HSBC bucks China property worries with 74% profit jump, $2bn buyback

HSBC bucks China property worries with 74% profit jump, $2bn buyback
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Updated 25 October 2021

HSBC bucks China property worries with 74% profit jump, $2bn buyback

HSBC bucks China property worries with 74% profit jump, $2bn buyback
  • HSBC was ranked Europe's biggest lender by assets until last year, when French rival BNP Paribas claimed the title with $3 trillion in assets

HSBC Holdings reported a surprise 74 percent rise in third quarter profit as it shrugged off concerns about pandemic-related bad loans and property problems in its key market of China, allowing it to announce a share buyback of $2 billion.

The British lender reversed potential credit losses it had previously expected due to pandemic-induced defaults, with CFO Ewen Stevenson telling Reuters on Monday that the worst of that impact is likely behind HSBC.


"You should also look at the buyback as a measure of the confidence that we have at the moment that we are not unduly concerned about our exposures in China," he said.


The bank said in its results presentation that it had $19.6 billion in lending to China's property sector, where China Evergrande Group is grappling with a $300 billion debt pile, stoking fears of further defaults and contagion risks.


HSBC CEO Noel Quinn, who was confirmed in the role in 2020 just as the pandemic-induced economic crisis began, is betting on Asia to drive growth, by moving global executives there and ploughing billions into the lucrative wealth business.


The bank could spend up to $1.5 billion more on acquisitions in that space after it bought insurer AXA's Singapore assets for $575 million in August, CFO Stevenson said.


"While we retain a cautious outlook on the external risk environment, we believe that the lows of recent quarters are behind us," Quinn said in the results statement.


HSBC posted pretax profit of $5.4 billion for the quarter to September, versus $3.1 billion a year earlier and the $3.78 billion average estimate of 14 analysts compiled by HSBC.


The bank's Hong Kong-listed shares rose as much as 1.8 percent to the highest in four months. Its London-listed shares have gained 15 percent so far this year versus a 5 percent rise in shares of Asia-focussed rival Standard Chartered, while Barclays is up 35% and U.S.-listed Citi has put on 16 percent.


HSBC was ranked Europe's biggest lender by assets until last year, when French rival BNP Paribas claimed the title with $3 trillion in assets.

Despite the overall positive results, HSBC said its cost projections for 2022 had increased to $32 billion from $31 billion, due to global inflation pressures which would push up its $19 billion wage bill.


Major companies worldwide have in recent weeks warned of the impact on their businesses from rising costs driven by spiralling energy prices and supply chain disruption.


"A little bit of inflation is good for us as it should drive policy rates higher," Stevenson said.


"However, we have a cost base of $32 billion of which $19 billion is compensation... so it doesn't take much (to push up costs), 2 or 3 percent inflation on the cost base is $400 to $600 million of additional costs," he said.


Set against those concerns, HSBC released $700 million in cash it had put aside in case pandemic-related bad loans spiked, as opposed to the same time a year earlier when it took an $800 million charge in expectation of such soured debts.


Another headache for HSBC compared to its peers is its investment banking performance, where rivals such as Citigroup are riding a M&A boom.


HSBC's investment bank however saw income fall this year as it paid the price for its bias towards debt markets, which have been patchy amid low interest rates that crimped trading, while rivals' equities and merger-focused businesses have thrived.


It is the second big British lender to post strong results for the quarter, after Barclays reported on Thursday it had doubled profits on the back of a strong performance from its investment bank advisory business. 


Startup of the Week: Wafeer — helping Saudis spend wisely and save money

Startup of the Week: Wafeer — helping Saudis spend wisely and save money
Updated 27 November 2021

Startup of the Week: Wafeer — helping Saudis spend wisely and save money

Startup of the Week: Wafeer — helping Saudis spend wisely and save money

JEDDAH: Personal finance app Wafeer is the only service in Saudi Arabia that automatically tracks user’s spending patterns in a bid to help them stick to budgets.
The fintech company was founded by Salah Al-Bassam, Ahmad Ramadan and Abdulaziz Al-Jasser in 2019.
Each founder brings their own skills to the firm — Al-Bassam is an investment professional, Ramadan specialized in tech, while Al-Jasser is an engineer.
“We believe this was the formula that made Wafeer what it is right now, the broad and diverse experience that each founder brings to the table and of course our value add investors,” Al-Bassam told Arab News.
In March, Wafeer raised an undisclosed amount in a pre-seed funding round led by Nama Ventures, with participation from RAI group, WomenSpark, and several angel investors.
At the time, Nama Venture’s general partner Mohammed Alzubi said: “We first met the Wafeer team in August of 2020. The first thing that stood out for us was how complementary was the skillsets of the team, with real role clarity from the get go.”
Al-Bassam explains that its software automatically updates expenses that are paid through the app, rather than needing manual entry.
“Beyond tracking user’s expenses, Wafeer offers personalized advice using artificial intelligence helping users get notified before overspending and gives them recommendations that help cut spending or create wiggle room,” Al-Bassam said.
He added the Saudi Vision 2030 growth initiative highlights the importance of creating more awareness of spending, savings and investment through its Financial Sector Development Program.
Al-Bassam said: “It is one of the Vision's realization programs. This program has several goals, the most important of which are achieving financial diversity, stability, and promoting the culture of saving.
“Our goal at Wafeer is to play a role in achieving these objectives with the aim of answering this ongoing question that arises at the end of each month: What did I spend my salary on?”
Wafeer has 82,000 active users in its platform, who have notched up almost 1 million transactions.
The startup has partnered up with big companies in the region, such as online marketplace Noon and Saudi fast food app Hungerstation to provide special offers to customers.
Al-Bassam said: “We are proud of our partnerships, we have signed a number of strategic partnerships, most recently with Noon and Hungerstation to provide Wafeer users with exclusive discounts and offers that match their spending behavior.”
Wafeer currently only operates in the Kingdom, but has plans to extend its services to other Middle Eastern and North African countries.


Americans spent $14bn online during holiday season, says report

Americans spent $14bn online during holiday season, says report
Updated 27 November 2021

Americans spent $14bn online during holiday season, says report

Americans spent $14bn online during holiday season, says report
  • Cyber Monday predicted to be the biggest online shopping day of 2021

RIYADH: US consumers spent $14 billion online during Thanksgiving and Black Friday, according to data from Adobe Analytics, a wing of Adobe’s business that specializes in data insights and tracks transactions at 80 of the top 100 US retailers. 

Black Friday

The report said $8.9 billion were spent on Black Friday and $5.1 of online sales were reported on Thanksgiving. Sales on both occasions slid in 2021 as compared to the previous year.

Forbes quoted Taylor Schreiner, director of Adobe Digital Insights, as saying: “We are seeing that more purchasing was done earlier in the season as retailers put forth promotions as early as October prompting consumers to shop early.”

Many retailers closed physical stores on Thanksgiving this year, as they did in 2020, amid a labor shortage and the coronavirus pandemic. Stores reopened the day after Thanksgiving, and shopper visits increased by 47.5 percent compared to 2020, but fell by 28.3 percent when compared to 2019, the last pre-pandemic year, according to data from Sensormatic Solutions.

Supply chain challenges and shipping delays may have prompted shoppers to visit stores in order to increase the chances of securing gifts in time for Christmas. More are making purchases online that they can pick up in-store, which keeps shipping costs down.

Macy’s, Walmart, Target and Kohl’s , for example, gave shoppers the flexibility to shop online, in stores or through hybrid methods, walked away as winners on Black Friday, said Louis Navellier, chairman of investor Navellier & Associates.

Of those purchasing online, slightly more used their smartphones. Canadian e-commerce company Shopify said the number of shoppers on its platform who used smartphones to make purchases increased this year to 72 percent from 67 percent last year.

Retailers’ moves to encourage buying holiday gifts earlier could also lessen the importance of Cyber Monday, the first Monday after Thanksgiving.

BNPL

Buy-now-pay-later solutions like Sezzle, Afterpay, Plan It by American Express and PayPal’s Pay in 4 are growing in usage as consumers look for ways to manage their holiday budgets. BNPL revenue is up 422 percent in November and is over pre-pandemic levels (Nov 2019) for online purchases. 

Cyber Monday sales

Adobe is predicting that Cyber Monday will be the biggest online shopping day of 2021, with between $10.2 billion and $11.3 billion  in online spending. 


Bitcoin prices likely to double over the next 12 months

Bitcoin prices likely to double over the next 12 months
Updated 27 November 2021

Bitcoin prices likely to double over the next 12 months

Bitcoin prices likely to double over the next 12 months
  • Fall in largest digital currency is a ‘major buying opportunity’

RIYADH: The discovery of a new coronavirus variant, B.1.1.529, may have weighed on Bitcoin, the world’s largest digital currency, but financial experts expect its value to “double over the next 12 months.”

The fall in Bitcoin value should be seen as a major buying opportunity, said Nigel Green, chief executive and founder of deVere Group.

Bitcoin tumbled over 9 percent on Friday, dragging smaller tokens down.

Bitcoin hit an all-time high of $69,000 earlier this month as more large investors embraced cryptocurrencies, with many drawn to its purported inflation-resistant qualities.

Others have piled into the digital token on the promise of quick gains, a draw that has been heightened by record low or negative interest rates.

“The discovery of a new coronavirus variant has rattled global stock markets as it brings in a new wave of uncertainty,” said Green.

“The crypto markets have mirrored the reaction of other financial markets. This underscores how mainstream digital assets have now become, as an increasing number of institutional investors have piled into Bitcoin this year.

“But for this reason, when they temporarily reduce exposure to most risk-on assets, despite the longer-term outlook, they also do the same with Bitcoin. In turn, due to Bitcoin’s mammoth market share, it weighs down the entire crypto sector,” the head of the fintech organization said.

He continued: “However, I think this a knee-jerk reaction from the crypto market. It will move on from this relatively quickly as it did with the delta variant in the summer.”

Bitcoin is often referred to as “digital gold” because like the precious metal it is a medium of exchange, a unit of account, non-sovereign, decentralized, scarce, and a store of value.

“In addition, investors will once again focus on the heightening global inflation fears caused by lingering supply-side issues,” says the deVere CEO.

Bitcoin is widely regarded as a shield against inflation mainly because of its limited supply, which is not influenced by its price.

“This ‘inflation shield’ will continue to bring to the crypto market growing investment from major institutional investors, bringing with them capital, expertise and reputational pull – and further driving up prices.”

Echoing similar sentiments, Martha Reyes, head of research at digital asset prime brokerage and exchange BEQUANT, said: “The news of a new coronavirus variant coming out of South Africa led to a broad-based sell-off across asset classes.

“If lockdowns do ensue, which is not our base case scenario, that will lead to further helicopter money, which ultimately benefits digital assets.”

Ruud Feltkamp’s view supports the opinions of both experts. The CEO of cloud-based automated crypto trading bot Cryptohopper said: “Inflation is skyrocketing, and people are searching for more alternatives for their money on the bank. I don't think it'll take long until investors see this as a ‘cheap’ buying moment. We are still in the midst of the bull cycle, and I think rising inflation will lead to more money being allocated to stocks and crypto.”


Saudi women comprise 50% of flyadeal’s cabin crew as it doubles its fleet

Saudi women comprise 50% of flyadeal’s cabin crew as it doubles its fleet
Updated 27 November 2021

Saudi women comprise 50% of flyadeal’s cabin crew as it doubles its fleet

Saudi women comprise 50% of flyadeal’s cabin crew as it doubles its fleet
  • Kingdom’s budget airline vows to promote, nurture local talent

JEDDAH: Saudi Arabia’s budget airline flyadeal aims to nurture and promote local female talent as it's doubling its fleet by end of next year, its chief commercial officer told Arab News.
Ahmed Albrahim said the low-cost airline’s fleet contains 15 A320 narrowbodies, and it will continue to receive more aircraft of the A320 Neo class.
Albrahim expects the fleet to reach up to 30 aircraft by the end of 2022. 
The airline seeks to be the fastest-growing company in the region next year, he said.
He said that 50 percent of the airlines’ cabin crew consists of Saudi women and the number will continue to rise.
“We are very proud that we are creating jobs for our young Saudi talents, this year we recruited close to 130 females,” he said.
The airline seeks to empower Saudi women in the aviation industry, he added, saying: “We have the first chief people officer, which is a female, also the first female airport duty manager, and first female pilot.”
The low-cost airline launched its first direct flights from Jeddah to Dubai last week. The new route signaled the company’s first international journey from the airport.
A subsidiary of Saudia, flyadeal now operates six routes to the UAE daily — with the other five originating from Riyadh.
The aviation industry was worst hit by the coronavirus disease (COVID-19) pandemic. 
In a report recently issued by the International Air Transport Association, total airline industry losses from 2020 to 2022 are expected to reach $201 billion despite a post-pandemic improvement.
Net losses are expected to come in at $11.6 billion in 2022 after a $51.8 billion loss in 2021, IATA said in its latest outlook for airline industry financial performance, showing improved results amid the continuing COVID-19 crisis.
Demand is expected to stand at 40 percent of 2019 levels for 2021, rising to 61 percent in 2022.
Albrahim admitted that the last two years had been bad for the industry. Likening it to the 2008 global financial crisis, he said during that time “people lost their spending power.”
“Back in 2008 when the world witnessed the financial crisis, people lost their spending power,” he said, It was a very tough time for everybody including airlines.
However, he added, the COVID-19 has changed people’s behaviors due to social distancing measures and airlines have to work out different strategies to ensure a smooth recovery. Albrahim said people now want all operations carried out electronically or “touchless.”  
Albrahim said this is putting pressure on all airlines. However, the airline official expressed optimism that the industry will recover and the flyadeal will grow from a “lean startup” into a key aviation player.
“We were able to recover a lot because we are domestic airlines, and because we are one of the very few airlines in the region that follows the low-cost carrier,” Albrahim said.


Egypt, Israel sign memorandum on gas supplies for re-export

Egypt, Israel sign memorandum on gas supplies for re-export
Updated 27 November 2021

Egypt, Israel sign memorandum on gas supplies for re-export

Egypt, Israel sign memorandum on gas supplies for re-export
  • The MoU also considers the possibility of using the existing pipeline between the two countries to transport hydrogen in future.

CAIRO: Egypt and Israel have signed a memorandum of understanding to consider the possibility of increasing Israeli gas supplies to Egypt with the aim of re-exporting and using the pipeline between the two countries to transport hydrogen in the future.
Last year, Egypt and Israel announced the start of pumping Israeli gas to Egypt through the EastMed Gas Pipeline, with the purpose of liquefying it at Egyptian liquefaction stations and re-exporting it to Europe.
A statement issued by the Egyptian Ministry of Petroleum added that the agreement is part of efforts aimed at expanding the use of less polluting fuels to reduce greenhouse gas emissions in the region.
The MoU said that natural gas is a transitional fuel, as its use in the Eastern Mediterranean contributes to a significant reduction in emissions, especially after the sharp decline in the use of coal and petroleum in Egypt and Israel.
During the last few months, joint working groups from both countries held several meetings, during which a comprehensive review of the possibility of expanding natural gas supplies for re-export was conducted.
Tarek El Molla, Egyptian minister of petroleum and mineral resources, said that supporting joint cooperation in order to benefit from the natural resources in both countries is important.
Karine Elharrar, the Israeli minister of national infrastructures, energy and water resources, said Egypt is an important partner in achieving energy security in the region.