David Fuller and Eoin Treacy's Comment of the Day
Category - General

    Yes Bank May Complete $1.2 Billion Capital Raise In Two Tranches

    This article by Vishwanath Nair for Bloomberg may be of interest to subscribers. Here is a section:

    The bank, which is currently in capital conservation mode, will be able to return to a focus on growth once the fundraising exercise is complete.

    This growth, however, may be more modest than what was seen under the previous chief executive Rana Kapoor.

    Yes Bank will be looking to grow its loan book at 20-25 percent for some time to come, bringing down its growth rate from the over 40 percent year-on-year growth seen until a few quarters ago.

    Yes Bank is also in the process of adjusting its exposure to a few corporate groups, where the lender was in breach of the Reserve Bank of India’s large exposure framework, the person quoted above said.

    The private sector bank will move from an asset-led growth strategy to a liabilities-led growth strategy as it aims at bringing in more retail and small business customers. It intends to do this by leveraging its 1,100 branches and mining customer data from its digital offerings such as the Unified Payments Interface (UPI). A liabilities-led growth could help the bank bring down its cost of funding by 100-150 basis points, the person quoted above said.

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    Bad Loans in Europe Tumble, but They Are Never Fully Gone

    This article by Patricia Kowsmann and Margot Patrick for the Wall Street Journal may be of interest to subscribers. Here is a section:

    You are pushing out the door the risk, but part of this risk comes back in through the window,” said Massimo Famularo, a Milan-based adviser on bad-loan deals.

    The ill-health of Europe’s banks is a drag on the economy and a factor for why the area has yet to fully bounce back from the crisis. When banks retain exposure to bad loans rather than selling them outright, they have less capital to back fresh lending to the economy.

    Lending growth has been weak in countries with the most nonperforming loans, or NPLs, such as Italy, Portugal and Greece.

    “The sale of NPLs is good for the balance sheets of the banks, but it doesn’t solve the NPL problem in the system,” says Giovanni Bossi, former chief executive of Italy’s Banca IFIS SpA. He estimates only a small portion of the disposed loans has been worked out by their buyers.

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    Pound Sinks to Lowest Since 2017 on Threat of No-Deal Brexit

    This article by Charlotte Ryan for Bloomberg may be of interest to subscribers. Here is a section:

    The beleaguered U.K. currency is finding few backers, with both leveraged funds and asset managers increasing their pound short positions, according to the latest data from the Commodity Futures Trading Commission. Deutsche Bank AG’s global head of currency research George Saravelos said the currency is not cheap enough, even after its recent slide, and that there is now close to a 50% chance of a hard Brexit.

    The president-designate of the European Commission, Ursula von der Leyen, said she was ready for a further extension of the Brexit deadline “should more time be required for a good reason.” However, a meeting of Brexit negotiators last week was one of the most difficult of the last three years, according to European officials, as they brace for talks to become more hostile under the next British government.

    Johnson and Hunt, who have long said they want the Irish backstop renegotiated, appeared to limit their room for compromise in a debate late on Monday.

    “This leaves only two options, no-deal Brexit, or no Brexit,” said Thu Lan Nguyen, a currency strategist at Commerzbank AG. “As both Johnson and Hunt have made clear they want Brexit, chances of a no-deal Brexit are rising.”

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    EM Succumbs to Sub-Zero Epidemic as Debt Pile Doubles in a Week

    This article by Selcuk Gokoluk for Bloomberg may be of interest to subscribers. Here it is in full:

    A sinkhole of negative-yielding debt in emerging markets has doubled in size over the past week. This time last year it was non-existent.

    The amount outstanding soared to $246 billion, driven mostly by the growing pile of corporate debt with sub-zero rates, which almost tripled in seven days, according to data compiled by Bloomberg.

    Corporate heavyweights such as China Everbright Bank Co. and Petroleo Brasileiro SA, and sovereigns including Poland and Hungary have seen their rates drop below zero after a dovish turn at Federal Reserve and the European Central Bank sparked a mad dash for yield. Emerging-market bonds handed investors 3.5% over the past two months, more than a percentage point above returns on U.S. Treasuries, according to Bloomberg Barclays indexes.

    The amount of negative-yielding corporate bonds almost tripled to $109 billion from a week ago
    Sovereign bonds with sub-zero rates climbed about 50% to $136 billion

    “This is a global phenomenon, not an EM phenomenon,” said Warren Hyland, who manages emerging-market debt at Muzinich & Co. in London. “Ultimately if less and less of bonds generate a positive yield, that means more and more people are looking for a positive-yielding bond and EM has more of that than elsewhere.”

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