Latest news with #Basel4
Economic Times
26-06-2025
- Business
- Economic Times
Now, give credit where credit's due
Washington: As leaders gather in Seville for the UN Financing for Development meet that starts from June 30, putting developing countries' needs first - and fixing the broken credit-rating system - must top the agenda, along with operationalising Africa Credit Rating Agency (AfCRA). Today, Fitch, Moody's and S&P dominate the credit-rating landscape, with their assessments influencing the cost of capital for countries. In 2023, many developing nations paid over 5 percentage points more than developed economies when borrowing from instruments deployed by MDBs and DFIs include direct debt and equity, lines of credit to commercial banks, intermediated investments via funds (including impact funds), guarantees and technical assistance. They also provide concessional finance, which mobilises private investors. Today, most lending from MDBs and DFIs focuses on infra: 34% of concessional and market-rate finance provided in the 'global south' in 2021 ($2.5 bn) focused on this sector. This compares with only 7% focused on the farm sector in the same year, and far less in climate adaptation. However, regulations such as Basel 3 and 4, set up in 2008-09, to respond to financial crises, and reporting requirements of the financial system, such as International Financial Reporting Standards 9 (IFRS 9) and 10 (IFRS 10) are biased against incorporating realities of the developing world. These regulations and standards also affect lending from national and public development banks, which are similarly deterred from investing in agriculture and climate a result, (multilateral and national) banks end up allocating their capital to less-risky sectors - those that, for instance, have more regular payments than the seasonal nature of agriculture allows, offer more predictable returns, and require lower capital capital adequacy requirements also limit banks' overall lending capacity, increasing the opportunity cost of lending to businesses perceived as higher risk and less profitable (e.g., smaller or less formal businesses in rural areas).As a result, in East African countries, central banks require domestic commercial banks to hold 10-15% of their capital, well above Basel 3 requirements (8.5%). This exacerbates low levels of commercial bank lending to the agriculture sector, which in 2019 averaged just 6% despite the sector contributing about 60% to Basel 4 regulations require banks to take a standardised approach to determining risk-weighted assets. These disincentivise global banks from financing rural infra projects in the 'global south', which are perceived as Basel 4 implementation began in 2023, banks could use proprietary models, which considered investment history, to allocate risk weightings to different assets. Now, they must use standardised capital weightings, which assign higher risk weightings to investments in countries with low national credit ratings, and to loans with longer standardised approaches to calculating risk-weighted assets (RWAs) do not account for the reduced risk associated with banks - or other investors - investing in senior tranches of blended finance structures where a first-loss guarantee has been provided by an impact investor or DFI. This has also meant that participating in blended finance confers no additional advantage to investors, irrespective of a first-loss risk being taken by another skewed nature of risk appraisal also affects MDB lending. They target AAA credit ratings from major credit-rating agencies to ensure they can borrow at low cost. While this allows MDBs to pass on the benefit of low-cost borrowing to borrowers (including rural businesses), in practice, MDBs manage their capital to protect these credit ratings. This limits their capacity to take on ventures perceived as risky, including those in rural or agricultural countries are significantly more agricultural and rural. Lending in these contexts should not be automatically deemed 'below investment grade', forcing banks to write down assets. Seville must call for reform of international rating architecture, which unfairly treats high-liquidity, essential sectors in developing regions as high-risk. (Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of Elevate your knowledge and leadership skills at a cost cheaper than your daily tea. Punit Goenka reloads Zee with Bullet and OTT focus. Can he beat mighty rivals? 3 critical hurdles in India's quest for rare earth independence HDB Financial may be cheaper than Bajaj Fin, but what about returns? INR1,300 crore loans for INR100? Stamp duty notice to ArcelorMittal, banks. Stock Radar: Titan Company breaks out from 3-month consolidation; check target & stop loss for long positions For risk-takers: More than bullish, be selective; 5 mid-cap stocks from different sectors with an upside potential of up to 38% Multibagger or IBC - Part 12: If transition is successful then there is no limit. But there is a big 'IF' These mid-cap stocks with 'Strong Buy' & 'Buy' recos can rally over 25%, according to analysts
Yahoo
07-05-2025
- Business
- Yahoo
Piraeus Financial Holdings SA (BPIRF) Q1 2025 Earnings Call Highlights: Strong Profit Growth ...
Release Date: May 06, 2025 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Positive Points Piraeus Financial Holdings SA (BPIRF) reported a strong net profit of EUR 284 million for Q1 2025, marking a 22% increase year-on-year. The company achieved a return on average tangible book value of 14.7%, surpassing the 2025 target of approximately 4%. Asset quality remains solid with a non-performing exposure (NPE) ratio at 2.6% and a historic low cost of risk at 35 basis points. The loan book expanded by EUR 1.1 billion in Q1 2025, continuing the strong momentum from 2024. Piraeus Financial Holdings SA (BPIRF) increased its assets under management to EUR 12.5 billion, already exceeding the 2025 target. Negative Points Net interest income declined by 7% annually due to a material drop in interest rates. The company faces potential capital volatility from its securities book, which was not booked in amortized cost. There is uncertainty regarding the impact of Basel 4 and other regulatory changes on capital ratios. The mortgage market growth is expected to be moderate, with some initiatives progressing slower than anticipated. Further reductions in net interest income are expected in the coming quarters due to the normalization of base rates. Q & A Highlights Q: What is the rationale behind the choice of not booking the increase in the securities book in amortized cost, and how are you managing potential capital volatility from these positions? Also, could you clarify the capital impact from the acquisition of ethnic insurance? A: The decision was to book the new additions under the OCI book with corresponding hedging instruments to avoid volatility. The capital impact from the ethnic insurance acquisition is expected to be between 150 and 160 basis points, with potential application of Article 49 of CRR3, though not currently in the primary plan. Q: How should we think about credit expansion seasonality across the year, and can you provide any insights into the current lending pipeline or changes in customer behavior? A: The first quarter was particularly strong with significant transactions setting the tone for the year. We are not upgrading our full-year guidance yet but remain vigilant. The retail consumer market is positive, and we expect moderate growth in the mortgage market by year-end. Q: How does the business outlook change if rates go below certain levels, and what are the drivers behind the increased NII sensitivity this quarter? A: The increased sensitivity is due to the unfreezing of mortgages, which are now sensitive to rate cuts. The assumed pass-through of rate cuts into time deposit costs is at 60%, currently at 52%. We expect the NII guidance to hold even with rate cuts, as growth is expected to mitigate any potential drop.
Yahoo
28-02-2025
- Business
- Yahoo
Eurobank Ergasias Services And Holdings SA (EGFEF) Q4 2024 Earnings Call Highlights: Record ...
Release Date: February 27, 2025 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Eurobank Ergasias Services And Holdings SA (EGFEF) achieved a record net profit of nearly 1.5 billion in 2024, with significant contributions from outside Greece. The company reported exceptional organic growth and transformational M&A activity, outperforming all initial targets for the year. Asset quality improved with the non-performing (NP) ratio declining to 2.9% and coverage increasing above 88%. Shareholder rewards increased significantly, with a payout of 50% of 2024 profits, including a 0.05 per share dividend and a 288 million share buyback program. The business plan for 2025-2027 aims for sustainable growth, with a focus on credit expansion, wealth management, and insurance, targeting a 15% return on tangible book value. The company anticipates a decrease in net interest margin by approximately 20 basis points in 2025 due to base rate trajectory. Operating expenses are expected to increase by an annual rate of less than 5%, driven by accelerated IT investments and inflationary pressures. The cost of risk is expected to decrease modestly, but the company remains prudent, reflecting a cautious approach to asset quality. The payout ratio is based on strong loan growth assumptions, which may not materialize if economic conditions change. The impact of Basel 4 regulations is expected to be 30 basis points in 2025, increasing to 60 basis points when fully phased in, potentially affecting capital ratios. Warning! GuruFocus has detected 7 Warning Sign with EGFEF. Q: Could you give us an indication of when should we expect the synergies from CMP to start impacting fee and commission income? Also, regarding the 50% payout assumption, can you discuss the risks involved? A: The synergies from CMP are expected to gradually phase in, with about 40% anticipated in 2025, mainly from the acquisition expected to complete soon. Regarding the payout, the assumption is based on strong loan growth and maintaining excess capital for potential M&A opportunities. A slightly higher payout is possible if growth is milder or if no suitable M&A opportunities arise. - Unidentified_3 and CEO Q: Is the 50% payout option applicable from the 2025 results, and does it depend on achieving 7.5% growth? Also, what is your current NII sensitivity to EUR rate moves? A: The 50% payout applies to each year of the business plan, including 2025. The NII sensitivity is approximately 40 million for every 25 basis point change in EUR rates, which is factored into our 2025 guidance. - CEO and Unidentified_3 Q: Given the strong loan growth, what has changed over the last few quarters, and do you expect this growth to continue? Also, when do you expect to start the buyback program? A: Growth has accelerated due to RRF projects and large transactions in Q4 2024. We expect continued growth, driven by both domestic and international markets. The buyback program will start after AGM approval in April, lasting 9 to 12 months. - CEO Q: Can you clarify the impact of recent transactions on bad will from the Hellenic acquisition and the Basel 4 impact? A: The acquisition resulted in a positive goodwill of 136 million, recorded in equity. The Basel 4 impact is 30 basis points for 2025, with a full phase-in impact of 60 basis points. - Unidentified_3 Q: How should we think about the mix between dividends and buybacks going forward? A: The mix will be similar to this year, with a slightly higher percentage for cash dividends, depending on market valuation. - CEO Q: Regarding international expansion in wealth management, how does this impact your fees going forward? A: Current plans in India and the Middle East are not included in the business plan for wealth management. We are awaiting approval to open an office in Mumbai and considering an office in Abu Dhabi. - CEO Q: On buybacks, how should we think about the number of shares and their cancellation? A: Shares bought back will be canceled after AGM approval. Treasury shares will not participate in dividends. - CEO Q: What is your strategy regarding M&A opportunities and the potential use of the Danish compromise? A: We are open to M&A in our core markets and sectors like insurance and asset management. The applicability of the Danish compromise in Greece is unclear, but if applicable, it would be considered positively. - CEO For the complete transcript of the earnings call, please refer to the full earnings call transcript. This article first appeared on GuruFocus. Sign in to access your portfolio
