Latest news with #FitchRatings
Yahoo
2 days ago
- Business
- Yahoo
Fitch: Private nonprofits see lowest operating margins in a decade
This story was originally published on Higher Ed Dive. To receive daily news and insights, subscribe to our free daily Higher Ed Dive newsletter. Dive Brief: Operating margins at private nonprofit colleges have plummeted to their lowest levels in over a decade due to growing financial challenges, especially for tuition-dependent institutions, according to a new Fitch Ratings analysis. The median adjusted operating margin, which includes endowment funds for operations, fell to -2.0% in fiscal 2024 for the 56 private nonprofit colleges in Fitch's portfolio. Despite the median margin sitting squarely in negative territory, the highest-rated colleges still enjoyed positive operating margins. Fitch analysts expect the credit environment for the U.S. higher education sector to deteriorate in 2025 year over year, with federal policy shifts likely to increase pressure on operations and revenue. Dive Insight: The Fitch analysis reflects the challenging financial environment that private nonprofit colleges are navigating. The litany of problems includes continued inflation, threats to federal funding and an expected decline in the number of high school graduates starting next year. Amid these challenges, adjusted operating margins shrank for all types of colleges. That includes the three private nonprofits with AAA ratings from Fitch — the highest one given by the credit rating agency, signaling an institution at very low risk of default. Their median adjusted operating margins declined to 8.4% in fiscal 2024. While 'still strong,' that's down from double-digit highs seen during the coronavirus pandemic, according to Fitch. Colleges with AA ratings showed a median adjusted operating margin of 2.3%, while those with ratings below AA had negative margins, a continuation of a yearslong trend. Lower-rated colleges tend to rely on tuition as their primary revenue source, while higher-rated colleges are more likely to get large contributions from their healthcare operations or investment returns, according to analysts. 'This growing credit differentiation within the sector highlights mounting financial challenges for less selective, tuition-dependent institutions,' they wrote. Despite numerous challenges, private nonprofits brought in more tuition and fee revenue in fiscal 2024 than the year before. On average, AA-rated colleges and below saw this revenue stream increase between 1.2 and 3.8%, while institutions with AAA ratings saw a 0.1% decline. However, this year has brought even more financial turbulence. 'Operating margins and financial flexibility will remain narrow in 2025, as further increases in tuition, if any, will likely be offset by losses in other revenue streams and are unlikely to be sufficient to preserve margins,' analysts wrote. Financial challenges are not new to much of the higher education sector. But many well-known private research universities are also starting to feel the pressure due to massive drops in federal research funding under the second Trump administration. The National Science Foundation, for instance, approved only $989 million in new grant funding from Jan. 1 through May 21, according to a recent analysis from The New York Times. That's a massive 51% decline from the 10-year average over the same time period. On top of the slowdown in new grant approvals, NSF has so far terminated some 1,600 active grants, totaling $1.5 billion in research funding. Major research universities across the nation — from the University of Southern California to Brown University, in Rhode Island — have signaled they will have to turn to layoffs to grapple with these declines. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data


United News of India
2 days ago
- Business
- United News of India
RBI liquidity infusions reduce pressure on Indian banks: Fitch Ratings
New Delhi, July 18 (UNI) Fitch Ratings said that the Reserve Bank of India's emphasis on liquidity reduced deposit pressure on Indian banks. It was stated in a report published on the theme 'Indian Banks Structural Deposit Pressures Ease on RBI's Liquidity Infusions'. The country's premier central bank, the RBI, showed its commitment to maintaining favorable liquidity conditions within the domestic economy. Fitch Ratings is a renowned American credit rating agency. It is officially authorized by the US Securities and Exchange Commission. Fitch Ratings is considered one of the 'Big Three credit rating agencies' along with Moody's and Standard & Poor's or S&P . RBI's prudent policy-making is reflected by falling deposit costs and increased system liquidity. Fitch also expected a slight decline in banks' margins as a significant share of loans falls in the future. This report also highlighted a future shift in retail savings, as funding and liquidity conditions will affect the Central Bank policy. If the asset rates reduce in the future, then it will support asset quality, and a high loan growth rate will affect the pricing. UNI SAS PRS


Zawya
2 days ago
- Business
- Zawya
Nigerian banks face uncertainty over looming Eurobond maturities: IFR
A cliff-edge fall is approaching for bonds maturing in the next 18 months issued by Nigeria's banks, which have been heavily affected by a rapid depreciation of the naira and a subsequent weakening of their capital ratios. Banks' balance sheets have been materially affected, raising concerns over how and whether they can repay and refinance their upcoming bonds. From October 2025 through to November 2026, five Nigerian banks face a combined US$2.2bn in Eurobond payments for maturing or callable bonds. The securities in question are First Bank of Nigeria's US$350m 8.625% October 2025s, Ecobank's US$150m 7.125% February 2026s, Access Bank's US$500m 6.125% September 2026s, Access Bank's US$500m 9.125% Additional Tier 1 note callable in October 2026, Fidelity Bank's US$400m 7.625% October 2026s and United Bank of Africa's US$300m 6.75% November 2026s. According to LSEG data, since June 2023, the naira has depreciated around 70% against the US dollar, due to the country's reforms which included a liberalisation of the currency. 'The devaluation of the currency inflated foreign currency assets and risk-weighted assets in local currency terms, which put downward pressures on capital ratios,' said Tim Slater, director, banks, at Fitch Ratings. The macroeconomic backdrop has not helped the country's lenders either, with the Central Bank of Nigeria having tightened monetary conditions significantly through rate hikes and tools such as open market operations. Meanwhile, inflation is set to remain stubbornly high and falling oil prices have not been helpful either. 'The banking sector's exposure to the oil sector is significant at around 29% of gross loans as of December last year,' said Slater. 'This oil exposure has historically been a source of bad asset quality and solvency pressures during episodes of low oil prices and low oil production.' All of these issues have raised some concerns about how easily Nigeria's banks will meet their upcoming Eurobond payments, although these worries have become less acute over the past few months. 'Since the second half of last year, the currency has stabilised and we are starting to see the benefits of the currency liberalisation coming through for the banking sector, particularly in terms of foreign currency liquidity,' said Slater. 'This is timely considering the upcoming Eurobond maturities.' 'Over the past 12 months, the foreign-currency liquidity of Nigerian banks has improved significantly, with the banking sector returning to a net foreign asset position,' he added. Ecobank Nigeria's CAR woes Of the five Nigerian banks with upcoming maturities, the biggest concern lies with Ecobank Nigeria, which has been in breach of its capital adequacy ratio since last year. The breach of its CAR requirement led S&P and Fitch to downgrade Ecobank Nigeria to CCC from B– and CCC+, respectively, deep into junk status. Ecobank Nigeria is more sensitive to the devaluation of the naira against the US dollar due to its balance sheet being more dollarised. The bank also has a significantly higher exposure to oil and gas compared to other banks in Nigeria. The bank recently completed a tender offer to buy back half of its previously outstanding US$300m 7.125% February 2026 bond while removing a covenant on the bond relating to the bank's CAR. This has mitigated concerns for the bank meeting its maturity payment. 'Ecobank Nigeria was the one that made me worried when it came to refinancing,' said Damilola Olupona, an Africa fixed income analyst at StoneX, based in Nigeria. ' We thought it could even default on its 2026 bond. Outside of this, we have no worries. On the macro front, the landscape has improved significantly in terms of FX liquidity in Nigeria. This improved liquidity feeds into the banks making them able to meet their debt obligations.' Union Bank of Nigeria is also in breach of its 10% minimum CAR requirement. However, the bank does not have any outstanding Eurobonds. To refi or not? While concerns have eased on Nigerian banks in meeting their upcoming maturities, the attention has turned to whether they will be able to access the market to refinance these bonds. 'The big question is how many of the bank will come back to the market,' said Olupona. Slater said: 'The vast majority of Nigerian banks have enough cash on their balance sheets to repay those bonds without relying on refinancing them'. Nevertheless, he said banks might still look to refinance depending on market conditions closer to the time of maturity. One of the banks most likely to refinance is Access Bank, which has the senior US$500m September 2026s and US$500m of AT1 callable October 2026. Given the combined US$1bn due in such a short space of time, the bank might look to lean on refinancing one of these bonds to reduce the impact on its balance sheet, according to market participants. The rest of the banks will likely adopt a wait and see approach to see if levels for refinancing reach sustainable levels. 'At today's rates, the banks would have to refinance at around 9.25%–9.5% but Nigeria's sovereign yield curve is contracting at the five-year point so these banks could potentially price much lower in the near future,' said Samuel Sule, chief executive officer at Renaissance Capital Africa, based in Nigeria. Having a number of banks reenter the market over a similar timeframe might be difficult. 'There has to be synchronised market access to enable a clear, sustainable path for refinancing,' said Sule. 'This has been the case historically'.
Yahoo
2 days ago
- Business
- Yahoo
Businesses are passing along tariff costs, Fed reports
Businesses across the economy are passing increased input costs from tariffs along to consumers in the form of higher prices, the Federal Reserve's latest anecdotal survey of domestic economic conditions — commonly referred to as the 'beige book' — found. Higher costs from tariffs were reported by businesses in all of the Fed's 12 regional districts, and many made the choice to raise prices as a result. 'Many firms passed on at least a portion of cost increases to consumers through price hikes or surcharges,' the Fed's July beige book, released Wednesday, reported. Those businesses that didn't push the additional costs through to their customers saw restricted profit margins, the beige book said, noting consumers' 'growing price sensitivity.' Inflation in the Labor Department's consumer price index (CPI) jumped in June, partly as a result of the tariffs. The CPI ticked up to a 2.7-percent annual increase last month from 2.4 percent in May and 2.3 percent in April. The uptick was in line with expectations. Many economists have been predicting that inflation coming from tariffs would show up in prices over the summer after the clearing of inventories of wholesale goods purchases made prior to the tariffs. Fitch Ratings recently put the aggregate U.S. tariff rate at 14.1 percent, the highest in decades. While President Trump has instituted a 10-percent general tariff, along with China-specific tariffs and targeted tariffs on some individual goods, his country-specific 'reciprocal' tariffs have been paused until Aug. 1 as trade negotiations continue. Import prices advanced by 0.1 percent in June and deflated by 0.2 percent relative to last year, the Labor Department reported Thursday. The number was below economists' expectations and reflected lower energy prices. Fuel import prices slid by 0.7 percent last month after dropping 5 percent during the previous month amid rising tensions and conflict in the Middle East. West Texas Intermediate crude oil is down more than 10 percent on the month. Taking out fuel and food imports, core import prices increased by 0.2 percent in June after rising 0.1 percent in May. The U.S. dollar is also losing value now relative to other currencies, having fallen about 9 percent since the beginning of the year amid President Trump's trade war. Economists say the weaker dollar could boost inflation. 'Since the Trump administration began imposing tariffs, the dollar has depreciated, which could lead to a larger pass-through from tariffs to consumer prices,' Michael Pearce, deputy chief U.S. economist at Oxford Economics, told the Reuters news agency. 'A weaker dollar boosts the likelihood that firms pass on a larger share of tariffs.' Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Straits Times
3 days ago
- Business
- Straits Times
Hong Kong's $32 billion pile of bad debt spurs talks to form ‘bad bank'
Hang Seng's credit impaired gross loans surged to HK$19.8 billion (S$3.2 billion) at the end of 2024, up from HK$1.08 billion a year ago. HONG KONG – The pile of non-performing loans at Hong Kong lenders has grown so large that some in the industry have discussed the creation of a 'bad bank' to soak up the financial hub's soured debt. The talks between some of the city's biggest banks, described by people familiar with the matter, have been preliminary in nature and lenders would face significant hurdles before putting the idea into action. Yet the discussions underline growing concern among industry insiders over a bad loan buildup. Soured loans increased to US$25 billion (S$32 billion) at the end of March, or 2 per cent of the total and a two-decade high, Fitch Ratings estimates, based on Hong Kong Monetary Authority figures. That may climb to 2.3 per cent by year end, the biggest jump in Asia Pacific, and loan quality is likely to deteriorate further through 2026, according to the ratings company. Hong Kong's banks are coming under increasing pressure to offload loans backed by real estate assets after rolling them over or amending the original terms in the past to avoid writedowns. The delay by some banks in recognizing impairments has helped mask even weaker underlying asset quality. 'We should be seeing more distressed sales – it's a little alarming that we're not,' said Jason Bedford, a former UBS Group analyst who made a name for predicting the troubles that hit Chinese regional banks in 2019. Lenders including Hang Seng Bank and Bank of Communications recently engaged with advisory firms and held early-stage discussions about setting up a special vehicle to take their bad debt, people familiar with the matter said. Top stories Swipe. Select. Stay informed. Singapore HSA launches anti-vaping checks near 5 institutes of higher learning Singapore Over 600 Telegram groups in Singapore selling, advertising vapes removed by HSA Business Singapore key exports surprise with 13% rebound in June amid tariff uncertainty Business Market versus mission: What will Income Insurance choose? Life First look at the new Singapore Oceanarium at Resorts World Sentosa Opinion AI and education: We need to know where this sudden marriage is heading Singapore Coffee Meets Bagel's Singpass check: Why I'll swipe right on that Singapore Jail for man who fatally hit his daughter, 2, while driving van without licence One of the proposed entities is modelled after China's distressed asset managers and could allow banks to recoup at least a portion of the loans, said the people. It's unclear how much traction the proposal has received among banks and Hong Kong regulators. Hong Kong also narrowly averted a deeper crisis in June as banks after tense negotiations agreed to a record US$11 billion refinancing for troubled developer New World Development. Political and economic turmoil over the past few years have shook the city's real estate sector, where office vacancies are surging to a record. 'There's too much supply of commercial real estate, particularly office space, hence we continue to see Hong Kong banks' asset quality deterioration stemming from the sector this year,' said Savio Fan, an analyst at Fitch. Still, the Hong Kong Monetary Authority (HKMA) said the banking sector's overall asset quality 'is manageable and provisions remain sufficient' even as its bad loan ratio edged up. The total capital ratio of locally-incorporated banks stood at 24.2 per cent at the end of March 2025, while the average liquidity coverage ratio of the major banks was 182.5 per cent, far above above international minimum requirements, according to the HKMA. While Fitch predicts loan quality will continue to deteriorate, it has said the situation is manageable given that lenders have large buffers. Hang Seng's credit impaired gross loans surged to HK$19.8 billion (S$3.2 billion) at the end of 2024, up from HK$1.08 billion a year ago. Impairments at Dah Sing Banking Group, whose unit was downgraded by Moody's Investors Service in June, more than doubled to HK$1.79 billion in 2024. The city's largest bank, HSBC Holdings, had US$33.2 billion of exposure to Hong Kong commercial real estate at December 2024, of which about US$4.6 billion was credit impaired. While the valuation of commercial real estate in Hong Kong has likely fallen more than 50 per cent in the last few years, they haven't 'really declined a lot' on property companies and bank books since there have been few transactions, according to Cusson Leung, chief investment officer at KGI Asia. 'It's a big dilemma for both the developers and the banks,' said Mr Leung. 'If a bank forces the sale of a commercial property at a 50 per cent discount, it would have implications on the valuations of other buildings and collateral and, under the current poor market sentiment toward commercial real state, this could have undesirable consequences.' In the first half of 2025, HK$2.9 billion, or 20 per cent, out of a total of HK$14.8 billion in transactions of mortgage sales and assets were sold at a capital loss, according to data from Colliers International. The HKMA said it monitors that banks have 'appropriate and timely loan classification and provisioning at all times' and subjects them to independent validation by external auditors. The lenders are now at risk of taking a hit on their lending income as well as the Hong Kong interbank offered rate, a benchmark for loan rates, has collapsed. One-month Hibor has slumped to 1.1 per cent from 4.6 per cent end last year, according to Bloomberg-compiled data. Corporate lending has also been been weak. Mr Fan at Fitch said he 'definitely sees some pressure' on net interest margins due to the drop in Hibor but at the same time, fee income looks 'quite strong' from wealth management. For Mr Bedford, the situation for Hong Kong lenders is different from the troubled regional Chinese banks, which were using special-purpose vehicles to intentionally hide bad loans. Financial disclosures in Hong Kong have always been very 'market-based,' he said. Ultimately, though, banks are trying to maintain the mark-to-market value of their property so they don't take huge impairment losses, he said, adding that there is a 'structural incentive' not to do anything that will create an immediate change to valuations. 'Hong Kong banks are going through a very textbook credit cycle,' said Mr Bedford. 'NPLs are going up, loan growth stalls, banks start to increase risk scoring standards and the economy slows.' BLOOMBERG