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Subpar Economic Recovery Seen Piling More Pain on Nigerian Banks

Subpar Economic Recovery Seen Piling More Pain on Nigerian Banks

(Bloomberg) — Nigeria’s economy is poised to expand at less than half the pace needed by banks next year to avoid a possible spike in unpaid loans.

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The 2021 outlook for sub-Saharan Africa’s largest economy was cut to growth of 1.7% by the International Monetary Fund on Tuesday, compared with a June forecast of 2.6%. That’ll make Nigeria the fourth-worst performer among nations measured by the Washington-based lender in the region.

Lenders need the economy to accelerate after restructuring about 40% of loans on their books that would’ve soured and should have been booked as non-performing loans. As growth lags, the risk of these reorganized loans going unpaid rises.

“There’s no real sense the economy will bounce back to 4% to 5% growth,” Ronak Gadhia, director for sub-Saharan African banks research at EFG-Hermes, said by phone. “We expect banks’ credit quality to remain under pressure.”

Nigeria’s gross domestic product will probably shrink 4.3% for this year, the IMF said, as a lockdown to contain the Covid-19 outbreak, lower oil prices and rampant dollar shortages weigh on output. GDP last expanded by more than 3% in 2014.



chart: Hidden Misery


© Bloomberg
Hidden Misery

The central bank anticipates that almost two-thirds of credit in the economy will be reorganized this year to help borrowers cope with the economic fallout from the pandemic. EFG expects NPLs will rise to 7.6% of total credit at the end of the year, as the economy deteriorates, increasing impairment charges, Gadhia said.

The Cairo-based brokerage predicts that Nigeria’s GDP will increase by 1% to 2% in 2021, “which is very low, and doesn’t help the banks from an asset-quality perspective,” the analyst said. Earnings per share at Nigerian banks could decline 65% this year, Gadhia said.

The government doesn’t have the financial resources to support the economy,

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Uganda: Thieves Use 2,000 SIM Cards to Rob Banks

Uganda: Thieves Use 2,000 SIM Cards to Rob Banks

By Andrew Bagala

Fraudsters who hacked into the mobile money system and fleeced two banks of billions of shillings used about 2,000 mobile phone numbers to execute the scam, Daily Monitor has learnt.

After hacking into the mobile money payment system, the hackers digitally instructed the banks to transfer billions of shillings to telecommunication companies who in turn remitted the money to the different SIM cards which were seeking payment across the country, just a few hours before the crime was detected at the weekend.

MTN, Airtel, Stanbic Bank and Bank of Africa temporarily suspended their mobile money services after detecting the scam and have since involved police to investigate the crime.

In a joint statement released on Monday, signed by MTN, Airtel and Stanbic Bank chiefs, they said there had been a system incident in which hackers accessed systems of a third party service provider (Pegasus Technologies) thus impacting all mobile money or wallet transactions.

“… the system incident has had no impact on any balances on both bank and mobile money accounts,” the joint statement read in part.

The CID spokesman, Mr Charles Twiine, confirmed police had commenced investigations into the hacking.

“We shall establish whether the unauthorised access caused any losses,” Assistant Superintendent of Police Twiine said yesterday, but declined to give further details on the case.

Banks and telecoms are interlinked through aggregators. Uganda has around six aggregators including Pegasus.

Aggregators facilitate a transaction from the bank to the phone such as buying airtime or paying school fees. Similarly aggregators facilitate operations such as sending money across networks.

MTN has an account at Airtel and vice versa. In between is Pegasus which facilitates transactions across the two telecoms.

When money is being transferred from MTN to Airtel, it is debited from a customer’s account and deposited

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Here’s what 710 years’ worth of Italian bond market data is showing about central banks ‘crushing rates’

Here’s what 710 years’ worth of Italian bond market data is showing about central banks ‘crushing rates’

The yield on Italian 10-year
TMBMKIT-10Y,
0.680%

and 30-year
TMBMKIT-30Y,
1.529%

debt fell to record lows on Monday.

As this chart from Deutsche Bank shows, the yield on the Italian 10-year is lower than it was even before Italy became a country. Deutsche Bank strategist Jim Reid attached proxies for Italian debt, such as from Naples, to chart pre-1861 data. (There is also a gap in the data series for the 1700s.)

He also charted debt-to-gross-domestic-product, which shows the Italian economy with an all-time low capability to service that debt.

The move on Monday came after the European Central Bank’s chief economist gave an interview suggesting the central bank may take further action. Among the ECB’s actions stimulus so far is the purchase of government debt from countries including Italy, through what’s called the pandemic emergency purchase program.

“Has the ECB permanently suppressed yields and spreads or are there many more twists and turns to this story over the years ahead? I would lean towards the latter but for now Italian politics and their control of the second wave are acting as strengths and not weaknesses,” Reid said.

David Stockman, the former Reagan-era budget director and acerbic critic, looked at the same chart and issued this brief but withering analysis: “when central banks crush rates, politicians bury their governments in debts.”

The current explosion in debt-to-GDP has been because the latter dropped, precipitously. The Italian economy shrank by 18% year-over-year in the second quarter.

Italy also has been issuing more debt. According to Italian bank Intesa Sanpaolo, Italy is forecast to issue a net €177 billion in new debt in 2020, compared with €54 billion in 2019.

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Financial Sector ETFs Kick Off a Big Earnings Week for Banks

Financial Sector ETFs Kick Off a Big Earnings Week for Banks

It’s going to be a big week for financial sector exchange traded funds as Wall Street banks kick off the third quarter earnings season.

JPMorgan Chase & Co (NYSE: JPM) will report earnings on Tuesday before the open bell along with Citigroup (NYSE: C). Other banks to reveal their third quarter results this week include Bank of America (NYSE: BAC), Wells Fargo (NYSE: WFC) and Goldman Sachs (NYSE: GS).

The Financial Select Sector SPDR (NYSEArca: XLF) includes a 10.9% position in JPM, 6.8% in BAC, 3.7% in WFC, 3.3% in C and 2.5% in GS.

“We’re keeping our eye on JPMorgan. I think that’s going to be the bellwether that we’re really going to want to watch here in earnings,” Piper Sandler chief market technician Craig Johnson told CNBC. “We’ve been making this kind of nice symmetrical sort of setup in the price action here recently, and that really suggests that perhaps a lot of the bad news might be priced in.”

The financial sector has been underperforming the broader market while the S&P 500 has been reaching toward new 52-week highs. However, bargain hunters are looking at banks as a value play, which typically outperforms during the beginning stages of a broad economic recovery.

“Then secondly, I like Wells Fargo right here. It’s the ultimate value play. In my opinion, it trades at too steep of a discount to book value. And if management can just stay out of the media and they can execute on their cost-cutting plan, I think the stock is a good buy at these levels,” Michael Binger, president of Gradient Investments, told CNBC.

However, some warn of potential risks. For instance, traders are concerned about potential political risk following the election. Banks have enjoyed a rollback of regulations, but November’s vote could mean a

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Are Banks and Financial Markets Open?

Are Banks and Financial Markets Open?

Today (October 12) is Columbus / Indigenous Peoples’ Day, which is a federal holiday in the U.S. While some are taking the day off—employer depending—some will be working as normal, but will this include banks and the financial stock exchange?



a close up of a piece of paper: Stock image: Will financial organizations remain open for Columbus Day?


© Dmitry Demidko / Unsplash
Stock image: Will financial organizations remain open for Columbus Day?

The national holiday works two-fold depending on which state of the country you’re in. Some celebrate Columbus Day as the day the explorer Christoper Columbus arrived in the Americas. According to Smithsonian Magazine, the first observance of Columbus Day in the U.S. actually took place 300 years after Columbus made landfall in the country.

The annual celebration then took place from 1869 in the Italian-American community in San Francisco and in 1934, the, then, U.S. President Franklin Delano Roosevelt declared the first national observance. Three years later, Roosevelt made it a national holiday and in 1972 President Richard Nixon signed a proclamation to make the official date the second Monday in October.

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However, because of the colonial history which started with Columbus, some Americans and people in the western world celebrate Indigenous Peoples’ Day instead, which honors Native Americans. According to Pew Research, 12 states plus District of Columbia have renamed Columbus Day to Indigenous Peoples’ Day.

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But regardless of which one people celebrate, the holiday remains a federal holiday and affects institutions such as banks. Only 21 states (as well as American Samoa and Puerto Rico) pay workers on the holiday, says the Council of State Governments’.

As a rule, banks and financial organizations close for federal holidays aligning with the Federal Reserve. For example, the Bank of America will close for

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