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Vietnam mounts major rescue of bank hit by fraud – Industry roundup: 18 April

Vietnam mounts ‘unprecedented’ US$24 billion rescue for bank hit by fraud

Vietnam has mounted an “unprecedented” rescue of Saigon Joint Stock Commercial Bank (SCB), which has been hit by the country’s biggest financial fraud, according to reports based on three bank documents and official information provided by a source.

“Without lending, SCB will collapse,” according to the new information provided to Reuters. “If the lending continues, the national treasury will gradually dry up.” Reuters has not identified the source more specifically due to the sensitivity of the matter.

The new information also described the situation as “unprecedented” for the massive volume of the cash injections, the complexity of the operation and the scale of existing and potential damage to Vietnam’s financial system.

Vietnam’s public debt was stable last year at 37% of gross domestic product, while the budget deficit widened slightly to 4.4% of GDP. Foreign reserves were around US$100 billion at the end of the year, according to the central bank. That is up from about US$90 billion at the end of October, according to the independent regional watchdog Asean+3 Macroeconomic and Research Office.

By the start of April, the South-east Asian nation’s central bank had pumped US$24 billion in “special loans” into SCB, according to one of the bank documents seen by Reuters, which provides daily updates since 29 March on overall injections from the central bank.

Lending has slowed slightly but averaged more than US$900 million a month in the past five months, according to that document, a second document with updates from 15 March to 20 March, and a third document from November with monthly updates from October 2022 to October 2023.

The State Bank of Vietnam’s previously unreported cash injections into SCB amount to 5.6% of the nation’s annual economic output, or about one-fourth of Vietnam’s foreign-exchange reserves.

The central bank placed SCB under its supervision to stem a run on the bank sparked by the October 2022 arrest of real estate tycoon Truong My Lan. Since then, SCB has been using the injections to cover cash withdrawals, according to one of the bank documents, which SCB sent to the central bank in November to account for its use of the loans.

After the central bank stepped in, SCB’s deposits plunged 80% to about US$6 billion by December 2023, according to the new official information from the source. SCB could run out of deposits by mid-year at the current pace, and bad loans had surged to 97.08% of SCB’s credit balance as at October, it said.

Lan, the tycoon whose October 2022 arrest sparked the bank run, was sentenced to death on 11 April after being found guilty of masterminding the fraud. She had pleaded not guilty to embezzlement and bribery for allegedly syphoning off US$12.5 billion in loans from SCB to shell companies while effectively controlling SCB through proxies.

Lan, formerly a prominent figure in Vietnamese finance, will appeal the verdict of the People’s Court of Ho Chi Minh City, one of her lawyers said.


Nestlé faces activist investors at AGM

A resolution filed by a group of Nestlé shareholders will go to vote today at the Swiss multinational’s annual general meeting (AGM), demanding one of the world’s biggest food makers reduces its reliance on products with high levels of sugar, fat and salts. 

The resolution was co-filed last month by five institutional investors with US$1.68 trillion (£1.35 trillion) in assets under management, including Legal and General Investment Management, one of Europe’s largest asset managers.

Coordinated by responsible investment charity ShareAction, shareholders have put forward a resolution to the maker of confectionery brands including KitKat and Quality Street that aims to move the company away from over-reliance on unhealthy products to healthier eating options.

They argue that Nestlé, alongside other large food manufacturers, “risk missing the opportunity to meet growing consumer demand for more healthy products and face increasing regulatory pressure from governments legislating to tackle the rising costs of poor health”.

Holly Gabriel, registered nutritionist and consumer health lead at ShareAction, who will attend today’s AGM, said: “While Nestlé made assurances that it would set an ambitious target to improve its healthier food offering, the target it released in September last year was inadequate.

“It gives investors no reassurance that sales won’t continue to jeopardise public health and expose the company to so much unnecessary risk. The trends that have led to shareholders filing this resolution are not going away, and in fact data suggests they are going to get worse.”

She added: “Nestlé must respond to these concerns and set a target that increases the share of healthier food it sells, which would also help the company meet its own commitment to contribute to a healthier future.”

A UK study by Oxford University and youth activist movement BiteBack finds that around 70% percent of Nestlé sales in the country are from foods that are high in fat, salt and sugar.

RWE issues inaugural US dollar green bond

German energy multinational RWE successfully placed its first green US dollar bond with a total volume of US$2 billion. The bond was issued in two tranches of US$1 billion with 10-year tenor and US$1 billion with 30-year tenor, respectively.

For the first tranche, the yield-to-maturity amounts to 5.926%, based on a coupon of 5.875% p.a. and an issuance price of 99.619%. For the second tranche, the yield-to-maturity amounts to 6.261%, based on a coupon of 6.250% p.a. and an issuance price of 99.852%. The issuance was met with strong interest from investors and the order book was 3.8 times oversubscribed at US$7.6 billion.

This is the Essen-based group’s first green bond placement outside Europe and marks the strategically important entry into the US bond market. RWE plans to issue 3.0-3.5 billion of bonds per year on average through to 2030 in both euros and US dollars.

“With our first US green bond, we are expanding our sustainable financing. Going forward, we plan to be a regular issuer in both Euro and US markets,” said Michael Müller, CFO of RWE AG. “The US stands as our largest market outside of Europe where we have more than doubled our net installed capacity since 2020 to 9 gigawatts today. As one of the leading renewable energy companies in the US, we want to further expand our market position in onshore and offshore wind as well as in solar and batteries with investments of about €20 billion by the end of this decade.”

RWE intends to use the net proceeds for its 'Growing Green' investment and growth programme. With this, the company is making an important contribution to the success of the energy transition and the decarbonisation of the energy system. RWE has already invested €20 billion net between 2021 and 2023 and plans to invest a further €55 billion net globally in renewable energies, batteries, flexible generation, and hydrogen projects by 2030. With this, the company intends to expand its green portfolio globally to more than 65 gigawatts through the end of the decade. 

RWE’s CEO, Markus Krebber recently told the Financial Times that Germany’s gas prices were structurally higher than elsewhere in Europe thanks to the country’s reliance on liquefied natural gas (LNG) imports.

Germany was importing 55% of its natural gas supply from Russia when Ukraine was invaded in February 2022. Russia was also Germany’s primary source of oil and coal imports. 

The country has since sharply reduced its reliance on Russian gas. Germany cut its gas imports by 32.6% in 2023, the country’s energy regulator said, mostly as a result of cutting out Russian supply.

However, Germany is still heavily dependent on other countries for its energy supply, creating pricing issues for its economy. The impact on German industry has been deep and will, predicts the RWE chief, be long-lasting. 

“You’re going to see a bit of recovery, but I think we’re going to see a significant structural demand destruction in the energy-intensive industries,” Krebber said.


Thames Water to revamp survival plan

Board members at heavily indebted Thames Water – the UK’s largest water and wastewater utility – meet today for last-ditch talks to update their business plan after shareholders branded its previous one “uninvestible.” Insiders have indicated that a revised plan will be released tomorrow.

Thames, which supplies a quarter of water and sewage services to England — including London — is rushing to find at least £2.5 billion (US$3.1 billion) in equity after its parent company Kemble Water Holdings Ltd last month refused to inject any more money into the business. 

Thames needs the cash to fund its turnaround, fix chronic leaks and sewage spills and develop new supplies in the face of worsening drought caused by climate change. But investors said an overly restrictive set of regulations from UK water industry watchdog Ofwat made it impossible for them to provide the money.

Kemble, which gets all of its income from Thames Water dividends, defaulted on its own debt a week after declining further payouts.

When Thames unveiled its new five-year business plan in October, the utility said it wanted to raise consumers’ bills by 40% to fund an investment program totalling £18.7 billion. Those figures could be revised upwards as Thames works to meet new rules set by the government to improve the environment.

The plan is currently being reviewed by Ofwat as part of a regulatory process known as PR24. A draft determination from the regulator will be announced on12 June.

So far, other water companies have increased their expected capital expenditure and hiked bills further following discussions with Ofwat and the government and ahead of the June determination.

In March, Southern Water Services Ltd. — which is one of the industry’s worst performers alongside Thames — revised up its expected expenditure by 8.5% and said it now sees average annual customer bills at £727 by 2030, up from an October projection of £681. Its customers are set to see the biggest bill hikes across the UK. 


Israel’s central bank to roll out CBDC sandbox

The Bank of Israel is launching a sandbox environment for testing central bank digital currency (CBDC) use cases, in an effort to refine the design of the digital shekel and ensure its capacity to facilitate advanced applications.

“We are now building the system and intend to officially announce the project in the coming weeks,” announced Andrew Abir, the central bank’s deputy governor.

A sandbox establishes a controlled environment for the evaluation of novel digital technologies, including financial innovations, prior to their broad implementation. Governments leverage sandboxes to foster innovation by permitting firms to experiment with these technologies under relaxed regulatory stipulations.

This API-driven sandbox will facilitate participation from financial institutions, fintech enterprises, and other relevant stakeholders, enabling them to collaboratively develop and test innovative applications for the digital shekel.

Abir characterised the digital shekel as a “liability of the Bank of Israel to the public.” and emphasized its similarity to physical cash, where possession does not entail credit risk. He also clarified the need to distinguish the digital shekel from cryptocurrencies.

“The digital shekel will not be developed by some anonymous Satoshi Nakamoto,” he added. “Everyone will know who is behind the digital shekel and who is responsible for it – it will be the central bank, the same Bank of Israel that stands behind the cash we all know and trust.”

Abir asserted that the digital shekel’s value would show stability, unlike cryptocurrencies which can experience significant fluctuations.

“A digital shekel will always be worth one cash shekel which is always worth one shekel in a bank account,” he said.


RBC targets Fortune 1000 companies with cash-management offering

Following a decade of steady growth at its US investment bank, Royal Bank of Canada (RBC) is launching a cash-management business in its “second home market” in a bid to win more of its clients’ spending.

Canada’s biggest bank has not previously offered treasury and liquidity-management services to the large companies it works with on deals, financing and other capital markets services in the US. Chief Executive Officer Dave McKay has hinted at the bank’s plans to change that several times on recent investor calls.

The new RBC Clear platform, being promoted to Fortune 1000 companies in the US provides near real-time traceability and transparency of transaction lifecycles for corporate treasurers, the firm said in a press release.

“When we decided to explore building out a US cash management business, we knew the client perspective was key in developing a solution that addressed existing pain points in the market,” Derek Neldner, CEO and group head of RBC Capital Markets, said in the release. “Our client-first culture was a significant tool in building RBC Clear, and through more than 150 conversations, we’ve developed a first-of-its-kind cash management experience.”

To help address those pain points, the new platform provides enhanced transparency with near real-time status on payments; customisable self-service functionality that lets clients choose how they want to be updated on transactions through a digital-first solution; and actionable insights that are compiled and centralized to help with day-to-day management, reporting and other tasks, according to the release.

RBC Clear also uses existing client information and an onboarding tracker to simplify onboarding, a process that is traditionally tedious, the release said.

The new platform joins the capital markets, banking and finance services that RBC Capital Markets provides to corporations, institutional investors, asset managers, private equity firms and governments, per the release.


Deutsche Bank, Morgan Stanley reduce ECB rate cut expectations

Brokerages Morgan Stanley and Deutsche Bank expect the European Central Bank (ECB) to reduce borrowing costs by 75 basis points (bps) this year, on uncertainty over the US Federal Reserve rate cut outlook and sticky domestic inflation.

Last week, the ECB held interest rates at a record high on Thursday but signalled it could start cutting as soon as June.

However, higher-than-expected US inflation data worried global markets and raised concerns that the Fed's rate cuts might be delayed further.

”Over the last few months we have had to gradually back out of a more aggressively dovish call on the ECB. The economy has been a bit more robust and inflation a bit stickier than we were expecting,” Deutsche Bank analysts wrote in a note on Monday

Deutsche Bank had previously estimated rate cuts of 125 bps by the ECB. It has, however, reiterated the central bank's first rate cut will likely come in June.

Morgan Stanley economists, who had previously projected a total of 100 bps cuts this year, have revised their view for the December cut to 25 bps compared with 50 bps earlier.

“While a certain level of decoupling between the Fed and ECB can occur, we think that it will be limited,” Morgan Stanley analysts wrote in a note dated Monday.Morgan Stanley's rate cut outlook for the ECB is also in-line with its forecasts for the Fed's policy easing.


Singapore allocates funding to train talent for sustainable finance market

The Monetary Authority of Singapore (MAS) and Institute of Banking and Finance (IBF), supported by Workforce Singapore (WSG), have launched the Sustainable Finance Jobs Transformation Map (JTM).

The JTM lays out the impact of sustainability trends on jobs in Singapore’s financial services sector and the emerging skills that the workforce will require to serve the sustainable finance market across the ASEAN region.

MAS has set aside S$35 million (US$25.7 million) in the Financial Sector Development Fund to support upskilling and reskilling and develop specialists in sustainable finance over the next three years.

A JTM study, conducted by KPMG in Singapore, projects that the sustainable finance market in ASEAN over the next decade will reach S$4 trillion (US$2.93 billion) to S$5 trillion over the next decade.

A robust and skilled workforce "will strengthen Singapore’s ability to serve the growing sustainable finance market in ASEAN and Singapore’s financial services sector workforce should aim to undergo upskilling within the next three years to seize these opportunities" a release noted.


DataBank secures US$725 million as AI creates data centre demand

US data centre owner DataBank has secured a $725 million loan to finance its development pipeline to help meet demand from cloud providers and companies seeking more powerful real estate facilities with the growing use of artificial intelligence (AI).

The company has been "very active," recently in the debt and equity financing markets, DataBank Chief Financial Officer and President Kevin Ooley revealed. The new credit facility offering a development-specific construction runway to build and lease US data centres, Ooley said, and is far larger than the initial target of US$400 million that Dallas-based DataBank originally anticipated raising from lenders.

“This is our first development financing that we have put in place,” Ooley said in an interview. “This new credit facility will allow us to meet that demand more quickly by shortening financing and construction timelines across all our campuses, but especially as we ramp up activity in the new ones we've announced in Northern Virginia and Atlanta. ”

New and emerging AI applications have created “unprecedented demand” for data centre capacity, he said. That demand played a key role in DataBank increasing its credit facility limit with lenders, he said. Analysts have said the increasing technological advances are requiring more digital hubs from a variety of providers and an increasing amount of power, stoking competition.

This is DataBank's second green round of financing, following a credit facility it secured in February. To qualify as a green loan, the facilities financed must meet specific sustainability criteria for water conservation and carbon emissions reduction. The properties in the company’s portfolio, totalling more than 65 facilities in 27 US metropolitan areas, are contributing to its goal of being carbon neutral by 2030.

TD Securities was the administrative agent, joint lead arranger and joint bookrunner on the deal. The other joint lead arrangers and joint bookrunners were Citizens Bank, CoBank, Deutsche Bank, First Citizens, and Société Générale. JP Morgan, Nomura Securities, RBC Capital Markets and Regions Bank were also joint lead arrangers. Bank of America and Goldman Sachs were co-documentation agents. Cadence Bank and Preferred Bank also supported the deal. Jones Day was DataBank's legal adviser.


Quor and ClearDox partner on commodity trading solutions

Quor Group, a specialist in commodity trading and risk management (CTRM) software, and ClearDox, which provides an intelligent document automation platform for commodity intensive organisations, are partnering to help organisations close the ‘automation gaps’ across the trading lifecycle. A release stated that “this collaboration marks a significant milestone in advancing the effectiveness and impact of technological investments made by clients.”

The ClearDox intelligent applications “leverage the latest AI technologies to digitise and automate critical business tasks and assets. They are embedded with operational AI-models for eliminating commodity trade lifecycle gaps such as rekeying and matching inventory movement receipts or the manual reconciliation of complex unstructured trades across counterparties and brokers. The ClearDox applications are highly adaptable and integrate seamlessly into the core workflows within Quor.”

”Whether it is addressing data locked in paper documents or dealing with the unsure nature of the quality and timeliness of the data used in making decisions, eliminating manual, disconnected processes is critical,” said Rick Nelson, CEO, ClearDox LLC. ”While commodity organisations are increasing their technology spend to drive efficiencies and improve resiliency against an ever-expanding risk profile, most are still struggling.”

The partnership will enable Quor customers to accelerate their adoption while rapidly expand into new automation opportunities within the platform. “Given the growing risk complexity and importance of delivering efficiencies and improved cash management, the transformational capability of the combined solution will deliver a greater return for their Quor multi-commodity investment,” the release noted.


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