Bank stocks steady after Swiss rescue as focus turns to Fed

Bank stocks steady after Swiss rescue as focus turns to Fed
The market is still feeling the effect of the collapse of US lenders Silicon Valley Bank and Signature Bank (Shutterstock)
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Updated 21 March 2023

Bank stocks steady after Swiss rescue as focus turns to Fed

Bank stocks steady after Swiss rescue as focus turns to Fed

LONDON: Investors stepped cautiously into bank stocks on Tuesday, emboldened by the rescue of Credit Suisse, with share prices inching tentatively higher amid continuing concerns about smaller US lenders and further financial market ructions, according to Reuters

After a tumultuous 10 days which culminated in the 3 billion Swiss franc ($3.2 billion) Swiss-regulator-engineered takeover of Credit Suisse by its rival UBS, attention has now shifted to this week’s meeting of the US Federal Reserve.

As concern over the health of US mid-sized lenders lingers, Treasury Secretary Janet Yellen plans to tell bankers later on Tuesday that the country’s banking system is stabilizing after strong actions from regulators.

But she will also say further steps to protect bank depositors may be warranted if smaller institutions suffer deposit runs that threaten more contagion.

“The steps we took were not focused on aiding specific banks or classes of banks. Our intervention was necessary to protect the broader US banking system,” Yellen said in excerpts of prepared remarks to an American Bankers Association conference.

Yellen said she believed the actions by the Federal Deposit Insurance Corp., the US Federal Reserve and the Treasury had reduced the risk of further bank failures.

The demise of 167-year-old Credit Suisse was triggered by the collapse of US lenders Silicon Valley Bank and Signature Bank, and investors are concerned about potential bombs ticking elsewhere in the financial system.

The European Central Bank’s top banking supervisor said euro zone banks should watch their sources of funding or risk being “caught off guard” by rising interest rates.

“Increasing interest rates and quantitative tightening require banks to sharpen their focus on liquidity and funding risks,” said Andrea Enria, in remarks the ECB said were drafted in February, before recent global banking upheavals.

The effects of these were felt on German investor sentiment, which tumbled in March as concerns about a new financial crisis ended a five-month streak of consecutive increases, the ZEW economic research institute said on Tuesday.

“The international financial markets are under strong pressure,” and the high level of uncertainty is reflected in the economic expectations, said ZEW President Achim Wambach.

In Switzerland, the Bankers Association said that credit supply would not be restricted by the demise of Credit Suisse, adding it was convinced the Swiss banking sector still had a “prosperous future.”

Credibility “is not destroyed, but it’s not good,” the association’s chairman Marcel Rohner told a news briefing.

As the rescue of Credit Suisse assuaged the worst fears of systemic contagion, European bank shares rose, while Asian stocks lifted off their lows.

And in a sign of business continuity, Credit Suisse kicked off its three-day annual Asian Investment Conference in Hong Kong, which draws top executives at regional companies.

Shares of beaten-down regional lenders climbed in premarket trade, including First Republic Bank, while big US banks such as JPMorgan, Citigroup and Bank of America also rose before the bell.

’Near Death'
Another burning question among traders and investors is whether the Fed’s relentless rate hikes, which some have blamed for sparking the biggest meltdown in the banking sector since the global financial crisis, might be at an end.

Policymakers from Washington to Europe have repeatedly stressed that the current turmoil is different from the global financial crisis 15 years ago, pointing to banks being better capitalized and funds more easily available.

But the sudden shock means traders have now increased their bets the US central bank will pause its hiking cycle on Wednesday to try to ensure financial stability, although they remain split over whether the Fed will raise its benchmark policy rate.

“The banking sector’s near-death experience over the last two weeks is likely to make Fed officials more measured in their stance on the pace of hikes,” said Standard Chartered head of G10 FX research, Steve Englander.

Top central banks promised at the weekend to provide dollar liquidity to stabilize the financial system to prevent the banking jitters from snowballing into a bigger crisis.

In a global response not seen since the height of the pandemic, the Fed said it had joined central banks in Canada, Britain, Japan, the euro zone and Switzerland in a co-ordinated action to enhance market liquidity.

Meanwhile, JPMorgan Chase & Co. CEO Jamie Dimon is leading talks with other big banks on new efforts to stabilize First Republic Bank, which last week had a $30 billion capital infusion, the Wall Street Journal reported.
First Republic and JPMorgan declined to comment on the report, which cited people familiar with the matter.

A spokesperson for First Republic pointed to an earlier statement where the bank said it was “well-positioned to manage short-term deposit activity.”

In Europe, the investor focus has shifted to the massive blow some Credit Suisse bondholders will take, prompting euro zone and UK banking supervisors to try to stop a rout in the market for convertible bank bonds.

The regulators said owners of this type of debt would only suffer losses after shareholders have been wiped out — unlike at Credit Suisse, whose main regulators are in Switzerland and whose AT1 prospectus made clear that hybrid (AT1) holders would not recover any value.

Nevertheless, lawyers are talking to a number of AT1 bond holders about possible legal action, law firm Quinn Emanuel Urquhart & Sullivan said on Monday.

Danske Bank has advised its private clients not to invest in high yield bonds, citing the risk of substantial capital losses as credit conditions tighten.

The category of high yield bonds includes both corporate and bank bonds, including the AT1 bonds that Credit Suisse will have to write down to zero on the orders of the Swiss regulator as part of the bank’s rescue merger with UBS.

Oil Updates — crude slips on US debt ceiling struggles

Oil Updates — crude slips on US debt ceiling struggles
Updated 17 sec ago

Oil Updates — crude slips on US debt ceiling struggles

Oil Updates — crude slips on US debt ceiling struggles

RIYADH: Oil prices fell on Tuesday, giving up earlier gains, as concerns about the viability of the US debt ceiling pact cooled the market’s risk-on sentiment and mixed messages from major producers have clouded the supply outlook ahead of their meeting this weekend. 

Brent crude futures fell 60 cents, or 0.78 percent, to $76.47 a barrel at 9:23 a.m. Saudi time, after rising by 0.5 percent earlier on Tuesday. 

US West Texas Intermediate crude dipped 37 cents to $72.30 a barrel, down 0.51 percent from Friday’s close. There was no settlement on Monday because of a US public holiday. 

Some hard-right Republican lawmakers said on Monday they might oppose a deal that would raise the debt ceiling in the US, the world’s biggest oil user, while Democratic President Joe Biden and Republican House of Representatives Speaker Kevin McCarthy remained optimistic the deal will pass. 

Biden and McCarthy forged an agreement on the debt over the weekend, and it must pass a divided US Congress before June 5, the day the Treasury Department says the country will not be able to meet its financial obligations, which could disrupt financial markets. 

OPEC will welcome Iran’s return to oil market when sanctions lifted 

The Organization of the Petroleum Exporting Countries will welcome Iran’s full return to the oil market when sanctions are lifted, its secretary-general told the Iranian oil ministry’s news website SHANA on Monday. 

Iran is an OPEC member, although its oil exports are subject to US sanctions to curb Tehran’s nuclear program. 

Secretary-General Haitham Al-Ghais, who is visiting Tehran for the first time, added that Iran could bring on significant production volumes within a short period of time. 

“We believe that Iran is a responsible player among its family members, the countries in the OPEC group. I’m sure there will be good work together, in synchronization, to ensure that the market will remain balanced as OPEC has continued to do over the past many years,” SHANA’s website cited him as saying. 

Asked about OPEC’s voluntary production cut and its effect on oil prices, Al-Ghais said, “In OPEC ... we don’t target a certain price level. All our actions, all our decisions are made in order to have a good balance between global oil demand and global oil supply.” 

In a surprise move in early April, Saudi Arabia and other members of OPEC+, which comprises OPEC and allies including Russia, announced further oil output cuts of around 1.2 million barrels per day.  

Brazil’s Petrobras approves new commercial portfolio for natural gas 

Brazilian state-run oil company Petrobras on Monday announced a new commercial portfolio for natural gas, saying it was moving to include “diversified” deadlines, benchmarks and places of delivery to “ensure competitiveness.” 

Petroleo Brasileiro SA, as the firm is formally known, said it would resume using Henry Hub benchmark prices for gas in addition to Brent oil prices while offering distributors more options for contract deadlines and delivery locations. 

(With input from Reuters) 

Saudi Arabia’s Red Sea Global reviews strategic partnership opportunities in Egypt

Saudi Arabia’s Red Sea Global reviews strategic partnership opportunities in Egypt
Updated 30 May 2023

Saudi Arabia’s Red Sea Global reviews strategic partnership opportunities in Egypt

Saudi Arabia’s Red Sea Global reviews strategic partnership opportunities in Egypt

RIYADH: The Saudi-based Red Sea Global company held its second promotional procurement exhibition in Cairo, in cooperation with its media partner, MEED Network, and in the presence of representatives from more than 100 Egyptian companies from the private sector, the Saudi Press Agency reported on Monday.
The exhibition is the second of its kind in a series of local, regional and international introductory meetings conducted by the company, which is wholly owned by the Kingdom’s Public Investment Fund.
The event aims to establish more partnerships with the private sector to enable the delivery of the company’s growing portfolio of projects.
Ben Edwards, group head of cost, commercial and procurement at Red Sea Global, said the opportunity to present projects and opportunities available to the Egyptian market is a major strategic step for Red Sea International this year.
“To achieve the innovative approach that we seek, especially with regard to sustainability, we had to identify organizations and companies that share the same vision to establish real partnerships with them, and we met today with many future partners,” he added.
Red Sea Global is one of the companies with continuous progress in implementing projects for its “Red Sea” and “Amaala” destinations, and the twelve future projects in the company’s portfolio, SPA added.
In March, it held its first regional induction tour in Doha, where the company met with representatives from more than 100 Qatari companies.
The company has awarded contracts worth more than SR40 billion ($10.6 billion) for its “Red Sea” and “Amaala” destinations so far and this year, contracts worth SR5 billion were awarded, with an additional SR20 billion expected to be awarded before the end of the year.

Riyadh Airports CEO joins international aviation body

Riyadh Airports Co. CEO Musad Aldaood (File)
Riyadh Airports Co. CEO Musad Aldaood (File)
Updated 29 May 2023

Riyadh Airports CEO joins international aviation body

Riyadh Airports Co. CEO Musad Aldaood (File)

RIYADH: In significant global recognition of the Kingdom’s aviation sector, Riyadh Airports Co. CEO Musad Aldaood has been elected to the board of the Airports Council International, Asia-Pacific.   

This assembly of airport authorities is dedicated to improving airport operations and standards, representing their collective interests with international organizations like International Civil Aviation Organization and International Air Transport Association.  

The announcement was made during the 18th meeting of the ACI Asia-Pacific Assembly in Kobe, Japan. 

Aldaood joined leaders from airports across mainland Asia, Australasia, the Pacific Ocean islands and key North American points such as Vancouver, San Francisco and Hawaii.  

Commenting on his appointment, Aldaood said he was looking forward to working with other board members, the World Executive Committee, regional advisers, and the management team to continuously make airports a great and safe place for travelers and airport partners.   

“We will devote our expertise and efforts to improve the aviation sector, raise the aspirations and expectations, and work with relevant sectors in a joint and integrated manner to develop our work through the ACI World Governing Board, Asia-Pacific and the Middle East,” he said.  

Aldaood brings over 21 years of experience managing and operating King Khalid International Airport under the RAC.   

He also holds concurrent positions as the vice chair of the board of directors of Saudi Public Transport Co. and a board member of Altanfeethi Co., overseeing executive terminals and offices across the Kingdom’s airports.  

New shipping service added to Kingdom’s Dammam port

New shipping service added to Kingdom’s Dammam port
Updated 29 May 2023

New shipping service added to Kingdom’s Dammam port

New shipping service added to Kingdom’s Dammam port

RIYADH: Traffic at the King Abdulaziz Port in Dammam will soon ease thanks to the addition of Swiss-based Mediterranean Shipping Co.’s new service, the Saudi Press Agency reported.

The Upper Gulf Express shipping service aligns with the objectives of the National Transport and Logistics Strategy to position the Kingdom as a global logistics hub connecting three continents, the General Authority of Ports said. 

The shipping service connects Dammam with the ports of Abu Dhabi and Sharjah in the UAE as well as the Iraqi port of Umm Qasr.  

The service which is set to launch at the end of May also consolidates the position of the King Abdulaziz Port as the main port through which goods pass from all over the world. 

In January this year, the ports authority announced the launch of a new freight service at King Abdulaziz Port operated by MSC.    

The connection allows Dammam to enjoy weekly sailings to eight maritime destinations spanning the Arabian Gulf, South Asia, and Southern Africa.    

These include the ports of Khalifa bin Salman in Bahrain, Khalifa in the UAE, Qasim in Pakistan, Mundra and Hazira in India, Port Louis in Mauritius, and Durban and Coega in South Africa.    

The service started on Jan. 21 and features five vessels with an average carrying capacity exceeding 6,000 twenty-foot equivalent units.

UAE’s Dana Gas raises its foreign ownership limit to 100% 

UAE’s Dana Gas raises its foreign ownership limit to 100% 
Updated 29 May 2023

UAE’s Dana Gas raises its foreign ownership limit to 100% 

UAE’s Dana Gas raises its foreign ownership limit to 100% 

RIYADH: The UAE’s vision of strengthening its capital markets has become one step closer to reality as Sharjah-based energy company Dana Gas plans to raise its foreign ownership limit to 100 percent. 

Listed on the Abu Dhabi market, the firm announced that it had obtained the approval of the regulatory authorities to raise the percentage of foreign ownership from 49 percent to 100 percent of its capital, according to a regulatory filing on the Abu Dhabi Securities Exchange. 

The largest private sector natural gas company in the region disclosed that the move aligns well with the UAE’s new Commercial Companies Law that abolished a requirement that UAE nationals own 51 percent of onshore firms. 

“Opening our company fully to foreign ownership will support the UAE’s vision of strengthening its dynamic capital markets by attracting greater numbers of international investors and deepening market liquidity,” said Dana Gas Chairman Hamid Jafar in a press statement. 

According to Jafar, the company’s growth outlook remained rather sturdy in the Kurdistan region of Iraq, where the firm is seeking to increase production. 

It also maintained a strong growth outlook in Egypt, where the firm is working on maximizing the value of its assets by negotiating improved fiscal terms. 

However, Dana Gas’ recent earnings report was not favorable. The company generated a net profit of 183 million UAE dirhams ($50 million) in the first quarter of 2023 compared to 198 million UAE dirhams in the year-ago period. 

Profitability for the quarter dropped 7 percent compared to a 22 percent decline in the company’s realized prices. However, the impact of lower realized prices on the company’s profitability was partially offset by reduced operating costs by 14 percent. 

Revenue was 13 percent lower at 447 million UAE dirhams in the first quarter of 2023 compared to 513 million UAE dirhams in 2022.

The decrease in revenue, and subsequently net profit, was primarily due to a pullback in energy prices from high levels.