MarketLine Blog

Posts tagged to Financial Services

A new dynamism for major European economies

MarketLine

The expansion of household debt in Europe in the 1980s, 1990s and 2000s was unprecedented by historical standards and the economic growth of European countries has become partially dependent on it. The numbers from the Bank of International Settlements (BIS) and Marketline analysis reveal that the outstanding credit from the banking system to European households increased more than 170%, in nominal values, from US$4tn in 1995 to more than US$ 11tn by the end of the 2000s. In the UK alone, household debt is running at US$2.4tn which represents an… Read more

Market maturity and intense competition forces banks to expand overseas

MarketLine

Overseas expansion is a key trend in the global banking industry as many major players look to reduce their reliance on mature and intensely competitive domestic markets. The push for overseas expansion is beginning to kick start M&A activity within the sector. CCB, ICBC, Credit Agricole, and Mitsubishi UFJ have all engaged in M&A deals that involve the purchase of at least a stake in a non-domestic player since 2013. As explored in detail in the MarketLine case study Top ten global banks: An analysis of financial performance, growth opportunities… Read more

Rise in non-performing loans potential time bomb for China’s swollen banks

MarketLine

As measured by total assets, four of the ten largest banks in the world are now headquartered in China. As the Chinese economy has swelled, so too have the balance sheets of its largest banks. This has spurred great growth in operating incomes and net profit as demand for credit has soared. However, there are signs that the curse of non-performing loans (NPLs) that wreaked such havoc with the West’s banking system could potentially strike China, a ticking time bomb if left unaddressed, with several economic sectors posing a significant… Read more

Financial services from Facebook?

MarketLine

Is Facebook planning to enter the European money transfer market? Yes, according to a report in the Financial Times that has been widely disseminated in the media. If so, it’s a bold move, but potentially a highly lucrative one. Let’s look first at the lucrative bit. The global money transfer market is huge and growing. One driver is remittances: money sent home by migrant workers. The figure below shows net transfers (inflows minus outflows) for several regions of the world. It is clear that between 1990 and 2010, there has… Read more

The rise, fall and rise of Bitcoin

MarketLine

The digital currency Bitcoin has experienced a surge in value in recent weeks, increasing rapidly since October to exceed a value of $900 for one unit on the Bitcoin exchange Mt. Gox. The value of Bitcoin fell to $125 after the closure of the Silk Road (a website where users could buy and sell illegal items using Bitcoin) by the FBI on October 2nd 2013, but has since rallied well to briefly reach $900 on November 19th, before falling to below $500. One of the reasons linked to this sudden… Read more

With Dread Pirate Roberts arrested, and Silk Road shut down, what next for Bitcoin?

MarketLine

With recent major news events covering the FBI’s arrest of Dread Pirate Roberts (Ross Ulbricht), the accused owner and mastermind behind the dark web’s primary illegal online marketplace Silk Road, Bitcoin has once again found itself in the spotlight. With the FBI seizing approximately $3.2m in Bitcoins, and the subsequent drop in value on the digital currency’s exchanges, Bitcoin once again finds itself in a difficult situation. First of all what is Bitcoin? Bitcoin is a form of crypto-currency with its origins dating back to 2008. It utilizes cryptography, a… Read more

Less scope for free market economics

MarketLine

The Prudential Regulation Authority was created to be an arm of the Bank of England and to promote the safety and the soundness of individual banks, building societies, credit unions, insurers and major investment firms. Ultimately, PRA will keep a very close eye on financial institutions to ensure that the bank bailouts of the last few years won’t happen again. The authority set up a 3% leverage ratio threshold, which forces banks and building societies to have at least £3 of own capital to support £100 of lending. Interestingly, after… Read more

Moving people, moving money: Western Union and the remittance market

MarketLine

In July 2013, Barclays, one of the UK’s largest retail banks, announced its decision to close the accounts of money transfer companies, which allow customers in one country to receive funds locally from a sender in a different country. The reason given by Barclays was that some of these companies had insufficient checks in place to prevent the transfer of funds to terrorists and other criminals. However, the resulting outcry revealed just how vital such remittance services are for many people in the developing world. A petition to the UK… Read more

Lloyds Banking Group and Royal Bank of Scotland: The big sell-off?

MarketLine

This week, both Lloyds Banking Group (Lloyds) and Royal Bank of Scotland (RBS) have announced encouraging results for the six months to the end of June. The two banks, which are 39% and 81% government-owned respectively, returned to profit and this has led to speculation that the UK government may look to divest its interests. Lloyds’ results came first on Thursday (August 1st) and showed a £2.13bn (approximately $3.38bn) pre-tax profit. This signals a welcome return to form for one of the country’s so-called ‘Big Four’ banks and represents a… Read more

Banking sector in Europe. Never ending recovery.

MarketLine

The Eurozone is still facing considerable financial instability according to a European Central Bank press release from July 13th. Austerity policies adopted by many European governments in the aftermath of the Greek crisis of 2010 increased its financial instability by suppressing the nascent economic recovery seen between 2009 and 2010. Fortunately, the prolonged assistance from the European Central Bank (ECB) reduced the level of bankruptcies in the financial system to a bare minimum. Fiscal policies, most notably tax increases and government cuts, that came in to force after the Greek… Read more

PayPal, online payments tycoon

MarketLine

PayPal is a convenient, secure online payment method which does not require disclosure of sensitive financial data. As of December 2012 PayPal covered more than 164 million accounts (123 million active) and allowed transactions in 19 currencies in 190 markets and territories around the world. Providing access to the global online market, PayPal also supports popular payment methods in local markets. Setting up PayPal account takes only a few minutes and it provides instant, safe and convenient money transfer service with plenty of the additional features. This article focuses on… Read more

Is monetary expansion fuelled by Quantitative Easing boosting the construction sector in the United Kingdom?

MarketLine

The Bank of England has flooded commercial banks with money in the aftermath of the financial crisis. The aim of its policy has been to inject money into the economic system and consequently increase investment and consumer spending. How does monetary expansion work? Since March 2009, the bank has bought government debt from pension funds, commercial banks, insurance companies and non-financial firms. Commercial banks selling their government debt to the central bank in exchange for cash should be depositing more money into their own reserves. This extra capital should then… Read more

Oligopoly in a credit rating systemic market

MarketLine

By agency, S&P Ratings, Moody’s, and Fitch (held by Fimalac) represent the largest credit rating companies in the world: as of 2011, S&P had 1,416 credit analysts; Moody’s, 1,252; and Fitch, 1,096. The next credit rating firm ranked by agency was A.M. Best with 123 analysts. By revenue, the same group of three companies tops the table: as of 2011, Moody’s brought in $2,281 million; S&P, $1,767 million; and Fitch, $757 million. DBRS, the next largest agency by revenue to publish financials, and with a similar number of analysts (118)… Read more

Stephen Hester steps down as RBS Chief Executive

MarketLine

Royal Bank of Scotland (RBS) Chief Executive Stephen Hester is to step down it was announced yesterday, causing much speculation over the reasons behind the decision. In recent months, Hester had spoken of his desire to see the project through to completion and so the surprise announcement begs the question of whether he was pushed. Hester succeeded disgraced former CEO Fred Goodwin in September 2008 after the bank was forced to go cap-in-hand to the UK government to ask for a £45bn capital injection. Hester has been central to the… Read more

Where all the Cash is

MarketLine

US corporates, especially tech corporations, represent the most liquid corporations in the world. Moody’s has estimated that the US tech sector holds $550bn in cash reserves, a vast proportion of 38% of all corporate cash reserves in the US. To further narrow this insight, Apple alone held $137bn in cash at the end of 2012. For context, any prospective Cyprian bailout is estimated to cost under €20bn; the British government’s immediate bailout of the banking sector in 2008 was £50bn; and the entire EU budget in 2007 equated to €120.7bn…. Read more