Showing posts with label banks and bankers. Show all posts
Showing posts with label banks and bankers. Show all posts

Saturday 25 November 2023

Tweet of the Week



Friday 6 October 2023

Is social media platform "X" now a financial blackhole threatening to consumer its investors & 'inconvenience' its bankers?

 

Reuters, 4 October 2023:


NEW YORK, Oct 3 (Reuters Breakingviews) - X is still worth something, but not for the people running it. Boss Linda Yaccarino is set to present her plans for the social network formerly known as Twitter to bankers holding nearly $13 billion of its debt, the Financial Times reported. Looming over talks is the likelihood that X’s value is substantially less than even that figure.


This week’s meeting with seven banks led by Morgan Stanley (MS.N) that supported Elon Musk’s $44 billion acquisition of the platform caps off a tumultuous first four months for Yaccarino, a former advertising executive at Comcast-owned (CMCSA.O) NBCUniversal. That includes a contentious interview last week in which she seemed caught off-guard by Musk’s announced ambition to charge X users a monthly fee to combat bots.


Despite Musk’s big pronouncements about pushing into subscriptions, X has historically relied on advertising, which contributed over 90% of revenue when it was a public company. But that business is spiraling, and the platform’s shifting policies could threaten more branding deals. In July, Musk posted that cash flow was negative because of a 50% drop in advertising sales.


The apparent strategic disconnect between the company’s ad-focused chief executive and its subscription-hungry owner comes as valuations are falling. TikTok parent ByteDance was recently valued at $224 billion, down by about a quarter from a year ago, the Information reported. Disappearing messaging app Snap’s (SNAP.N) market value has slumped by more than 10% over the past year.


Put it all together, and X isn’t just worth less than Musk paid for it, but likely less than its debt. Assume that the company’s revenue last year was $4.7 billion, based on results before it was taken private. If advertising has dropped by half, then this year’s sales should be a bit over $2.5 billion. Put that on the same enterprise-value-to-sales multiple as Snap, which is down to a mere 3 times, and X is worth around $8 billion.


The company is so far covering its hefty interest payments of $300 million per quarter, and Yaccarino sees profitable days ahead. But between Musk’s impromptu product shifts and the need to woo back advertisers, her task is daunting. If things deteriorate further, the company’s bankers - already nursing billions in on-paper losses - face the prospect of taking back the keys to a diminished platform that is worth less than even their claim on it. Like a financial black hole, X threatens to consume most of whatever value it once had.


(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)



The seven banks which reportedly facilitated Musk’s US$13 billion loan arrangements so that he could purchase Twitter Inc/“Twitter” now known as X Corp/“X”:


Bank of America

Barclays

BNP Paribas - $6.5 billion term loan facility

Mizuho - $500 million revolving loan facility

Morgan Stanley - $3 billion secured bridge loans

MUFG - $3 billion unsecured bridge loans

Societe Generale

[Reuters, 7 October 2023]



BACKGROUND


USA Today, 4 October 2023, excerpt:


X, formerly known as Twitter, has lost most of the guardrails it once had. Massive employee cuts, in particular, to content moderation teams, more divisive content, the removal of state-affiliated media labels, and a blind allegiance to free speech by Elon Musk have made the platform much more susceptible to misinformation and disinformation. COVID, Russia’s invasion of Ukraine and the 2024 election are all vulnerable topics…..


Dana Taylor:


Pivoting to the 2024 US presidential election, there are quite a few nefarious forces out there including both state and non-state actors who are chipping away at American's confidence in election integrity and would like nothing more than to see the US democracy fail. Elon Musk also recently announced he was cutting X'S global election integrity team in half. Is it looking worse than 2020? And if so, how?


Josh Meyer:


For the story that I wrote, I talked to a lot of experts in, I do think there was a tremendous amount of concern that this could be the worst one ever. Hopefully that won't be the case, but we have a lot of state run actors now. We've got China, Iran, and, of course, Russia looking to meddle in the election. You've got a lot of right-wing extremist groups doing it. Some of the security information specialists that I talked to said you even have kids in their parents' basement who could manipulate things…..


According to Fiber in 2021 there were 5.8 million Twitter users in Australia.



Wednesday 9 November 2022

Australia is seeing mortgage stress and other cost-of-living pressures rise, but we can avoid the financial impact being felt in the UK and US, says a UNSW Business School real estate expert


A perspective on the national economy, inflationary pressures, interest rates, house prices, household budgets and cost of living......





UNSW, media release, 7 November 2022:





What happens to the economy if you can't pay your home loan?


Australia is seeing mortgage stress and other cost-of-living pressures rise, but we can avoid the financial impact being felt in the UK and US, says a UNSW Business School real estate expert.


For economists – and indeed, anyone else with an interest on how much they spend at the supermarket – cost-of-living and housing prices have been hot topics in 2022. The Reserve Bank of Australia (RBA) has been trying to combat rising inflation with interest rate raises (read how that works here).


The latest rise was announced by the RBA last week on November 1, with the official cash rate rising to 2.85 per cent.


This process has contributed to a fall in house prices in some areas, as well as fears from mortgage holders that they won't be able to make payments on the now larger amounts.


“Australians have been fortunate to see sustained house price growth for a while now,” says economist and expert in real estate markets, Dr Kristle Romero Cortés Associate Professor in the School of Banking & Finance, UNSW Business School. “But they need to know, house prices can come down too.”


But while data from the Domain Group (shares of which are majority owned by Nine Media) might have recently shown the sharpest quarterly decline in house prices since 1994 across the country’s biggest capital cities, Dr Romero Cortés isn’t unduly concerned about house price falls.


“Commentary on the housing market is quite sensationalised in the media.”


But when it comes to not being able to pay the mortgage, and the impact higher loan repayments might have on the economy? That’s a bit more complicated to predict.


Why Australia may not follow other countries into financial disaster


Australians only have to look over to the United Kingdom to feel nervous when witnessing the impact of high inflation and interest rates on the economy and the day-to-day lives of financial situation of its citizens.


Like Australia, the UK’s central bank (the Bank of England) has introduced a series of interest rate hikes that have had a limited effect. Unlike Australia, the UK economy is still reeling from Brexit, plus a post-pandemic recovery, high inflation and energy costs, and levels of wage stagnation that have seen various sections of the working population strike.


The country has also just experienced the effects of a disastrous set of economic policies and extensive tax cuts for the wealthy implemented by Liz Truss as prime minister, which would have put money into in an already inflated economy (where the idea is to usually ‘cool’ things by encouraging people not to spend).


This spooked the financial markets to such a degree that investors quickly sold off British assets, including government bonds. The value of the pound plunged, forced the Bank of England to take an unprecedented step and pledge 65 billion pounds worth of bonds to stop pension funds from failing and stabilise the market … and caused Liz Truss to resign after just 44 days.


For the average Briton, this situation has led to a greater threat of recession: something which could lead to loss of jobs, higher unemployment, higher inequality, wage growth that is too low to match price increases, and issues meeting costs, such as regular mortgage payments that have already risen because of interest rate hikes.


But does the UK situation foreshadow D-R-A-M-A for the Australia’s own economy and housing market? Dr Romero Cortés says no – for several reasons.


Australians are fans of variable rate loans - unlike in the UK


As well as not experiencing a Brexit-like crash or an energy price crunch to the same degree, a big point of difference is that Australians are more likely to have opted for the more flexible variable rate mortgages, than in the UK, where homeowners are more likely to have picked fixed rate mortgage.


In the UK, 74 per cent of homeowners have a fixed rate mortgage for their home loans, and 96 per cent have chosen this option since 2019, according to data from UK-based trade association, UK Finance. AMP Capital data shows that Australia has a higher share of mortgage holders with variable rate mortgages. Just 10-15 per cent picked fixed rates before 2020 (although this rose to 40 per cent in 2020-2021).


While variable rate mortgages can be a great option when interest rates are low in the short-term, fixed rate mortgages can be more predictable over the long-term, as they are less impacted by interest rate rises that can raise overall home loan repayments.


“What we see in the US or Europe is not necessarily what we will see here,” Dr Romero Cortés says. “The US Federal Reserve (Fed) or the Bank of England are also effectively trying to slow down the economy, but when they raise their rates, they can't reach a large portion of homeowners that have a 30-year fixed rate mortgage.


“The Fed and the Bank of England can raise cash rates all they want – they are not reaching these homeowners.


“In Australia, our increases from the RBA pass through the banks almost instantaneously to the consumers,” she explains. “There is a slight delay because banks want to give borrowers as much time as possible to budget in an increase, but that rate does flow through almost automatically in a way that's much faster here than you'll see in countries like the US and UK.”


This means, faster possible cooling impacts on the economy with the RBA puts interest rate hikes in place.


Another big factor is that the big four Australian banks are highly capitalised.


“They are flush with cash,” explains Dr Romero Cortés. “I study the financial network in Australia, and it is very sound. We won’t see the kind of crisis that we saw in the US in 2008, where the banks were holding assets that they didn't understand the underlying worth of.”


What does that mean for mortgage stress and the Australian economy?


Dr Romero Cortés say that while lifting of interest rates might mean Australia will see mortgage stress rise faster than in other places, it is this situation that helps the RBA prevent the economy from “running red hot” and collapsing in on itself.


“Like any central bank, the RBA wants to ensure price stability, and they will do whatever it takes to prevent us from losing this. They don’t want consumables like bread and eggs to suddenly be seven times as much the next day. If that happens people will revolt, effectively.


“We're nowhere near there. But that's why we don't want to get anywhere near there. So, the RBA stay very much on top of this, and their role is to keep this issue as front and centre of the Australian public for as long as they need, so they are more cautious with their spending over a longer period of time.”


It’s in this way that the RBA plays a psychological stabilising role, not just a financial one.


“You know, ‘Okay, the RBA is on this: so, I don't need to freak out’,” says Dr Romero Cortés. “Because if you as a member of the financial public start freaking out, you’re more likely to make poor financial decisions which have more of a domino effect on the wider economy.”


Having said that, there is a limit to how much financial stress homeowners can undergo.


"There could be a point where homeowners and others can't withstand the raising of monthly repayments any longer,” she says. “This is not yet the case.


“Long term, you would expect some sort of horizon where things settle around 4 or 5 per cent cash rate. Australia is highly leveraged (meaning it has an on average high level of debt to equity), so more than that would be difficult to sustain.”


Banks don’t want to see mortgage defaults


At the end of the day, lenders don’t want homeowners to default on loans or to proceed with a repossession. It’s costly, in time, effort and capital for them, says Dr Romero Cortés. They would much rather work with the borrower before they get to that point of extreme financial difficulties.


“A homeowner in financial stress would contact your bank, who would require some documentation of financial hardship, and then would work with you either in a payment plan or deferral plan, refinancing or making interest-only payments.”


Remember: you're not getting out of it. You still pay it, the interest is still accruing, and it could lengthen the loan term. All this means that borrowers are going to consume less in other places, and therefore is supposed to lead to a ‘cooling’ of the economy.


What happens if cost of living doesn’t come down?



But if living here gets too hard and expensive with inflation or higher mortgage repayments, you could see Australia reputation as ‘a good place to live’ take a hit, pushing down the number of people who want to live here, and putting further pressure on an already tight labour market, says Dr Romero Cortés.


For example, a portion of all the Australians with overseas heritage might decide Australia is too hard and expensive to live in and move to their other country of citizenship. That’s when it might start to get uncomfortable.


"Australia has an economy that's built up by people wanting to come to Australia, and we’re constantly growing in that fashion,” explains Dr Romero Cortés. “There's demand for housing, education, and we currently have people willing to come here.


“So, the government can say whatever they want about the RBA [and their decision to raise rates] so they will get voted in again. But the RBA doesn’t have a choice: one family defaulting on their mortgage, compared to everyone not being able to afford bread, is what they are envisioning.”


Does all this mean house prices will come down more?


Higher mortgage repayments could pressure homeowners to accept lower sale prices than they might have expected from their property, investment or otherwise; nudging down overall prices on the property market over a period of time, as well as the occasional ‘fire sale’.


Are you going to see a massive crash of house prices where you see a Bondi four-bedder going for $500,000? No.


“But we could see a small depression in prices where 5 to 10 per cent of the price is cut. Even if you cut off 10 per cent from a $2 million home, that's $200,000 less. This means unless they have to, sellers are not going to want to sell.”


All this means it is true you're going see some very high mortgage payments and additional cost of living pressures as homeowners prioritise their mortgage repayments, Dr Romero Cortés points out.


“It’s also true that politicians (who are complaining about the RBA’s approach) may be among those who own a lot of investment properties themselves.”


Dr Kristle Romero Cortés is an Associate Professor in the School of Banking & Finance in the Business School at UNSW Sydney, an expert in real estate economics and formerly worked at the Federal Reserve Bank of Cleveland.


Friday 12 November 2021

So what do you know about the people behind management of the Morrison Government's punitive Cashless Debit Card? Perhaps it's time to meet Indue Limited's board of directors & their industry partners


 

IMAGE: news.com.au, 30.01.2019


Just as night follows day, if Scott John Morrison and the Liberal-Nationals Coalition win the federal government election, by the last quarter of 2022 he will announce all government cash transfers to citizens will in future come via the highly restrictive and punitive cashless debit card scheme.


So who has been milking the cash cow as they constructed the mechanism for Morrison's dream of a frightened, deprived and suppressed working class he could strut before?


Well that an easy question to answer - just hit this link 

https://www2.indue.com.au/wp-content/uploads/2021/10/J0982-Indue-Annual-Report-2021_WEB.pdf  and scroll down to pages 14-15 to see their six self-satisfied faces along with a brief bio.


A bit of background......


Sometime in early 2016 the Australian Government through its agency the Dept. of Social Services entered into a contract with Indue Limited, currently valued at $70,340,628.60 (original value: $7,859,509). This contract period now extends from 26-Feb-2016 to 31-Dec-2022.


Indue Limited documents clearly state that its investors-shareholders are “the owners of the company” and that those who contract the company’s services are its “clients” or “customers”.


In relation to the cashless debit card scheme it administers, it appears that the relatively large class of mandatory users of this card during this extended trial period & the somewhat smaller number of voluntary users are simply end product consumers.


How Indue Limited sees itself:……..


Indue Limited ABN 97 087 822 464 (“Indue”) is a bank and Authorised Deposit-Taking Institution (“ADI”) that is regulated by the Australian Prudential Regulation Authority. Indue is owned by financial institutions, each of which is also an ADI. Indue provides transaction processing and settlement services to credit unions, building societies, church funds, mortgage originators, commercial clients and the Australian government. Many clients would be too small individually to be able to provide a competitive alternative financial services offering without Indue.


Indue has over 40 years’ experience in the payments industry and as a financial product issuer since 1992. Indue is a principal member of Visa, MasterCard and eftpos, and holds an Australian Financial Services Licence (AFSL). It is also a reporting entity pursuant to the Anti-Money Laundering (AML)/Counter-Terrorism Financing (CTF) legislation. [Submission to the Australian Treasury. 7 September 2018, excerpt]


Indue Limited has 7 major partners which includes it being a principal member of Visa licensed to issue all Visa card products including credit, debit, prepaid, commercial and premium cards; ia member of eftpos and licensed to issue eftpos card products. These cards may be used in ATMs and eftpos terminals throughout the domestic Australian eftpos network; and, ia member of BPAY allowing us to offer both payer and biller facilities to clients.


2019-20


Indue’s vision is to be the leading partner of payment solutions to our customers. Indue’s mission is to drive competitive advantage for our customers by helping people pay….


Wholly owned Group

The Company does not have significant restrictions on its ability to access or use its assets and settle its liabilities other than those resulting from the supervisory frameworks within which Authorised Deposit-taking Institutions operate.

Transactions with related parties are conducted on an arm’s length basis….


Against this backdrop [global COVID-19 pandemic] Indue delivered a before tax profit of $3.127 million, a solid result given the prevailing headwinds…..


Events Subsequent to Balance Date

At the date of approving these financial statements, the Directors are of the view the effects of COVID-19 do not change the significant estimates, judgements and assumptions in the preparation of the financial statement…..


Likely Developments

Information on likely developments in the operations of the Company and the expected results of operations have not been included in this annual financial report because the Directors believe it would be likely to result in unreasonable prejudice to the Company. [NOTE: Likely relying on s299A(3) of the Corporations Act 2001 in order to conceal expected future progression of the federal government cashless debit card scheme]

[Indue Limited, Annual Report 2019-2020]


2020-21


It is pleasing to report a lift in profit, despite the ongoing influence of the COVID-19 pandemic. ….


A more positive outlook has contributed to our improved performance, with a Profit Before Tax (PBT) result of $3.6 million, an increase of 24% over the previous year….


An operating profit after tax of $2.583 million (2020: $2.091 million) was achieved this year….


Indue’s capital position remains sound. Our Tier 1 ratio rose to 15.5% at the end of FY21, an increase of 35 basis points on last year.


In relation to dividends, we have a good record of rewarding owners for providing investment capital. With an improved economic outlook and stronger financial performance, we are pleased to be able to declare a fully franked dividend of $7.50 per share for FY22….


After nearly 50 years, our partnership with Westpac is coming to an end in 2022. We are moving to become a Tier 1 provider for Direct Entry services, which is well-aligned to our strategy. We look forward to continuing to support our clients in this important payment channel.


Our core focus continues to be delivering sustainable value for our clients and shareholders….


We will continue to support our clients, so they can focus on growing their businesses – while we navigate the changed world of payments on their behalf….


The constitution of the Company provides for two Groups of Directors, both elected in accordance with the constitution. Group One Directors, referred to as ‘Industry Directors’, must be officers, employees or associates of a member. Group Two Directors, referred to as ‘Independent Directors’ must not be officers, employees or associates of a member. Industry Directors are not remunerated by the Company. Independent Directors are remunerated by the Company, with shareholders determining the maximum annual aggregate amount of remuneration that may be provided to them ….


The following persons were Directors of Indue Ltd during the financial year:

Chair – Non executive [Independent]

F[rank] Gullone (appointed 28 August 2020)

R Burns (resigned 27 November 2020)

Non executive Directors [Independent]

S Collier (resigned 27 November 2020)

M[ichael Francis] Currie

P[eter Robert] Townsend

P[eter Hooper] Wright

A[nthony] De Fazio

S[usan] Rix (appointed 8 January 2021) [my yellow highlighting]

A Cheadle (appointed 8 January 2021, resigned 27 May 2021)....


The Company’s Authorised Share Capital is $17.265 million. All issued shares [total of 126,182] are fully paid ….


In August 2021 Indue entered into a share buyback arrangement for a small number of issued shares….


Total Contributed Equity, Reserves, Retained Earnings, Balance at 30 June 2021 = $58,650,000 ” …..


Government grants

Government grants, including JobKeeper, are recognised when there is a reasonable assurance that the Company will comply with the conditions attached to the grant, and the grant will be received.

The Company became eligible for JobKeeper in June 2020 after meeting the specific obligations, and remained eligible until September 2020. All expected grant payments were received by October 2020…...

[Indue Limited, Annual Report 2020-2021, excerpts]


The Guardian, 4 November 2021:


*The company contracted by the federal government to run the controversial cashless debit card claimed $2m in jobkeeper payments before increasing its revenues during the pandemic.


Payments firm Indue, which was handed a $26m, two-year extension to its contract to keep running the scheme late last year, received about $2.1m in jobkeeper wage subsidies in total. That comprised $632,700 in June 2020 and $1.49m between July and September 2020, according to its annual report.


The company’s revenue increased in 2019-20 and 2020-21, leading to profit of $2.1m and $2.5m, the report shows.


Under the jobkeeper program, businesses were required to estimate whether their turnover would decrease by 30-50% when compared to the previous year, depending on their size. There is no suggestion Indue did not qualify for the payments under the rules of the scheme.


Controversially, the government elected not to include a clawback provision to recoup money from those companies that outperformed expectations…..


https://www.scribd.com/document/538531113/INDUE-LIMITED-Current-Historical-Company-Extract

Monday 21 June 2021

RBA warns overseas markets are looking to Australia to decarbonise its production processes – including the est. 70% of product the agricultural sector exports


 The Guardian, 19 June 2021:


On Thursday morning, shortly after the resources minister, Keith Pitt, finished his “net zero by 2050: not on your nelly” sortie on the ABC, the governor of the reserve bank, Philip Lowe, touched down in Queensland Nationals country.


Lowe went to Toowoomba to deliver a keynote address at the Australian Farm Institute conference. The speech was principally about household debt, house prices and whether Australians could ever expect a pay rise. But during the questions that followed the presentation, the RBA governor was asked about decarbonisation in the agriculture sector.


Lowe told the conference he was often up late, participating in the international meetings that central bank governors participate in “and a very frequent question that comes up in those meetings is ‘what is Australian business doing to decarbonise?’”.


It is worth letting Lowe explain. “Many international investors are very focused on this issue and it’s particularly important for the agricultural sector because up to 70% of agricultural output in Australia gets exported – so you are relying on overseas markets, and increasingly overseas investors are asking about the carbon content of production, and that is a trend that is only going to continue,” the central bank governor said.


So agriculture has tremendous opportunities here, but we need to find ways to disclose to global investors and global customers the decarbonisation strategy and how successfully we are doing that.


It is a really important issue and it’s going to become more important.”


Lowe inhabits a universe where climate change is real, the science is settled, and global capital has already made its choice.


If you inhabit that world, there’s very little grey area. You can see that transformation is coming. You can see countries are now in a race to prosper in what Scott Morrison now likes to call the “new energy economy”.


That race is only intensifying.


Over the past couple of months, the International Energy Agency has said fossil fuel expansion must end now if the planet is to address the climate crisis; there has been a G7 declaration (with Morrison in attendance) that public financing of unabated coal-fired power must stop this year and a pledge that net zero emissions must be achieved by 2050 “at the latest”; Joe Biden, Yoshihide Suga and Justin Trudeau have pledged much deeper cuts in emissions by 2030; and Boris Johnson says climate action is Britain’s top priority and the UK will deliver a 78% emissions cut by 2035 compared with 1990.



In which the Nationals defend the mining industry against a dreaded national “zero emissions” policy being established



The Guardian, 17 June 2021:


The resources minister, Keith Pitt, believes the National party would be ‘unsupportive’ of any commitment to net zero emissions. Photograph: Mick Tsikas/AAP













The resources minister, Keith Pitt, has fired a warning shot at Scott Morrison, declaring he cannot adopt a policy of net zero emissions by 2050 without the backing of the Nationals.


Morrison has been trying to telegraph a pivot on climate policy since the election of Joe Biden as the US president, signalling Australia wants to achieve net zero as soon as possible and “preferably” by 2050.


The British prime minister, Boris Johnson, wants Australia to unveil more ambitious commitments before the UN’s climate change summit in Glasgow in November, and he maximised Morrison’s comments in London this week by saying Australia had already “declared for net zero”.


Morrison is facing pressure from metropolitan Liberals to make the mid-century commitment, as well as sustained pressure from his global peers to do more to reduce emissions sooner.


The Australian prime minister was at the G7 summit in Cornwall last weekend as leaders committed “to ambitious and accelerated efforts to achieve net zero greenhouse gas emissions as soon as possible and by 2050 at the latest, recognising the importance of significant action this decade”.


But a number of National party figures have been signalling for months they are not on board with Morrison’s climate change shift.


Pitt’s clear public warning shot on Thursday, in the wake of the G7 commitments and Johnson’s quip in London, is significant because the Queensland National is a member of the cabinet.


The resources minister said Australia’s climate policy – currently devoid of an official mid-century commitment – had not changed.


We have not committed to net zero by 2050,” Pitt told the ABC. “That would require the agreement of the Nationals and that agreement has not been reached or sought.”


Asked for his own view, Pitt said: “It is all about the cost and who is paying.”


He said committing to net zero emissions by 2050 would “absolutely cause damage in regional communities” given those communities were reliant on export income from fossil fuels…….