|Bid||0.00 x 0|
|Ask||0.00 x 0|
|Day's Range||5.10 - 5.10|
|52 Week Range||4.86 - 9.74|
|Beta (5Y Monthly)||1.49|
|PE Ratio (TTM)||9.04|
|Forward Dividend & Yield||N/A (N/A)|
|Ex-Dividend Date||Mar 04, 2020|
|1y Target Est||N/A|
UK-listed companies could cancel about $60 billion in dividend payments this year following Britain's lockdown and calls from regulators to preserve cash during the coronavirus crisis, according to a report by analytics company Link Group. As Britain battles to curb the spread of virus, the report published on Thursday showed that a record 41% of dividend payouts by the country's listed companies were under threat if the situation worsens. Link Group, which provides shareholder management services as well as analytics, said it based its UK Dividend Monitor findings on publicly available data from companies listed on Britain's main stock market, and consensus analyst forecasts.
Top executives at British lenders HSBC, Standard Chartered and NatWest said on Wednesday they would take salary cuts after pressure on bankers to show solidarity with customers struggling to make ends meet during the coronavirus crisis. All the executive directors at Britain's biggest domestic lender Lloyds, including chief executive Antonio Horta-Osorio, have also agreed to waive their bonuses for 2020, a source familiar with the matter told Reuters. HSBC said its CEO Noel Quinn and CFO Ewen Stevenson would donate 25% of their salary for the next 6 months to charity and forego their cash bonuses, totalling 1.4 million pounds and 800,000 pounds respectively.
HSBC and Standard Chartered said their top executives would not receive cash bonuses this year and would donate part of their salaries to charities supporting victims of the coronavirus pandemic. HSBC said its chairman, Mark Tucker, would donate roughly £1.5m — his entire fee for 2020 — to charities supporting “healthcare workers and vulnerable people” in the UK and Hong Kong. Chief executive Noel Quinn and chief financial officer Ewen Stevenson will also donate one quarter of their salary this year, equivalent to about £160,000 and £93,000, respectively.
HSBC and Standard Chartered Bank would be welcomed by the government, if they were to move their headquarters to Hong Kong, a senior minister said, adding that the city met international lenders' regulatory and business requirements."HSBC has always had a lot of operations in Asia and Hong Kong, while a substantial portion of its profitability also comes from the region. Likewise, Standard Chartered Bank also has a big exposure to Hong Kong and Asia. The regulations and business opportunities in Hong Kong are very good. We would welcome it " if HSBC or Standard Chartered Bank decide to relocate here," James Lau Yee-cheong, the city's Secretary for Financial Services and the Treasury, said in a recent interview.Lau's comments come after the London-based lenders " also two of the city's three currency-issuing banks along with the Bank of China (Hong Kong) " said on Wednesday they would cancel dividend payments in the fourth quarter and in the first three quarters of 2020, at the behest of the United Kingdom's Prudential Regulation Authority, an arm of the Bank of England and their chief regulator. The cancellation is meant to allow them to reserve more funding for small and medium enterprises amid the Covid-19 pandemic.This is the first time since 1946 that HSBC has cancelled its dividends. Last week, both banks suffered their biggest sell-off in a decade, while investors and brokers called for HSBC to move its headquarters back to Hong Kong to avoid the UK's regulatory requirements."We took a considered decision on domicile in 2016, and so far do not have plans to change this. Hong Kong is one of our two home markets and continues to be a major contributor to the group. We have confidence in the resilience of Hong Kong as a financial centre, and we are committed to supporting its continued growth and development," an HBSC spokeswoman said on Sunday. Investors wipe billions off HSBC, StanChart's shares, call for HQs to moveThe non-payment of dividends is the third time in the past two decades that Hong Kong has readied the red carpet for HSBC. There was speculation in 2008 that it would move back to the city for tax reasons; in 2015 for the spin-off of its UK retail business; and in 2016 because of the Brexit vote.HSBC, which was founded in Hong Kong in 1865, moved its headquarters to London to fulfil a regulatory requirement to expand in the UK after it acquired Midland Bank in 1993.Hong Kong, the "H" in HSBC, is the bank's biggest single geographical market. HSBC earned 49 per cent of its adjusted revenue from Asia last year, and about a third of its shares are held by retail investors, who depend on its dividends for income.But, as a UK-domiciled bank, it felt it had to follow the BoE's call, as did several other UK banks, including Standard Chartered, Barclays, Royal Bank of Scotland and Lloyds Banking Group.Meanwhile, the Hong Kong Monetary Authority (HKMA), the city's de facto central bank, last week said it did not require local lenders to suspend dividend payments as the local banking sector was well capitalised."Hong Kong's financial markets will continue to benefit from the development of Greater Bay Area projects, which will bring in a lot of opportunities to international lenders," Lau said. "The current outbreak might lead to some slowdown, but it is not a financial crisis. The Hong Kong government has brought in many relief measures " and we will offer more " to help companies cope with the economic impact of the pandemic." HSBC to cut costs by US$4.5 billion, slash 35,000 jobs in third overhaul in a decadeHe pointed out that local banks' average capital adequacy ratio stood at 20.7 per cent at the end of last year, above the 8 per cent minimum requirement. He said Hong Kong lenders had already provided 9,000 small companies with HK$57 billion (US$7.3 billion) in loans under special relief programmes."HSBC should move its headquarters back to Hong Kong, so it can make the HKMA its primary regulator and does not need to scrap dividends. Local brokers and investors will continue to lobby the bank to relocate its base to Hong Kong and to reconsider its decision about dividend payments. It should at least consider paying the dividend in shares, so that it does not affect its cash flow," said Gordon Tsui, chairman of the Hong Kong Securities Association.Standard Chartered, which has always been based in the UK, could not be reached for comment.Sign up now and get a 10% discount (original price US$400) off the China AI Report 2020 by SCMP Research. Learn about the AI ambitions of Alibaba, Baidu & JD.com through our in-depth case studies, and explore new applications of AI across industries. The report also includes exclusive access to webinars to interact with C-level executives from leading China AI companies (via live Q&A; sessions). Offer valid until 31 May 2020.This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved. Copyright (c) 2020. South China Morning Post Publishers Ltd. All rights reserved.
With the future of many coronavirus hit firms in their hands, British banks, still scarred by the financial crisis, are worried that they are being asked by a desperate government to make loans that will never be repaid. This caution, combined with the challenges of an unprecedented demand for loans, is testing the British public's fragile faith in the lenders, which have spent a decade trying to rebuild their battered reputations and capital positions. "We've got to only make loans that we can reasonably believe people will be able to repay after the crisis has gone; to businesses which will still be there," Ian Rand, who runs business lending at Barclays, told Reuters.
(Bloomberg Opinion) -- China’s banks may be about to assume the mantle of the ultimate widows-and-orphans home for Hong Kong’s small investors.For decades, HSBC Holdings Plc has held that status — a reliable provider of investor income that even carried on paying dividends through the global financial crisis in 2008-2009. Hong Kong’s biggest bank hadn’t missed a payout in Bloomberg-compiled data going back to 1986. That changed Wednesday when London-headquartered HSBC scrapped its interim dividend in response to a request from the Bank of England. The lender’s stock plunged 9.5% in Hong Kong, the most in more than a decade.It’s difficult to overstate the importance of HSBC to individual investors in the city where it was founded more than 150 years ago. The stock is unusually widely held. Institutions own just 61.5% of the shares, compared with 94% for Standard Chartered Plc, HSBC’s London-based and Hong Kong-listed rival. Standard Chartered also cancelled its dividend along with other British banks after the BOE called on them to conserve cash amid the coronavirus pandemic.HSBC’s dependable payouts have also been a lure for institutional investors. Shenzhen-based Ping An Insurance Group Co., the bank’s second-largest shareholder, cited the dividend as an attraction for taking its 7% stake. Mainland Chinese investors will also be feeling the pain: As much as 8.2% of HSBC’s Hong Kong-listed stock sits with investors who bought via trading pipes that connect the city’s exchange with counterparts in Shanghai and Shenzhen. That’s risen from about 2% three years ago.HSBC said it would cancel an interim dividend slated to be paid this month and make no payouts or buybacks until at least the end of the year. That raises the question of where investors will turn in search of the stable income that they used to take for granted from HSBC. The answer may lie in the bank’s giant, state-controlled rivals across the border in mainland China.That might seem surprising. Shares of Industrial & Commercial Bank of China Ltd., and three fellow Chinese lenders that are members of Hong Kong’s benchmark Hang Seng Index, have languished over the past decade. Their poor performance reflects investor concerns that China’s post-financial-crisis buildup of debt will eventually lead to a surge in bad loans. ICBC’s Hong Kong-traded shares are 13% lower than they were a decade ago, and Bank of China Ltd. has slumped 27%. While China Construction Bank Corp. has lost only 1%, Bank of Communications Co. has fallen 44%.Yet all have been steady dividend payers. Including dividends, ICBC has returned 46% in the past decade, Construction Bank 65% and Bank of China 28%. Only Bocom has lost money for its investors. The four banks have typically traded at high dividend yields over that period. Yields for ICBC, Construction Bank and Bank of China have all averaged more than 5%, with peaks higher than 8%. Elevated yields often indicate that investors expect payouts to be cut or omitted altogether, but dividends have actually been rising at the Chinese banks in recent years.China’s opaque financial system and the state-owned banks’ status as policy tools of the government have helped to deter some investors. Yet with the coronavirus shutting down economies from the U.S. to Europe and pressuring financial systems, it’s debatable whether Chinese institutions should be seen as any more risky than their overseas counterparts. For one thing, having been first into the coronavirus outbreak, China’s economy is also the first to start getting back to normal. For another, the government has an incentive to ensure that the banks keep paying dividends because it relies on that income to fund social security spending. An unofficial rule has mandated the big state banks to pay at least 30% of their profits out as dividends, another reason to be sanguine that payouts will be sustained.In 2016, HSBC chose to keep its headquarters in London rather than move back to Hong Kong, a call that it may now be tempted to revisit. It would be ironic if a decision by its adopted jurisdiction helped send shareholders in the bank’s home city — and biggest market — scurrying into the hands of Chinese rivals. This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Nisha Gopalan is a Bloomberg Opinion columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
From retirees to global insurers and investment managers, outraged shareholders in Hong Kong have wiped billions of dollars in value off HSBC's and Standard Chartered's shares after the banks axed dividends and suspended share buy-backs on Wednesday.Over the course of two days, HSBC's shares in Hong Kong have lost 12 per cent of their value, plumbing their lowest level since the depths of the global financial crisis in March 2009. Standard Chartered's stock did not fare much better, dropping 8 per cent since Tuesday's close.The sharp pullback came after shareholders in Hong Kong woke up Wednesday morning to headlines that the Prudential Regulation Authority (PRA) " a regulator nearly 6,000 miles away from the banks' biggest market " called on United Kingdom-based banks to suspend investor payouts until at least the fourth quarter in light of the novel coronavirus pandemic that is roiling economies worldwide.The move was bitter reminder to Hongkongers that they have little say in matters relating to their city's defence, diplomacy and now, even the dividends paid by some of the world's largest banks. The stocks touch the lives of many Hongkongers who often give HSBC's shares as graduation or wedding gifts. About a third of HSBC's shares are held by retail investors."I understand it is a tough time but how can a regulator just order the bank to hurt investors. It's not fair," said Mrs Mak who owns about US$1 million worth of HSBC shares, some of which she inherited from her father who bought the shares more than half a century ago. She asked to be identified only by her last name.Many of the city's retirees rely on dividend streams from HSBC and Standard Chartered for a living.By not paying its final interim dividend of US$0.21 a share on April 14 as planned, HSBC cost its two biggest shareholders, the asset manager BlackRock and Ping An Insurance, roughly US$596 million in dividend income.The PRA's actions also reignited the thorny debate about whether HSBC, which is based in London but generates more than half of its revenue in Asia, should move its domicile back to Hong Kong, where it was founded 155 years ago.HSBC said on Thursday there are "no discussions" to review HSBC's global headquarters or reopen the issue of its domicile. The bank opted to keep its headquarters in London in 2016 after taking nearly a year to examine whether to move its home base.Based on interviews with executives and others, the banks had little choice on Tuesday but to make the decision to accede to the request of their chief regulator " the PRA is an arm of the Bank of England " and had scant time to craft a strategy for relaying the news to investors.In the wake of the global financial crisis, bankers were seen by politicians to blue-collar workers as both the cause of the crisis and the overwhelming beneficiary of bailouts to keep the financial system from collapsing. Governments are keen to avoid a replay of the bank rescues that cost them votes " even at the expense of private investors.As the coronavirus pandemic began to drag on economies from Hong Kong to the United States, policymakers have moved fast to make sure banks are able to keep lending to small businesses and homeowners.They have pushed banks, including HSBC and Standard Chartered, two of the city's currency issuing banks, to increase lending and waive fees. HSBC also has paused thousands of planned jobs cuts as part of a massive overhaul of the lender announced just over a month ago.A provision of a US$2 trillion stimulus package passed in the United States last week barred companies that receive government-backed loans from paying dividends or buying back shares until a year after they repay those loans.Eight of the US's biggest lenders agreed last month to suspend their buy-backs until at least July and the European Central Bank on March 27 asked continental banks not to pay dividends or buy-back shares until October 1, including final payouts for 2019, to boost lenders' capabilities to absorb losses.And calls were increasing for the PRA to take similar action, but the regulator had little time to make a decision as the British bank Barclays was set to pay its final dividend for 2019 on Friday.On Tuesday, the PRA sent a letter to the UK's seven largest banks and building societies, asking them to reply by 8pm London time if they would agree to suspend their dividend payments and buy-backs. The regulator added it was preparing its own announcement for 9pm that night either way."The PRA stands ready to consider use of our supervisory powers should your group not agree to take such action," the letter said.The Reserve Bank of New Zealand followed suit on Thursday with its own prohibition on bank dividends, but the Hong Kong Monetary Authority has said a suspension of dividends or buy-backs is not necessary for local banks as the sector is well capitalised to meet lending demands.Mark Tucker, HSBC's chairman, said on a conference call with reporters on Wednesday that discussions with regulators had happened over the "last days", but the bank had little choice but to make the "incredibly difficult decision" to cancel investor payouts."The lead regulator was clear about what action they feel is needed to be taken and we have taken that action," Tucker said.The PRA said the move was a "sensible precautionary step" to allow banks to continue to support the wider economy through lending. It also gives banks extra headroom to absorb losses and, hopefully, avoid the need for a future bailout.By not paying the final 2019 dividend, HSBC had an additional US$4 billion in available core tier one capital, a measure of a bank's financial health, Ewen Stevenson, the HSBC chief financial officer said.That provided little comfort to investors both big and small who are losing dividend income as a result of the moves by two of the city's biggest banks.Tucker said on Wednesday that he did not speak with the bank's largest shareholders ahead of the announcement. He did call several big investors, including Ping An's Chairman Peter Ma Mingzhe, on Wednesday to discuss the move and provide context as to why the decision was made, according to a person familiar with the matter who was not authorised to discuss it publicly."We note the information and we will follow the situation," a Ping An spokesman said.A BlackRock spokeswoman declined to comment on Thursday, saying the world's biggest asset manager does not discuss individual holdings.Senior management at Standard Chartered also spoke with the bank's top shareholders following the announcement, according to a person familiar with the matter. Big investors, while disappointed, were not surprised as they had anticipated such a move after other regulators moved to limit bank dividends, according to the person, who was not authorised to discuss the matter publicly.A spokesman for Standard Chartered's largest shareholder, Singaporean wealth fund Temasek, said: "In these extraordinary circumstances, the decision is understood."Citigroup analyst Ronit Ghose said a number of investors, including retail investors, own UK banks, including HSBC, for dividend yield and buy-backs were attractive for investors in Standard Chartered, which announced a US$500 million repurchase programme in February."While we do understand the social rationale behind these steps, this regulatory intervention risks leading to further underperformance by UK banks in the near-term, relative to both UK insurers and global banks," Ghose said in an April 1 research note.Local brokers in Hong Kong have called on Financial Secretary Paul Chan Mo-po and the Securities and Futures Commission to intervene, according to Christopher Cheung Wah-fung, a lawmaker for the financial services sector and chairman of Christfund Securities."I have received over 10 complaints from Hong Kong investors about HSBC's decision. Many of them are diehard fans of HSBC and have owned its shares for many years," Christopher Cheung said. "They invested their savings in HSBC for its high dividends which is better than bank saving. A suspension of dividend will affect their daily lives substantially."Sign up now and get a 10% discount (original price US$400) off the China AI Report 2020 by SCMP Research. Learn about the AI ambitions of Alibaba, Baidu & JD.com through our in-depth case studies, and explore new applications of AI across industries. The report also includes exclusive access to webinars to interact with C-level executives from leading China AI companies (via live Q&A; sessions). Offer valid until 31 May 2020.This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved. Copyright (c) 2020. South China Morning Post Publishers Ltd. All rights reserved.
(Bloomberg) -- Britain’s biggest banks scrapped their dividends, sending their shares tumbling, after regulators pushed them to free up more money for loans to counter the fallout from the coronavirus pandemic and withhold cash payouts for top staff.HSBC Holdings Plc, Standard Chartered Plc, Royal Bank of Scotland Group Plc, Barclays Plc and Lloyds Banking Group Plc all canceled their outstanding dividends and buybacks and said there would be no payments in 2020.The Bank of England’s Prudential Regulation Authority wrote to lenders on Tuesday, asking them to cancel dividend payments while calling attention to their role in supporting the wider economy. The watchdog included a sharp warning that it “expects banks not to pay any cash bonuses to senior staff, including all material risk takers.”The companies’ subsequent statements didn’t mention bonuses.The U.K. push to cut discretionary awards for senior managers follows a similar stance from the European Banking Authority. In its strongest warning to date, the EBA also said banks should set pay, and especially bonuses, at a “conservative level” during the crisis. Firms should also consider deferring awards for a longer period and paying staff in shares.Banks are under pressure globally from the virus-driven volatility in markets and slumping growth. At the same time, they’ve been at the front end of massive support from central banks and regulators, including relief on some capital buffers and more time to tackle soured loans.The U.K.’s five biggest banks had planned to pay out 7.5 billion pounds ($9.3 billion) in dividends over the next two months; Barclays was due to dole out more than 1 billion pounds on Friday.“It looks structurally bearish for the sector, namely: higher cost of equity, increased regulatory uncertainty, weaker investment cases in the event of future capital raises,” Jefferies analyst Joseph Dickerson wrote, adding that HSBC is likely the most hit.HSBC’s shares plunged as much as 10% in London trading, and were down 8.4% at 11 a.m. in London. Standard Chartered tumbled 7%, Barclays shares declined as much as 8.4%, Lloyds fell as much as 8.8% and RBS 6.4%.HSBC said it would cancel an interim dividend slated to be paid this month and also make no payouts or buybacks until at least the end of the year. In its statement on Tuesday, HSBC said that “we expect reported revenues to be impacted in insurance manufacturing, and credit and funding valuation adjustments in Global Banking & Markets, alongside higher expected credit losses.”The bank, which generated half its 2019 revenue in Asia, has earlier said in the most extreme scenario, in which the virus continues into the second half of 2020, it could see $600 million in additional loan losses.Standard Chartered said any decision on a final dividend for 2020 will take into account the financial performance of the group for the full year and the medium-term outlook at that time.(A previous version of this story corrected the day when the PRA made the request.)(Updates shares)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
HSBC and Standard Chartered said on Wednesday they would cancel their dividends and not launch any share buy-backs in 2020 after a financial regulator in the United Kingdom asked the country's biggest lenders to suspend payments to investors and not pay cash bonuses to senior staff in light of the coronavirus pandemic roiling economies worldwide.The moves sent their stocks into a tailspin. HSBC's shares plunged 9.5 per cent to close at HK$39.95 in Hong Kong on Wednesday, the lowest point since March 2009. Meanwhile, Standard Chartered's shares dropped 7.6 per cent to HK$39.90.The banks, which are based in London, but generate much of their revenue in Asia, were among six lenders who said they would suspend their dividends as part of a coordinated response following a request by the Prudential Regulation Authority (PRA), a regulatory arm of the Bank of England."The board recognises the current and potential material impact on the global economy as a result of the coronavirus pandemic and the important role that HSBC has in helping its customers to manage through the crisis and to have resources to invest when recovery occurs," HSBC said in a statement. "HSBC has a strong capital, funding and liquidity position; however, there are significant uncertainties in assessing the time period of the pandemic and its impact."The novel coronavirus, known as SARS-CoV-2, has infected more than 846,000 people worldwide and has likely sent the global economy into a recession. It has uprooted daily life across Asia, Europe and the United States, with several countries instituting lockdowns, airlines grounding much of their fleets and millions of people losing their jobs."The board fully recognises the importance of dividends to the group's owners," Standard Chartered said in a stock exchange filing on Wednesday. "However, suspending shareholder distributions at this time will allow the group to maximise its support for individuals, businesses and the communities in which it operates whilst at the same time preserving strong capital ratios and investing to transform the business for the long term."On Tuesday, the PRA, HSBC's and Standard Chartered's chief regulator, asked the biggest banks operating in the UK to suspend their dividend payments and buy-backs and said it "expects" banks not to pay cash bonuses to senior staff and material risk-takers.The UK is following in the footsteps of European regulators who ordered lenders to suspend dividends and buy-backs last week in light of the pandemic's effects on economies on the continent."We do not expect the capital preserved to be needed by the banks in order to maintain adequate capital positions, but the extra headroom should help the banks support the economy through 2020," the regulator said.The Hong Kong Monetary Authority, which acts as the city's de facto central bank and is the chief regulator to HSBC subsidiary Hang Seng Bank, said it did not believe that local banks in the city should be required to suspend their dividends or stop buybacks as the local banking sector has a strong capital ratio and should be able to meet lending demands. The authority will closely monitor the outbreak's effects on banks and the city's economic situation, according to an HKMA spokesman.HSBC, one of three lenders alongside Standard Chartered authorised to issue currency in Hong Kong, had been set to pay its final interim dividend of US$0.21 a share on April 14, but will now not make that payment."We truly regret the impact of this non-payment of dividend on our loyal shareholders and our customers," Mark Tucker, the HSBC chairman, said on a conference call with journalists. "We have been asked to do this by the regulators. Their decision [was designed] to ensure there is capital for growth and allowing us to support our customers. This is an incredibly difficult decision."Tucker said it did not consult any of its biggest shareholders before making the decision to cancel its dividend.The bank said it would make no dividend payments or repurchase shares until the end of this year and would review its dividend policy "once the full impact of the pandemic is better understood, and economic forecasts for global growth in future years are clearer."Ewen Stevenson, the HSBC chief financial officer, said the bank would not commit at this point to pay all of the dividends that had been suspended for the year, but make a decision on its dividend policy later in the year.Standard Chartered said it would not make its final 2019 dividend payment of US$0.20 a share and suspend its US$500 million buy-back programme announced last month. The bank reports on April 29 and will update its guidance then.HSBC said in February that it expected about US$600 million of provisions for additional loan losses if the pandemic drags into the second half of the year, but that was before conditions worsened in Europe and the US. The bank is expected to update its guidance when it reports its first-quarter results.Banks are not the only companies suspending their dividends. Aircraft manufacturer Boeing, Olive Garden owner Darden Restaurants, carmaker Ford and hotel chain Marriott have all paused their dividends this year.Goldman Sachs said last week that it expects dividends of S&P; 500 companies in the US to be 25 per cent lower than 2019 due to suspensions, cuts and eliminations by companies this year, noting recently passed stimulus programmes in the US bar companies who seek relief from paying dividends or buying back shares until a year after they repay any government-sponsored loans.Big companies have faced pressure to table share repurchases and suspend payments to investors in recent weeks as millions of people have found themselves out of a job as cities from London to New York have ground to a halt in order to stem the spread.The announcement comes days after HSBC said it would delay thousands of job cuts as part of a planned overhaul announced in February because of the "extraordinary impact" of the pandemic.The reshaping " the third major restructuring by the lender in a decade " is part of a big bet that HSBC chief executive Noel Quinn is making on future growth in Asia.Noel Quinn on March 17, 2020. Photo: HSBC Holdings / AFP alt=Noel Quinn on March 17, 2020. Photo: HSBC Holdings / AFPQuinn, who was permanently appointed to the top job this month, has said that the bank would shift capital from underperforming businesses in Europe and the US to growth markets, such as Hong Kong and mainland China.HSBC said on Wednesday that its performance in the first quarter has been "resilient", but the pandemic would likely weigh on its insurance business, cause credit and valuation funding adjustments in its investment bank and lead to higher credit loss provisions. The bank is expected to announce its first-quarter results on April 28."We've got to recognise we're in pretty unprecedented times. There is a significant amount of economic uncertainty," Quinn said on a conference call Wednesday.Additional reporting by Enoch Yiu.This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved. Copyright (c) 2020. South China Morning Post Publishers Ltd. All rights reserved.
(Bloomberg) -- Singapore’s central bank said lenders will offer additional relief for consumers and companies battered by the sharp economic slowdown, including a freeze on mortgage and business loan payments and cuts to credit card rates.Banks and finance companies can defer both principal and interest payments on residential mortgages through Dec. 31, the Monetary Authority of Singapore said in a statement late Tuesday. Small and medium-sized firms can opt to defer principal payments on their secured term loans until the end of the year, the MAS said.The central bank’s latest loan relief adds to several other fiscal and monetary measures the city state is employing after the coronavirus pandemic induced the worst economic downturn in a decade in the first quarter. More than S$40 billion ($28 billion) of existing loan facilities to small businesses will likely qualify for the relief plan.“The shock to the economy from the COVID-19 outbreak is unprecedented,” Samuel Tsien, chairman of the Association of Banks in Singapore, said in the statement. “We must take extraordinary measures to address not just a health crisis, but what has developed to become a deep global economic crisis.”Given deep capital buffers, ample liquidity and low leverage, Singapore lenders “are well placed to not only ride out the economic storm caused by Covid-19, but also provide meaningful relief to individuals and SMEs affected by the crisis,” MAS Managing Director Ravi Menon said in the release.Bank ReliefDBS Group Holdings Ltd., Oversea-Chinese Banking Corp. and United Overseas Bank Ltd., Singapore’s three largest lenders, are already taking steps to help small firms and individuals with measures that include deferring principal repayments and liquidity relief.Given the banks’ combined asset books of nearly S$1.5 trillion, “the anticipated impact on the Singaporean banks’ earnings will be small” relative to the estimated S$40 billion for qualifying SME loans, Kevin Kwek, a banking analyst at Sanford C. Bernstein in Singapore, said in an emailed reply to questions. He added the Singapore lenders are unlikely to cut their dividends, as U.K. banks did late Tuesday.“Since the balance sheet isn’t likely at this point to take a big hit and capital ratios are robust, this year’s promised dividends won’t be affected,” Kwek said. “Next year will be a question of how much earnings are affected.”Still, the three major Singapore banks are suffering from the economic slowdown, which has driven down interest rates and increased the risk of loan defaults. DBS shares dropped 2.2% to S$18.16, taking this year’s decline to almost 30%. UOB shares fell by about the same measure, with a year-to-date drop of 28%. OCBC retreated 1.5%, with a loss of 23% in 2020.More MeasuresThe new measures announced by the central bank will also allow life and health insurance policy holders to defer premium payments for up to six months, while customers with property and auto insurance policies can set up an installment payment plan.“Deferring payments increases future obligations and hence borrowers and policy holders should weigh their options carefully,” the MAS said. “Financial institutions will process all applications expeditiously.”International banks operating in Singapore including Citigroup Inc. and Standard Chartered Plc are also joining the relief measures.Other highlights of the new measures:Companies, including SMEs, holding general insurance policies that protect their business and property risks may apply to their insurer for installment payment plans.Banks and finance companies may apply for low-cost funding through a new Singapore-dollars facility for loans granted under Enterprise SingaporeHomeowners can apply for up to nine months relief on principal payments and/or interest payments on their mortgages. Interest will continue to accrue on the deferred principal amount.Consumers with credit card balances whose income has been cut by 25% or more can apply for a term loan of as many as five years. The rate would be capped at 8%, compared with 26% typically charged.Banks can also access the $60 billion of MAS funding established on March 26Deputy Prime Minister Heng Swee Keat last week unveiled a second fiscal support package of S$48 billion to help businesses and consumers hurt by the virus outbreak. Gross domestic product fell an annualized 10.6% in the first quarter from the previous three months, and the government projected a severe recession for the full year.Singapore’s central bank also took unprecedented easing steps Monday to support the trade-reliant economy. The MAS, which uses the exchange rate as its main policy tool rather than a benchmark interest rate, lowered the midpoint of the currency band and reduced the slope to zero. That implies the regulator will allow for a weaker currency to bolster exports.(Updates with estimated size of banks’ assets in seventh paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Oil posted the worst quarter on record after the coronavirus crushed demand and raised fears about overflowing storage tanks amid a price war that has flooded the market with extra supply.Futures in New York edged higher on Tuesday but still ended the quarter down more than 66%. While Brent and West Texas Intermediate futures held above $20 a barrel, the underlying, physical market flashed signs of distress. The gap between paper market trades and real barrels has widened to multi-decade highs in some cases, suggesting financial flows are supporting the futures market.“The prices of the physical barrels are showing a lot more distress than the paper benchmarks,” said Roger Diwan, oil analyst at IHS Markit Ltd.With demand weakening by the day and producers slow to cut output, Dated Brent, the benchmark for about two-thirds of the world’s physical oil, was assessed at $17.79 a barrel on Monday, the lowest since 2002. Across major shale regions in Texas and North Dakota, oil remains below $10 a barrel, while some lesser known grades have posted negative prices.Read: Key U.S. Crude Oil Grade Has Never Been Cheaper in Modern EraU.S. crude stockpiles were said to have ballooned by 10.5 million barrels last week, according to traders citing the American Petroleum Institute report, with a 2.93 million-barrel gain in Cushing, Oklahoma, the delivery point of the U.S. crude futures contract. If confirmed by the U.S. Energy Information Administration data, the nationwide crude build will be the biggest since February 2017. The market was little changed after the report.From shuttering and reduced throughput at refiners from South Africa to Canada, to major consuming countries like India pulling back, the additional oil supply and lower demand has reverberated around the globe. Saudi Arabia is unleashing a flood of oil to Europe and traders expect Aramco to slash prices for Asia further. To make matters worse, space to store the huge oversupply is quickly running out.Goldman Sachs’s Jeff Currie said on Bloomberg TV that even Russia is “extremely vulnerable” to oil storage and infrastructure limits because its fields require thousands of miles of pipelines to get to buyers.Oil tanks around the world could fill in six weeks, a move that will likely force significant production shut-downs, Standard Chartered analysts including Emily Ashford wrote in a report.“Huge inventory builds, potentially exhausting spare storage capacity, will mean that market balance requires an unprecedented output shutdown by producers,” they wrote.Brent futures are signaling a historic glut is emerging. The May contract traded at a discount of $13.66 a barrel to November, a more bearish super-contango than the market saw even in the depths of the 2008-09 global financial crisis. The WTI equivalent discount is at $12.43 a barrel.The pressure on U.S. producers and drillers is growing as the rout has caused firms to cut capital spending budgets, accelerate restructuring and lay off workers. Now, even Texas oil buyers have been asking for large production cuts as crude flows overwhelm pipelines and storage, according to Pioneer Natural Resources Co. Senators are asking President Donald Trump to take action, after he agreed with Russian President Vladimir Putin that current prices do not suit the interest of either country.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
The Bank of England welcomed moves by Britain's biggest banks to suspend dividends and said it also expects them not to pay cash bonuses to senior staff during the coronavirus epidemic. The BoE's Prudential Regulation Authority said banks entered the pandemic, which has put Britain into lockdown, with strong capital positions, enough to withstand a severe UK and global recession. "The PRA also expects banks not to pay any cash bonuses to senior staff, including all material risk takers, and is confident that bank boards are already considering and will take any appropriate further actions with regard to the accrual, payment and vesting of variable remuneration over coming months," the PRA said in a statement.
(Bloomberg) -- India opened up a wide swath of its sovereign bond market to overseas investors, taking its biggest step yet to secure access to global indexes as the government embarks on a record borrowing plan. Bonds rallied.Global funds will be able to buy new five-, 10- and 30-year bonds from April 1, the Reserve Bank of India said in a statement late Monday. It scrapped caps on some issued debt including the benchmark and said tenors may be changed or added.The rule change comes as Prime Minister Narendra Modi faces his biggest challenge yet after locking down the country for three weeks to contain a worsening coronavirus outbreak. Already under pressure from a slowing economy, Modi’s government needs inflows to fund a $22.6 billion stimulus package.“It’s certainly a right step moving forward to further open up the local market,” said Arthur Lau, head of Asia excluding Japan fixed income at PineBridge Investments Asia Ltd. “Whether the breadth of the move is sufficient will depend on the frequency and magnitude of the issuance.”Foreigners hold just 2.6% of the 60 trillion rupees ($794 billion) of sovereign bonds issued by India, and the government had set a 6% limit on overseas ownership. They also own under 2% of the outstanding benchmark 10-year debt.Gains were seen in the securities selected by the central bank for full foreign investments. The benchmark 6.45% bond due in 2029 fell eight basis points to 6.13%, while the 7.32% note due in 2024 was down eight basis points at 5.59%.The greater access comes just as global funds are selling emerging-market assets to hoard dollars amid fears of a global recession. They’ve sold $9.1 billion of rupee-denominated debt this quarter, the most in Asia, and the outflows helped send the currency to a record low.“It makes sense at a time when the government is trying to fund fiscal spending,” said Frances Cheung, head of Asia macro strategy at Westpac Banking Corp. “Current offshore-onshore rate differentials don’t suggest there is a lot of pent-up demand.”Inclusion in the Bloomberg Barclays Global Aggregate Index may translate into potential inflows of $6-$7 billion, according to HSBC Holdings Plc. A place in the JP Morgan GBI EM Index at a later date can potentially attract $12-$16 billion, the report said.Under existing rules, foreigners can account for a maximum 30% of the outstanding amount of any sovereign security, and the combined upper limit will remain at 3.6 trillion rupees until new limits are given, the RBI said. It didn’t specify whether the bonds falling under the new rules will still be part of the overall cap.The overseas cap in corporate debt will now be 15% of what’s outstanding, the RBI said. The plan to provide wider access to Indian bonds was first announced in the budget unveiled on Feb. 1.Opening up the debt market along with allowing domestic banks to trade in offshore currency markets will help deepen the hedging market for foreign investors, according to Standard Chartered Plc.Huge BorrowingsIndia will detail on Tuesday its borrowing plan for the first half of the fiscal year starting April 1. The government may slash or even cancel debt sales because of the virus outbreak, Reuters reported on Monday, citing finance ministry officials it didn’t identify. Authorities are also looking at selling these bonds to the RBI or to the state-owned Life Insurance Corp. of India, according to the report.“Lower oil prices should be positive to India’s economy and this should help RBI and the government to have more room to support,” PineBridge’s Lau said. “That being said, the ongoing public health issue remains the major risk factor of how things will evolve especially after the lockdown.”The yields on the benchmark 10-year bond fell to 5.98%, the lowest in more than a decade, on Friday after the RBI slashed the key rate by 75 basis points. It has since risen more than 20 basis points through Monday on concerns over new borrowings.The idea of tapping the global debt market more aggressively was floated September when Modi was in New York. Bloomberg LP, the parent company of Bloomberg News and Bloomberg Barclays Indices, announced it would help Indian authorities navigate a course to inclusion in international bond benchmarks.Investors who don’t have direct access to Indian debt can come via the International Central Securities Depositories, the central bank said.“This is potentially the first milestone in the path toward global bond index inclusion,” said Mayank Prakash, fixed income fund manager at BNP Paribas Asset Management India. “Euro clearing shall be the next probable task.”(Adds HSBC’s estimates in ninth paragraph, closes prices)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Standard Chartered has told staff it is freezing all external and internal hiring for two months and signaled it is likely to cut bonuses for 2020, as the Asia and Africa-focused lender grapples with the fallout from the coronavirus pandemic. The FTSE 100 bank would also re-prioritize discretionary investment for the time being, the company said in a memo seen by Reuters. The memo said the lender expected to have to make "sensible adjustments" to any variable compensation for 2020 given its finances were "likely to be challenged".
Standard Chartered has told staff it is freezing all external and internal hiring for two months and signalled it is likely to cut bonuses for 2020, as the Asia and Africa-focused lender grapples with the fallout from the coronavirus pandemic. The FTSE 100 bank would also re-prioritise discretionary investment for the time being, the company said in a memo seen by Reuters. The memo said the lender expected to have to make "sensible adjustments" to any variable compensation for 2020 given its finances were "likely to be challenged".
(Bloomberg) -- South Africa’s rand weakened to a record low, dollar bonds plunged and banking stocks dropped after the country lost its last investment-grade credit rating. Investors anticipate it may slide even deeper into junk as the spread of the coronavirus hammers the economy.The currency dropped as much as 2.5% to 18.09 per dollar, breaching 18 for the first time. It traded 1.1% down at 17.82 by 12:46 p.m. in Johannesburg, still the worst performance among major emerging-market currencies after the Mexican peso.Yields on 10-year dollar-denominated bonds climbed 69 basis points to 8.13%, a record, and widening the premium over U.S. Treasuries to 735 points. Yields on 10-year government bonds opened 60 basis points higher, but erased the increase as additional liquidity measures announced by the country’s central bank over the weekend came into play.An index of South African bank stocks slid as much as 6.1%, extending Friday’s 12% slump. The equity market’s main gauge gained 0.8%, with some exporters and companies with international income benefiting from the currency’s depreciation.Moody’s Investors Service on Friday cut its assessment of South Africa to sub-investment grade, saying unreliable electricity supply, persistently weak business confidence and investment, and labor market rigidities continue to constrain the economy.Lowering South Africa’s rating to Ba1, one level below investment grade, Moody’s kept a negative outlook on the government’s debt, which it said “reflects downside risks to economic growth and fiscal metrics.”That could lead to a rise in the debt burden, increasing borrowing costs and weakening South Africa’s access to funding, it said.“Perhaps the downgrade is a catalyst for much-needed structural reform,” said Nema Ramkhelawan-Bhana, an analyst at Rand Merchant Bank in Johannesburg, in a note to clients. “The end state remains unclear, especially as South Africa sinks further into the abyss of recession.”Finance Minister Tito Mboweni said on Sunday evening that he may approach the International Monetary Fund and World Bank for assistance in fighting the coronavirus pandemic.The downgrade will cause Africa’s most industrialized economy to fall out of the FTSE World Government Bond Indexes, which are tracked by around $3 trillion of funds. South Africa has a 0.45% weighting in the main index. The index will be reweighted at the end of April.Analysts are divided over how many outflows from passive funds the index exclusion will trigger. Barclays Plc analysts said Monday there could be $6 billion of forced selling, with foreign holdings of South African local-currency government debt falling to 30-32% of the total from 37%. Morgan Stanley forecasts $2-$4 billion of outflows, while Standard Chartered Plc says it could be anything from $4 billion to $10 billion.Foreign investors have already sold a net 46.8 billion rand ($2.7 billion) of government securities this year.The cost of insuring South Africa’s dollar debt against non-payment rose to the highest since 2009, with five-year credit default swaps climbing 38 basis points to 438.(Updates market moves in second paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- China’s central bank cut the interest rate it charges on loans to banks by the biggest amount since 2015 as authorities ramp up their response to the worsening economic impact from the coronavirus pandemic.The People’s Bank of China reduced the interest rate on 7-day reverse repurchase agreements to 2.2% from 2.4% when it injected 50 billion yuan ($7.1 billion) into the banking system, according to a statement Monday. The central bank said this will keep liquidity sufficient to help the real economy.The first cut to a PBOC policy rate since February is in line with a pledge by the Communist Party’s leadership on Friday to increase support to the economy through increased sales of sovereign debt, as domestic and international demand slumps due to the pandemic. The step brings the PBOC closer in line with the stance of global peers, who have loosened policy dramatically in recent weeks.“The larger-than-usual rate cut is an expression that China is willing to join the coordinated consortium for economic stabilization,” said Raymond Yeung, chief China economist at Australia & New Zealand Banking Group in Hong Kong. “Small and medium-sized businesses are collapsing for lack of cash flow.”Further Cuts ExpectedA reduction in the central bank’s main tool to adjust the price of market liquidity also signals coming reductions in its main one-year funding tool, and potentially a corresponding cut to the benchmark deposit rate. Reductions to policy rates should also be reflected in the main market benchmark of the cost of lending to companies, the loan prime rate.“Lowering banks’ lending rates without a reduction in the cost of their liabilities will squeeze banks’ net interest margin, eroding their profitability and capital base,” said Ding Shuang, chief Greater China and North Asia economist at Standard Chartered Bank Ltd. “A benchmark deposit rate cut is necessary.”China will increase its fiscal deficit as a share of gross domestic product, issue special sovereign debt and allow local governments to sell more infrastructure bonds as part of a package to stabilize the economy, according to a Politburo meeting on Wednesday, Xinhua reported late Friday.What Bloomberg’s Economists Say...“We expect the authorities to urge banks to expand lending, particularly to smaller and private companies. To achieve this, more liquidity will be injected by the PBOC via both broad-based and targeted methods, such as reductions in the required reserve ratio and offering liquidity via targeted MLFs.”\--David Qu, Bloomberg economistSee full report hereIn a separate statement published late Friday, the People’s Bank of China called for better coordination of global macro policies, while re-emphasizing it will keep liquidity sufficient to help with the real economy and watch out for inflation risks.Plenty of Room LeftThe cut Monday signals the PBOC has entered “a stage with stronger counter-cyclical adjustment,” out of consideration of both domestic demand and the global virus outbreak, Ma Jun, a PBOC adviser, said in a statement sent to the media after the rate cut. “The PBOC doesn’t use its bullets all at once. China still has plenty of room in monetary policy.”Economists have lowered their median forecast for economic growth to 2.9% for 2020, the slowest pace since 1976, when the Cultural Revolution wrecked the economy and society. Until the past few days, China’s policy makers had maintained a relatively cautious program of easing, mindful of the nation’s heavy debt load and of risks to financial stability.While the Politburo statement and the PBOC move signal the response is moving up a gear, it still falls short of a no-holds-barred stimulus.The leaders of the Group of 20 said last week they were injecting more than $5 trillion into their economies to fight the effects of the outbreak. Central banks globally have slashed interest rates and started quantitative easing programs.“Certainly, the policy easing is continuous and today’s liquidity injection at least suggests that the policy aid will be mildly constant and will be more proactive when the authorities deem necessary,” said Zhou Hao, an economist at Commerzbank AG. “China is joining the global easing wave.”(Updates with Bloomberg Economics, details of actions of other nations.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- It’s hard to imagine sentiment being any worse than it was coming into this week. The Dow Jones Industrial Average was down 35% from its high for the year in February, and more than a few Wall Street strategists were calling for a drop of 50% or more before it was over. What a difference a few days make. The benchmark briefly entered a (technical) bull market on Thursday, rising 20% over the course of three days from its lows on Monday. False rallies are a hallmark of bear markets, and this could be one of those, but this turnaround has one big thing going for it. Rather the some sudden confidence in the battle against the coronavirus pandemic and a subsequent quick rebound in the economy and corporate profits, much of the recovery in stocks can be tied to the dollar. As equities have soared the past three days, the Bloomberg Dollar Spot Index, which measures the greenback against a basket of major currencies, has tumbled some 3.78% from a record high after surging 8.91% the previous two weeks. Considered a haven, it’s not unusual for the dollar to strengthen in times of crisis. The problem is, the global financial system is tied to the dollar like never before, and its appreciation causes financial conditions around the world to tighten. The most visible example is in the debt markets, with the Institute of International Finance estimating that emerging-market borrowers alone have $8.3 trillion of foreign-currency debt, the bulk of it in dollars, up more than $4 trillion from a decade ago. So, any rise in the dollar makes it that much more expensive for these borrowers to make interest payments or refinance, which would only exacerbate the deep recession already facing the global economy. Much of the dollar’s recent weakness can be tied to one key move by the Federal Reserve to ease the run on the U.S. currency. What the Fed did was provide foreign-exchange swap lines with central banks in both developed and emerging markets, offering dollars in exchange for their currencies. The dollar “may now become a barometer of the efficacy of the policy response to corporate credit difficulties, interbank funding challenges, etc.,” Standard Chartered currency strategists Eric Robertson and Steve Englander wrote in a research note. “Global policy makers have adopted a ‘whatever it takes’ approach to countering financial-market volatility and the expected recession, but this response may also need to have an impact on the (dollar) to be seen as truly effective.”THE ‘SMART MONEY’ BELIEVESThere’s a school of thought on Wall Street that trading in the first 30 minutes after equity markets open represents emotions, driven by greed and fear of the crowd based on news, as well as a lot of trades based on previously set-up market orders. The “smart money,” though, waits until the end of trading to place big bets, when there is less “noise.” This action is what the Smart Money Flow Index tries to capture as it relates to the Dow. What’s encouraging is that this gauge has just risen back to pre-crisis levels, suggesting big institutions are more confident that perhaps equities have reached fair value. It’s also notable that Deutsche Bank AG equity strategist Binky Chadha, who called the S&P 500 Index’s surge higher in 2019, then pivoted to forecast no gain at all in 2020 before the coronavirus crisis hit, is turning more bullish — or at least less negative. Chadha just boosted his recommended equity allocation to “neutral” from “underweight,” according to Bloomberg News’s Joanna Ossinger. Among the main reasons for his shift, Chadha pointed out that equities’ peak-to-bottom decline was in line with historical patterns and that positioning was at a record low. BRING IT ONUsually it could be a warning sign when demand soars at an auction of U.S. Treasury securities. After all, Treasuries are the ultimate haven asset, and a rush into them may signal tough times ahead for the economy. So how should Thursday’s auction of $32 billion of seven-year notes be interpreted? Investors bid for 2.76 times the amount offered, the highest so-called bid-to-cover ratio since the height of the European debt crisis in 2012 and a big jump from the 2.49 times at last month’s sale. Yes, there is still a lot of concern about the future of the economy, but perhaps the jump in demand signals that the government will have no problems selling as much debt as needed to fund the $2 trillion rescue package. There’s even evidence of optimism in the corporate bond market, where the cost to insure investment-grade company debt from default has fallen for four consecutive days to the lowest since March 6. It has fallen three days for junk bonds. Not only that, Bloomberg News reports 34 issuers in the U.S. and Europe were in the market selling debt on Thursday, making it the busiest day in months. They wouldn’t be selling if there was no demand.COMMODITIES AS THE OUTLIERThe market for raw materials doesn’t seem to have received the memo. Some investors feel there won’t be a real recovery in markets until oil prices begin to rise, bolstering the cash flow of many U.S. energy firms that are now in jeopardy of defaulting after West Texas Intermediate crude plunged from more than $60 a barrel in January to as low as about $20 this month before trading at $22.78 Thursday. And it’s not just oil. Bloomberg Economics notes that metals consumption moves closely in line with global gross domestic product growth. As a result, the economists note that metals prices can provide a high-frequency guide to the ups and downs in the economy. “The fit is so strong that Bloomberg Economics uses the S&P GSCI Metals Price Index in our global GDP nowcast,” Tom Orlik and Niraj Shah wrote in a research note Thursday. “A 13% drop in the index since the start of March shows markets pricing in a sharp decline in activity.”TEA LEAVESThe news out of Italy has been grim. The nation reported the most coronavirus infections in the last five days on Thursday, even after weeks of rigid lockdown rules. The civil protection agency reported 6,153 new cases on Thursday, bringing confirmed cases there to 80,539, which is a level approaching China’s. On Friday, we’ll get some sense of what this is doing to consumer confidence when data for March is released. The median estimate of economists surveyed by Bloomberg is for a drop to 100.4, which would be the lowest since December 2014 from 111.5 in February. Such measures will likely gain in importance in the months ahead because market optimists are banking on consumer confidence rebounding quickly once the coronavirus pandemic slows. But no one knows when that will be and whether consumers will have the confidence — or the resources — to go about life as they did before Covid-19.DON’T MISS What More Could the Federal Reserve Possibly Do? A Lot: Tim Duy Euro-Zone Rescue Talks Are Irrelevant: Ferdinando Giugliano We Can’t Dismiss This Rebound as a Reflex Action: John Authers Dollar Crunch Is Europe’s Gift to Asia: Gopalan and Mukherjee Matt Levine’s Money Stuff: Nobody Wants a Margin Call Right NowThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Robert Burgess is an editor for Bloomberg Opinion. He is the former global executive editor in charge of financial markets for Bloomberg News. As managing editor, he led the company’s news coverage of credit markets during the global financial crisis.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- Banks in Asia are suddenly shy to part with dollars. And who can blame them? Many of their corporate clients are borrowing the U.S. currency and depositing it with the same banks — just in case they can’t get the funding when they need it. The caution amid the coronavirus outbreak isn’t all that different from Amazon.com Inc. trying to discourage vendors from cornering toilet paper supplies. “Corporate banks are becoming a bit more discretionary about permitting draws on credit lines where hoarding cash is the sole objective,” according to Greenwich Associates consultant Gaurav Arora. The dollar squeeze is evident, as one of us wrote Monday, in the hefty premiums South Korean banks must fork out to borrow the U.S. currency — a reliable indicator of trouble in the past. It also appears that China’s banks may be less eager or able than before to fund the dollar needs of their corporate borrowers, Bloomberg Opinion’s Anjani Trivedi noted Wednesday.For Asia, the crunch is an unwanted gift from European lenders, whose departure from the region post-2008, as well as regulations that reined in Wall Street firms, have led to a funding hole. Japan’s banks have expanded and lenders like BNP Paribas SA have scaled up trade finance, but they’re yet to fill the void, especially as troubled Deutsche Bank AG shrinks. The German lender was in the top five corporate banks in Asia in 2014; last year, it wasn’t even in the top 10, according to Greenwich. Some countries like Korea have felt the loss more keenly than others. U.K. banks’ exposure to Korea has dwindled to $77 billion from $104 billion in the first quarter of 2008. German lenders’ claims have fallen to $13 billion from $36 billion.Japan’s lenders have taken up part of the slack. Driven by negative interest rates and aging demographics at home, they have dished out funds aggressively in Southeast Asia as well as to global deal-chasing clients like SoftBank Group Corp. The large U.S. operations of megabanks like Mitsubishi UFJ Financial Group Inc. also provide them with liquidity, as does their stack of fully convertible, cheap yen deposits. But some Japanese lenders have piled into off-balance sheet products, which suck liquidity in times of stress. Japan's Norinchukin Bank, a lender to farmers and fisherman, was one of the world’s largest buyers last year of collateralized loan obligations, bundled U.S. leveraged loans.When the Fed extended emergency swap lines to South Korea, Australia, Singapore and New Zealand last week to ease the worldwide dollar shortage, a step that our colleague Shuli Ren called for here, it was a sign that the liquidity problem was serious enough. Overall, the Fed gave temporary access to nine authorities in addition to the five that it has permanent arrangements with for making dollars available.(2) Emerging economies like India, Indonesia, Chile and Peru, though, have seen their requests for swap lines rebuffed in the past. The U.S. only helps those it sees as important to the stability of its own banking system.So what can Asia do? Start with the most extreme case. Australia needs U.S. dollar funding not just for foreign-currency loans but also for Australian dollar mortgages. That’s because the domestic deposit base is small, compared with the size of the banking industry. The average loan-to-deposit ratio of Macquarie Bank Ltd. and other major Australian lenders was 126% versus 68% for the top Asian banks, namely DBS Group Holdings Ltd., Mizuho Financial Group Inc., MUFG, Standard Chartered Plc, and HSBC Holdings Plc, according to banking analyst Daniel Tabbush, founder of Tabbush Report.Offshore funding sustains around one-third of major Australian banks' total worldwide operations. While the International Monetary Fund and others have flagged the reliance on foreigners as problematic, the Australian regulators have so far refrained from discouraging lenders to borrow abroad. Yet, the fact that the country had to seek dollars from the Fed during the epidemic upheaval and auction them to its banks will call into question the sagacity of this relaxed approach. In rest of Asia, one lesson from the dollar squeeze is to shun protectionism. Well-capitalized regional banks like Singapore’s DBS could supplement the three traditionally entrenched foreign lenders: HSBC, StanChart, and Citigroup Inc., a big cash management bank for Western multinationals. DBS could emerge as an Asian global bank, though in good times its expansion has been stymied by regulators playing to nationalist political sentiment, as we saw when it wasn’t allowed to buy Indonesia’s PT Bank Danamon in 2013.The next step may be to seek more intermediaries with scale. JPMorgan Chase & Co. is pumping top dollar into serving corporate treasuries as a safeguard against the fickle fortunes of investment banking. Japan’s lenders could also do more: MUFG is already one of the region’s most aggressive lenders and has the historical advantage of having a dollar clearing license, like HSBC. Unlike 2008, this isn’t a credit contagion yet, though that could change if large, messy financial bankruptcies were to erupt. But beyond the current crisis, the regulators must plan for the next squeeze. Since not everyone can rely on the Fed, the dollar supply chain is each country’s responsibility. At least until a credible alternative to the U.S. currency comes along. (1) The standing facilities are with the Bank of Japan, the Bank of England, the Bank of Canada, the Swiss National Bank and the European Central Bank.This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Nisha Gopalan is a Bloomberg Opinion columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
The Zacks Analyst Blog Highlights: Royal Bank of Scotland, Barclays, HSBC, Lloyds Banking and Standard Chartered