First Abu Dhabi Bank issues $610 million Formosa bond

First Abu Dhabi Bank, the largest bank in the United Arab Emirates, was created last year by the merger of National Bank of Abu Dhabi and First Gulf Bank. (Courtesy First Abu Dhabi Bank)
Updated 15 January 2018

First Abu Dhabi Bank issues $610 million Formosa bond

DUBAI: First Abu Dhabi Bank, the largest bank in the United Arab Emirates, has issued a $610 million Formosa bond, it said on Monday, confirming an earlier Reuters report.
Formosa bonds are sold in Taiwan by foreign borrowers and are denominated in currencies other than the Taiwanese dollar.
First Abu Dhabi Bank priced the deal last week, said one of the sources.
In a statement, the bank said the issue had a 30-year tenor and was callable — or redeemable by the issuer — every five years, adding the transaction would settle on January 22.
Other banks in the Gulf have recently raised funds in the Formosa bond market due to the low cost of issuance of this type of debt instrument.
Qatar National Bank, the Gulf’s largest bank, said last week it had completed a $720 million Formosa bond issuance which had a maturity of 30 years, callable every five years.
Abu Dhabi Commercial Bank, Abu Dhabi’s second-largest bank by assets, has also recently sold a $540 million Formosa bond, sources said last week.
First Abu Dhabi Bank was created last year by the merger of National Bank of Abu Dhabi and First Gulf Bank.
National Bank of Abu Dhabi has issued such bonds in the past, including an $885 million 30-year Formosa bond in January last year, and a $696 million public Formosa bond in October 2016, which was the first 30-year Formosa bond from the Middle East and North Africa.
Other banks in the Gulf region are expected to tap the Formosa market over the coming weeks, the sources said.

Easy credit poses tough challenge for Russian economy minister

Updated 18 August 2019

Easy credit poses tough challenge for Russian economy minister

  • Measures being prepared to help indebted citizens; situation might blow up in 2021

MOSCOW: New machines popping up in Russian shopping centers seem innocuous enough — users insert their passport and receive a small loan in a matter of minutes.

But the devices, which dispense credit in Saint Petersburg malls at a sky-high annual rate of 365 percent, are another sign of a credit boom that has authorities worried.

Russians, who have seen their purchasing power decline in recent years, are borrowing more and more to buy goods or simply to make ends meet.

The level of loans has grown so much in the last 18 months that the economy minister warned it could contribute to another recession.

But it’s a sensitive topic. Limiting credit would deprive households of financing that is sometimes vital, and could hobble already stagnant growth.

The Russian economy was badly hit in 2014 by falling oil prices and Western sanctions over Moscow’s role in Ukraine, and it has yet to fully recover.

“Tightening lending conditions could immediately damage growth,” Natalia Orlova, chief economist at Alfa Bank, told AFP.

“Continuing retail loan growth is currently the main supporting factor,” she noted.

But “the situation could blow up in 2021,” Economy Minister Maxim Oreshkin warned in a recent interview with the Ekho Moskvy radio station.

He said measures were being prepared to help indebted Russians.

According to Oreshkin, consumer credit’s share of household debt increased by 25 percent last year and now represents 1.8 trillion rubles, around $27.5 billion.

For a third of indebted households, he said, credit reimbursement eats up 60 percent of their monthly income, pushing many to take out new loans to repay old ones.

Orlova said other countries in the region, for example in Eastern Europe, had even higher levels of overall consumer debt as a percentage of national output or GDP.

But Russian debt is “not spread equally, it is mainly held by lower income classes,” which are less likely to repay, she said.

The situation has led to friction between the government and the central bank, with ministers like Oreshkin criticizing it for not doing enough to restrict loans.

Meanwhile, economic growth slowed sharply early this year following recoveries in 2017 and 2018, with an increase of just 0.7 percent in the first half of 2019 from the same period a year earlier.

That was far from the 4.0 percent annual target set by President Vladimir Putin — a difficult objective while the country is subject to Western sanctions.

With 19 million people living below the poverty line, Russia is in dire need of development.

“The problem is that people don’t have money,” Andrei Kolesnikov of the Carnegie Center in Moscow wrote recently.

“This is why we can physically feel the trepidation of the financial and economic authorities,” he added. Kolesnikov described the government’s economic policy as something that “essentially boils down to collecting additional cash from the population and spending it on goals indicated by the state.”

At the beginning of his fourth presidential term in 2018, Putin unveiled ambitious “national projects.”

The cost of those projects — which fall into 12 categories that range from health to infrastructure — is estimated at $400 billion by 2024, of which $115 billion is to come from private investment.