Browsing all articles tagged with loan

Banks In The Dark Over $15 Billion of Promised Rosneft M&A business

Banks that assist Russian oil company Rosneft finance its $55 billion buyout of rival have been left waiting for their payback a share in $15 billion in asset sales projected to follow the deal.

State oil company Rosneft’s takeover of this year aimed to generate a major oil group producing more oil than however it also tightened the Russian government’s grip on the country’s energy sector.

The asset sales promised by Rosneft Chief Executive Igor Sechin would offload less-profitable businesses to turn the company into the major oil player the CEO has stated he wants it to be. The delay demonstrate Rosneft has a lot on its plate integrating and that the sales are on the back burner.

Rosneft had dangled the juicy divestment mandates at the banks in exchange for a $29.8 billion loan the largest in Russia’s history on good terms, all the lending banks are waiting. We thought asset sales and refinancing bonds would kick start straight following the closing.

Rosneft’s slow motion is annoying the banks as they would earn fat fees from advising the oil giant on the asset sales this year, which would assist boost M&A revenues in an otherwise arid deal making landscape.

M&A activity across all sectors is losing 7 percent in Europe, Africa and Middle East since January partly due to the impact of the euro zone crisis on business confidence.

Banks that uphold big balance sheets throughout the financial crisis have been hoping to use this muscle to win lucrative M&A advisory business from competitor which had to shrink partly to meet tough European capital rules.

Banks frequently use their balance sheets to offer cheap loans to corporate clients to secure higher margin business such as share or bond issues or M&A work.

Big balance sheets helped Deutsche Bank and Barclays to achieve number 2 and 3 rankings in M&A league tables previous year, challenging US rival Goldman Sachs which had the top slot.


Bank of America Profit Misses Estimate as Revenue Collapse

Bank of America Corp reported a lower than expected first quarter profit and its revenue knock down, sending the No. 2 US bank’s shares down 3 percent earlier than the bell on Wednesday.

Net income quadrupled to $2.62 billion or 20 cents per share from $653 million or 3 cents per share a year earlier as expenses fall and the bank set aside less money to cover bad loans.

However total adjusted revenue knock down 8.4 percent to $23.85 billion, partly due to lower revenue from trading in fixed mortgages and income securities.

Revenue from the fixed income, commodities and currency markets knock down $829 million to $3.3 billion.

BofA shares slump 3 percent before the bell to $11.90.

Income in the year earlier period were affected by a host of one-time items including a $4.8 billion charge related to the value of its debt.

Net income in the Global Banking division chop down to $1.34 billion from $1.57 billion because net income in the Global Markets arm dropped to $1.4 billion excluding items from $1.7 billion.

Brian Moynihan, Chief Executive has made progress in building capital and settling mortgage related lawsuits since taking over in January 2010. The bank stated on Wednesday it had settled a mortgage backed securities class action lawsuit related to its nationwide unit for $500 million.

However Moynihan is under pressure to show that the bank can create higher earnings at a time of low interest rates, volatile economic conditions and stricter regulations.

BofA, the last of the big four US banks to report outcome has vowed to cut $8 billion in expenses by mid 2015 and has stated it could reduce expenses in its division that handles delinquent mortgages by $1 billion by the end of 2013.

The bank stated on Wednesday it expects to save almost $1.5 billion in costs per quarter, by the fourth quarter of 2013, representing 75 percent of the quarterly target. Total expenses knock down 5.2 percent to $18.15 billion in the first quarter.


European Central Bank ‘s Coeure sees euro zone inflation straying off course

Executive Board member Benoit Coeure said that ECB will monitor euro zone inflation carefully over the next 18 months because it threatens to sink further below the ECB’s 2 percent target.

Euro zone inflation fall in March for a third straight month to an annual rate of 1.7 percent, compared to the ECB’s target of close to, however not above 2 percent.

Coeure told reporters that they have a rate of inflation which looks set to move away from the ECB’s 2 percent target over the coming 18 months, adding that a slump in inflation was as worrying as a climb.

Coeure further said that it is still fairly close to the 2 percent target however it is moving below that goal and this is something the board of governors is clearly following because they have a goal of 2 percent.

Current economic statistics is in line with the ECB’s projections for the bloc this year and coming with no bad surprises, saying this justified the bank’s resolution this week not to lower rates, despite doubts regarding weak domestic demand.

The ECB held rates at a record low 0.75 percent on Thursday the maximum level between the world’s major central banks, however ECB chief Mario Draghi stated the central bank stood prepared to act to boost the stalled economy.

Underlining the difficulties receiving credit flowing in the alliance, Coeure stated many banks were discouraged from granting new loans because their balance sheets remained weighed down with assets acquired before the financial crisis which had since lost value.

Though the ECB has provided huge amounts of liquidity to banks, Coeure stated the central bank did not have a position to play in mitigating the risks from banks’ pre-crisis legacy assets.

Monetary policy cannot be the main tool used to attempt and resolve difficulties with credit flows. Monetary policy can contribute however it cannot completely resolve these problems.

The ECB is concerned its low rates are not getting households and companies in the euro zone margin, mainly as banks’ funding costs in crisis-hit countries are higher than those in the core countries pushing up loan costs.


Ally Financial Inc. Was Only Bank Below Fed standard In Stress Test

The primary stage of a extensive awaited two stage stress test for the giant banks is in, and all except one stayed over lowest financial ratios set out in the test. That was according to early Federal Reserve results released on Thursday, seeking to discover whether 18 of the biggest financial institutions could survive a deep recession like the credit crunch of 2008.

Ally Financial Inc. most of them owned by the government was the only bank that failed to meet one of the key ratios. The test demonstrate that Ally had 1.5% in capital set apart under a measure recognized as Tier 1 common ratio, which compares the bank’s general equity to its risks weighted assets.

That is considerably beneath the commonly accepted standard of 5%. The other 17 institutions priced better, however many experienced major securities, mortgage and loan losses under the recession scenario.

With the experiment, Fed and the banks measured a hypothetical nine quarter scenario with an unemployment rate of approximately 12% climbed up from 7.9% in January. Banks also appraised how their capital shield would withstand real GDP deteriorating by about 5% and equity prices decreasing by more than 50%. These results assumed an average of the previous four quarters of dividend payments at each bank.

The final results will be released on March 14, could alter considerably for some banks as they are based on each institution’s planned capital distribution plans, including share and dividends repurchases for the next 12 months.

The Fed stated banks cannot pass or fail Thursday’s examination as the regulatory thresholds don’t count this time. However on March 14 Fed will announce whether or not it support each institution’s payout plans.


European Central Bank State Banks To Repay Less Than Forecast of Second Loan

ECB stated banks will pay back only half the quantity of emergency loans economists predicted, signifying financial institutions remains cautious of lending to each other.

Central bank stated in today’s statement that total 356 banks will return 61.1 billion euros which is equal to $80.5 billion of the ECB’s second three year loan on Feb. 27, the first chance for early refund.

Jan von Gerich, chief fixed income analyst at Nordea Bank AB in Helsinki said that expectations following the initial repayment of the first loan became inflated, the current number illustrates much improved how the banking sector is doing. They are seeing improvements however it is a slow procedure.

Ewald Nowotny, committee member told reporters in Riga that today ECB expected quite a substantial number, Executive Board member Benoit Coeure, remarks following the number was published.

The ECB stated nine banks will pay back a additional 1.7 billion euros from the first three year Longer Term Refinancing Operation subsequent week. That takes the total quantity of funds pay off early to 212.3 billion euros, or 21 percent of the generally amount lent. Banks can persist to repay the loans over next weeks.

Nick Matthews, senior economist at Nomura International Plc in London said that ECB will appropriate the repayment as long as banks make it for the right reasons. If banks are comfortable that they do not require the money anymore or can get funding in the market, it’s alright. The final thing you desire, while, is to observe banks rushing to repay only to get into trouble as they don’t have their funding in place.


European Central Bank Says Banks to Repay More Than Predicted of 3-Year Loan

ECB said that during the coming week banks will pay back more of its emergency three year loans than economists predict in another sign the euro region’s debt crisis is reduction.

The Frankfurt based ECB stated in a declaration today, about 278 financial institutions will pay back 137.2 billion euros which is equal to 184.4 billion dollars on Jan. 30, the first prospect for early repayment of the early three year loan. That compares with the center prediction of 84 billion euros. The ECB’s first loan totaled 489 billion euros and banks can persist to make early repayments during the coming weeks.

Christian Schulz, senior economist at Berenberg Bank in London said that the ECB is taking back some of the extra liquidity it added into the banking system previous year. This is a stark difference to other central banks such as the US Federal Reserve, the Bank of Japan and the Bank of England, who are still blowing up their balance sheets, no doubt that the euro exchange rate is going up.

The ECB swamped financial markets with two tranches of so called Longer Term Refinancing Operations accumulating more than 1 trillion euros a year ago following banks stopped lending to each other because of Europe’s debt crisis. Banks have the opportunity of repaying the loans, which were offered at the average of the ECB’s standard rate over their extent after a year.

Nicholas Spiro, managing director of Spiro Sovereign Strategy Ltd. in London said that the more than anticipated loan refund number is a additional confirmation of the sea change in response toward the euro zone over the previous several months. Yet this is a double edged sword if it’s the start of a major extraction of liquidity at a time when the euro zone economy is in recession.