Treasury News Network

Learn & Share the latest News & Analysis in Corporate Treasury

  1. Home
  2. Bank Relations & KYC
  3. Evaluating Banks’ Overall Performance

South Africa to hold rates ahead of election result – Industry roundup: 30 May

South African Reserve Bank to hold rates as it plans cashless future

Ahead of full results from the polling stations in the country’s general election, South Africa’s central bank is set to leave interest rates unchanged, staying the course in the inflation fight amid political uncertainty one day after the country’s tightest contest in 30 years.

Economists polled by Bloomberg expect Governor Lesetja Kganyago’s monetary policy committee (MPC) will keep the benchmark rate at a 15-year high of 8.25% , when he announces the decision later today. Most surveyed in a separate poll also expect the decision, which comes a day after elections, to be unanimous.

South Africa’s inflation rate eased for a second straight month in April to 5.2%, but remains above the midpoint of the central bank’s 3% to 6% target range. Kganyago, who was reappointed to a third five-year term in March, has repeatedly said the SARB will only adjust policy once inflation slows to the midpoint and stabilizes there.

Some economists suggest that while the elections will not influence today’s rate decision, they could have an impact in the future if the outcome is positive for South Africa’s currency. 

The rand has appreciated 3% since the MPC last met, buoyed by the view that the next government will still be led by the ruling African National Congress, keeping the country on a market-friendly path even if it has to form a coalition with a smaller rival.

Whatever the result, South Africa is on the road to becoming cashless, with the Reserve Bank publishing its digital payments roadmap to overcome the barriers to reducing cash use in the country. 

The roadmap, published by the South African Reserve Bank (SARB) last month, laid out a 17-item action plan by which the Bank plans to increase the effective use of digital payments in South Africa. 

According to Lerato Lamola, a partner at Johannesburg law firm Webber Wentzel, this roadmap follows the National Payment System Framework and Strategy Vision 2025: Action Plan published back in 2018.

The benefits of digital payments are safety, convenience, cost-effectiveness, women’s empowerment, business opportunities, and transparency, the bank said.

Lamola said the obstacles and challenges that need to be addressed to achieve South Africa’s goal of being a country that relies mostly on digital payments are: low bank account usage; high cash usage; transactional costs; infrastructure and regulatory framework

A central challenge that needs to be addressed is consumer trust in digital payments, as a lack of trust influences how consumers adopt and interact with digital platforms. The SARB acknowledges that this, along with otherr items of the action plan, may require further research and assistance from other government departments and stakeholders. 

 

ABN Amro agrees €672 million deal with China’s Fosun to buy German bank

ABN Amro has agreed to buy German private bank Hauck Aufhäuser Lampe (HAL) for €672 million (US$725 million) from China's Fosun International to expand in wealth management, its largest deal since the 2008 global financial crisis.

The Dutch bank's deal comes as European lenders seek to diversify their revenues by bulking up in areas such as wealth management and private banking.

ʺThe proposed acquisition will further strengthen our position and offer employees of the combined group the opportunity to play a driving role in the consolidating German market,ʺ ABN Amro CEO Robert Swaak said in a statement. Germany is the largest private banking market in Europe.

The deal is expected to close in the first quarter of 2025 and will increase ABN Amro's assets under management by €26 billion and add €2 billion in loans.

Fosun, whose businesses range from healthcare to oil and gas, acquired HAL in 2016. Some of HAL’s units such as those that provide alternative investment fund management or fund administration services will not be part of the acquisition.

JP Morgan analysts said some investors may have preferred if ABN Amro had used the excess capital to buy back shares - a key driver of the rally in European bank shares this year - than on acquisitions.

Market expectations for more buybacks this year and next will likely fall and the impact of the deal on profitability would be limited, they said.

ʺThere may be more expansion ahead and given press reports of ABN's interest in other deals, there could be interest in adjacent geographies as part of ABN’s strategy going forward (e.g. in Belgium),ʺ the analysts added.

ABN Amro was nationalised during the 2008 financial crisis. The Dutch state has been gradually reducing its ownership and in November it said it was lowering its stake to around 40%.

Fosun, which is paring back its portfolio after years of expansion, said it would use the sale proceeds for general working capital.

This year, the Chinese conglomerate has stepped up efforts to streamline its assets. In April, Fosun sold a 9% stake in Belgium insurer Ageas to BNP Paribas for €730 million. It is also said to be exploring a sale of all or part of its luxury resort Atlantis in southern China as part of efforts to reduce debt.

 

Global debt has swelled to US$315 trillion, reports the IIF

The world has amassed a total debt load of US$315 trillion, according to a report from the Institute of International Finance (IIF), the Washington, DC-based global association of the finance industry.

This figure reflects the biggest, fastest and most wide-ranging rise in debt since the Second World War, coinciding with the Covid-19 pandemic.

“This increase marks the second consecutive quarterly rise and was primarily driven by emerging markets, where debt surged to an unprecedented high of over US$105 trillion—US$55 trillion more than a decade ago,” the IIF said in its latest quarterly Global Debt Monitor report.

Around two-thirds of the US$315 trillion owed originates from mature economies, with Japan and the United States contributing the most to that debt pile. However, the debt-to-GDP ratio for mature economies — regarded as a good indicator of a country’s ability to service its debts — has been falling in general.

On the other hand, emerging markets held $105 trillion in debt, but their debt-to-GDP ratio hit a new high of 257%, pushing the overall ratio up for the first time in three years. China, India and Mexico were the biggest contributors, the report found.

The IIF identified stubborn inflation, rising trade friction and geopolitical tensions as factors that could pose a significant risk to debt dynamics, “putting upward pressure on global funding costs.”

“While the health of household balance sheets should provide a cushion against ‘higher for longer rates’ in the near term, government budget deficits are still higher than pre-pandemic levels,” the IIF added.

Of the US$315 trillion debt stock, household debt, including mortgages, credit cards and student debt, among others, amounted to US$59.1 trillion.

Business debt, which corporations use to finance their operations and growth, stood at US$164.5 trillion, with the financial sector alone making up US$70.4 trillion of that amount and public debt making up the rest at US$91.4 trillion.

 

Fintech N26 blames regulator for crimping growth

German digital bank and fintech N26 believes that regulatory actions by financial watchdog BaFin against the online-only bank for its poor anti-money laundering (AML) controls may have caused it to forfeit substantial potential earnings.

In 2021 BaFin ordered N26 to reduce its new client sign-ups to 50,000 a month, at a time when its monthly average was 170,000. The cap was increased to 60,000 last year and will be removed from June, according to N26

Last week the regulator revealed that it had fined the bank €9.2 million (US$9.9 million) for the persistent late filing of suspicious activity reports in 2022. This was on top of an earlier fine of €4.25 million in 2021 for similar problems in previous years. An independent monitor that oversees N26’s AML controls on behalf of BaFin will remain in place, reported the Financial Times citing people familiar with the situation.

N26 said this week that the direct costs of BaFin’s actions added up to €100 million, including spending on its control functions and monitoring systems, and the fines. But co-founder Valentin Stalf believes the indirect costs were much higher, the FT said.

In an interview with the paper to mark the authorities finally removing the cap on its growth, Staff commented: “The impact on N26 surely amounts to billions of euros because it lowered the company’s valuation as we were unable to grow.” In its most recent funding round in 2021 — before BaFin announced it was taking action — N26 was valued at €7.7 billion.

Stalf said he was “pleased about the trust of our regulators” and stressed that as the bank’s priorities had changed since 2021 it would not return to its earlier expansion spree.

“Our key priority won’t be growth but profitability of clients and attractiveness of market,” he stressed, adding that N26 wanted to create “a sustainable portfolio of clients which is profitable in the long run”.

Business dynamics were favourable he claimed, and N26 had “very strong demand” for its digital banking services and “the market has not been carved-up by our competitors over the past two and a half years”.

N26 expects to become profitable in the second half of this year, he said. Last year, it halved its losses to €100 million and reported a 27% increase in revenues to more than €300 million. This year, it hopes to increase revenues by up to 35 per cent, according to Stalf.

The business was founded in 2013 and has 8 million customers in 24 European countries, but in the recent years it has reined back some its international expansion plans, exiting the UK, the US and Brazil. N26 initially offered current accounts and more recently has expanded into brokerage services and savings accounts.

 

IFS and PwC UK partner on sustainability management and reporting

Enterprise software company IFS and professional services provider PwC UK are partnering to launch a new Sustainability Management Solution on the IFS Cloud platform aimed at supporting companies in meeting sustainability disclosure requirements, including the European Union’s (EU) new Corporate Sustainability Reporting Directive (CSRD) regulation, and embedding sustainable practices into their business operations.

The collaboration will see IFS develop a Sustainability Management module within IFS Cloud, while PwC will assist in the design and build, contributing expertise in environmental, social and governance (ESG) criteria and the regulatory landscape. Additionally, IFS Cloud customers will be able to enlist PwC services for guidance on sustainability reporting issues and tasks, such as conducting double materiality assessments and preparing for CSRD readiness.

According to IFS, the new solution will help customers navigate the new CSRD requirements, as well as other emerging mainstream global regulatory standards, with key features including out-of-the-box CSRD metrics, data mapping, approval workflows, target setting, and insights, as well as a library of KPIs, including quantitative metrics with calculation logic, supported by PwC ESG experts. Alongside the new module, PwC UK will provide services for companies to be compliant for their first CSRD reporting cycle in 2025. The first version of the new module is currently under development, and anticipated to be released in late November.

 

HSBC completes sale of Russian unit to Expobank

HSBC has transferred ownership of its Russian unit to Expobank for an undisclosed fee, concluding around two years of negotiations and uncertainty. The bank signalled its intention to exit from Russia in February, when Russian President Vladimir Putin gave approval for the asset sale to privately owned Expobank to go ahead.

Expobank said it had successfully completed the deal. HSBC later confirmed that it had transferred ownership of the business to the Russian lender. ʺEconomic ownership of HSBC Russia has been transferred to Expobank,ʺ HSBC confirmed. ʺThe transaction will formally complete once the legal title transfer has been registered in the State Corporate Register.ʺ

HSBC first announced in June 2022 that it had agreed to sell a 100% stake in the unit, HSBC Bank (RR) LLC, to Expobank. A 2022 decree bans investors from ʺunfriendlyʺ countries - those that have imposed sanctions on Russia over its invasion of Ukraine - from selling shares in key energy projects and banks without explicit presidential approval.

Expobank said in a statement that the unit would continue to operate, but under a new, unspecified name.

European banks have been under growing pressure to extricate themselves from Russia. Austria's Raiffeisen Bank International is the largest European lender doing business in Russia, followed by Italy's UniCredit. Another large Italian lender, Intesa Sanpaolo is working to dispose of its Russian business. It received Putin's approval to exit last September, but the deal has been held up by "bureaucratic steps", according to its CEO.

 

Relay raises US$32.2 million to expand services

Relay, a New York and Toronto-based business banking and money management service for North America’s small businesses, has closed a US$32.2 million Series B round led by Bain Capital Ventures with participation from BTV, Garage, Industry Ventures, and Tapestry.

The new cash bring the startup’s total raised to US$51.6 million. Relay said that the funding will help lay the groundwork for expansion into new spaces including spend management, crediting and financial application programming interfaces (APIs).

Elay’s co-founder and CEO, Yoseph West, says that owners of small- and medium-sized businesses (SMBs) check their bank balances daily to make financial decisions, but believes typically there is information and functions missing from bank accounts that owners could really use.

“SMBs make up 44% of US GDP, underpin the economy and have a deep impact on all of us,” West notes, “And yet most SMBs only have enough cash on hand to last 27 days. They need greater cash flow clarity and control in their banking.”

Relay’s platform allows SMBs to organise their income, expenses and reserves across up to 20 checking accounts. Relay Is not a bank itself; the company relies on its partner Thread Bank for the banking services it provides, which West says are FDIC-insured. Through Relay, a company can automatically set aside cash into savings accounts with 1%-3% annual percentage yield (APY) and issue up to 50 physical or virtual Visa debit cards to employees.

Relay users can send and receive ACH transfers, wires, and check payments as they would with traditional banks. They can also capture and store receipts, allowing people in their employ access through role-based accounts.

 

Currencycloud and Pyvio in cross-border payments partnership

Global payments platform Currencycloud and Hong Kong based fintech Pyvio have announced a partnership that aims to simplify processes for ʺthe many Chinese online merchants who struggle with the payment collection and payout process.ʺ

The partnership will allow Pyvio to leverage Currencycloud technology to collect and pay funds in over 180 countries and more than 30 currencies, including offshore renminbi (CNH and yuan (CNY). In turn, this will make the cross-border payments process not only more efficient but more cost-effective too.

The companies said that the impact of the partnership will especially be seen in emerging regions. Specifically, those where infrastructure is not well-developed and ensuring compliance in payments can be challenging in a complex regulatory landscape.

Rohit Narang, managing director, Currencycloud, APAC, said: “Pyvio is a fast-growing business in an exciting space. For Chinese firms, the challenges they face in the payment collection and payout process are a real blocker to expansion – so the solution that the Pyvio team has built is much needed.

“This partnership will help the Pyvio team further disrupt the online e-commerce payment landscape in emerging markets, and we look forward to being on that journey with them”.

 

Vestas to streamline technology, production and supply chain ops

Denmark’s wind turbine manufacturer Vestas plans to establish a single organisation that will encompass technology, manufacturing, and global procurement to accelerate ramp-up and industrialisation.

The company is merging its technology organisation (CTO) and manufacturing and global procurement organisation (COO) into one technology and operations organisation (CTOO).

The new organisation will be headed by Vestas’ current chief technology officer, Anders Nielsen, who will become CTOO. It is expected to be fully implemented during the third quarter of 2024.

Creating the CTOO organisation is only expected to impact senior management roles and not entail any restructuring at an operational level, said Vestas. The restructure will see the current COO, Tommy Rahbek Nielsen, step down from the company after more than 25 years of service.

“Vestas has built a strong backlog across onshore, offshore, and service towards the end of this decade, and we are announcing the next step in our organisational evolution to deliver on our customer commitments,” said Henrik Andersen, Group President and CEO.

“The united CTOO-organisation will help accelerate ramp-up and industrialisation across Vestas and the industry by simplifying interfaces, collaboration and strengthening our end-to-end approach.”

 

VoPay’s TXB platform helps banks implement API-first transactions

Canada’s VoPay, an embedded payment tech provider, has launched its Digital Transaction and Cash Management Banking Platform, TXB. VoPay’s TXB platform is ʺa turnkey solution designed to help banks and credit unions launch application programming interface (API)-first transaction banking and cash management services.ʺ

A release stated: ʺIn the rapidly evolving landscape of transaction banking, businesses demand solutions that are efficient, agile, and adaptable to their unique needs. TXB's approach streamlines and automates corporate treasurry operations, providing businesses with enhanced control and flexibility over their financial management.ʺ

TXB enables financial institutions across North America to roll out a suite of API-first solutions supporting virtual accounts, multi-layer ledger management, multi-currency cash management, process automation across various payment rails, and real-time visibility and centralisation of cash.

Like this item? Get our Weekly Update newsletter. Subscribe today

Also see

Add a comment

New comment submissions are moderated.