Morocco hosts World Bank and IMF annual meeting one month after quake

The International Monetary Fund (IMF) believes that a debt deal between Zambia and its creditors is “imminent” and is hopeful it will be announced this week during the crisis lender’s gathering of policymakers, a top official for the institution said.

“I’m very optimistic,” Abebe Aemro Selassie, director of the fund’s Africa department, said in an interview in Marrakech, Morocco, on the sidelines of the IMF and World Bank annual meetings. “The ball is in the authorities’ court. It’s between the authorities and their creditors. They’ve told us that they’ve made very, very good progress.”

A deal in principle was reached in June, but subsequent talks have advanced only slowly. The deal would come in the form of signing a memorandum of understanding (MoU) to restructure US$6.3 billion of the southern Africa country’s debt.

Zambia, which became Africa’s first pandemic-era sovereign defaulter in 2020, has struggled to come to a deal with creditors. Earlier this year, the IMF withheld a near-US$190 million disbursement because of delays in the group agreeing to debt relief. China is by far Zambia’s biggest bilateral creditor.

The IMF and the World Bank are holding their meeting in Morocco, weeks after a earthquake killed nearly 3,000 people and threatened to derail the event.

The global lenders traditionally hold their annual gathering of finance ministers and central bank governors outside their Washington headquarters every three years. This is the first meeting on African soil in 50 years.

The southern Moroccan city of Marrakech was originally chosen to host this week’s gathering in 2021, but the meeting was postponed twice because of the Covid-19 pandemic.

“A prosperous world economy in the 21st century requires a prosperous Africa,” IMF Managing Director Kristalina Georgieva said in a speech in Abidjan last week.

The World Bank is expected to confirm plans to boost lending by US$50 billion over the next decade through balance sheet changes, although its President Ajay Banga wants to go further and raise capacity by US$100 billion or even US$125 billion through contributions from advanced economies.

• The world economy has shown ‘remarkable’ resilience, given the impact of Covid-19, the Ukraine war, and high inflation, the IMF says in its latesst World Economic Outlook. Pierre-Olivier Gourinchas, the IMF’s economic counsellor, comments; "The global economy continues to recover slowly from the blows of the pandemic, Russia’s invasion of Ukraine, and the cost-of-living crisis. In retrospect, the resilience has been remarkable. Despite the disruption in energy and food markets caused by the war, and the unprecedented tightening of global monetary conditions to combat decades-high inflation, the global economy has slowed, but not stalled. Yet growth remains slow and uneven, with growing global divergences. The global economy is limping along, not sprinting."

 

Bank of Israel to sell US$30 billion of forex to stabilise shekel

Israel’s central bank has resorted to unprecedented measures to contain the most intense volatility faced by the shekel (ILS) in two decades but could not prevent its steep slide after an attack by Hamas militants led the government to declare war.

In a statement minutes before trading was set to begin on Monday, policymakers said they’woud sell as much as US$30 billion of reserves to support the currency and extend up to US$15 billion through swap mechanisms.

While the shekel slumped to its weakest since 2016 and a gauge of expected swings rose sharply, the Bank of Israel signaled confidence in its efforts so far, saying an emergency interest-rate hike isn’t currently planned.

The central bank stated that it will “operate in the market during the coming period in order to moderate volatility in the shekel exchange rate and to provide the necessary liquidity for the continued proper functioning of the markets.”

Despite the Bank of Israel’s announcement, the shekel weakened more than 2% to around 3.92 to the dollar in Monday morning trading as Israeli forces continued fighting Hamas in towns near the Gaza border.

“The Bank of Israel will continue monitoring developments, tracking all the markets, and acting with the tools available to it as necessary,” the central bank said in the statement.

The bank previously intervened in 2021, when it bought billions of dollars to stem the appreciation of the shekel. Now the Bank of Israel is planning to sell dollars in the open market to maintain stability and functioning in the financial market.

“This a plan and it doesn’t mean that the central bank will use the full amount of the programme,” IBI Investment House Ltd. chief economist Rafi Gozlan told The Times of Israel.

 

HSBC buys Citi’s Chinese retail assets in US$3.6 billion deal

HSBC Holdings has agreed to buy Citigroup’s retail wealth management portfolio in mainland China, furthering its expansion in the world’s second-largest economy.

The portfolio comprises about US$3.6 billion in assets and deposits from wealth customers across 11 major cities, HSBC said in a statement. Terms of the transaction were not disclosed and the deal is expected to close in the first half of 2024, Citi said.

HSBC aims to become a leader in one of the world’s fastest growing wealth markets as part of its pivot to Asia strategy. However, the deal comes as concerns grow over the direction of the Chinese economy amid a protracted slump in the country’s real estate market, previously a major source of wealth growth, and a crackdown on private enterprise. 

“Mainland China is central to our ambition to be the leading wealth manager in Asia,” said Nuno Matos, chief executive officer wealth and personal banking at HSBC. 

HSBC, which counts Hong Kong as its largest market, also recently acquired the remaining 50% stake in HSBC Life China and launched other private banking initiatives across six cities in mainland China. 

The sale is part of a wind-down of Citi’s consumer banking business in China, which was announced in December 2022. The portfolio excludes credit cards, mortgages and other loans of Citi China.

 

UK’s Metro Bank plans cost cuts after £925 million rescue

Metro Bank which became the UK’s first new high street lender in 150 years when it launched in 2010, will embark on a fresh cost-cutting drive after securing a £925 million (US$1.13 billion) rescue package from investors at the weekend.

The bank said it was aiming to remove about £30 million of costs a year from 2025 as part of the deal, which avoided a potential breakup or takeover by a rival UK bank. Specialist lender Shawbrook, which has made an offer for rival Co-op Bank, was reported to also be interested in bidding for Metro.

It has not yet been announced whether Metro’s planned cuts would result in job losses among its 4,000 employees, including those who work across its 76 branches. However, given that staff costs are about 45% of the bank’s total costs, the Shore Capital analyst Gary Greenwood said he “would be surprised if some of the cost cutting doesn’t involve employee impact”.

Metro confirmed that customers had begun to withdraw their money over recent days amid worries over its financial health. However, the lender said it still expected current account balances to grow, “notwithstanding the recent increase in deposit outflow rates in advance of the announcement of the capital package” on Sunday night.

In total, the rescue deal involves £600 million of debt refinancing, on top of a £325 million capital raise, which includes £150 million of new shares sold at 30p a share. Metro also plans to sell off about 40% – or £3 billion – of its mortgages to reduce the risks on its balance sheet by the end of the year. That is on top of a shift to “specialist mortgages and commercial lending”, which is likely to involve buy-to-let mortgages.

According to the Financial Times, a Colombian billionaire behind the financing deal has said he sees opportunities to use the UK challenger bank as a base for acquisitions — once costs are brought under control — following model similar to the one he has used during four decades of dealmaking in Latin America.

Jaime Gilinski Bacal will take a 53% stake in Metro after agreeing to contribute £102 million of new equity as part of a wider refinancing that drew a line under weeks of private negotiations to shore up the bank’s capital position. “Once Metro becomes profitable and the business model continues to grow, we should be looking at building more value through adding more assets,” Gilinski told the FT.

According to a Sky News report, a London-based hedge fund which fought a long-running battle with one of Italy's biggest banks has emerged as a key player in the deal to recapitalise Metro.

It said that Caius Capital, which was founded in 2016 by Antonio Batista and William Douglas, is the largest bondholder involved in the weekend talks struck to keep Metro trading as a standalone company.

Caius, which reached a settlement with Italian lender Unicredit in 2018 following a dispute over the bank's treatment of complex financial instruments, is said to have played a pivotal role in the agreed deal.

 

India discusses local currency trade with Tanzania

India is discussing trade in local currencies with Tanzania, according to a foreign ministry official who said that New Delhi has pushed for trade in rupees.

Tanzania has also sought additional lines of credit from India in defence and other sectors, above the US$1.1 billion offered by India previously, Dammu Ravi, a secretary at the foreign ministry, told reporters at a briefing on the visit of Tanzanian President Samia Suluhu Hassan to India.

India and Tanzania have also agreed to collaborate in areas of space technologies and digital public infrastructure.

Tanzanian President Samia Suluhu, who is on a four-day official visit to India, had a bilateral meeting with Prime Minister Narendra Modi on Monday, where the two leaders announced the elevation of Indo-Tanzania relationship to the level of ‘strategic partnership.

The two sides signed six agreements for cooperation in sectors including digital transformation, culture, sports, maritime industries and white shipping information sharing. “Tanzania is the biggest and the closest partner of India in the entire Africa,” Modi said.

Both sides noted that the strategic partnership will help the two countries jointly work on issues like maritime security, defence co-operation, development partnership, trade and investment among others,” per the joint statement issued after the bilateral meeting.

 

South Korean companies avoid bond issues as interest rates rise

South Korean companies are turning to bank loans and asset sales to secure cash instead of issuing corporate bonds amid rising interest rates, according to reports.

Citing the local banking industry, they state that banks’ corporate loans have been increasing for nine consecutive months. The outstanding balances of corporate loans at five major banks ― KB Kookmin, Shinhan, Hana, Woori and NH NongHyup ― stood at won (KRW) 756.3 trillion (US$561 billion), as of the end of September, a more than a KRW52 trillion won increase from December 2022.

Companies have approached banks that offer relatively lower interest rates than bond issuance. However, the burden faced by companies in issuing bonds has increased, as banks plan to issue even more loans to meet the increasing demand of corporate bonds. The increase in bank bonds, often more credible with investors, will subsequently push corporate bonds aside.

In addition, local credit market liquidity is expected to be hit further, as South Korea’s financial authorities have decided to eliminate the issuance limit for bank bonds from this month. The move is aimed at helping banks find ample capital for upcoming high interest rate mature savings products. However,  top credit-rated banks are expected to dominate the credit market as a result, absorbing institutional investors' demands for bonds.

The demand for relatively riskier corporate bonds usually decreases when the issuance of top-credited bank loans rises. The net volume of South Korea’s corporate bond issuance has significantly reduced in the second half, from the first half's KRW 17.3 trillion.

Against this backdrop, companies with good credit ratings, including Hyundai Department Store with an AA+ rating, and Lotte Chilsung Beverage, with an AA0 rating, plan to raise capital through bond issuance. Other blue chip companies like EcoPro BM, LG Uplus and LS Cable & System aim to issue bonds later this year, as they attempt to pre-empt the credit demand before other more competitive bonds.

“The credit market is showing signs of an overall weakness, as construction and bank bonds have turned enervated, which had been strongly leading the credit market, while spreads are widening across all sectors,” commented Lee Kyong-rok, a bond analyst at Shingyoung Securities. “As we enter the fourth quarter, the credit market seems to be currently experiencing an unease due to several factors, including the burden of upcoming maturities of high-interest deposits, the collection of public funds as well as the resumption of KEPCO (Korea Electric Power Corp) bond issuance.”

 

Malaysia’s HLB and Cagamas in US$63.5 million green asset deal

Malaysia’s Hong Leong Bank (HLB) and its subsidiary Hong Leong Islamic Bank, together with National Mortgage Corporation of Malaysia, aka Cagamas, have successfully concluded their ringgit (MYR) 300 million (U$63.5 million) green housing loans and financing (green assets) transaction.

The transaction was funded by the issuance of Cagamas’s one-year Asean Green Bond worth MYR210 million and one-year Asean Green Sustainable and Responsible Investment Sukuk worth MYR90 million under the national mortgage corporation’s MYR60 billion conventional and Islamic medium-term notes (MTN) programme.

The issuances of the Asean Green MTNs by Cagamas are Malaysia’s first corporate issuances relating to green housing loans and financing, the parties said in a joint statement.

“The increasing demand for green asset financing highlights the urgency of addressing climate impact and sustainability concerns,” said HLB group managing director and chief executive officer Kevin Lam. “It also reflects a growing awareness that sustainable business practices are not just the right thing to do but also essential for long-term economic viability and environmental stewardship,”

President and chief executive officer of Cagamas Kameel Abdul Halim said the purchase of thegreen assets not only contributes positively to the environment but also fortifies its essential role in the facilitation of liquidity within a developing green capital market.

“This practical step underlines our continued efforts as an intermediary in the secondary market, helping to support industry-led green initiatives to achieve their sustainability agenda,” he added.

 

TerraPay and Bancolombia partner on cross-border remittances

Global payments network TerraPay has partnered with Latin America financial services group Bancolombia in “a bid to revolutionise cross-border remittances in the region.”

TerraPay has connections with over 100 remittance companies worldwide, facilitating payments between 200+ sending countries and 120+ receiving countries. This collaboration aims to bolster domestic remittances in Colombia, empowering Colombians living abroad to send funds securely and innovatively to their loved ones back home.

The partnership between TerraPay and Bancolombia is driven by a shared commitment to enhance financial inclusion. By leveraging TerraPay’s expansive network and cutting-edge payment solutions, the collaboration seeks to make cross-border transfers seamless, benefiting Colombians both within the country and abroad.

Bancolombia is Colombia’s largest player in the remittance market and in 2022 processed US$ 5.69 billion of the US$ 9.43 billion that flowed into the country. With agreements in place with 17 remittance companies spanning 125 sending countries, Bancolombia holds a significant position in facilitating cross-border transfers.

The partnership is expected to amplify the influx of funds into Colombia, primarily from the US, UK, Spain, and various European nations, as well as several countries in Asia and Africa. The collaboration aims to enhance the availability of channels for sending money to Colombia, benefitting Colombians both within the country and abroad.

 

Lloyds Bank introduces digital solution for Direct Guarantees and Standby Letters of Credit

Lloyds Bank has introduced a digital solution, which enables clients to obtain Direct Guarantees or Standby Letters of Credit to enhance the efficiency, safety, and security of their trading activities. 

The initiative, known as the Paperless Guarantee, is designed to assist businesses that frequently require bank-issued guarantees. It offers immediate delivery to recipients and minimises their environmental impact.

This development is part of Lloyds Bank’s ongoing commitment to digitalise trade and follows the bank’s successful execution of the UK’s first digital trade transaction under the newly enacted Electronic Trade Documents Act (ETDA) on 20 September.

Lloyds Bank also led the way in the UK by completing a transaction using a digital promissory note in August 2022 and recently announced a €3 million investment in Enigio to expedite the adoption of digital documentation in trade.

Trade finance is responsible for the circulation of approximately 28.5 billion pieces of paper globally each year. Through its Paperless Guarantee programme, Lloyds Bank aims to further assist clients in securing new business, fulfilling contractual requirements, and reducing time, costs, and logistics. 

The initiative also contributes to lowering carbon emissions by eliminating the need for paper couriers.

 

ABN Amro sells stake in EMS payments joint venture to Fiserv

ABN Amro has sold its 49% stake in payment processing joint venture EMS to US fintech services multinational Fiserv.

Founded in 2005 as a joint venture, EMS is a Netherlands-based digital payments business, providing infrastructure and technology for processing payments between merchants and their customers.

The company currently counts 40,000 clients in 25 markets and membership of 13 national payment schemes. Previously, EMS was part of International Card Services, the Netherlands' largest credit card issuer for consumers and business credit cards.

In a statement, the Dutch bank said: “ABN Amro regularly reviews its investments and concluded in consultation with Fiserv and EMS that EMS will be best served in its next chapter of growth by being wholly owned by Fiserv.”

Fiserv formerly owned 51% of EMS and has now acquired, with immediate effect, the outstanding 49% stake from its former partner.