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Fintech CEO: Credit Suisse Troubles Indicative of Broader Bank Issues

Moody’s Investors Service announced that it expected losses for Credit Suisse to mount to $3 billion, which could drop core capital below 13%

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Credit Suisse

This week, Moody’s Investors Service announced that it expected losses for Credit Suisse to mount to $3 billion, which could drop core capital below 13%. If the bank’s core capital ratio stayed below 13%, it would fall into the credit negative category. The bank has been mired in controversy, with both S&P Global and Moody’s holding a negative outlook.

“The current market environment is not supportive of restructuring and is not supportive of Credit Suisse’s current capital market business model,” Alessandro Roccati, Senior Vice President of the financial institutions group of Moody’s. “Deteriorating market conditions have affected the potential realisation value of businesses they were considering to sell.”

“While the bank’s current position in terms of liquidity isn’t overly weak, it looks like Credit Suisse will be offering up a fresh set of write-downs at the end of the month. How will its solvency look then? That’s a big question for Credit Suisse, but there are indicators that issues exist across the industry,” said Richard Gardner, CEO of Modulus, a US-based developer of ultra-high-performance trading and surveillance technology that powers global equities, derivatives, and digital asset exchanges.

“There’s a lot of talk about the bank splitting up, but challenges even exist there. Its American businesses were focused on leverage finance, which was a cash cow while the Fed offered historically low interest rates. Now that rates are increasing significantly, the business won’t be able to show the same profits, even in the very best of circumstances,” said Gardner.

“I wouldn’t be surprised to see a bank selloff coming in the extreme near-term, maybe even as soon as next week. Credit Suisse isn’t alone in its predicament. The Bank of England confirmed that UK pensions almost collapsed. Since the bond market is taking away the printing press from the central banks, we’re about to see a major shakeup,” said Gardner.

Modulus is known throughout the financial technology segment as a leader in the development of ultra-high frequency trading systems and blockchain technologies. Modulus has provided its exchange solution to some of the industry’s most profitable digital asset exchanges, including a well-known multi-billion-dollar cryptocurrency exchange. Over the past twenty years, the company has built technology for the world’s most notable institutions, with a client list which includes NASA, NASDAQ, Goldman Sachs, Merrill Lynch, JP Morgan Chase, Bank of America, Barclays, Siemens, Shell, Yahoo!, Microsoft, Cornell University, and the University of Chicago.

“Credit Suisse is in a particularly dire situation, given the issues they’ve had even before the interest hikes began. Last year, they were whacked with $5.5 billion in losses from the default of Archegos Capital Management, as well as supply chain finance funds linked to Greensill,” noted Gardner.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Banking Sector

Ecobank Reports $401 Million Before Tax in Nine Months to September 2022

Revenue grew by 7% from $1.26 billion in recorded the same period of 2021 to $1.35 billion in the period under review.

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Ecobank - Investors King

Ecobank Group on Thursday reported a 7% increase in revenue for the nine months ended September 2022, the leading financial institution announced in its audited financial statement.

Revenue grew by 7% from $1.26 billion in recorded the same period of 2021 to $1.35 billion in the period under review.

The bank’s operating profit expanded by 12% to $593 million, up from $528 million filed in the corresponding period of 2021, Investors King reports.

Profit before tax rose to $401 million, a 14% increase from $352 million achieved in 2021. Profit paid to shareholders grew by 7% from $182 million to $196 million.

Gross loans and advances to customers increased 5% from $9.469 billion to $9.917 billion. Similarly, deposits from customers increased by declined by 2% to

Commenting on the bank’s performance, Ade Ayeyemi, CEO, Ecobank Group, said: “We continued to deliver on our strategic priorities and are on track to meet full-year targets despite the complex operating environment. Group-wide return on tangible equity reached a record 21%, and profit before tax increased by 14%, or 48% at constant currency (i.e., excluding currency movements).

“These results reflect the resilience, strong brand and diversification of our pan-African franchise. We saw decent client activity in consumer and wholesale payments, trade finance and foreign currency markets. Additionally,
despite inflationary pressures, we maintained a tight lid on costs, thereby improving our cost-to-income ratio to 56.3% from 58.3% in the previous year.

“The dampened economic outlook necessitated maintaining a sound balance sheet with adequate levels of liquidity and capital. As a result, our total capital adequacy ratio at 14.4% is well above our internal and minimum regulatory limits. Also, we hold sufficient gross impairment reserves that fully cover our non-performing loans. Moreover, we have fully repaid the five-year $400 million convertible debt we issued in September and October of 2017.

“Ecobankers have worked extremely hard to serve our customers’ financial needs, and I am proud of them. As always, we will passionately work towards realising our vision and remaining the bank that Africa and friends of Africa trust.”

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Banking Sector

Insider Dealing: Hafiz Mohammed Bashir Acquires 37 Million Shares in Unity Bank

Alhaji Bashir carried out the acquisition in 32 different transactions at an average price of N0.51 a unit between November 8th and 11th 2022

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Unity bank - Investors King

The management of Unity Bank Plc has announced that a non-Executive Director, Hafiz Mohammed Bashir scooped 37,681,947 shares of the bank.

The transaction was disclosed in a statement signed by the bank’s secretary, Alaba Williams.

Alhaji Bashir carried out the acquisition in 32 different transactions at an average price of N0.51 a unit between November 8th and 11th 2022, according to the disclosure available on the Nigerian Exchange Limited (NGX).

Insider dealing is the buying or selling of a company’s shares by someone with a piece of insider information not available to the public. Insider dealing is illegal in the U.S. but not in Nigeria as long as it’s disclosed.

The Nigerian Security and Exchange Commission (SEC) mandated all listed companies to disclose insider trading to enforce transparency across the nation’s Exchange market.

Also, insider dealings can help stakeholders and retail investors assess the confidence of top company executives in a listed company. While Alhaji Bashir’s acquisition could demonstrate his trust in the future of the company, it could also mean positioning ahead of a major company’s event given his position.

Hafiz Mohammed Bashir Profile

In 2017, Hafiz Mohammed Bashir was appointed as a Non-executive Director following the Central Bank of Nigeria’s approval.

Hafiz Mohammed Bashir is an accomplished professional with vast experience in the public and private sectors. He retired at the apex of Local Government Administration in Katsina State in 1992 and has chaired the Board of many companies – including Fiztom International Ltd, HafadGlobal Resources limited and Fiziks Nigeria limited.

Alh. Hafiz who is currently in private business holds a Post Graduate Diploma in Management from Abubakar Tafawa BalewaUniversity, Bauchi, and an Advance Diploma in Public Administration from the University of Jos, a higher Diploma in Local Government Administration- AhmaduBello University. Zaria and Diploma in Insurance from ABU, Zaria He is also currently undergoing a Master’s programme in Business   Administration at the Business School of the Netherlands.

See the details of the transactions below.

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Banking Sector

McKinsey Global Banking Annual Review: Banking on a Sustainable Path

African banks have experienced a strong recovery in profitability, with average ROEs up from 12% in 2020 to 15% forecast for 2022

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Global Banking - Investors King

McKinsey has released its yearly state of the industry report providing an in-depth look at banking in today’s volatile environment and its future prospects.

This year marked the biggest shift in global banking for over a decade, providing banks with both the opportunity (from higher margins and the fintech correction) and the need (as a result of macroeconomic volatility and growing sector divergence) to master a dual challenge: maintain resilience in the short term while accelerating the transformation into a future-proof, sustainable value creation model.

The divergence in performance between leading banks and the rest continues to grow. Despite higher margins from rising interest rates and a stronger capital position, more than half of the world’s banks continue to struggle with profitability and have a return on equity that is below their cost of capital. But all banks can focus now on improving their short-term resilience and preparing for longer-term opportunities. The report examines strategies that have allowed some players to rise above the fray and outperform.

Among the opportunities is sustainable finance, which is on the cusp of a “next era” as banks finance not just clean energy but a broad array of transformational low-carbon projects across industry sectors. Debt-focused investment supporting the transition to net zero alone could represent revenue potential for banks of at least $100 billion annually by 2030.

What this means for African Banks

In line with banks globally, African banks have experienced a strong recovery in profitability, with average ROEs up from 12% in 2020 to 15% forecast for 2022. This could mean relatively stable ROEs for African banks over the next 5 years despite global macroeconomic shocks. But there is also significant variance across the continent, with banks in Nigeria and Kenya, in particular, trading at price-to-book ratios well below 1, Morocco trading over 1, and South Africa well over 2 on average (amongst the highest in the world).

“This boost in profitability gives African institutions the breathing room to improve their short-term resilience as we face the global challenges of continued geopolitical shocks. It also gives them the opportunity to continue investing in technology to enable growth,” says Francois Jurd de Girancourt, a partner in McKinsey’s Casablanca office, and leader of the firm’s Financial Institutions Group in Africa.

Africa could be one of the fastest growing regions for banking revenue globally (6-7% in local currency terms) in 2022—led by North Africa (9%) and West Africa (7%) with a revenue pool of ~$100bn. The picture is lower but remains positive if currency depreciation is taken into account. This growth is underpinned by deepening penetration of banking services and rising interest rates adding to opportunities in payments and transactional banking and is aided by the ongoing explosion of fintech activity across the continent.

“In Nigeria, agile and innovative startups are taking advantage of increased technology penetration and high levels of unmet needs in the traditional banking sector to seize market share. A youthful population, increasing smartphone penetration, and a focused regulatory drive to increase financial inclusion and cashless payments are all contributing to this shift,” says Edem Seshie, an associate partner, in McKinsey’s Lagos office.

Much like the rest of Africa and the world, sustainable finance in Nigeria is also entering the ‘next era’—shifting from a focus on renewables to a broader set of deployment across the energy transition. 

Africa’s efforts to navigate the energy transition and adapt to climate change are likely to be supported by investor demand for sustainability-linked bonds, which have grown from 2% of bonds in 2017 to ~8% in 2022 (>$1.7bn of sustainability-linked bonds issued).

To fully take off, climate finance will require clearer definitions and better metrics. There are a number of opportunities across CIB, commercial and small-business banking, retail banking, and wealth and asset management. Examples of business building are emerging across geographies as banks recognize the capital need required to support the transition and the role the industry plays.

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