Global Debt Rose to $258 Trillion in the First Quarter of 2020
Global debt rose to a record high of $258 trillion in the first quarter of the year, according to the Institute for International Finance (IIF).
The IIF, the body that represents global banks and financial institutions, said debt to GDP ratio rose by over 10 percent to reach a record 331 percent during the period under review.
“While increasing debt levels raise concerns about debt sustainability, over 92% of government debt is investment-grade,” the report said.
In emerging economies, the debt-to-GDP ratio rose to 230 percent and expanded by $700 million in value to $72.5 trillion due to the decline in emerging currencies against the US dollar.
While debt-to-GDP in developed economies grew from 380 percent in 2019 to 392 percent. The report noted that the U.S. debt accounted for half of the total $185 trillion debt in developed economies while debt outside the financial sector was high in Canada, France, Norway and the United States.
The report noted that debt across all sectors in China was on track to hit 335 percent of GDP following a surge from 302 percent to 318 percent in the first quarter.
Ecobank Profit After Tax Declined by 298 Percent in Q3, 2020
Ecobank, whose official name is Ecobank Transnational Inc., reported a 298 percent declined in profit after tax for the third quarter ended September 30, 2020.
In the unaudited financial statements released through the Nigerian Stock Exchange, the leading lender’s profit after tax declined from N19.347 billion profit posted in the same quarter of 2019 to -N38.250 billion in the third quarter of 2020. Representing a decline of 298 percent.
Similarly, profit before tax dipped by 182 percent from N36.052 billion filed in the corresponding quarter to -N38.250 billion in the quarter under the review.
However, net interest income rose by 45 percent from N64.563 billion in 2019 to N93.621 billion in 2020. But the 163 percent plunged in other operating income from N77.939 billion in the third quarter of 2019 to -N4.505 billion in the quarter under review weighed on non-interest revenue by 1 percent to N77.229 billion.
Similarly, operating expenses rose by 12 percent to N106.321 billion, up from N94.526 billion. Net monetary loss arising from hyperinflationary economy rose from zero in the third quarter of 2019 to N8.817 billion in Q3 2020 with Goodwill impairment hitting N60.584 billion from zero in the corresponding quarter of 2019.
This, coupled with N8.762 billion tax dragged profit before tax to -N29.635 billion in the third quarter.
First Bank, GTBank, UBA, Others Generate N133.92 Billion from Electronic Payment in Nine Months
Rising investment in financial technologies and the growing adoption of electronic payments have earned 12 Nigerian banks a total sum of N133.92 billion in the first nine months of the year.
Billions spent in ensuring that bank customers have access to their funds and can perform financial transactions 24 hours a day paid off during the COVID-19 lockdown as many customers were able to maintain social distancing by carrying out financial transactions on numerous digital platforms.
Some of the electronic platforms banks generated revenue from in the first nine months were Automated Teller Machine transactions, USSD, online transfer, electronic bills payments, Remita, Point of Sale payments and agency banking, among others.
While some of the twelve banks were Access Bank Plc, First Bank of Nigeria Plc, First City Monument Bank Plc, Fidelity Bank Plc, Guaranty Trust Bank Plc, United Bank for Africa Plc and Sterling Bank Plc.
The other five were Jaiz Bank Plc, Union Bank of Nigeria Plc, Wema Bank Plc, Unity Bank Plc and Stanbic IBTC Plc.
A breakdown of the banks’ unaudited financial statements showed Access Bank’s revenue from electronic payments rose by 105 percent to N38.80 billion in the period under review, up from N18.96 billion posted in the same period of 2019.
First Bank’s electronic payment revenue stood at N34.59 billion, representing an increase of 0.5 percent over the N34.42 billion recorded in the corresponding period of 2019.
Similarly, fees and commissions FCMB earned from digital payments in the first nine months amounted to N6.62 billion, a 17 percent contraction from the N7.98 billion earned in the same period of 2019.
Jaiz Bank posted a 24 percent contraction on its electronic payment earnings from N406.65 million in 2019 to N309.55 million in the same period in 2020.
Also, Stanbic IBTC’s electronic earnings dropped by 15 percent from N2.49 billion posted in 2019 to N2.12 billion in 2020.
Fidelity Bank’s e-payments revenue contracted by 34 percent in the first nine months of the year to N1.74 billion, down from N2.63 billion in 2019. While GTBank posted a 26 percent decline in electronic banking income to N8.21 billion in the period under review, below N11.04 billion earned in the same period of 2019.
Union Bank Plc realised N5.34 billion from electronic payments charges in the first three quarters of the year. Meaning, the bank’s electronic payments decline by 5 percent to N5.6 billion.
For Sterling Bank Plc, electronic products earned the bank N4.31 billion in the very first nine months of 2020, again a reduction of 16 percent from N5.11 billion posted in the same period of 2019.
UBA Plc, Unity Bank and Wema Bank Plc generated N26.71 billion, N1.74 billion and N2.02 billion from electronic payment income, respectively.
Ghana/Kenya: Eurobonds to Decouple as Fiscal Challenges Come to Fore
Ghana and Kenya, two of the sub-Saharan African sovereigns with the highest amount of outstanding Eurobonds, could see a widening of their risk premiums over 2021, according to a Senior Credit Analyst at Redd Intelligence, Mark Bohlund.
Faced with fiscal challenges, the two African nations are expected to return to the Eurobond market in the first quarter of 2021, but this time with bigger risk premiums as investors are expected to incorporate a higher likelihood of frontier-market issuers being pushed into debt restructuring.
Mark Bohlund said, “Ghana and Kenya are likely to return to the Eurobond market in 1Q21 but see a widening of their risk premiums over 2021 as investors incorporate a higher likelihood of frontier-market issuers being pushed into debt restructuring.”
With Ghana’s outstanding Eurobonds presently estimated at US$10.3 billion and Kenya’s outstanding Eurobonds put at US$6.1 billion, spreads on Ghana’s Eurobonds will increase over those of Kenya in 2021.
“It is likely that spreads on Ghana’s eurobonds over those of Kenya will increase over 2021 as concerns rise over its weak fiscal position and high reliance on commercial overseas financing,” Bohlund stated.
Commenting on the countries’ fiscal positions, Bohlund said both countries are likely to post double-digit fiscal deficits this year, as contracting economies add to already faltering government revenue.
“With interest costs absorbing close to 50% of government revenue, Ghana will struggle to find sufficient cost- savings in other areas to reduce the fiscal deficit substantially in 2021.”
“In contrast to Kenya, Ghana has already cut back its capital expenditure to a bare minimum. The Bank of Ghana stepped up its purchases of government bonds sharply in September and we expect this to continue during 2021.
“In Kenya, part of the solution should be to encourage county governments to raise more revenue, but this will be challenging to implement before the August 2022 elections.
“Having shied away from bi- and multilateral creditors in favor of commercial borrowing, Ghana is likely to struggle to secure sufficient external financing in 2021. This makes increased central bank financing likely and poses downside risks to the cedi.
“Neither Ghana nor Kenya is likely to seek DSSI participation in 1H21 even if they deem that international bond issuance will not be possible.
“We have changed our view and now expect both Ghana and Kenya to issue Eurobonds in 1H21.
“Kenya is likely to continue to draw on funding from the IMF, the World Bank and other multilateral creditors, as well as bilateral financial support from China as the Standard Gauge Railway, continues to bleed funds.”
Bohlund added that the spreads between Ghana and Kenya Eurobonds are likely to widen further as a higher risk of a debt restructuring is priced into Ghanaian assets.
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