ING to ditch upstream oil and gas business by 2040

Following this month’s COP28 climate summit in Dubai, ING Groep NV has announced plans to end all financing of upstream oil and gas activities by 2040 and to triple its funding of renewable energy over the next two years.

The Dutch bank expects to boost its financing of renewable power generation to €7.5 billion (US$8.2 billion) annually by 2025, up from €2.5 billion in 2022. It will also cut loans for oil and gas exploration and production by 35% by 2030. By 2040, the financed emissions linked to its portfolio will be reduced to zero, ING said. The group currently has a €4 billion upstream oil and gas portfolio.

ING confirmed that it had taken the decision after world leaders at COP28 agreed to transition away from fossil fuels, while tripling global green energy capacity by 2030. The group aims to accelerate the phasing out the financing of upstream (exploration and production) oil and gas activities in line with guidance from the International Energy Agency (IEA).

ING CEO Steven van Rijswijk said the move builds on the progress made at this month’s summit as well as the latest scientific research. Environmental group Greenpeace was however less convinced by the announcement, claiming the move away from fossil finance is too slow.

“It is great that ING confirms the agreements from Dubai,” said Maarten de Zeeuw, a climate expert at Greenpeace’s Dutch branch. But while this is a “step in the right direction,” he stressed that “our planet is on fire.”

“Let’s face it: just stepping away from the fire isn't enough, as long as you keep fanning the flames in the meantime.”

ING responded that the energy transition “cannot happen overnight,” and although it finances “a lot of sustainable activities, we still finance more that’s not. That is a reflection of the current global economy, how far the world has come and still needs to go.”

 

Citigroup to end distressed debt trading

Citigroup has decided to exit the distressed-debt trading business, the latest retrenchment in Chief Executive Officer Jane Fraser’s effort to reshape the group in pursuit of higher returns.

The move will remove one of the key players in distressed-debt markets and follows last week’s announcement by the New York-based bank that it also intends to move out of municipal bond trading and underwriting, a once-thriving business with 100 employees that has more recently seen business contract.

Reports based on inside sources suggested that closing the distressed-debt business, run by Pat Kris and Joseph Beggans. will impact roughly 20 positions, one of the people said, asking not to be identified because this information isn’t public. A company spokesperson declined to comment.

Fraser announced in September that she is undertaking the biggest restructuring of Citigroup in decades as she seeks to make the company more efficient and eliminate layers of management within the bank’s 240,000-person workforce. Citi has repeatedly abandoned or missed targets over the years, and Fraser is determined to restore investor confidence in its ability to set and meet guidance.

Distressed trading can be volatile, with outsized performance one year potentially followed by leaner times. The business at Citigroup outperformed in 2021 but has reportedly slowed significantly in the past two years.

Bank of America and Goldman Sachs are among the other participants in the market known for their distressed franchises, a field that is now dominated by a handful of big sell-side players globally.

 

Argentina auctions US$3.7 billion of peso debt

Argentina has auctioned about pesos (ARS) 2.96 trillion (US$3.7 billion) worth of treasury debt denominated in its local currency, as part of the government’s efforts to unravel a spiralling pile of short-term central bank arrears held by local creditors.

Investors, primarily Argentine banks, whose short-term notes had recently expired, bought ARS964 billion of new treasury bonds maturing in 2025 and 2026. The bonds have yields of minus 15.95% and minus 4.53%. They are linked to inflation, partially shielding holders from Argentina’s rampant inflation rate that has reached 160%.

They also bought ARS2 trillion worth of 27-day treasury notes with a yield of 8.66%, according to the economy ministry. The total tender was worth US$3.7 billion at the official exchange rate, which is almost 10% of the South American country’s GDP.

The short-term notes Argentina wants to phase out were issued by the central bank as a way of soaking up excess pesos in the economy, created by the previous government’s reliance on money printing to finance its chronic fiscal deficit. The central bank has resorted to more money printing to pay exploding interest on this debt pile, which is now ARS26 trillion.

However, Argentina’s incoming president Javier Milei, a libertarian economist who took office on 10 December, is keen to halt money printing and avoid a scenario in which creditors suddenly exit the short-term notes. Clearing the central bank’s balance sheet, he has said, was an essential precondition for removing the country’s strict currency controls and eventually fulfilling his campaign promise to dollarise the economy.

The tender came after Argentina’s central bank, directed by economy minister Luis Caputo’s former investment bank colleague Santiago Bausili, moved to discourage banks from holding the short-term instruments. It stopped issuing 28-day notes, known as leliqs, which paid 133% annual interest, instead offering only one-day notes, known as pases, paying 100% annually.

Milei unveiled a sweeping emergency decree on Wednesday night that mandated more than 300 measures to deregulate the country’s economy.

The decree strikes down major regulations covering Argentina’s housing rental market, export customs arrangements, land ownership, food retailers and more. It also modifies rules for the airline, healthcare, pharmaceuticals and tourism sectors to encourage competition. Employee severance packages will be cut and the trial period for new employees extended.

 

Sweden’s central bank suggests rates may have peaked

Sweden has seen several positive developments regarding inflation both at home and abroad since the end of November, and may not need to raise rates again, Riksbank Governor Erik Thedeen said on Wednesday.

At its most recent meeting on 23 November, the central bank kept its policy rate on hold at 4.00% after eight rate hikes in a row, but said it was ready to hike again if inflation proved stubborn.

However, a bigger than expected drop in inflation last month to 5.8% from 6.5% in October and a stronger krona (SEK) point to a brighter inflation outlook, Thedeen said. “We think that we can reach the inflation target without further rate hikes,” he told reporters.

However, forecasts could still be wrong, he cautioned earlier in a speech. “It is therefore still important to follow developments to see how they affect the economic outlook and inflation prospects and to adjust monetary policy accordingly.”

Market analysts believe that not only is the rate hiking cycle over, but the Riksbank will start cutting rates sometime in the middle of 2024.

Thedeen said the Riksbank would return to the outlook for rates at the central bank's next meeting on 31 January. Separately, leading think tank NIER said it expected Sweden’s inflation to fall rapidly ahead and the bank to start cutting rates next summer with the policy rate ending 2024 at around 3.3%.

 

The Cardano Foundation is joining forces with Brazil’s state-owned oil company and the country’s largest corporation, Petrobras, to provide blockchain education and explore technology use cases in the energy sector.

The partnership aligns with one of Cardano’s key five-year objectives, unveiled in 2021, to strengthen relationships with Fortune 500 companies, seeking to increase diversity in on-chain activity and expand blockchain use cases to a wider range of industries.

 

UK financial services chiefs concerned by disruptive tech risks

Concerns over the potential risk of imposing disruptive technologies, such as artificial intelligence (AI), have shot up the agenda for UK C-suite executives in the financial services industry in the past two years, reports Accenture. The Dublin, Ireland-based IT company adds that UK FS executives were also more concerned about the risks posed by implementing AI and other disruptive techs than their global peers.

In its latest global Risk Study of the top concerns among senior executives at financial services businesses, Accenture found that 31% of financial services chiefs in the UK said that implementing disruptive tech, including AI, had become a more significant concern since 2021, compared to just 25% globally.

Of all the risk factors that have increased in the last two years, disruptive technologies were the second most significant for UK executives, only behind regulatory and compliance risks (33%). Disruptive technology risk ranked fourth among global executives.

Over a third (35%) of UK executives said that implementing disruptive tech has escalated the importance of financial risks (market, credit, liquidity risks), compared to a global average of 29%. Among the global sample, operational risk factors (cyberattacks, supply chain disruption) were seen to be more significantly impacted by implementing disruptive technologies (39%).

In contrast, climate change and environmental risks were ranked towards the bottom of the factors that had risen up the agenda in terms of their potential impact on FS firms. Just 17% of executives said climate risks had become significantly more important, compared to a global average of 24%.

UK respondents said that climate risks had most impacted their concerns around broader financial risks (56%), compared to just 24% globally. They were also more concerned that climate risk would most escalate the importance of operational risks (34%).

Heather Adams, Managing Director, Head of Risk Strategy & Consulting at Accenture commented: “Implementing artificial intelligence has shot up the agenda for businesses across all sectors in the last two years, as business growth and efficiency benefits are becoming clearer. Amid the hype, it’s little surprise to see that UK financial services firms are increasingly concerned about the risks its implementation could pose to their businesses.

“New innovative technologies inherently bring some uncertainty, and with uncertainty comes risk in the short term. But the potential is even greater, and so to mitigate these risks, UK financial services businesses must implement robust governance frameworks and ensure thorough data quality control, something they are uniquely well-placed to do due to heavy regulation and governance requirements in the sector. If embraced in a safe and responsible way, AI and other disruptive technology will help mitigate some of the other risks, such as operational threats and talent productivity.”

 

Coupang, South Korea’s Amazon, buys Farfetch for US$500 million

Online fashion giant Farfetch, reported to be close to bankruptcy due to falling sales and a declining luxury market, has been rescued by South Korea’s Coupang, which has agreed to buy the company for US$500 million.

Founded by Bom Kim in 2010, Coupang is the country’s largest digital retailer in, which has led it to be nicknamed “South Korea’s Amazon.” Although it offers all types of products and services (including restaurant food delivery), the acquisition of Farfetch is the company’s opportunity to enter the luxury goods sector, which has one of its most thriving markets in South Korea.

“This acquisition positions Coupang as a leader in the US$400 billion global personal luxury goods segment,” Coupang said in a statement.

José Neves will continue to retain his role as CEO of Farfetch, but it was unclear whether the acquisition will affect the company’s collateral businesses and if Coupang will also take over News Guards Group, Browns or Farfetch’s recent stake in Neiman Marcus.

As recently as February 2021, Farfetch’s market capitalisation had reached approximately US$23 billion but recently it had fallen to US$250 million. Founded by Portuguese entrepreneur J Neves in 2008, Farfetch adroitly capitalised. on the growth of online shopping. It operated as a large multi-brand platform for luxury brands, selling products mainly for independent designers or brands with few physical stores.

In the last 10 years, the company expanded, opening offices in London, Tokyo and New York while also launching different lines of business. In response to the rise of urban fashion, Farfetch created New Guards Group, a conglomerate that owns brands such as Off White, Palm Angels, Heron Preston and Marcelo Burlón. In 2015, they gave up on physical stores and bought Browns, the legendary London multi-brand independent design store. and in 2017, the publisher Condé Nast entered as an investor in Farfetch after closing its e-commerce platform Style.com.

Farfetch’s success seemed unstoppable. Indeed, it was recently confirmed that the company was negotiating with the luxury goods group Richemont (owner of Cartier) to take over the majority stake in its main competitor in the digital market: YOOX Net-à-Porter (YNAP), which belongs to that group. However, falling gross profit, with sales down, and the declining share prices in the luxury sector pushed Farfetch to the brink of bankruptcy in a matter of months.

 

Neonomics and Ping Payments offer open banking services across the Nordics

Norway-based open banking technology company Neonomics announced a partnership with Ping Payments. a Swedish payment provider specialising in payment solutions for platforms, SaaS businesses, and marketplaces.

The new partnership will enhance Ping Payments’ capabilities in account-to-account payments, identity verification, and compliance within the Nordic region.

The joint effort will see Neonomics manage end-user consents and account-to-account payments for Ping Payments, supporting -open banking-powered identity verification, “which, when combined with account-to-account payments, will strengthen value by fulfilling a need to validate recipients of pay-outs in several segments.”

Ping Payments will benefit from Neonomics’ broad connections to banks across Norway, Denmark, and Finland, using the capabilities of the robust open banking API platforms available in the market.

Petter Sehlin, CEO at Ping Payments, said: “Reach, market insight and technical viability were paramount in our selection of a partner for expanding our services. Neonomics has consistently demonstrated high quality throughout our relationship, and we are excited to expand our offering outside of Sweden across the Nordics with Neonomics.”

Working together, the two companies aim to expand the footprint of secure, seamless financial transactions across the Nordic region and are strategically positioned to broaden their influence throughout the Nordic financial sector.

 

HSBC recruits US stock analysts to serve wealthy clients

HSBC has revealed that its Americas equity research team was expanded to 24 people this year, adding to its coverage of US stock markets for wealthy clients, the bank said on Tuesday.

HSBC hired 12 equity analysts for the region, doubling the equity team to 24 people and the group of researchers for all asset classes in the Americas to 40. Globally HSBC has 323 analysts covering all asset classes.

Daragh Maher, HSBC's head of research in the Americas, said the recruits enabled HSBC to broaden its equities coverage in the Americas to more than 250 stocks across 83 sectors.

Wealthy clients, particularly from Asia, are showing increasing interest in US equities given the stronger growth prospects relative to other regions.

HSBC’s wealth division had about US$1.6 trillion in assets under management in the third quarter of 2023.

 

Bank of America CEO says it will devote more capital to trading

Bank of America’s Chief Executive Officer Brian Moynihan said the bank is continuing to invest in its markets division as it seeks to increase market share.

“We increased the size of the business three or four years ago, and that has borne fruit,” Moynihan said in an interview for Bloomberg, adding that the bank plans to allocate more capital to trading. “As long as they can keep deploying it we’ll keep pushing capital.”

Moynihan also said that US consumers are doing well and that the balance is “several times” what it was before the Covid-19 pandemic. He noted that spending has slowed as inflation has risen, yet overall consumer spending this year is still 4% to 5% higher than in 2022.