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Industry roundup: 12 August 2020

Tradeshift and Raindew Trade launch US$1.5bn bid to revive supply chains in Africa

Tradeshift has launched a ZAR25bn (approximately US$1.5bn) COVID-19 Instant Supplier payment scheme for businesses in South Africa and selected African markets in partnership with Raindew Trade, a trade and supply chain financing platform providing supply chain solutions to corporations in Africa and other selected markets.

Launched off the back of the recent roll-out of Tradeshift Engage and a similar US$55bn Instant Supplier Payment programme with Denmark's Export Credit Agency, the initiative is designed to address the cash flow and liquidity challenges in African supply chains. 

Underlined by the current COVID-19 economic environment, weakness in African supply chains contribute to the realisation that digital supply chain management and payment infrastructure is no longer an investment in the future. 

Using the Tradeshift platform, the Instant Supplier Payment scheme will inject liquidity into the market and accelerate digitisation in supply chains at scale, building a digital collaboration between suppliers, buyers, and financing institutions. Through upfront and early payments to suppliers, corporate buyers can request payments in advance to pre-qualified suppliers to be made on their behalf, with credit payment terms of 21 to 360 days. Additionally, the Instant Supplier Payment enables to export and import financing solutions for cross-border trades, allowing exporters to get paid upfront or on the same day of their export shipment. 


Jamie Dimon to deliver opening keynote at Sibos 2020

Jamie Dimon, chairman and CEO of JPMorgan Chase, will deliver the opening keynote at Sibos 2020, the annual financial services event organised by SWIFT. Dimon's career spans five decades and senior positions at Citigroup, the Travelers Group, and American Express. He has served as CEO of JPMorgan Chase since 2005, navigating the 2008 financial crisis while steering the bank’s digital transformation and guiding it to become the largest US bank by assets, with nearly 250,000 employees globally.

The central theme of this year’s Sibos is 'Driving the evolution of smart finance' and features experts in banking, payments, securities services, technology and fintech. It will be coordinated around the core theme and four interconnected sub-themes: delivering digital value, responsible innovation, banking for humanity and the future of finance. Due to the COVID-19 pandemic, this year’s conference will take place entirely digitally for the first time in its 43-year history.

“We are looking forward to Jamie Dimon opening this year’s digital Sibos," commented Chantal Van Es, head of Sibos. "His experience, achievements and qualities of persistence and endurance are more pertinent than ever given the current circumstances. Receiving insight direct from one of the biggest names in finance is sure to inspire delegates ahead of a great week of discussion and debate."

Sibos 2020 will be held online between 5th and 8th October. 


French banks: part of the economic solution but revenue equation more complex

Policy efforts to avoid the emergence of problem loans are bearing fruit and supporting the resilience of French banks, according to a report from Scope Ratings. However, as banks and clients adapt to a blurred economic reality, new balance sheet dynamics are putting renewed pressure on revenues.

“We expect French banks to be resilient through the cycle,” said Nicolas Hardy, executive director in the financial institutions team of Scope Ratings, in the report. “But while banks are being projected as part of the solution, policy measures are not neutral on banking as a business. Pre-crisis issues have not disappeared. Solutions implemented to relaunch the economy are even accentuating them.

French GDP declined by 13.8% in the second quarter after a 5.9% contraction in the first quarter. French banks withstood the initial lockdown and its immediate aftermath well. Hardy believes they should prove resilient to the uncertain operating conditions, given that they continued operating during lockdown, their financial soundness has improved since the last crisis and because stimulus measures to relaunch the French economy are intended to facilitate a vigorous V-shaped economic recovery.

French banks displayed resilient capital ratios at the end of the first half, while non-performing loan ratios stood well below their end 2018 levels. But first-half net profits fell significantly year-on-year owing to pressure on operating revenue and rising cost of risk. Results varied widely mainly because of sector concentration in intrinsically more volatile corporate and investment banking (CIB) activities.

The cost of risk rose significantly in the first half but from a low level. “If banks were to provision 30% less in the second half, given the expected economic rebound, it would still represent close to 2.5x 2019 levels for the full year,” Hardy said, “or 50bp-60bp in aggregate, which is manageable.”

Among support measures put in place, banks have been asked to make extra efforts to finance the economy. The boost comes from the €300bn State-guaranteed loan programme (PGE; prêts garantis par l’Etat) for corporate working-capital needs. Banks are playing a major role in distributing these loans. As of July 31, a total of €116.6bn of lending facilities had been granted. In the meantime, interest revenues are increasingly being squeezed. Corporates have switched to short-term working capital facilities, at low rates. Housing loan production is holding up well, also at low rates, with no sign of repricing. Precautionary savings in the form of sight deposits are on the rise across the board.

There is little leeway for banks to address the revenue challenge. One solution is to reduce the cost base. The reported operating expense base fell 2.5% on average for the five largest French banks in the first half compared to the same period of last year. Lockdown helped on that front but dealing with costs needs to be a permanent feature. Revenue diversification will not happen overnight and, with the global spread of the pandemic, geographic diversification no longer provides any benefit.

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