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Citigroup expects its corporate banking business in India to grow at a 10% annual rate – Industry roundup: 1 August

Citigroup expects Indian corporate revenue to grow at a 10% annual rate

After recently selling its consumer banking business, Citigroup expects its annual growth in its corporate banking business in India to reach 10% over the next few years by focusing on its institutional business. K Balasubramanian, Head of Corporate Banking for South Asia, Citigroup, stated, "conservatively, we expect India corporate banking business revenue to grow at around 10% a year in dollar terms over the next three to four years, which translates to 16% to 17% in rupee terms, given the depreciation." As a result, Citi has increased hiring, noting that a 10% increase would be 200 basis points higher than annual growth in recent years and faster than growth in other countries where the bank has a presence.

According to reports, Citi India's revenue from corporate banking totalled US $1.07 billion in the fiscal year ending March 2021, making it the company's single largest contributor, surpassing revenue from treasury, retail and other banking segments. Balasubramanian emphasized that commodity-linked hedging business has been boosted by global market volatility caused by the Russia Ukraine conflict in the last six to nine months, reaching the bank's highest level ever. He went on to say that India is a major contributor to corporate banking revenue in Asia Pacific.

Despite the effects of the pandemic, India is reportedly one of the fastest-growing major economies, with growth expected to average 7.2% this fiscal year. Citigroup in India has increased its front-end corporate banking headcount by 10% in the last two quarters of 2022, and if business momentum continues, Citigroup may look to increase headcount further in the next 12 to 18 months, according to Balasubramanian.

Reports also indicated that Citi has concentrated on channelling credit flows to Indian companies' offshore subsidiaries and capturing flows on trade corridors between India and neighbouring countries.

Irish businesses to benefit from a 500-million-euro fund by the EC

The European Commission has revealed the establishment of a 500-million-euro fund in an effort to support Irish businesses in adopting green and innovative digitalization technologies to ensure improved competitiveness and efficiency. According to Margrethe Vestager, VP, European Commission, this 500-million-euro scheme will help Ireland set the course for a faster and more sustainable recovery, representing an important step toward closing the investment gap left by the pandemic.

The aid, in the form of direct grants, will finance investments in business assets and stimulate business. Companies engaged in manufacturing, information and communication, scientific and technological activities are said to be eligible for funding. Up to 500 businesses can expect to receive funding. The funds are part of the pandemic temporary framework, which was created to help member countries recover. The Commission has stated that it will closely monitor future economic developments and, if necessary, act quickly.

Pakistan on the verge of financial collapse per reports

Reports indicate that Pakistan is on the verge of economic collapse and is moving in the same direction as Sri Lanka as a result of its declining foreign exchange reserves and growing inflation. State Bank of Pakistan (SBP), the central bank of Pakistan, has issued an alert to the government warning that declining foreign exchange reserves may have a severe impact on the nation's ability to import. According to a report from the European Times, the reduction in Pakistan's foreign exchange reserves reached USD 8.24 billion on 17 June 2022.

This trend, according to reports, is likely to continue in the near future due to the pressure of debt servicing and other payments. The SBP has advocated for a temporary ban on the import of all non-essential goods in order to preserve diminishing foreign exchange reserves. The greater challenge today, however, is said to be the risk posed by rising fuel imports, which affect Pakistan's energy security.

Pakistan's current economic indicators are shown as weak, with a debt of more than USD 250 billion, reported the United Nations Development Programme (UNDP). Reports indicate that the cost-of-living crisis is pushing millions of people into poverty and even starvation at breakneck speed, and the threat of increased social unrest grows by the day, according to Achim Steiner, Head Administrator, UNDP. The Pakistani rupee fell to a record low against the US dollar in the interbank market last Friday, falling to PKR 240.5 per dollar.

According to the Forex Association of Pakistan (FAP), the Pakistani currency fell 4.48%, or 1.89%, compared to last week's close of 236.02. Additionally, FAP reported that the rupee has lost more than 30% of its value since the beginning of 2022.

Miftah Ismail, Pakistan's Finance and Revenue Minister, expressed hope that the rupee's pressure would ease in the coming weeks since incoming dollars from exports and remittances are expected to exceed outgoing dollars from imports and debt servicing.

Multiple factors, including the US dollar reaching significant highs globally, interest rate hikes, global inflation and supply chain disruptions, he claims, have contributed to the rupee's depreciation. Earlier this month, the International Monetary Fund (IMF) reached a staff-level agreement with Pakistani authorities to conclude the Extended Fund Facility's (EFF) combined seventh and eighth reviews. Moody's Investors Service and Fitch Ratings said they expect Pakistan to receive a USD 1.2 billion bailout from the International Monetary Fund (IMF).

FTX receives full approval to operate a cryptocurrency exchange in Dubai

As the Gulf emirate moves forward with plans to develop its digital asset sector, Bahamas-based cryptocurrency exchange firm FTX announced on Friday that it has received full approval to operate its exchange and clearing house in Dubai. The firm stated that it will begin by providing regulated crypto derivatives products and trading services to institutional investors in Dubai, as well as operating a nonfungible token marketplace and custodial services.

The firm’s license will reportedly be extended to retail customers at some point; however, it is expected to be done gradually, ensuring the firm meets the retail market parameters in accordance with the guidelines set by the Virtual Assets Regulatory Authority (Dubai's sector regulator), according to Balsam Danhach, Chief Executive Officer, FTX Middle East and North Africa.

The services would be provided by FTX Exchange FZE, a subsidiary of FTX's European and Middle Eastern division. The United Arab Emirates (UAE) has reportedly been working to establish itself as a centre for the virtual asset industry, despite regulators raising concerns about the technology. Dubai also granted Binance a virtual asset license to conduct some operations in the region, prompting the crypto exchange to increase hiring in the city. FTX received a partial license from Dubai in March 2022, when it announced plans to establish regional headquarters in the city.

U.S. Bank fined over $37.5 million for misuse of customer account data

Following a five-year investigation, the Consumer Financial Protection Bureau (CFPB) discovered that U.S. Bank (whose parent company is U.S. Bancorp), the fifth largest commercial bank in the United States, pressured employees to meet sales targets by opening fraudulent checking and savings accounts, credit cards and lines of credit without customers' permission. The Minneapolis-based bank has been fined US $37.5 million for illegally accessing customer credit reports to open these hoax accounts for more than a decade.

According to Rohit Chopra, Director of CFPB, U.S. Bank was reportedly aware of its employees exploiting its customers by misappropriating consumer data to create fictitious accounts. The CFPB investigation discovered evidence that bank officials not only did not intervene, but instead held incentive-compensation programs that financially rewarded employees for selling bank products and opening new accounts.

In addition to the $37.5 million fine, reports indicate that U.S. Bank will be required to refund any illegally collected fees and charges related to the fraudulent accounts, as well as pay interest to impacted customers.

A spokesperson for the bank commented that the settlement was related to legacy sales practices involving a small percentage of accounts dating back to 2010. In response to the illegal sales practices, they stated that the bank has improved its processes and oversight since 2016. The CFPB action now concludes a 5-year investigation.

The fine imposed is not the first time a major bank has been charged with illegally opening accounts for unsuspecting customers without their knowledge. Wells Fargo reportedly paid $185 million to regulators in 2016 after two million hoax accounts were discovered to have been illegally created by employees in order to increase their cross-sell ratio.

Bank of England to prepare for an unprecedented rise in interest rates

The Bank of England's monetary policy committee is expected to raise interest rates to 1.75 percent, up from 1.25 percent currently. This would be the highest increase in 27 years.

The committee has reportedly limited itself to a series of 25 basis-point increases. However, following an unexpected rebound in May 2022, GDP figures and sustainability in the labour market, traders and analysts are increasingly confident of a 50 basis-point increase. Reports show that consumer prices have increased by 9.4% as of June 2022.

The US Federal Reserve raised interest rates by 75 basis points, a record since 1994, and the European Central Bank raised its deposit rate by 50 basis points, a higher-than-expected increase that increased pressure on the Bank of England.

Financial markets expect that a 50 basis-point rate increase is almost certain, with a 3% chance that rates will rise to 1.5%.

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