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Industry roundup: 16 November

Resurgent COVID-19 threatens US corporate credit’s improved trend

COVID-19 will determine the near-term fate of the US and world economies in 2021. If resurgent coronavirus infections prompt another broad shutdown of businesses, US real GDP will again contract sequentially, according to a new credit markets review from John Lonski, chief capital markets economist at Moody’s Capital Markets Research. At the other extreme, a vaccine for the virus would significantly enhance 2021’s outlook.

Though the pandemic remains a major threat, the consensus view of 49 economists contributing to early November’s Blue-Chip survey has 2021’s US real GDP growing by 4.0% annually after shrinking by an expected 3.7% in 2020. The consensus growth outlook for 2021 is between the 2.9% rise predicted by the lowest 10 forecasts and 5.0% advance projected by the 10 highest forecasts. Thus, even the lowest projections are consistent with an economic recovery for 2021. However, a recovery in the context of tangible COVID-19 risks requires sufficient financial assistance for those households, businesses and public-sector entities most adversely affected by the virus.

The report finds that distribution of US company credit rating revisions is greatly improved compared to what transpired in 2020’s first half. Credit rating upgrades have outnumbered downgrades thus far during 2020’s final quarter. Debt refinancings, infusions of equity capital, mergers and acquisitions, as well as improved outlooks for operating earnings have abetted the stabilisation of corporate credit quality. A preliminary count of US high-yield credit rating changes shows 36 upgrades and 25 downgrades, while the rating revisions of U.S. investment-grade issuers include two downgrades and five upgrades. In terms of net downgrades, high-yield is at -11 and investment-grade is at -3.

After averaging 51 per quarter during calendar-year 2019, the arrival of the COVID-19 recession would then drive US net high-yield downgrades up to the 194 of 2020’s first quarter and the record-high 368 of the second quarter. By 2020’s third quarter, US net high-yield downgrades had plunged to 29. If the current trend holds, the net high-yield downgrades of 2020’s final quarter may post their first negative score since the -7 of 2018’s final quarter.

Net US investment-grade downgrades averaged -1 per quarter during calendar-year 2019. The COVID-19 recession then drove U.S. net investment-grade downgrades up to the 21 of 2020’s first quarter and the 26 of the second quarter. The latter was the highest such count for any quarter since the 33 of 2016’s first quarter. By 2020’s third quarter, U.S. net investment-grade downgrades had dropped to 7. If the current trend holds, the net high-yield downgrades of 2020’s final quarter may post their first negative score since the -10 of 2019’s second quarter.

 

HSBC launches platform to streamline banking for US small businesses 

HSBC Bank USA, part of HSBC Group, has announced it is working with Biz2Credit to give small business owners quicker and easier access when applying for business financing. As part of the HSBC Fusion service offering, the bank is using Biz2Credit’s Biz2X Platform to speed up the approval of credit applications for small businesses across the country. The Biz2X technology should also improve the accuracy of credit decisions on retail business banking transactions, ultimately reducing risk in the bank’s lending portfolio.

HSBC Fusion, a service for business owners that brings business and personal banking together for a more streamlined way of working and living, is designed to facilitate account management, saving both time and money. The service provides a single point of access, whether in the branch, by phone, or through digital banking, by which HSBC customers can manage both their personal and business finances.

HSBC will use the Biz2X Platform’s credit decisioning engine, based on artificial intelligence and a configurable lending rules engine, to provide its relationship managers with faster and more accurate credit decisions. The bank says that the platform will allow:

  • The ability to automatically approve loan or line increase requests up to US$100,000. Full underwriting protocols will be in place via the staff portal for larger loan amounts.
  • Coverage of origination and credit line increases for small business credit products, including credit cards, term loans and lines of credit.
  • Ease-of-use for HSBC staff processing loan applications through a new staff portal built on Biz2X.
  • Credit rules that feature advanced neural network models to ensure fast loan decisions, based on several hundred data parameters.
  • A configurable rules engine that allows HSBC to modify its lending criteria smoothly in response to changing market conditions.

 

Japan's trade data sharing platform sees cross-industry investment 

Seven Japanese enterprises have agreed to jointly invest in TradeWaltz, a company that manages the trade data sharing platform of the same name. Partaking in the investment are NTT DATA, Mitsubishi Corporation, Toyota Tsusho, Tokio Marine & Nichido, MUFG Bank, Kanematsu, and Sompo Japan Insurance. TradeWaltz is headquartered in Tokyo's Chiyoda Ward, and its president and CEO is Hirohisa Kojima.

Trading operations cover a wide range of products and involve numerous procedures, including documentation, consistency confirmations, and other work that can be costly to perform manually. Furthermore, considering multiple parties engaged in a single transaction, developing a system accurately and safely to share information has been a challenge faced by all industries.

A cross-industrial consortium was established in August 2017 to address this challenge. With NTT DATA acting as its secretariat, the consortium worked with various trading companies, banks, insurance companies, shipping companies, and other industry players to examine how digitalise technologies might be used to make trading operations safer and more efficient. After tax reforms prompted a revision of Japan's law on the preservation of electronic tax records and other changes in 2020, the Japanese government also began to actively encourage businesses to make the switch from paper to digital. 

Administration, development, and management of the platform is handled by its namesake company TradeWaltz, which was founded in April of this year. The seven aforementioned enterprises that recently agreed to invest in TradeWaltz will be working closely with one another to further develop the platform into a practical and commercially viable business. The first step will be a sequential rollout, whereby it is adopted gradually for different processes with new functions added and other improvements made where necessary. In the future, the TradeWaltz platform can connect government agencies, service providers, and other players both in Japan and abroad who are considering digitisation of documents. All seven investors are confident that its successful rollout can help to promote the digitisation of trading operations, first in the ASEAN region and eventually throughout the world.

 

Progress Bank launches Sensibill for digital receipt management

Sensibill, a provider of AI and machine learning (ML)-powered SKU-level data and financial tools, has announced that Progress Bank has launched the company’s digital receipt management solution.

Progress Bank is a commercial-focused institution that serves businesses in communities throughout Alabama and the Florida panhandle. The bank wanted to add to its digital tools designed to help businesses that are typically too busy to visit the branch, which prompted the partnership with Sensibill. 

By leveraging Sensibill’s AI/ML technology through the FIS Digital One platform, the bank’s business customers can now capture and store receipts in their digital banking apps. This allows businesses to more easily track spending, separate business and personal expenses, and better manage their overall financial health. Digital receipts also provide SKU-level data to Progress Bank, which can help the bank better know their customers and anticipate their timely financial needs. 

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