Saturday 30th August 2014
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South Africa’s central bank has disagreed with a ratings decision by Moody’s to downgrade Capitec Bank Limited (Capitec) by two notches, and place it on review for a further downgrade. The central bank says it respects the independent opinion of rating agencies but that it does not “agree with the rationale given in taking this step”. Two reasons are given for the rating action: a lower likelihood of sovereign systemic support based on decisions recently taken in relation to African Bank Limited (African Bank), and heightened concerns regarding the risk inherent in Capitec’s consumer lending focus. “With regard to the first point, it is important to reiterate that the approach taken by the SARB to any resolution to address systemic risk will always be based on the circumstances and merits of the particular prevailing situation. Decisions will also be informed, as was the case with African Bank, by principles contained in the Key Attributes for Effective Resolution Regimes proposed by the Financial Stability Board (FSB), which have the objective that a bank should be able to fail without affecting the system,” notes the central bank in an official statement. “This is in keeping with evolving international best practice. In the case of African Bank bond holders and wholesale depositors are taking a 10% haircut, which is generally regarded as being very positive given that the trades following the announcement of African Bank's results were taking place at around 40% of par. Therefore in fact substantial support was provided, not reduced. Moreover, all retail depositors were kept whole and are able to access their accounts fully,” it adds - According to the Hong Kong Monetary Authority (HKMA) credit card receivables increased by 2.1% in the second quarter to HKD112, after a reduction of 6.7% in the previous quarter. The total number of credit card accounts edged up by 0.7% to around 16.8m.The rollover amount, which reflects the amount of borrowing by customers using their credit cards, increased by 2.9% during the quarter to HKD19.2bn. The rollover ratio also rose marginally from 17.0% to 17.1% in the same period. The charge-off amount increased to HKD569mduring the quarter from HKD528m in the previous quarter. Correspondingly, the quarterly charge-off ratio rose to 0.51% from 0.46% in the previous quarter. The amount of rescheduled receivables transferred outside the surveyed institutions’ credit card portfolios reduced to HKD94m from HK$109m in the previous quarter. The delinquent amount increased to HKD249m at end-June from HKD239m at end-March. However, the delinquency ratio remained the same at 0.22% because of an increase in total card receivables. The combined delinquent and rescheduled ratio (after taking into account the transfer of rescheduled receivables mentioned above) edged up to 0.29% from 0.28% during the same period - Harkand has been awarded a contract to support Apache with inspection, repair and maintenance work (IRM) as well as light construction (LC) across their assets in the North Sea, following completion of a competitive tender exercise. The award includes the provision of vessels, ROV and diving services for a three-year period, plus two one-year options. The firm will also support offshore marine construction contractor EMAS AMC who have been awarded a separate contract for pipe lay and heavy construction as part of the same tender process. Harkand Europe managing director, David Kerr, said: “This contract is an important step in strengthening our close working relationship and growing our North Sea business with Apache.

Fortunes divide in infrastructure spending in the GCC

Monday, 03 October 2011
Fortunes divide in infrastructure spending in the GCC The growing disparity of fortunes in the GCC project segment was starkly exposed by a Citigroup report, which highlighted the fact that while some $170bn of projects in the United Arab Emirates have been put on hold or cancelled outright, the MENA region has seen a substantial uptick in infrastructure project spend. Who are the winners and runners up in the GCC project stakes right now? http://www.ftseglobalmarkets.com/

The growing disparity of fortunes in the GCC project segment was starkly exposed by a Citigroup report, which highlighted the fact that while some $170bn of projects in the United Arab Emirates have been put on hold or cancelled outright, the MENA region has seen a substantial uptick in infrastructure project spend. Who are the winners and runners up in the GCC project stakes right now?

Citigroup’s latest MENA construction tracker report holds that the value of projects either delayed or cancelled rose to $170bn in August alone; a signal indication that the construction segment, particularly related to real estate in the Emirates, is still suffering from the fallout of local construction firms overstretching their credit exposure in the early years of this century. The figure is significant; the value of projects cancelled or delayed accounts for 56% of the all stymied projects across the survey area and is up 13% on July’s figures.  The property boom in the Emirates has now been languishing for over 3 years, with some prices of private property estimated to have fallen by as much as 60% in Dubai. No wonder many developers have been forced to abandon projects.

Projects cancelled or on hold across the wider MENA region in contrast, fell slightly to $1.69bn, compared with $1.7bn in July.  However, key markets in the GCC continue on the fast track in terms of new project spend. Saudi Arabia added $81bn worth of projects to the already $100bn it intends to spend on infrastructure in general and $20bn it will spend on downstream petrochemical projects over the coming five years.  Saudi Arabia, the UAE, also Jordan and Egypt are reportedly now pushing forward the idea of building nuclear power capacity across the MENA region; with the estimated value of projects topping $400bn over the next 15 years.  Saudi Arabia will again dominate this segment, with a planned $350bn spend on the King Abdullah City of Atomic and Renewable Energy project, which aims to establish a zeroCo2 emissions city using a mix of nuclear and other renewal energy sources.  Around 16 separate nuclear units are planned.

Kuwait ($20bn) and Qatar ($2bn) also have projects that are in preliminary stages of construction. In contrast, the UAE also showed a $12bn decline in preliminary projects to $118bn.

It is a contrasting picture with the situation even two years ago. While the outlook for countries such as Saudi Arabia look strong in the near term, revised data issued by the Saudi Arabian Monetary Authority shows that the build up to the current construction pipeline was rather slow in 2009 and the first half of 2010. There was an uptick in growth in 2010, with the industry posting 3.7% year-on-year real construction industry growth, while an average growth in construction projects of some 4% a year over the next four years is expected, backed by a healthy project pipeline, strong government support, an ability to invest and local demand for infrastructure keeps the industry stable.

The country’s Ninth Development Plan announced a touch over a year ago sets out an investment spend on infrastructure of some SAR1, 444bn ($385bn) between 2010 and 2014. Then, in response to stirrings elsewhere in MENA, now called the Arab Spring, the government created two packages of social benefits worth $130bn to finance further investment in education, healthcare and housing projects. SAR250bn ($66bn) was pledged for housing alone, with 500,000 new units in the pipeline. Around 7% of development plan investment will be channelled into housing, encompassing some 1m new houses to be built on a public-private partnership basis.  Another 19% will be invested in healthcare, involving the build of some 117 hospitals and 750 so-called primary care units.  The government also has an $80bn 10-year investment plan for electricity infrastructure underway in parallel with the infrastructure investment plans, which run out to 2018. Some 20GW of electricity capacity is currently under construction, worth around $30bn.

In a boost to local construction firms, the Saudi Industrial Development Fund has announced it will finance up to 75% of costs for investment projects in under-developed regions.

The current crop of investments underway includes the SAR40bn expansion of the Grand Mosque, underscoring the Kingdom’s pivotal role in Islam. The expansion, in the northern part of the Grand Mosque will cover an estimated 356,000 square metres, ultimately accommodating up to 1.2m worshippers.  It includes the construction of four giant bridges allowing access to the northern courtyards inside the Grand Mosque. It is the largest expansion project within the Grand Mosque complex to date and will showcase the country’s move into the 21st century, while retaining its sacred role as protector of the Islamic faith.

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