 (INDEXFTSE:UKX) shares could offer higher return potential than gold in my opinion.The post Forget gold! I’d buy these 2 FTSE 100 dividend stocks to get rich and retire early appeared first on The Motley Fool UK.
- Bloomberg
Ramaphosa Unveils Overhaul of South African Energy Industry
(Bloomberg) -- South African President Cyril Ramaphosa announced sweeping changes to the nation’s electricity industry to address energy shortages and reduce reliance on debt-stricken state power utility Eskom Holdings SOC Ltd.The government will invite private companies to submit bids to supply additional renewable energy to the grid, while businesses will be allowed to produce unlimited electricity for their own use, Ramaphosa said in his state-of-the-nation address in Cape Town on Thursday. Additional capacity will be purchased from existing solar and wind plants, and independent producers will also be permitted to sell their output directly to municipalities.“We will be implementing measures that will fundamentally change the trajectory of energy generation,” Ramaphosa said.Eskom provides about 95% of South Africa’s power, but isn’t generating enough income to cover its costs. While the measures announced by Ramaphosa could further deplete its revenue base, its aging power stations don’t generate enough electricity to meet demand. That’s resulted in rolling blackouts and with several of its plants due to be retired over the next few years, urgent intervention is needed to avert an even deeper crisis.Ramaphosa announced the overhaul after being forced to delay his speech for 90 minutes because of repeated interruptions by the opposition Economic Freedom Fighters. The party’s members demanded that Public Enterprises Minister Pravin Gordhan be fired -- for failing to address the energy crisis -- before they walked out of the chamber.The rand weakened as much as 0.8% before trimming its losses to trade 0.6% weaker at 11 p.m. in Johannesburg, after Ramaphosa’s speech had ended.The protest made for “good political theater, but wasn’t really a surprise to observers,” said Ilya Gofshteyn, a New York-based strategist at Standard Chartered Bank. “Reform progress is likely to continue to be halting, but I do not think that EFF behavior today materially changes the outlook.”Since succeeding Jacob Zuma as president in February 2018, Ramaphosa has faced mounting pressure to revive the economy and create jobs for the 29% of the workforce that’s unemployed.Besides constraining economic growth, Eskom, South African Airways and several other state companies are stretching the government’s already limited finances with constant demands for bailouts to stay afloat.Ramaphosa warned the nation’s debt trajectory is unsustainable and said Finance Minister Tito Mboweni will announce measures to cut spending when he delivers his budget speech on Feb. 26. The government is in talks with labor unions about reducing the state wage bill, he said.“We need to fix our public finances,” Ramaphosa said. “We cannot continue along this path, nor can we continue to stand still.”The energy reforms and others announced by Ramaphosa will take some time to implement, and his speech doesn’t signal a fundamental shift in policy or approach, said Peter Attard Montalto, head of capital markets research at Intellidex.‘Short-Term Lift’“He could have gone harder on specifics of timelines and responsibilities,” Attard Montalto said. “At the margin, the market is going to have a short-term lift on this going into the budget, but I think it will then fade after that.”Mineral Resources and a Energy Minister Gwede Mantashe signaled the measures to boost energy production will be speedily implemented.“The president mentioned the generation capacity outside of Eskom” must be increased, he said in an interview. “To me that’s an order.”Ramaphosa’s address struck the right chord with the Congress of South African Trade Unions, the country’s biggest labor group and a member of the nation’s ruling coalition.“The president focused on the key issues of growing the economy and restoring the capability of the state,” said Matthew Parks, the group’s parliamentary liaison officer. “Eskom is a key factor and we know that negotiations are proceeding positively between government, business and labor to sort out Eskom’s financial situation.”Other Highlights:A sovereign wealth fund will be established to preserve the nation’s wealth.The government will press ahead with plans to establish a state bank.Far-reaching economic reforms, including a number that were proposed by the National Treasury, will be implemented.South African Airways will be restructured to ensure it is commercially and operationally sustainable.The auction of additional broadband spectrum will be concluded this year.The Treasury will set aside 1% of the budget to address youth unemployment.Efforts will be stepped up to tackle crime and corruption.(Updates with energy minister’s comment in second paragraph below Short-Term Lift subheadline.)\--With assistance from Robert Brand, Justin Villamil and Antony Sguazzin.To contact the reporters on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net;Paul Vecchiatto in Cape Town at pvecchiatto@bloomberg.netTo contact the editors responsible for this story: Paul Richardson at pmrichardson@bloomberg.net, Rene VollgraaffFor 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
Three Risks for Banking in the Time of Coronavirus
(Bloomberg Opinion) -- When bankers fret about contagion, it’s usually the financial kind. DBS Group Holdings Ltd. is battling a different outbreak. The full-year results of Singapore’s largest lender are pre-coronavirus. Still, they offer clues to what investors in banks with pan-Asian heft — including HSBC Holdings Plc, Standard Chartered Plc and Citigroup Inc. — should be watching.A day before its earnings report Thursday, DBS had to evacuate an entire floor of 300 people in its headquarters after one employee tested positive for the virus. Stressful as such situations are, big organizations like DBS have protocols to preserve business continuity. The bank, which now does a growing chunk of its business online, ought to be able to supply banking services reasonably efficiently. The main concern is whether the epidemic, which has hit its key markets of Singapore, Hong Kong and China, will sap demand for financial intermediation. Things were looking tough even before the virus, though DBS ended the year with record earnings of S$6.39 billion ($4.6 billion), a 14% increase. Loans grew 4% last year, slowing from 7% in 2018. The Singapore mortgage business lost momentum after the government surprised the market in July 2018 by introducing measures to curb price gains. Net interest margin peaked at 1.91% in the first half before stumbling to 1.86% in December, as the Federal Reserve stopped raising interest rates and started cutting.That’s a less favorable stage than the 2003 Severe Acute Respiratory Syndrome epidemic, when DBS had better margins than now.If the top headache for trade finance in 2019 was the U.S.-China spat, supply-chain disruptions would be this year’s migraine. Assuming the outbreak is under control by summer, DBS foresees a 1% to 2% hit to annual revenue. But what if the public health scare lasts longer and spreads wider? Add the risk that the Fed may be forced to cut interest rates further to deal with the fallout from the disease, and the outlook for loan pricing is dimmer than two months ago. Singapore is expected to vigorously prime its fiscal pumps next Tuesday to support virus-hit businesses, such as hospitality and retail. With local infections climbing, DBS should assume that the first half of 2020 may be a washout in its home market. What’s more relevant is whether there will be a sharp recovery, which is what happened after SARS. After dropping 13% in the first half, net profit for 2003 tapered to a smaller 7% fall. It almost doubled the following year. DBS had to face SARS when its balance sheet hadn’t fully healed from the 1997-98 Asian financial crisis. Nonperforming loans, which had surged to 13% of the total in 1999, were still elevated at about 6% in December 2002. Contrast that with 1.5% bad loans at the end of last December; it’s a figure that will keep coming back for scrutiny as the year progresses.The credit quality in Singapore might still hold up, as banks proactively manage their borrowers’ liquidity. United Overseas Bank Ltd., the smallest of Singapore’s three homegrown lenders, said Wednesday that it’s setting aside S$3 billion to provide relief, especially to small companies. Those affected will meet only interest obligations this year. Principal repayment can wait. But DBS’s regional presence could be problematic. A sharp tumble in either the over-leveraged Chinese economy, the epicenter of the epidemic, or turbulence in the frothy Hong Kong property market would put investors’ focus back on provisions for bad debt. Subdued loan volumes, pricing pressures and spikes in credit costs will complete the trifecta of risks for Asian regional banks.Globally, banks garner the biggest chunk of their near $2 trillion annual pretax profit from Asia. The growth rate of that earnings pool collapsed to just 3% between 2014 and 2018 from 12% in the preceding four years, according to new research by McKinsey & Co., which comes with a dire message: “Asia's banks must reinvent themselves or risk disappearing.”When the dust settles, there may be acquisition opportunities for a well-capitalized lender like DBS. That’s a story for a later time. The worry right now is that customers won’t be doing M&A deals because of business uncertainty and anxiety about travel and meetings. That can’t be good news for investment banking fees. To contact the author of this story: Andy Mukherjee at amukherjee@bloomberg.netTo contact the editor responsible for this story: Patrick McDowell at pmcdowell10@bloomberg.netThis 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.
