Banks lead post- Labor Day corporate debt spree

Spain’s CaixaBank was also in the market with a $2 billion two-part offering of senior non-preferred notes, according to reports. The longest-dated portion of the offering — an 11-year fixed-rate note which is not callable for 10 years — yields 2.55 percentage points over Treasuries after initial pricing discussions of about 2.7 percentage points.

Completing a trio was Irish lender AIB Group, which sold US$1 billion of six-year fixed-to-floating rate notes, which are not callable for five years. The offering yielded 2.17 percentage points over Treasuries after initial pricing discussions of 2.45 percentage points.

Wednesday’s US$14.4 billion deluge came after 20 borrowers sold US$36 billion of fresh debt the previous day, making it the busiest session in terms of deals and daily supply so far this year, according to Bloomberg data. As a result, the high-grade market has already met consensus forecasts of around US$50 billion of issuance for the week.

“We’re anticipating a very active financial calendar in September,” said Ray Zeek, who spearheads US regional bank issuance and execution at Barclays. “We will likely see banks that have taken advantage of cross currency opportunities year to date or have been patiently awaiting regulatory proposals to closely evaluate the USD market this fall.”

Toyota Motor Credit, Idaho Power, Black Hills Corp., Nestle Holdings, Nippon Life Insurance., GATX Corp and Marsh & McLennan Cos were also in the market Wednesday.

With the Federal Reserve largely expected to keep US interest rates on hold at its next rate-setting meeting on 19-20 September, the corporate bond supply was seen as a factor contributing to higher yields in the coming weeks.

“I don’t necessarily think (the Fed) has got any more rate moves or rate tightenings left,” said Tom di Galoma, managing director and co-head of global rates trading at BTIG. “For right now, it’s just all about supply, and I think that’s what’s pushing yields higher.”

 

Nairobi Declaration calls for polluters to pay more

India’s prime minister Narendra Modi says that Western countries must not impose “restrictive” climate change policies on the developing world, as he prepares to host this weekend’s critical G20 summit in Delhi.

In an article for The Times of London, Modi appears to criticise the failure of western nations to meet a pledge of spending US$100 billion a year to help developing countries decarbonise, which is almost three years overdue.

He also insists that any action to tackle global warming must be “complementary” to development rather than risk holding back economic progress.

His call comes a day after the conclusion of the Africa Climate Summit, which saw the issue of the Nairobi Declaration, which calls for major polluters to commit more resources to help poorer nations and the raising of US$23 billion for green growth, mitigation and adaptation to address climate challenges in Africa.

The Declaration was announced by Kenya’s president, William Ruto, and adopted by African heads of state and government in the presence of global leaders and high-level representatives at the closing plenary of the summit.

The Nairobi Declaration target was announced among several other commitments from world leaders to appreciate that decarbonising the global economy is also an opportunity to contribute to equality and shared prosperity.

“Increasing Africa’s renewable generation capacity from 56 gigawatts (GW) in 2022 to at least 300 GW by 2030, both to address energy poverty and to bolster the global supply of cost-effective clean energy for industry,” the declaration document states in part.

The three-day summit was dominated by discussions of how to mobilise financing to adapt to increasingly extreme weather, conserve natural resources and develop renewable energy. Despite suffering from some of the worst impacts of climate change, Africa only receives about 12% of the financing it needs to cope, according to researchers.

 

Resurgent inflation to slow global wealth growth

The post- Covid 19 surge in global inflation is now expected to last longer than previously anticipated and negatively impact wealth growth for ultra-high-net-worth (HNW) and high-net-worth investors, although their wealth will continue to rise.

Global output is projected to return to pre-pandemic levels but would be US$7.9 billion or 6% lower in 2027 than previously projected when expressed in current US dollars and lower still in real terms, according to Global Wealth Report 2023 recently issued by Credit Suisse-UBS.

Although the global inflation rate returned to a peak of 8.75% in 2022, the highest annual increase since 1996, it is gradually declining as a result of successful anti-inflationary interest rate hikes and is forecast to decline to 6.9% for 2023. Inflation is expected to drop sharply to 3.87% in 2024, 3.61% in 2025, but remain above 3% in 2027 to 2028, according to data from Statista.

Despite its decline, the persistent inflation rate is adversely impacting global GDP and global wealth. Global GDP has stabilised, although at a much lower level than previously expected, while wealth will also continue to grow but at a much slower pace.

“Recovering from the setback in 2022, we believe that total global wealth will continue to grow at a pace similar to that recorded since 2000, averaging 6.7% per annum over the next five years,” according to the Credit Suisse-UBS report. “This would increase global household wealth by US$174 trillion over the next five years, equivalent to an extra US$25,500 per adult.

“However, if inflation persists at the rates that are currently expected, real growth of global wealth will average just 2.1% and real wealth per adult will grow by less than 1% per year.”

While inflation has eroded the real value of wealth in this century (and made it easier for adults to become US dollar millionaires), it has not greatly distorted the year-on-year wealth growth comparison, at least not until recently.

Using data based on the annual change in total global household wealth and its components using smoothed exchange rates (%), the report says inflation from 2001 to 2022 has reduced wealth growth by one to two percentage points, in line with the inflation target of many central banks. However, inflation considerably reduces the year-on-year growth in debt. Inflation also reinforces the wealth decline in 2008, raising the loss from –4.3% to –7.2%, with both financial and non-financial assets now contributing to the overall reduction.

A series of compounding issues such as rising energy and food prices, fiscal instability in the wake of the pandemic, and consumer insecurity have created a new global recession, the report says.

 

European sustainability agreement will avoid double reporting

The European Financial Reporting Advisory Group (EFRAG) and the Global Reporting Initiative (GRI) announced that they have achieved a high level of interoperability between the European Sustainability Reporting Standards (ESRS) and the GRI Standards.

They said that the high interoperability achievement will significantly reduce the sustainability disclosure burden for many companies, largely eliminating the prospect of “double reporting,” or the need to disclose sustainability-related information according to two sets of separate standards.

Hans Buysse, EFRAG Administrative Board President said: “This joint statement concludes several years of diligent work towards a high level of interoperability between the ESRS and GRI standards. The efforts made by the GRI and EFRAG Sustainability Reporting teams will prevent the need for double reporting by companies resulting in a user-friendly reporting system without undue complexity. Our collaboration with GRI is bearing fruit and we are already preparing ourselves for the next challenges in the field of sustainability reporting.”

The ESRS, developed by EFRAG, and officially adopted by the European Commission in July, set out the rules and requirements for companies to report on sustainability-related impacts, opportunities and risks under the EU’s upcoming Corporate Sustainable Reporting Directive (CSRD). The CSRD, on track to begin applying from the beginning of 2024, will significantly expand the number of companies required to provide sustainability disclosures to over 50,000 from around 12,000 currently, and introduce more detailed reporting requirements on company impacts on the environment, human rights and social standards and sustainability-related risk.

GRI Sustainability Reporting Standards are one of the most commonly accepted global standards for sustainability reporting by companies, developed to enable consistent reporting across companies and industries, providing clearer communication to stakeholders regarding sustainability matters.

The GRI published a major update of the standards in 2021.

Eelco van der Enden, CEO of GRI, said: “This is great news for businesses and for GRI reporters. They can use their current reporting practices to prepare for the new requirements under ESRS. What is more, ESRS reporters are considered as reporting with reference to the GRI Standards and have the possibility to report on additional topics not covered by the ESRS in accordance with GRI Standards. GRI is fully committed to actively engage with EFRAG and other standards setters to reduce the reporting burden for companies.”

 

Bank of China opens Saudi Arabia branch

Bank of China (BOC), one of China's four biggest state-owned commercial banks, has opened its first branch in Riyadh, capital of Saudi Arabia, with the aim of expanding the use of the yuan (CNY)in finance and trade. 

The bank opened the Riyadh branch on Tuesday, with BOC President Liu Jin, Chinese Ambassador to Saudi Arabia Chen Weiqing, Governor of the Saudi Central Bank Ayman Al-Sayari and other officials attending the opening ceremony.

Liu said that the establishment of a branch in Saudi Arabia to serve trade and investment exchanges is a solid initiative to promote the high-quality construction of China’s Belt and Road Initiative (BRI) with the power of finance.

The bank said that it will continue to improve its global service network and provide high-quality financial services, contributing to the deepening of cooperation between China and Arab countries, between China and the Gulf Cooperation Council, and between China and Saudi Arabia.

Separately, the BOC and e-commerce giant Meituan have signed a digital yuan (e-CNY) collaboration deal, with both firms looking to step up their central bank digital currency (CBDC) capabilities.

Reports state that the two firms have sealed a “cooperation agreement” that will see them “deepen” their “digital yuan cooperation.” The new deal will build on the firms’ existing CBDC partnership deal, signed back in 2021. The companies’ new agreement will see them co-develop solutions that go beyond retail commerce, the initial focus of the pilot.

The two companies will instead also branch out into CBDC-powered corporate services, explore cross-border usage cases for the e-CNY and look beyond smartphone-based e-CNY usage “scenarios” and expand their adoption of “hardware wallets.”

In early 2022, Meituan announced that its Meituan Waimai food delivery network, one of the largest in the country, had added e-CNY payment options. The company has also been trying to spur adoption by giving away e-CNY vouchers that can be redeemed on its sites, with would-be recipients obliged to open e-CNY wallets.

The BOC meanwhile, has been working with another e-commerce heavyweight, JD.com, on a cross-border e-CNY pilot in Hong Kong.

 

Citibank closing its ATM network in Russia

Citigroup’s Russian business Citibank, has reported closure of its automated teller machine (ATM) chain across the country.

Citi had already announced plans to exit Russia consumer banking in April 2021 as part of its global strategic refresh to exit consumer franchises in 14 markets in Asia, Europe, Middle East and Africa, and Mexico. Following the invasion of Ukraine, Citi expanded the scope of its planned exit in Russia March 2022 to include local commercial banking.

It has accelerated its exit from Russia in the past year and estimated a resulting write-off of US$190 million,

In a statement, the bank said: “Dear clients, we inform you about the beginning of the process of termination of service in joint stock commercial bank Citibank. All ATMs will be dismantled by the end of 2023.” It added that customers could use mobile banking for most transactions.

Last December, Russia's Uralsib bank bought the consumer loans portfolio of Citibank and is continuing the service of the loans.

Russian Deputy Finance Minister Alexei Moiseev warned last week that the Russian government would not allow foreign banks to leave the country easily.

 

Japan’s Mizuho joins MUFG’s stablecoin platform

Japan’s Mizuho Financial Group will join a stablecoin platform being developed by Mitsubishi UFJ Financial Group, in a major boost to a framework still being developed that aspires to replace the conventional trade finance network, Nikkei Asia reports.

A stablecoin is a kind of cryptocurrency whose value is anchored to a fiat currency such as the yen or dollar. Mitsubishi UFJ Trust and Banking is leading the development of the platform, which is expected to launch as early as 2024.

The new stablecoin promises an alternative to the conventional trade finance network, known for being costly and time-consuming. The platform will be capable of settling cross-border transactions instantly at zero cost.

In Japan, banks, trust companies and money transfer services have been allowed to issue stablecoins under a revised payment services act that came into effect in June.

The new cryptocurrency network will be operated by Progmat, a company to be set up next month by Mitsubishi UFJ Trust in partnership with major Japanese banks, the Japan Exchange Group and NTT Data. It will be headquartered in Tokyo.

Progmat intends to create a digital currency network that can accommodate many financial institutions. Mizuho is still considering how to introduce the stablecoin and into what business areas.

 

NEC APAC & TASConnect join forces on working capital tech

Singapore’s NEC Asia Pacific , part of Japan’s tech giant NEC Corporation, signed a strategic agreement with TASConnect, a wholly owned subsidiary of SC Ventures Holdings  - Standard Chartered's innovation, fintech investment and ventures arm - to develop a joint technology solution that seeks to revolutionise the way organisations measure, monitor, manage and enhance financial performance, ultimately driving sustainable growth and improving their working capital efficiency.

A release added that through the collaboration, NEC APAC and TASConnect will provide organisations with powerful real-time analytics tools, together with TASConnect's comprehensive working capital management platform-as-a-service to make informed decisions, thereby enhancing financial efficiency. This partnership represents a powerful synergy between both organisations, united by a shared vision of transforming financial management practices.

A core component of the technology tool supported by NEC APAC is a single-window visualisation of crucial financial health metrics, enabling organisations to gain real-time insights into their organisation's financial performance. Decision makers can set key performance indicators (KPIs) related to working capital and other vital financial metrics. Performance against these KPIs can then be accurately tracked and measured.

Users will have the ability to compare their organisation's financial performance against industry benchmarks, facilitating a deeper understanding of their competitive standing. In-depth diagnostics and root cause analysis tools are also incorporated, assisting decision makers in identifying the underlying factors influencing their financial health. Organisations will receive actionable recommendations tailored to each organization's unique situation, facilitating the improvement of financial metrics and overall operational efficiency.

The release adds that NEC Financial Insights capabilities, together with TASConnect's enhanced working capital solutions offered on its cloud-based platform-as-a-service, promises to be a game-changer for organisations seeking to unlock sustainable economic value in their finance and treasury functions.

 

Coinbase launches crypto lending service for major investors

Coinbase has created a new crypto lending service in the US for institutional clients, helping fill the void left by the demise last year of Genesis and BlockFiT.

The cryptocurrency exchange platform has already raised US$57 million for the new service, according to a September 1 filing with the US Securities and Exchange Commission (SEC).

A source revealed that clients can lend Coinbase money – predominantly crypto assets – and get collateral exceeding the value of the loan. Such overcollateralisation acts as a safeguard from disaster.

Coinbase can then in turn make secured loans to institutional trading clients – akin to the prime brokerage service banks provide in traditional finance, the source said.

Genesis and BlockFi provided similar lending services in the US, but suffered massive losses last year that drove them, fully or in part, into bankruptcy court.

The new service differs from a controversial Lend programme that Coinbase cancelled in 2021. That was pitched at retail customers, and SEC officials objected. This latest lending service is instead geared toward institutions, which means regulation is less onerous – on the presumption large investors have the sophistication to handle it.

 

ThetaRay didn’t reveal its valuation in the funding round, but said that it rose significantly compared to its previous round. The company has raised a total of US$150 million to date.

Global trade has suffered from payment networks becoming risk averse, causing global payments to become hard to complete, unpredictable and costly. ThetaRay’s cloud-based transaction monitoring and screening solution uses proprietary and patented AI technology to monitor financial transactions and allow the flow of funds across the world by establishing trusted transactions.

ThetaRay’s customers include several major financial institutions such as Santander, Travelex, Mashreq Bank, MFS Africa and ClearBank.

“Global payment infrastructure too often fails to accurately differentiate between perfectly legitimate transactions and ones from bad actors dealing with illicit funds,” said Peter Reynolds, CEO of ThetaRay.