Fed resumes rate hikes with 0.25% rise

The US Federal Reserve has met market expectations by raising interest rates by a quarter of a percentage point, citing still above-target inflation as a rationale for what is now the highest US central bank policy rate in 16 years.

The rate hike was the Fed's 11th in its last 12 meetings and follows a temporary pause at its previous meeting on June 14. It set the benchmark overnight interest rate in the 5.25%-5.50% range, and the accompanying policy statement left the door open to another increase.

“The (Federal Open Market) Committee will continue to assess additional information and its implications for monetary policy,” the Fed said in a statement that was little changed from last month’s and left the central bank's policy options open as it searches for a stopping point to the current tightening cycle. The FOMC's next meeting is scheduled for September 19-20.

The European Central Bank (ECB) also met market expectatiions on Thursday by raising its benchmark rate by a quarter-point to 3.75%.. The ECB said that “inflation continues to decline but is still expected to remain too high for too long”. 

It was the ninth successive rise since July 2022; euro zone interest rates have now risen by 400 basis points in the past year to their highest in 23 years, and are widely regarded as close to peaking as headline inflation cools and the economy weakens. Today's move was described as a "marginally dovish" decision that kept the ECB's options open for further rises, while raising expectations that its tightening cycle is close to an end.

What the bank's next move will be after this month iremains uncertain though and financial markets are looking for guidance..“The difference (from past meetings) is that until now they've given at least quite precise guidance vis-a-vis the next meeting,” Barclays head of European economics research Silvia Ardagna told Reuters. “And we expect that to become more loose.”
 

Santander to hire 150 bankers under US expansion plan

Spain’s Santander plans to recruit around 150 bankers, primarily in the US., as part of its strategic expansion to diversify earnings. This announcement was made by Jose M. Linares, the bank’s global corporate and investment banking chief, during a recent town hall meeting in New York. The recruitment process is expected to be completed over the next year.

Santander, the second-largest lender in the euro zone by market value, is focusing on expanding its U.S. franchise. The bank is taking the opportunity to recruit a significant number of bankers from Credit Suisse. Linares told employees that around 60 of the new hires would be managing directors, predominantly in the US, but also in the UK and other markets. Santander has already recruited over 20 senior investment bankers, mainly in the US.

In conjunction with the new hiring, a reshuffle at the unit was also announced by Linares that includes the appointment of David Hermer, a former Credit Suisse banker, as the head of Santander’s corporate and investment banking business in the US.

Hector Grisi, the bank’s CEO and also a former Credit Suisse banker, recently said that while Santander is bolstering its US. investment banking to support and expand its business, it does not aim to compete with the major players in the sector. The bank’s strategy is to focus on leveraged finance and corporate services for clients with a presence in Europe and Latin America, especially in high-growth sectors like energy transition.

Currently, Santander employs around 8,000 staff members at its global corporate and investment bank. The new hiring strategy is expected to significantly enhance its operations and performance, especially in the US market.

Analysts said that the move underscores Santander’s commitment to grow its investment banking business and diversify its earnings. Given its robust performance and the new hires expected from Credit Suisse, Santander is well-positioned for expansion and success in the competitive banking landscape.

 

China names Pan Gongsheng as new PBOC chief

China has appointed Pan Gongsheng as new governor of the People's Bank of China (PBOC), following his elevation to the central bank’s top political post earlier this month. He succeeds Yi Gang, who held the top post at the PBOC since 2018

On Tuesday, state media confirmed Pan, who from 2016 headed up China’s top foreign exchange regulator, as the new PBOC chief, making him the first person to take over both posts since Yi’s predecessor Zhou Xiaochun. US Treasury Secretary Janet Yellen met Pan during her recent trip to Beijing and referred to him as the head of the PBOC.

Pan has a reputation for taking a tough stance against currency speculators and was also involved in state banking reforms, tightening property market and fintech regulations, and in banning cryptocurrencies.

He comes to the post with the task of responding to a downturn in China’s property sector - which accounts for about a quarter of economic activity - while substantial local government debt also poses major challenges for the banking sector and the broader economy. As the world's second largest economy China is also reporting slowing growth and youth unemployment at a record high.

While Pan will serve both as Communist party head at the PBOC and central bank governor, the central bank now reports into new regulators as China has taken steps this year to tighten party control over the financial system, including plans for a Central Financial Commission to oversee the PBOC and other institutions.

The new structure dampens expectations Pan might champion pro-market reforms as his two predecessors did.

Several analysts said the promotion of Pan, who is not regarded as a close ally of President Xi Jinping, signals recognition by the government that it needs an experienced economist with a track record in crisis management to help steer the country through its economic problems.

The governor of the PBOC is one of the most prominent figures in China's financial system.

However, compared to the leaders of many central banks in other large economies, the PBOC governor's powers are limited as it is controlled by the ruling Communist Party.

 

Survey finds investment industry cool towards CBDCs

A comprehensive survey of the global investment industry’s attitude towards central bank digital currencies (CBDCs) has found both limited support and a lack of understanding of how a digital dollar, euro, yen or pound would work.

The survey carried out by the CFA Institute, a worldwide non-profit association for bankers, investors and finance chiefs, found that only 42% of the more than 4,150 respondents who took part believed that CBDCs should be launched.

Several countries including the Bahamas and Nigeria have already launched CBDCs, and around 130 more representing 98% of the global economy are exploring whether to follow their lead.

“Even for a sophisticated and financially literate cohort like our members there is very little understanding of what CBDCs are,” the CFA Institute's Olivier Fines told Reuters. There was also “a general feeling of scepticism” about their possible benefits, especially in developed economies where people can already pay for things instantly online or using mobile phones, he said.

Only 37% of respondents from developed markets said they favoured a CBDC versus 61% from emerging markets, while 31% of respondents in the US supported the creation of a digital dollar, followed by 38% in Canada, 45% in the European Union and 46% in the UK.

In China, in contrast, where the People's Bank of China (PBOC) is currently running the world's biggest CBDC pilot project, the support rate was 70% while in India, which hopes to launch an e-rupee next year, it was 66%.

“There is a clear and very significant divide,” Fines said, putting it down to a likely “perception in developing economies that a CBDC could fill a gap that may not exist in the developed world”.

Central bankers themselves have raised questions about CBDCs, including Bank of England (BoE) governor Andrew Bailey who said: “We have to be very clear what problem we are trying to solve here before we get carried away by the technology”.

Among UK respondents who opposed launching a CBDC, the top reason cited by almost half was a belief that their introduction would not address a compelling need. Age also correlated with the level of support for or opposition to CBDCs. Less than a quarter of respondents under 30 opposed them, the survey found, compared with 37% among those over 55.

“Clearly the younger you are the more receptive you are to a CBDC, like with crypto assets more generally,” Fines said. “The question is will this stabilise over time or as people get older will their mindset shift?” Overall, though, the main questions were what benefits CBDCs will bring compared with existing payment systems. “I don't think the argument has been settled on whether this is absolutely necessary,” Fines concluded.
 

Post-pandemic boost for Rolls-Royce

Aero-engineer Rolls-Royce, which is due to release its H1 2023 results on August 3, has primed the market to expect figures that come in well above previous expectations.

The UK company’s shares rose sharply on Wednesday as it hiked its full-year operating profit forecast by around 45% and said that operational improvements, increased military spending and a recovery in long-haul flying delivered a stronger-than-expected first half.

Rolls-Royce, whose engines power the Airbus A350 and Boeing  787 long-haul jets, said underlying operating profit for the first six months would come in at just over twice the market expectation of £328 million. The company now expects profit this year of between £1.2 billion and £1.4 billion (US$1.6-1.8 billion), against its previous guidance of £800 million and £1 billion. The market had forecast £934 million.

Chief executive Tufan Erginbilgic, who joined Rolls-Royce in January, said his turnaround had started well, with progress already evident across the company. “Despite a challenging external environment, notably supply chain constraints, we are starting to see the early impact of our transformation in all our divisions,” he said.

Analysts said the primary driver of the improved first-half and full-year performance was improved operations, a key priority for Erginbilgic. Much of Rolls-Royce’s revenue is tied to the hours flown by its engines, a model that plunged it into crisis when planes were grounded during the pandemic.

A revival in flying, however, is now benefiting the company, as is increased defence spending due to the war in Ukraine, and it shares have risen by 64% this year.

Rolls-Royce said it would produce up to £360 million of free cash flow for the six months to end-June, well above the £50 million forecast, and it could produce as much as £1 billion of cash in the full year.

Steve Clayton, head of equity funds at financial services group Hargreaves Lansdown, commented: “Rolls Royce is highlighting the early success of its transformation programme, which is driving productivity improvements. Civil aerospace has swung back into profit, reflecting a stronger aftermarket outcome, while defence sector earnings are also sharply improved, with demand stronger and a more even pattern of deliveries this year compared to last.

“The company is benefiting from a recovery in flying hours by the airline industry, which is pushing more aircraft into the workshops for engine overhauls. The only real negative on the report card today is that working capital has been pushed sharply higher because the group is to hold higher inventory to cover the additional activity levels and ongoing constraints in the supply chain.”

 

Cash-flow platform Settle gets US$145 million funding from Silicon Valley Bank

Silicon Valley Bank, whose US operations became a division of First Citizens Bank in March, is providing a US$145 million credit facility to cash-flow management platform Settle. The investment significantly boosts Settle’s potential to support high-growth e-commerce, consumer brands, and small businesses.

Settle has strategically positioned itself as a cash-flow management platform dedicated to e-commerce and consumer brands with challenging inventory and cash conversion cycles. The platform centralises key operations, including vendor payments, payment status tracking, invoice management, and application for flexible financing solutions. Its clients include consumer brands such as Branch, Starface and Lalo, which manage their cash-flow and secure their inventory needs with Settle Working Capital.

The new financing will be utilised to expand the firm’s customer base and further develop its suite of lending products for larger e-commerce and consumer brands. The credit facility will support business owners’ needs by providing the tools necessary to adapt to changing market conditions. Amidst the inherent volatility of the capital markets, the secured funding gives Settle the power to assist growing brands in changing their business trajectories.

Alek Koenig, CEO and founder of Settle, commented: “Approximately 80% of small businesses fail because of cash-flow issues. From day one, we have been laser focused on helping e-commerce and consumer brands meet their inventory demands by giving them the tools and support to manage cash-flow and obtain access to financing. The need for additional capital provided by Silicon Valley Bank is a testament to continued demand from our customers and our commitment to support them.”

 

Vietnam to increase raw rare earths output

Vietnam aims to raise its rare earths production to 2.02 million tonnes of unprocessed minerals annually by 2030, according to a government plan reviewed by Reuters, as the Southeast Asian country seeks to tap one of the world's largest reserves of key industrial metals.

The rare earths will be extracted from nine mines in the northern provinces of Lai Chau, Lao Cai and Yen Bai, according to the plan signed recently by Deputy Prime Minister Tran Hong Ha.

Rare earths are a group of elements that have applications in electronics manufacturing and batteries, making them important for the global transition toward cleaner sources of energy and in defence.

Vietnam has the world's second-largest reserves of rare earths -- an estimated 22 million tonnes -- second only to China, according to the United States Geological Survey (USGS).

The country's production of rare earths has already accelerated from 400 tonnes in 2021 to 4,300 tonnes last year the USGS said.

According to the government plan, Vietnam will develop three to four new mines after 2030, aiming to raise its output of raw rare earths to 2.11 million tonnes by 2050.

Apart from mining, the country said it will also seek to invest in rare earth mining facilities, with a target of annually producing 20,000 to 60,000 tonnes of rare-earth oxides (REO) by 2030. The plan aims to raise the annual REO output to between 40,000 and 80,000 tonnes by 2050.

 

Airtel Money and TerraPay partner on cross-border payments in UAE

Global payments infrastructure company TerraPay has partnered with Airtel Mobile Commerce Uganda Limited (AMCUL) to launch seamless cross-border merchant payments in the United Arab Emirates (UAE).

This partnership will enable Airtel Money customers travelling from Uganda to the seven Emirates to go cashless quickly. It also provides instant cross-border merchant payments across 30,000+ merchants in the UAE!

Japhet Aritho, Managing Director of Airtel Mobile Commerce Uganda Limited, said “With effect from July 21, 2023, anyone accessing any of the seven emirates: Abu Dhabi, Dubai, Sharjah, Ajman, Umm Al Quwain, Ras Al Khaimah and Fujairah, will be able to pay for all their goods and services with Airtel Money across over 30,000 merchant locations. Airtel Money is the dedicated mobile money platform for Airtel Africa.”

Airtel Money offers mobile money services including payments, microloans, savings, and international money transfers.

Mobile money has seen substantial growth over recent years. According to the latest GSM Association (GSMA) ‘State of the Industry Report on Mobile Money’, registered mobile money accounts grew by 13% year-on-year to reach 1.6 billion in 2022. With mobile money and digital payments growing, they are cementing themselves as mainstream financial services, further boosting financial inclusion.

 

Nexpay expands services with SWIFT payments in 23 currencies

Nexpay, a Lithuania-based Electronic Money Institution (EMI) has announced its enhanced service offering with the addition of SWIFT payments in 23 currencies. “The move caters to the needs of digital businesses worldwide and advances Nexpay’s ambition to bring forth innovative and secure financial solutions,” it said in a release.

The latest service expansion aligns with the industry’s shift towards cross-border payments transformation, allowing customers to leverage SWIFT’s payment infrastructure. Initially focusing on euro transactions via the SEPA payment system, Nexpay has now enhanced its offerings to include multi-currency payment orders through the SWIFT network.

This development enables Nexpay clients to process payments in a wide range of currencies, including USD, GBP, JPY, AUD, CAD, and many more. The automatic conversion feature ensures hassle-free transactions, as funds are effortlessly converted into their respective EUR accounts.

Uldis Tēraudkalns, CEO of Nexpay said, “Digital businesses need transactional banking, where the focus is merely on enabling them to receive and make payments safely, cost-effectively, and simply. In the face of the evolving landscape of cross-border payments, our move to include SWIFT payments reinforces our commitment to a banking model prioritising simplicity, safety, and cost-effectiveness, enabling digital businesses to flourish without unnecessary frills and risks.” 

Nexpay is a Vilnius-based FinTech scale-up that provides business banking solutions for digital companies. Established in 2017, the company  helps over 600 businesses build the future of money with a range of payments and accounts products.
 

Hitachi Payment to buy Writer Corporation’s cash management services

India’s Hitachi Payment Services has agreed to acquire the cash management business of Mumbai-based Writer Corporation, a multi-business enterprise.

Writer Safeguard – the company’s cash management arm, has provided comprehensive cash services, including ATM cash replenishment and retail cash pick-up services to corporate clients in India.

A release announcing the acquisition said that it will transform Hitachi Payments’ market standing by integrating the cash management business into its overall service offerings, positioning it as a one-stop payments and commerce solutions provider.

Sumil Vikamsey, managing director and CEO of cash business, Hitachi Payment Services, added: “The acquisition of the cash management business of Writer Corporation will complement Hitachi Payments’ vision of becoming leading payments and commerce solutions provider, offering holistic, reliable and cost-effective solutions across the payments value chain.

“In line with our overall strategy, the deal creates opportunities for us to broaden our service offerings. It provides us with a unique position to drive growth and innovation in the Indian payments landscape.”

The deal “would enable Hitachi Payments to provide comprehensive ATM services to financial institutions, while on the merchant side, it would complement Hitachi Payments’ digital offerings”. It also strengthens Hitachi Payments’ value proposition to merchants by offering a unified single platform for all merchant-related payment and commerce needs.