New York plans how to return to business amid pandemic

A general view of the inside of a mostly empty Grand Central Station in New York City. (AFP)
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Updated 27 April 2020

New York plans how to return to business amid pandemic

  • Many small businesses have yet to receive emergency loans promised by the US Congress

NEW YORK:  Banks are considering letting some employees keep working from home indefinitely, and staggering the shifts of those who do come into the office.

Hotels are trying to figure out a way to let arriving guests go straight to their rooms without signing in at the reception desk.

New York — the financial, cultural and tourism capital of the United States — is gingerly preparing to get back to business after more than a month of coronavirus shutdown.

“’When will we return to work?’ is a question on many people’s minds these days,” said Jane Fraser, the No. 2 official at Citigroup. She has assembled a committee of veteran bankers to come up with conservative scenarios for a return to something resembling normalcy.

Most Citigroup employees currently work from home, including CEO Michael Corbat.

Like its rivals, Citi has set up market-watching computer terminals for traders at home, although some traders have been sent to specially disinfected facilities to do their jobs.

BACKGROUND

  • Financial services represents nearly 10 percent of private sector jobs in the city, which is home of the New York Stock Exchange, Nasdaq and headquarter offices of several large banks. Finance also represents 29 percent of the city’s GDP.
  • Citigroup anticipates that some employees will be reluctant to return to work, with no treatment yet available.
  • At JPMorgan Chase, one of the city’s largest employers, the return to work will be modeled somewhat after how New York’s economy was restarted after the 1918 Spanish flu epidemic.
  • Many businesses have unpaid rent and bills, and no savings to dip into.

The bank anticipates that some employees will be reluctant to return to work, with no treatment or vaccine yet available for COVID-19.

For those employees “we will want to do our best to provide them the flexibility to continue working remotely,” said Fraser.

Financial services represents nearly 10 percent of private sector jobs in the city, which is home of the New York Stock Exchange, Nasdaq and headquarter offices of several large banks. Finance also represents 29 percent of the city’s GDP.

At JPMorgan Chase, one of the city’s largest employers, the return to work will be modeled somewhat after how New York’s economy was restarted after the 1918 Spanish flu epidemic.

“Employees will return to work on-site in a phased approach over a period of time,” read an internal memo.

This won praise from Patrick Foye, chairman and CEO of the Metropolitan Transportation Association, who said that staggered office shifts will reduce congestion, and chances of contagion, on the city subway, trains and buses.

Having people come in three days a week, as opposed to five, as well as having them stay at least six feet apart, would be helpful measures, Foye told journalists in a recent video conference.

New York is the most densely populated US city. The epicenter of the US coronavirus pandemic, New York has been through crises before, including the Sept. 11, 2001, terror attacks and the great recession of 2008. But those challenges are minor compared to the task of reopening the Big Apple this time.

Measures taken to curb the spread of the virus will probably destroy 475,000 jobs through March 2021 and leave New York with a 9.7 billion dollar budget deficit, according to the Independent Budget Office.

New York Gov. Andrew Cuomo has said the city will gradually return to business, area by area, but gave no date or conditions.

The city’s 25,000 bars and restaurants are wondering if they will be allowed to operate full-steam in a world now shaped by social distancing.

“If you have to open up 50 percent reduced occupancy — we understand that from a public health perspective, but many businesses are not financially viable,” said Andrew Rigie, head of the New York City Hospitality Alliance, which represents restaurants and nightlife venues.

Many businesses have unpaid rent and bills, and no savings to dip into. Many small businesses have also yet to receive emergency loans promised in massive relief packages approved by the US Congress, as banks tasked with disbursing the money prefer to give it to larger companies.

A huge question mark also hovers over everything: Will people be comfortable gathering in large groups in small spaces again?

“We do not know what consumer purchasing behavior is going to be like,” said Rigie. 


INTERVIEW: Real estate exec Fabrice Susini confident Saudi Arabia’s coronavirus-hit mortgage demand will return

Updated 31 May 2020

INTERVIEW: Real estate exec Fabrice Susini confident Saudi Arabia’s coronavirus-hit mortgage demand will return

  • "There seems little prospect of a cascade of mortgage defaults as long as the current policy of government support continues," Saudi Real Estate Refinance Company CEO Fabrice Susini tells Arab News

What a difference a pandemic makes. At the turn of 2020, Fabrice Susini, CEO of Saudi Real Estate Refinance Company (SRC), could look back on two years of significant progress toward the provision of affordable home ownership for the Kingdom’s aspirational young population.

Increased property ownership was one of the main aims of the plan to diversify the Saudi economy away from oil dependency, setting a target of 70 percent home ownership by 2030.

It was all going to plan. New mortgage issuance had been “staggering,” Susini said, and SRC had reached its target of facilitating 60 percent home ownership with months to spare.

“It was a very positive story,” he said, allowing him to work on the next phase of Saudi Arabia’s move toward being a home-owning economy — buying more mortgage portfolios from banks and other mortgage originators, injecting more liquidity into the housing market via domestic and international sukuk issuance, and offering new long-term fixed-rate mortgages to potential and actual home owners.

The economic lockdown that took increasing effect from March has changed the figures on which those plans were based. New mortgage applications, which has been running between SR20 million ($5.3 million) to SR50 million per week, dropped into single-digit millions as potential buyers were forced to stay at home rather than go viewing properties and took stock of their spending plans in light of the economic downturn that followed the pandemic outbreak.

“We expect to report a sharp drop for April and May. I would be surprised if the numbers remain the same,” Susini said. “But the fundamentals remain the same. It is still an underserved market, compared with the demands and needs of the young, dynamic population aspiring to home ownership. The process may be slowed by a couple of months, but the demographic is still there. There will be a slowdown but I’m sure a catch-up is coming and the forward movement will resume.”

One reason for his optimism is the action taken by the financial authorities to support the economy in its hour of need, especially the stimulus packages unveiled by the Saudi Arabian Monetary Authority (SAMA) and the Finance Ministry.

“There has been a lot of support coming through for small to medium businesses and private companies, and that will balance and smooth out the process. I don’t see a big hit coming,” he said.

Effective monitoring and control of SAMA liquidity injections would ensure they reached the SME and private sector organizations they are mainly intended to help, he added.

“I’d be very surprised if any significant proportion was not properly channeled to the private sector and SMEs,” he said.


BIO

BORN: Rome, 1964

EDUCATION: 

  • Law degree, Paris X Nanterre University, France
  • Banking and finance degree, Sciences Po, Paris
  • Master’s degree, finance, Dauphine University, Paris
  • MBA, London Business School

CAREER

  • Relationship manager, Societe Generale
  • Analyst, Bayerische Landesbank
  • Global head of securitization, BNP
  • CEO, Saudi Real Estate Refinance Company

The mortgage industry in Saudi Arabia enjoys significant subsidies from the government for its products, and while some of these have been changed in recent week, reducing subsidies to mortgages for military and some civilian personnel, he does not see this as the beginning of a trend to remove subsidies for mortgages in the broader scope of SRC’s business.

“There is no danger to mortgage subsidies that I am aware of. The budget has been carried out, the resources are there. But of course we want to make sure that every riyal of subsidy is used to its most effective extent,” Susini said.

“When we saw the situation was becoming more challenging, the SAMA package was a great help by injecting liquidity into the financial system, but we also wanted to be more proactive ourselves in the relationship we have with our borrowers and our partners. We didn’t just want to wait until people were actually in difficulties before we acted,” he added.

The result was the “forbearance” plan for borrowers, by which SRC asked its mortgage partners to offer a three-month mortgage holiday to those who felt the need, and many took up the offer. “A big majority has gone for it. We see ourselves as a ‘citizen’ company and we do not just want to rely on the authorities. We asked ourselves what we can do in terms of citizenship and public policy initiatives,” Susini said.

There seems little prospect of a cascade of mortgage defaults as long as the current policy of government support continues, and SRC and mortgage originators persist with the policy of showing patience and understanding in difficult economic circumstances.

Nonetheless, prospective home owners are facing big challenges. Not only has the lockdown made the market mechanics of home-buying more difficult, with viewings almost impossible in the light of curfews and travel restrictions, but there is also the question of whether people will hesitate over such a life-changing decision. Will they want to buy a house or apartment while the pandemic continues to rage?

Susini thinks customers will learn to prioritize their financial decisions more carefully. “You might defer the purchase of a new car, but still want to buy a home. You would direct your choice toward those things you regard as more important. Home ownership is probably regarded as more essential,” he said.

The appetite of Saudi citizens for house purchase in the new circumstances will be better judged when SAMA and other financial bodies publish official figures in the near future, he said.

With regard to the overall health of the real estate market, Susini said that he has not seen a significant fall in property prices, but underlines the fact that SRC caters mainly for the affordable segment of the market, where big falls in value are less likely. He noted that apartments have been holding their value “quite well” in comparison with bigger units like townhouses and villas.

In an era when global interest rates are falling toward zero in many parts of the world, there could be an incentive for customers to go for the long-term fixed-rate deals SRC is offering.

“We’re seeing the need for more awareness of the benefits of fixed rates. Borrowers can grasp the benefit of remortgaging at rates that are significantly lower now than they were before. It is a choice for the borrower really. They can either own their home more quickly than before, or maintain their payments on more sensible terms. It can be beneficial for them whether rates are subsidized or not,” he said.

SRC reduced its lending rates for long-term fixed mortgages last month, is first cut this year following two rate reductions in 2019. Borrowers could now take advantage of a 5 percent rate on a 25-year mortgage, Susini said.

SRC is also working hard on the digital space, with online facilitators becoming more crucial to home purchase. The company is in the early stages of a study on fintech and digital mortgage origination, and some initiative could be forthcoming by the summer, he said.

“If you can talk of a silver lining from the current situation, it is that it is accelerating the digitization of financial processes. The payment processes are already quite well developed, but the sale of processes presents more of a challenge. The health ministry has organized some innovative processes around the digital market place, and the justice ministry has done good work on the digital origination of contracts.”

The strategy of including mortgage originators in the SRC set-up will continue, and Susini is holding talks with financial and corporate firms to bring more products under its portfolio. 

SRC is owned by the Public Investment Fund, the Kingdom’s $325 billion sovereign wealth fund, so it has access to finance at the highest level. But under Susini’s stewardship there has also been a willingness to raise money in local markets via domestic sukuk issues. Two have already been launched, and a third is lined up to take place in the summer.

After that, the company will be work on an international bond offering toward the end of the year, though he declined to say how much would be raised.

“We want to ensure we can continue to finance mortgages, to have sufficient tools and channels so that no bank or finance company is stopped from offering mortgages because of issues to do with capital ratios of liquidity,” Susini said.

He viewed recent downgrades by ratings agencies of banks’ creditworthiness or prospects as a “gray cloud” over liquidity.

“We want to be ready so that primary originators of mortgages have all the tools necessary to keep operating regardless of the problems they might face,” he added.