America's bank branch network contracted further in 2023

The network of traditional ‘bricks and mortar’ bank branches across the United States shrank by more than 1,000 in 2023.

Citing data from regulator the Office of the Comptroller of the Currency (OCC) for the period 1 January to 22 December 2023, Mail Online reports that banks filed notices to close a total of 1,566 branches, partly offset by notifications to the regulator of plans to open 472. California saw by far the greatest net closures, losing an average of 300 branches, while the area around Seattle lost more than a dozen branches while only gaining two.

But the rapid retreat of banks from some regions was possibly the most pronounced in the Midwest. Michigan lost 36 branches over the year but gained no new ones, while Illinois lost 60 branches and gained 18.

A handful of states went against the trend. Arkansas, Mississippi, Nebraska, Oklahoma, South Carolina, Tennessee, West Virginia and Wyoming all experienced a net gain of branches. West Virginia was also the one state that did not lose a single bank branch throughout 2023.

Mail Online reports that Wells Fargo led the retreat, closing 312 branches and filed to close 15 branches in one week alone during November. It was followed by PNC and US Bank which notified of 196 and 178 closures respectively. Bank of America and Chase both filed to close 157 branches.

Citibank was a notable outlier among the big national banks, filing to close only eight banks over the period. Meanwhile, certain smaller banks also closed a significant number of branches. Santander, headquartered in Boston, announced plans to close 61 of its 500 branches, with 38 of the closures scheduled in Massachusetts.

Citizens announced that it would close 85 branches, nearly 10% of its national network of around 1,000 branches.

JPMorgan Chase was a notable exception as one of the only banks that filed to open more banks than it said it would close. It notified the OCC of 195 openings, or more than 40% of the total 472 reported by all banks across the year. TD Bank also expanded its network, announcing just one branch closure in Maine against 24 new branches.

TD Bank said it would close just one branch in Maine but would open 24.

A spokesperson for Bank of America told the website that it was closing branches in response to diminishing customer traffic. “What we're seeing across the industry is that our clients are using digital banking for more of their everyday needs. They only come into our financial centres when they want to have a conversation about their finances or something that's a little more complex.”

Amy Amirault, spokesperson for Wells Fargo, said that the bank is evolving with its customers. “As customer preferences and transaction patterns change, so will our branches,” she wrote in a statement. “For example, we may open new branches where we combine two older existing branches into one better situated location.”

A separate report stated that the UK bank branch network, which has contracted by nearly 6,000 since 2015, saw a further 645 banks close their doors last year. British banks have already announced plans for a further 189 closures in 2024.

 

US office owners face US$117 billion of debt repayments and refinancings

Billions of dollars of debt will fall due during 2024 on hundreds of big US office buildings that their owners are likely to struggle to refinance at current interest rates.

Citing data from the Mortgage Bankers Association (MBA) the Financial Times reports that there are US$117 billion of commercial mortgages tied to offices which either need to be repaid or refinanced this year.

Many were taken out a decade ago during the era of low interest rates. Commercial mortgage rates have nearly doubled since then, while the performance of many buildings has sunk, raising the prospect of billions of dollars of losses for investors.

“It’s going to be a problem to get some of these refinancings done,” John Duncan, head of the real estate finance practice at law firm Polsinelli, told the FT. “We’re seeing deals where even sophisticated borrowers are calling it a day and asking their lenders whether they would like to take the keys.”

Unlike US home loans, commercial mortgages are almost entirely interest-only so developers of large properties tend to have low monthly payments but face a balloon payment equal to the original loan the day the mortgage comes due.

Although expected losses are currently on a much smaller scale than during the 2008 housing crisis, soured loans could cause billions in losses for investors, wipe out some property developers — such as Austrian property owner Signa, which announced in late November that it would file for bankruptcy — and lead to forced sales in the already struggling office market. In December, Signa’s insolvency administrator put the company’s ownership of half of New York’s Chrysler Building up for sale in order to raise urgently needed cash.

“We are in the very beginning of trying to weather the office market downturn,” said Richard Hill, the head of real estate strategy at Cohen & Steers. “This is not driven by fundamentals; this has everything to do with financing costs going back up.”

 

China’s factory output weakens for a third month

Pressure on China’s leaders to accelerate efforts to revive weak demand in the country’s own markets has intensified after figures revealed that its manufacturing industry contracted for the third successive month.

The official manufacturing purchasing managers’ index (PMI) for December dipped to 49, below the 50-point mark that separates growth from contraction and down from 49.4 in the previous month. The figure was also far below the consensus for an increase to 49.6.

In his annual new year’s address, President Xi acknowledges that the world’s second largest economy was facing "winds and rain" and that “some enterprises had a tough time, some people had difficulty finding jobs and meeting basic needs” over the past year. However, he insisted that the Chinese economy had “sustained the momentum of recovery” and Beijing is likely to maintain its annual 5% GDP growth target for 2024.

The latest PMI figure suggests that government efforts to boost economic activity with a round of stimulative measures, such as ordering banks to lower interest rates and increasing borrowing to fund investment projects, have yet to fully make their mark.

Growth is also hampered by a combination of over-indebted developers struggling to shift properties amid high youth unemployment, elevated savings rates and stretched local government finances.

The non-manufacturing PMI, which captures activity in China’s services sector, edged up to 50.4 from 50.2, but was also slightly below analysts’ expectations. Severe winter conditions have curbed construction activity and kept people away from shops, holding back further improvements among non-manufacturing firms.

The overall PMI measure indicated that external demand for Chinese goods is weak, with the new export orders index down by 0.5 points to 45.8. Western economies are under pressure from rapid rises in interest rates over the past two years to tame an inflation crisis, while consumers are still struggling to cope with the high cost of living.

 

Saudi Arabia heads sovereign wealth spending league

Saudi Arabia’s sovereign wealth fund (SWF) spent more than any other last year with a total of US$31.5 billion in investments ranging from a stake in London’s Heathrow airport to ownership of a US gaming company.

The Kingdom’s Public Investment Fund (PIF) has topped an annual ranking of sovereign investment fund spending, compiled by consultancy Global SWF, for the first time.

Investment by PIF accounted for just over a quarter of the US$123.8 billion spent in total by all of the world’s sovereign wealth funds in 2023. Spending rose by a third compared to 2022 as the Fund struck 48 deals last year as part of Saudi Arabia’s stated policy to diversify its economy away from a reliance on oil revenue.

Saudi’s PIF has jumped from third to first in the global ranking of sovereign wealth fund spending over the last year. In 2021, it did not even feature in the top 10. The Fund had a relatively modest presence on the global stage until it was reformulated eight years ago by Crown Prince Mohammed Bin Salman, Saudi Arabia's de facto ruler, who made the Fund central to his “Vision 2030” plan.

Major purchases included US$4.9 billion for US  gaming company Scopely, US$3.6 billion to buy Standard Chartered's aircraft leasing division and US$3.3 billion for steelmaker Hadeed

However, its most famous investment spree has been in the world of sport. The Fund bought the UK’s Newcastle United football club and has spent heavily to attract some of the world’s most high-profile players to the Saudi Pro League. It also set up the well-funded LIV Golf League to rival the PGA Tour, before agreeing to merge the rival with the longer-established tournament organiser.

As well as investments abroad, Saudi Arabia has been investing heavily in plans to reshape its domestic economy, including a scheme to spend US$500 billion on a new city dubbed Neom. Planned for an area near the Red Sea, proposals include a miles-long mirrored skyscraper.

Singapore's GIC, which led spending by wealth funds for the past six years, invested 48% less in 2023, despite a US$144 billion inflow from the country's central bank.

Gulf funds were able to increase their dealmaking dominance, largely at the expense of Canadian and Singaporean funds, the Global SWF report showed. Gulf funds now account for nearly 40% of the investment value deployed by SWFs.

 

Cambridge University’s AI centre welcomes Google as first partner

The UK’s prestigious University of Cambridge announced that its newly established Centre for Human-Inspired AI (CHIA) has unveiled a long-term research agreement with Google, including an unrestricted grant to support endeavours in responsible AI, health care and sustainability.

The agreement will make the technology giant the first funding partner for CHIA

An extension of the longstanding partnership between Google Research, Google DeepMind, and the University of Cambridge, the collaboration features research funding and support for a postdoctoral fellowship. Google DeepMind has also established the first professorship in machine learning at Cambridge’s Department of Computer Science and Technology.

Matt Brittin, president of Google EMEA and Cambridge alumnus, said: “AI has huge potential to benefit people across the world – whether it’s through making daily life that bit easier, or by tackling some of society’s biggest challenges. It’s vital that we work together to seize this opportunity.”

By collaborating with the University, Brittin hopes for AI research that is “bold, responsible and designed to meet the nee ds of people across the country.”

In November the UK hosted an AI safety summit at Bletchley Park where governments, researchers and tech giants came together to discuss the potential opportunities, and concerns, around the technology. Issues raised included the potential use of AI for terrorism, warfare and the existential risk posed to humanity.

Michelle Donelan, Secretary of State for Science, Innovation and Technology, said: “Artificial intelligence can offer us enormous opportunities – growing the economy, creating new jobs and making lives longer, healthier and happier for British people.

“To seize those opportunities, we must bring together insights from business and academia to encourage the safe and responsible development of AI. That is why we are welcoming the partnership which Google and the University of Cambridge have announced.”

 

Nigeria to convert additional US$8.2 billion central bank loan into debt

Nigeria’s lawmakers have approved a request from President Bola Tinubu to convert naira (NGN) 7.5 trillion (US$8.2 billion) in overdrafts from the Central Bank of Nigeria (CBN) to longer-dated bonds that will be added to the country’s debt.

The senate granted approval at a sitting last weekend at which it also endorsed an NGN 28.77 trillion spending plan for 2024, higher than the figure of NGN27.5 trillion figure proposed by Tinubu.

Nigeria’s president said the conversion will reduce the cost of servicing the debt to 9% when compared to the monetary policy rate plus 3% that it currently attracts, and also improve the transparency of liabilities owed to the banking regulator.

Last May, lawmakers approved the conversion of NGN22.7 trillion in loans from the CBN into bonds. The request was made by Tinubu’s predecessor, Muhammadu Buhari, under whose administration loans from the central bank rose by more than 3,000%. That contributed to an increase in Nigeria’s outstanding debt by more than 50%; total public debt was NGN87.9 trillion in September.

Tinubu took over that same month as Nigeria’s 16th president, inheriting an economy burdened by inflation, high unemployment, extreme poverty and a crumbling infrastructure. Reports at that time stated that the country’s external debt stock – what it owes non-residents – reached US$41.69 billion in 2022

Multilateral lenders made up almost half of that figure. Eurobonds accounted for about 38% of Nigeria’s external debt, with Exim Bank of China accounted for US$4.3 billion or 86% of the US$5 billion in bilateral debt. The country’s public debt stock – what the government owes in total – was about US$100 billion in 2022.

 

Deutsche Bank donates to help combat human trafficking in New Mexico

Deutsche Bank has pledged nearly US$5 million in funding to help combat human trafficking in New Mexico, the bank announced in a joint statement with Attorney General Raúl Torrez.

The announcement comes seven months after Deutsche Bank settled a US lawsuit for US$75 million that claimed the German lender should have seen evidence that the late Jeffrey Epstein engaged in sex trafficking when he was a client.

Torrez’s office has been investigating several financial service companies and their role in what he says is a failure to identify sexual abuse and trafficking of underage girls at Epstein’s ranch in Santa Fe County, according to the statement. Last month it sued Meta and its CEO Mark Zuckerberg, accusing the company of enabling human trafficking and the distribution of child sexual abuse materials. The complaint alleges that Facebook and Instagram are “breeding grounds” for predators targeting children for human trafficking, grooming and solicitation.

“I am pleased that Deutsche Bank recognizes its ongoing responsibility to help us combat this problem,” Torrez said in the statement. “We appreciate the steps they have taken since terminating Jeffrey Epstein as a client in 2018 to strengthen their oversight capabilities and intend to use their pledge to support our ongoing efforts to apprehend traffickers and expand our victim services.”

A spokesperson for Deutsche Bank said the lender is pleased to support Torrez “in this important effort, which reflects our industry’s shared responsibility to play an active role in safeguarding the financial system.”

 

Zoth runs supply chain financing pilots in Latin America

Zoth, described as an “on-chain marketplace which brings fixed income opportunities offering high yield from Real World Assets (RWA)” announced the completion of Supply Chain Financing (SCF) pilots via the tokenisation of invoices using the XDC blockchain protocol.

The pilots used TradeFinex's open source smart contract standards and were funded using $FXD, a fully decentralised stablecoin softpegged to US Dollars and overcollateralised with the $XDC token using the Fathom Protocol. $FXD is primarily focused on RWA DeFi use cases.

Zoth promotes its platform as enabling businesses in emerging markets to access vital capital for their growth and expansion needs. The Zoth ecosystem “acts as a bridge between lenders and businesses looking for new age capital.”

For the two recent transactions, Zoth served as the loan originator and secured funds for its clients, a fintech which offers factoring solutions based out of Columbia and a leading revenue-based financing platform operating in Brazil, through the tokenisation of essential Supply Chain Financing documentation including invoices. This streamlined process resulted in a cash flow of $FXD 100,000 (FXD) for each institutional client. The success underscores blockchain-powered efficiency of Web3 financing.

“These successful pilots are just the first steps in our collaboration with using TradeFinex smart contract standards. We are actively exploring to scale FXD one billion in liquidity through our cooperation with XDC,” said Pritam Dutta, Founder of Zoth.

 

Near Intelligence files for Chapter 11

US consumer data company Near Intelligence has filed for Chapter 11 bankruptcy protection less than a year after going public. The Pasadena-based company will sell nearly all of its assets to credit institution Blue Torch Finance LP and plans to continue normal operations through the bankruptcy proceedings.

Near went public last March via a business combination with special acquisition company KludeIn I Acquisition Corp., a deal that was based on Near’s pre-money enterprise valuation of US$575 million at the time. The company later received notice in mid-November that, as a result of failing to file its Q3 financial report in a timely manner, it was not in compliance with the Nasdaq’s listing rules. It was officially suspended from trading on the Nasdaq on 27 December and is now trading on OTC Markets Group.

Near was founded by former chief executive Anil Mathews in 2012 and uses a combination of consumer data and artificial intelligence to provide partnering businesses with insights into consumer behaviour and trends. Mathews said last year that about 87% of its income is recurring and comes from licensing its products. However, Near stated in its Chapter 11 filing that it had struggled in recent years to raise sufficient capital to cover operational costs and that recent enactment of stricter data-privacy regulations have changed the industry and made it increasingly difficult for data-intelligence providers to gather information. The company accrued approximately US$100 million in net losses in 2022.

 

Seatrium secures S$400 million refinancing from DBS

Seatrium Financial Services (SFS), a wholly owned subsidiary of Singapore-based marine engineering firm Seatrium Limited, has secured early refinancing of S$400 million (US$303.2 million) from DBS Bank Limited with an option to convert to a sustainability-linked loan. The agreement came a day after the delivery of a converted floating production storage and offloading (FPSO) vessel to Mitsui Ocean Development and Engineering Company (MODEC), which is destined to work on the Woodside Energy-operated offshore oil development project in Senegal.

Seatrium delivered the FPSO Léopold Sédar Senghor to MODEC Offshore Production Systems six days ago, with no lost time incidents. The FPSO will work for Woodside on the Sangomar field development Phase 1, which is Senegal’s first offshore oil development. The Australian giant has been working on the Sangomar field development Phase 1, targeting approximately 230 million barrels of crude oil, since the project was sanctioned in January 2020.

As a result, Woodside awarded the contract for the supply of the FPSO, named after Senegal’s first president, Leopold Sédar Senghor, for the project to MODEC later that year. The vessel was converted from a very large crude carrier (VLCC) into a fit-for-purpose FPSO. The first oil was originally anticipated in late 2023. However, last July the target was put back to mid-2024 while the total project cost is expected to be US$4.9 – 5.2 billion, an increase from the previous cost estimate of US$4.6 billion, after a cost and schedule review.

Marlin Khiew, Executive Vice President, Oil & Gas (Americas) at Seatrium, commented: “We are pleased to support Woodside in contributing to Senegal’s oil and gas industry with a first FPSO for deployment in the Sangomar field, delivering sustainable long-term economic and social benefits for Senegal.”