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SSA news through Sept. 29

Street Talk Episode 40 - Digital Banks Take a Page Out of 'Mad Men'

Broadband Only Homes Skyrocket In 2018 Validating Top MSOs Connectivity Pivot

Power Forecast Briefing: As retirements accelerate, can renewable energy fill the gap?

2019 Credit Risk Perspectives: Is The Credit Cycle Turning? A Fundamentals View

SSA news through Sept. 29

* The World Bank adjusted its growth forecast forsub-Saharan Africa to 1.6% for the year, down from 2.5% in its last forecast inearly June, Jeune Afrique said. This parallels the IMF, which has trimmed itsforecast to 1.6% — the slowest growth forecast in 20 years.

* Economists interviewed by Jeune Afrique calledfor reforming the CFA franc, criticizing the role of the French Treasury inholding the currency's external trading account reserves, and calling itsmonetary policy overly restrictive.


* The Central Bank of Kenya said lenders from eight foreigncountries, including the United Arab Emirates and South Africa, are aiming toenter Kenya, even after it capped interest rates and suspended the entry of newlenders, Business Daily wrote.

* Large Kenyan banks will benefit most from the new lawcapping interest rates, with medium and small banks' profit margins expected tobe tightened, Capital Business noted.

* KCB GroupLtd. recorded 6.3 billion shillings in new personal loans inthe past three weeks, increasing from 1 billion shillings a month before the interestrate cap was implemented, contradicting earlier fears that the new law woulddiscourage lending, Business Daily wrote.

* Meanwhile, Commercial Bank of Africa Ltd. will likely reduceits 7.5% facilitation fee for M-Shwari mobile-based loans by year-end, TheStar reported, citing Managing Director Isaac Awuondo. The bankwill review the business model for the M-Shwari platform to realign its chargeswith the law capping interest rates.

* Separately, Bloomberg News cited Awuondo as saying CBA plans to export itsM-Shwari service as part of a strategy to eventually do business in 16 Africannations, with Rwanda being the "most immediate market" for theplatform.

* France-based Proparco and Germany's DEG will increasetheir stakes in I&MHoldings Ltd. from the current 10.68% in the bank's upcomingrights issue, Daily Nation reported.

* The National Bank of Rwanda maintained its key repo rate at 6.5%. The centralbank's financial stability committee observed that in the 12 months to June,Rwandan banks' total assets increased by 14% and are dominated by credit to theprivate sector.

* GhanaInternational Bank Plc intends to soon launch operations in severalEast African nations, including Rwanda, Tanzania and Zambia, in an aim to boostGhana's trade finance, Citi Business News reported.


* Bank of Ghana Governor Abdul Nashiru Issahaku told Bloomberg News that the central bank wants morebanking sector M&A activity ahead of new rules that will raise lenders'capital requirements. The central bank is set to publish by year-endrecommendations of a committee reviewing minimum capital requirements, withimplementation expected in 2017. Insiders told Joy Business that the capital requirement forcommercial banks could be lifted to 500 million cedis starting in 2017. The regulatorwill allow banks more time to meet the new requirements, Citi BusinessNews reported.

* Meanwhile, Issahaku called on banks to increase efforts tothwart electronic fraud and help prevent the country from being blacklistedagain by the Financial Action Task Force, Business & Financial Times noted. Issahaku said the rising number of e-fraud cases inthe country could cause reputational damage to banks.

* He also signaled that the performance of the country'slenders will improve significantly after having partly settled the debt owed tocommercial banks by the Volta River Authority, Ghana Star reported.

* A preliminary probe launched by the Bank of Ghana absolvedGCB Bank Ltd.Chairman Daniel Owiredu of any wrongdoing in relation to reports that Owireduhas been pushing the bank to approve loans without collateral, Joy Business noted.

* The IMF approved a loan of about $116 million to Ghana tosupport the country's balance of payment, Joy Business noted. The IMF earlier said a provision in the amended Bankof Ghana Act allowing the Ghanaian government to borrow from the central bankundermines the credibility of the nation's monetary policy "in the contextof the inflation targeting framework," Ghana Business News noted.

* The Banque Centrale des Etats de l'Afrique de l'Ouestdemanded 50 billion CFA francs from Ivory Coast, saying this amount was stolenfrom its Ivorian operations in the past decade, Financial Afrik reported.

* Nigerian lenders are having a "tough" timeraising capital as the country's dwindling economy scares off investors,Bloomberg News reported. Umaru Ibrahim, managing director of the NigerianDeposit Insurance Corp., urged local lenders to "become more creative tomobilize deposits." A report from Afrinvest West Africaindicated that three lenders will have to raise more funding in 2016-2017 tosustain their capital adequacy ratios, with further job losses in the sectorseen as likely, Vanguard wrote.

* Meanwhile, Access Bank Plc was set to begin an investor road showfor the first eurobond to emerge from Nigeria in nearly two years, Bloomberg noted.

* The African Development Bank will grant Nigeria a $4.1billion loan over 2016 and 2017, and $10 billion by 2019, to boost thecountry's economy, Reuters reported.


* Linah Kelebogile Mohohlo will Oct. 20 as governor ofthe Bank of Botswana. No information was provided on a potential successorto Mohohlo, who became governor in 1999.

* Angolan central bank chief Valter Filipe signed an accordwith his South African counterpart to work together to improve supervision ofthe Angolan financial sector and help bring it up to internationalstandards, Novo Jornal and Angop reported. The central bankers also pledged toforge closer ties between their countries' commercial banks.

* Banco BICSA has not yet decided whether to sell its 2% stakein Banco BPISA following CaixaBank SA's takeover bid for the Portuguese bank lastweek, Jornal de Negocios and Dinheiro Vivo reported.

* Angola's insurance regulator said the country could havefarm insurance before the end of the year, Angop writes.

* Fixed-income asset manager Futuregrowth lifted thesuspension on buying debt of South African state-run Land Bank following an"extensive review of the governance and investor protectionmechanisms," Reuters noted. The Old Mutual Plc unit maintained its ban on buyingbonds from five other state-owned companies, but said it is in discussions withthem regarding the issue. Futuregrowth imposed the suspensions citing politicaluncertainty amid probes into South African Finance Minister Pravin Gordhan.

* Capitec BankHoldings Ltd. will cut back on lending to customers in lowerincome groups amid weak economic growth in South Africa, Reuters wrote. The bank also said it will team up with an insurerto launch insurance products in 2017, Bloomberg News reported.

* The head of an IMF mission to Mozambique praised thegovernment's efforts to restore investor confidence following revelations thatstate companies had taken on more than $1 billion in "hidden"debt, Jornal de Notícias reported. The IMF, which suspended loans to Mozambique due tothe scandal, began an audit of Mozambique's debt last week.

* Mauritian Finance Minister Pravind Jugnauth opened Bank ofChina's first branch in the African country and called on banks to show greaterinterest in financing government projects, L'Express said.

* Didier Harel replacedGérard Hardy as chairman of MCBGroup Ltd.


* The Democratic Republic of Congo's central bank raised itskey rate to 7% from 2% amid deterioration in international market prices forthe country's copper and oil exports, FinancialAfrik and BloombergNews noted.

* Gabon has a new prime minister in Emmanuel Issoze Ngondet,a career diplomat who previously was foreign minister, Agence Ecofin reported.

* AttijariwafaBank SA received regulatory approval to open a subsidiary in Chad, Jeune Afrique wrote.The approval brings to 14 the number of African countries where the Moroccanlender has a presence. Chairman Mohamed Kettani said, meanwhile, thatAttijariwafa is unconcerned by the strife in Gabon following disputed electionsthere, saying its unit in the country, Union Gabonaise de Banque, is doing well, accordingto L'Observateur du Maroc.

Pádraig Belton and Helen Popper contributed to thisreport.

Listen: Street Talk Episode 40 - Digital Banks Take a Page Out of 'Mad Men'

Mar. 20 2019 — Some fintech companies are making hay with digital platforms that tout their differences with banks, even though they are often offering virtually the same products. In the episode, we discuss with colleagues Rachel Stone and Kiah Haslett the deposit strategies employed by the likes of Chime, Aspiration and other incumbent players such as Ally Financial, Discover and Capital One. Those efforts conjure up memories of a Don Draper pitch in Mad Men and likely will enjoy continued success.

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Technology, Media & Telecom
Broadband Only Homes Skyrocket In 2018 Validating Top MSOs Connectivity Pivot


The segment stood at an estimated 23.6 million as of Dec. 31, 2018, accounting for 24% of all wireline high-speed data homes.

The following post comes from Kagan, a research group within S&P Global Market Intelligence.

To learn more about our TMT (Technology, Media & Telecommunications) products and/or research, please request a demo.

Mar. 20 2019 — The U.S. broadband-only home segment logged its largest net adds on record in 2018, validating Comcast Corp.'s and Charter Communications Inc.'s moves to make broadband, or connectivity, the keystone of their cable communication businesses.

The size and momentum of the segment also put in perspective the recent high-profile online-video video announcements by the top two cable operators as well as AT&T Inc.'s WarnerMedia shake-up and plans to go toe-to-toe with Netflix in the subscription video-on-demand arena in the next 12 months.

We estimate that wireline broadband households not subscribing to traditional multichannel, or broadband-only homes, rose by nearly 4.3 million in 2018, topping the gains from the previous year by roughly 22%. Overall, the segment stood at an estimated 23.6 million as of Dec. 31, 2018, accounting for 24% of all wireline high-speed data homes.

For perspective, broadband-only homes stood at an estimated 11.3 million a mere four years ago, accounting for 13% of residential cable and telco broadband subscribers.

The once all-powerful, must-have live linear TV model, which individuals and families essentially treated as a utility upon moving into a new residence, increasingly is viewed as too expensive and unwieldy in the era of affordable, nimble internet-based video alternatives. This has resulted in a sizable drop in penetration of occupied households.

As a result, continued legacy cord cutting is baked in and broadband-only homes are expected to continue to rise at a fast clip, with the segment's momentum in the next few years compounded by Comcast's, Charter's and AT&T's ambitious moves into online-video territory.

Note: we revised historical broadband-only home estimates as part of our fourth-quarter 2018, following restatements of historical telco broadband subscriber figures and residential traditional multichannel subscriber adjustments.

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Q4'18 multichannel video losses propel full-year drop to edge of 4 million

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Q4'18 multiproduct analysis sheds more light on video's fall from grace

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Watch: Power Forecast Briefing: As retirements accelerate, can renewable energy fill the gap?

Mar. 19 2019 — Steve Piper shares the outlook for U.S. power markets, discussing capacity retirements and whether continued development of wind and solar power plants may mitigate the generation shortfall.

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Credit Analysis
2019 Credit Risk Perspectives: Is The Credit Cycle Turning? A Fundamentals View

Mar. 15 2019 — On November 20, 2018, a joint event hosted by S&P Global Market Intelligence and S&P Global Ratings took place in London, focusing on credit risk and 2019 perspectives.

Pascal Hartwig, Credit Product Specialist, and I provided a review of the latest trends observed across non-financial corporate firms through the lens of S&P Global Market Intelligence’s statistical models.1 In particular, Pascal focused on the outputs produced by a statistical model that uses market information to estimate credit risk of public companies; if you want to know more, you can visit here.

I focused on an analysis of how different Brexit scenarios may impact the credit risk of European Union (EU) private companies that are included on S&P Capital IQ platform.

Before, this, I looked at the evolution of their credit risk profile from 2013 to 2017, as shown in Figure 1. Scores were generated via Credit Analytics’ PD Model Fundamentals Private, a statistical model that uses company financials and other socio-economic factors to estimate the PD of private companies globally. Credit scores are mapped to PD values, which are based on/derived from S&P Global Ratings Observed Default Rates.

Figure 1: EU private company scores generated by PD Model Fundamentals Private, between 2013 and 2017.

Source: S&P Global Market Intelligence.2 As of October 2018.

For any given year, the distribution of credit scores of EU private companies is concentrated below the ‘a’ level, due to the large number of small revenue and unrated firms on the S&P Capital IQ platform. An overall improvement of the risk profile is visible, with the score distribution moving leftwards between 2013 and 2017. A similar picture is visible when comparing companies by country or industry sector,3 confirming that there were no clear signs of a turning point in the credit cycle of private companies in any EU country or industry sector. However, this view is backward looking and does not take into account the potential effects of an imminent and major political and economic event in the (short) history of the EU: Brexit.

To this purpose, S&P Global Market Intelligence has developed a statistical model: the Credit Analytics Macro-scenario model enables users to study how potential future macroeconomic scenarios may affect the evolution of the credit risk profile of EU private companies. This model was developed by looking at the historical evolution of S&P Global Ratings’ rated companies under different macroeconomic conditions, and can be applied to smaller companies after the PD is mapped to a S&P Global Market Intelligence credit score.

“Soft Brexit” (Figure 2): This scenario is based on the baseline forecast made by economists at S&P Global Ratings and is characterized by a gentle slow-down of economic growth, a progressive monetary policy tightening, and low yet volatile stock-market growth.4

Figure 2: “Soft Brexit” macro scenario.5

Source: S&P Global Ratings Economists. As of October 2018.

Applying the Macro-scenario model, we analyze the evolution of the credit risk profile of EU companies over a three-year period from 2018 to 2020, by industry sector and by country:

  • Sector Analysis (Figure 3):
    • The median credit risk score within specific industry sectors (Aerospace & Defense, Pharmaceuticals, Telecoms, Utilities, and Real Estate) shows a good degree of resilience, rising by less than half a notch by 2020 and remaining comfortably below the ‘b+’ threshold.
    • The median credit score of the Retail and Consumer Products sectors, however, is severely impacted, breaching the high risk threshold (here defined at the ‘b-’ level).
    • The remaining industry sectors show various dynamics, but essentially remain within the intermediate risk band (here defined between the ‘b+’ and the ‘b-’ level).

Figure 3: “Soft Brexit” impact on the median credit risk level of EU private companies, by industry.

Source: S&P Global Market Intelligence. As of October 2018.

  • Country Analysis (Figure 4):
    • Although the median credit risk score may not change significantly in certain countries, the associated default rates need to be adjusted for the impact of the credit cycle.6 The “spider-web plot” shows the median PD values for private companies within EU countries, adjusted for the credit cycle. Here we include only countries with a minimum number of private companies within the Credit Analytics pre-scored database, to ensure a robust statistical analysis.
    • Countries are ordered by increasing level of median PD, moving clock-wise from Netherlands to Greece.
    • Under a soft Brexit scenario, the PD of UK private companies increases between 2018 and 2020, but still remains below the yellow threshold (corresponding to a ‘b+’ level).
    • Interestingly, Italian private companies suffer more than their Spanish peers, albeit starting from a slightly lower PD level in 2017.

Figure 4: “Soft Brexit” impact on the median credit risk level of EU private companies, by country.

Source: S&P Global Market Intelligence. As of October 2018.

“Hard Brexit” (Figure 5): This scenario is extracted from the 2018 Stress-Testing exercise of the European Banking Authority (EBA) and the Bank of England.7 Under this scenario, both the EU and UK may go into a recession similar to the 2008 global crisis. Arguably, this may seem a harsh scenario for the whole of the EU, but a recent report by the Bank of England warned that a disorderly Brexit may trigger a UK crisis worse than 2008.8

Figure 5: “Hard Brexit” macro scenario.9

Sources:”2018 EU-wide stress test – methodological note” (European Banking Authority, November 2017) and “Stress Testing the UK Banking system: 2018 guidance for participating banks and building societies“ (Bank of England, March 2018).

Also in this case, we apply the Macro-scenario model to analyze the evolution of the credit risk profile of EU companies over the same three-year period, by industry sector and by country:

  • Sector Analysis (Figure 6):
    • Despite all industry sectors being severely impacted, the Pharmaceuticals and Utilities sectors remain below the ‘b+’ level (yellow threshold).
    • Conversely, the Airlines and Energy sectors join Retail and Consumer Products in the “danger zone” above the ‘b-’ level (red threshold).
    • The remaining industry sectors will either move into or remain within the intermediate risk band (here defined between the ‘b+’ and the ‘b-’ level).

Figure 6: “Hard Brexit” impact on the median credit risk level of EU private companies, by industry.

Source: S&P Global Market Intelligence. As of October 2018.

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  • Country Analysis (Figure 7):
    • Under a hard Brexit scenario, the PD of UK private companies increases between 2017 and 2020, entering the intermediate risk band and suffering even more than its Irish peers.
    • Notably, by 2020 the French private sector may suffer more than the Italian private sector, reaching the attention threshold (here shown as a red circle, and corresponding to a ‘b-’ level).
    • While it is hard to do an exact like-for-like comparison, it is worth noting that our conclusions are broadly aligned with the findings from the 48 banks participating in the 2018 stress-testing exercise, as recently published by the EBA:10 the major share of 2018-2020 new credit risk losses in the stressed scenario will concentrate among counterparties in the UK, Italy, France, Spain, and Germany (leaving aside the usual suspects, such as Greece, Portugal, etc.).

Figure 7: “Hard Brexit” impact on the median credit risk level of EU private companies, by country.

Source: S&P Global Market Intelligence. As of October 2018.

In conclusion: In Europe, the private companies’ credit risk landscape does not yet signal a distinct turning point, however Brexit may act as a pivot point and a catalyst for a credit cycle inversion, with an intensity that will be dependent on the Brexit type of landing (i.e., soft versus hard).

1 S&P Global Ratings does not contribute to or participate in the creation of credit scores generated by S&P Global Market Intelligence.
2 Lowercase nomenclature is used to differentiate S&P Global Market Intelligence credit scores from the credit ratings issued by S&P Global Ratings.
3 Not shown here.
4 Measured via Gross Domestic Product (GDP) Growth, Long-term / Short-term (L/S) European Central Bank Interest Rate Spread, and FTSE100 or STOXX50 stock market growth, respectively.
5 Macroeconomic forecast for 2018-2020 (end of year) by economists at S&P Global Ratings; the baseline case assumes the UK and the EU will reach a Brexit deal (e.g. a “soft Brexit”).
6 When the credit cycle deteriorates (improves), default rates are expected to increase (decrease).
7 Source: “2018 EU-wide stress test – methodological note” (EBA, November 2017) and “Stress Testing the UK Banking system: 2018 guidance for participating banks and building societies”. (Bank of England, March 2018).
8 Source: “EU withdrawal scenarios and monetary and financial stability – A response to the House of Commons Treasury Committee”. (Bank of England, November 2018).
9 As a hard Brexit scenario, we adopt the stressed scenario included in the 2018 stress testing exercise and defined by the EBA and the Bank of England.
10 See, for example, Figure 18 in “2018 EU-Wide Stress Test Result” (EBA November 2018), found at:

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2019 Credit Risk Perspectives: Is The Credit Cycle Turning? A Market-Driven View

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