Mozambique: A growth story which can be sustained

2014 is witnessing a remarkable reversal in some important European banking trends of the past few years, according to the 9-month results of the continent’s largest banks. This is not solely a positive thing: apart from improvements in core revenues and a return to balance sheet expansion, expense levels are also rising again. Is deleveraging and shrinking over, then? [more]

Since its outbreak in December 2013 in Guinea, the Ebola epidemic in West Africa has resulted in over 3,000 deaths out of 7,000 cases, according to the World Health Organization. The actual figure could be higher since there is evidence of substantial under-reporting of cases and deaths. This outbreak has been spreading considerably faster than previous ones, mostly because it has reached urban areas in Liberia and Sierra Leone. It could spiral to over 500,000 infections, and potentially many more, by the end of January if control measures do not improve, according to the US Centers for Disease Control and Prevention. In contrast to this worst-case scenario, mobilisation by the international community as seen recently and increased education in affected countries could almost end the epidemic. [more]

The half-year results of large European banks offer ammunition to both optimists and pessimists: loan losses and administrative expenses are shrinking, but so are total revenues. Net interest income, the sickly child of recent years, finally seems to be stabilising; however, net income is down again to poor levels. The state of an industry with two distinct faces. [more]

Current results are still very weak, with total revenues and profits both at the lowest level since 2009. But the largest European banks can justifiably draw hope from a stabilisation in interest income as well as fees and commissions, from declining loan loss provisions and shrinking expenses. The bottom line may have broadly bottomed out, though pressure from litigation charges and the ECB’s balance sheet assessment remains high. New record capital levels abound. [more]

The fundamental transformation of the European banking sector into a leaner, less profitable, low-growth but also more stable industry in the “new normal” continues to make progress. Banks are shedding assets, reducing costs and raising capital ratios, with revenues in 2013 having declined for the third consecutive year. Legacy assets and litigation remained an additional, significant burden. Nonetheless, profitability has improved somewhat from its extremely low levels and may well rise further this year. [more]

Following years of struggle and having seen their world turned upside down, European banks may finally be heading for a (somewhat) smoother ride in 2014. Profitability is returning, though so far this is mainly driven by lower extraordinary charges rather than improvements in revenues and costs. Pressure to build capital may lessen thanks to significant progress over the past two years, yet currently banks are still shrinking relentlessly. Much will also depend on regulatory and supervisory actions, especially on how the EU Banking Union is implemented. [more]

Among the agreed derivatives market reforms, the central clearing of OTC derivatives contracts has a pivotal role that changes the existing risk management and collateralisation practices tremendously. Nevertheless, to date, there is little empirical evidence on the impact of the new market infrastructure on CDS spreads. Controlling for a number of factors, our results indicate that the costs of central clearing seem to be passed on to end-users in the form of increased CDS spreads. [more]

The East African country has been experiencing impressive economic growth: double-digit between 2004 and 2010, it has averaged 8.7% annually over the past five years thanks to the expansion of agriculture and services. Ethiopia has thus been the fastest-growing economy in Sub-Saharan Africa (SSA). Projected at 6.5% annually over the next five years, it is set to remain on a robust growth path. [more]

The former Portuguese colony has developed from an agriculture-based economy into one of Sub-Saharan Africa’s main oil and mineral producers and its third largest economy, with strong growth potential. Relative political stability after a 27-year civil war ending in 2002, high foreign investment (current FDI inflows are estimated at USD 15 bn) and strong government spending have propelled Angola onto a robust growth path: annual real GDP growth has averaged 11% over the past decade, it is estimated at over 8% in 2012 and around 7% in upcoming years. The government has embarked on a series of reforms towards economic diversification and more inclusive growth [more]

Since 1997, small and medium-sized enterprises (SMEs) in Germany have raised their average equity ratio substantially from 6% to 22%, not least as a reaction to more stringent lending requirements by banks. At the same time, SMEs’ dependence on bank loans declined
whose share in total assets dropped to just 26% from 37%.
Large differences remain between private and public firms. [more]

After two decades of international financial integration, foreign investors have decided to pull out of Italy and Spain. In this context two central questions arise: what is the cause of this development and what are its consequences? [more]

Since the outbreak of the financial crisis in 2007, euro-area banks have been gradually cutting back their exposure to the US market, thereby making room for others to step in. Especially financial institutions from Canada, Japan and certain emerging countries have expanded their US business significantly. [more]