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Attijariwafa to buy Barclays Egypt; South Africa's FSB backs new exchange

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


Attijariwafa to buy Barclays Egypt; South Africa's FSB backs new exchange

IMF further lowersSSA's 2016 growth forecast: The IMF reduced its growth forecast forsub-Saharan Africa for the year by a further 0.2% to 1.4%, noting that braindrain in the form of emigration to Organization for Economic Cooperation and Developmentcountries had increased sharply in the last 15 years, Jeune Afrique reports.

MIDDLE EASTAND NORTH AFRICA

AttijariwafaBank to acquire Barclays Bank Egypt: Barclays Bank Plc agreed to its retail and corporate bankingbusiness in Egypt to Morocco-based Attijariwafa Bank SA, in a transaction expected toreduce the U.K. lender's risk-weighted assets by approximately £2 billion. Thetransaction is expected to be completed by 2016-end. The $500 million deal isprojected to boost Barclays Bank's common equity Tier 1 ratio and reduce itsworkforce by about 1,500 employees, the FinancialTimes notes.

* Egypt-based Beltone Financial Holding SAE acquired a 60% stake inNew York-based broker Auerbach Grayson, which specializes in emerging markets,for $24 million, Daily News Egypt says.

* The Central Bank of Egypt kept the Egyptian pound steadyagainst the U.S. dollar in yesterday's weekly foreign currency auction, despiteexpectations of a devaluation that had helped boost the stock market, Reuters reports.The central bank sold $117.9 million, with the cutoff price stable at 8.78pounds per dollar.

* The World Bank will lend Egypt $1 billion to lift thecountry's fiscal balances and support energy reforms, Amwal Al Ghad says.The World Bank also approved a $5.2 billion loan for the Middle East and NorthAfrica region to support 15 projects this fiscal year.

* The Saudi Arabian Monetary Agency is examining howcommercial banks should reschedule housing mortgage loans, taking into accountstriking a balance between mortgage borrowers' financial situation andcreditors' loan policies, following the government's implementation ofausterity measures, Reuters reports,citing Saudi paper Al-Riyadh. Thecentral bank is trying to retain interest paid by borrowers as a percentage oftheir incomes.

* Bank loans to Saudi Arabia's private and public sectorsreached 1.5 trillion riyals at the end of August, up 8% from a year earlier,Argaam writes,citing central bank data. Private sector lending grew 7% year over year to 1.4trillion riyals.

* The Saudi Arabian Monetary Agency approvedGulf Union Co-operative InsuranceCo.'s plan to reduce its capital to offset accumulated losses.

* Ali Hamoud Badr resignedfrom his position as head of conformity and adherence at

* Kuwait's Capital Markets Authority amendeda law regulating brokerage activities in the country's stock exchange,increasing the required deposit and capital for activity.

* Qatar-based Ahli Bank QSC secureda three-year, $195 million club loan from eight banks. The facility, pricingdetails of which were not revealed, will be used for general corporate fundingpurposes.

* Oman's Capital Market Authority cancelled the license ofInternational Financial Services Co. to operate in the financial securitiessector after the company failed to meet the regulatory requirements, Argaam writes.

* BahrainIslamic Bank B.S.C. appointedMohammed Essa Hamada chief information officer.

* Eskan BankBSC received central bank approval to set up and register Bahrain'sfirst retail real estate investment trust, Eskan Bank Realty Income Trust,Thomson Reuters' Zawya reports.Ahmad Tayara, the lender's chief business officer and deputy general manager,said Eskan plans to invite private and public sector real estate players toinclude their assets in the Sharia-compliant REIT, which has a total valueexceeding the regulatory minimum of $20 million.

* Abu DhabiIslamic Bank PJSC laid off more than 200 employees over the pastthree months, most of whom were from its retail business, insiders tellBloomberg News. Roughly 100 layoffs were from last month, mostly affectingjunior staff.

* Meanwhile, Abu Dhabi Islamic Bank launched a partnershipwith Germany-based Fidor BankAG to establish the Gulf region's first community-based digitalbank targeted at millennials, Thomson Reuters' Zawya notes.

* The Qatar Central Bank is working on improving itsprograms and systems to further accelerate the development of the localinsurance sector, The Peninsula writes,citing central bank Governor Abdullah bin Saud al-Thani.
* Qatar Insurance Co.SAQ's QatarReinsurance Co. Ltd. obtained a license from the Monetary Authorityof Singapore to start branch operations in the Asian country.

* The Middle East and North Africa reinsurance markets areanticipated to harden over the next 12 months amid a series of major insuredlosses in the Gulf Cooperation Council and the retrenchment of some leadingmarket participants, the Qatar Financial Centre saidin it 2016 MENA Reinsurance Barometer. While MENA remains an attractivehigh-growth, low-catastrophe market, with positive effects on thediversification of global risk portfolios, many reinsurers operating in theregion have recently suffered significant losses and view current pricinglevels as technically insufficient, the report noted.

EAST ANDWEST AFRICA

Nigeria secures AfDB support: The African Development Bankwill support Nigeria in getting out of recession but the "too big tofail" nation should raise taxes and increase hard currency curbs to easeits U.S. dollar shortages, Reuters reports,citing Akinwumi Adesina, the bank's president.

* Kenya is close to signing a deal to establish a regionalheadquarters for the African Export-Import Bank in Nairobi, Business Daily writes.Afreximbank had signaled that it would move to Ethiopia if Kenya does not grantit diplomatic status by September-end.

* The Kenyan central bank extended for six months from Oct.13 the appointment of Kenya Deposit Insurance Corp. as a receiver manager ofcollapsed Imperial BankLtd., accordingto the Daily Nation.

* CommercialBank of Africa Ltd. plans to offer by December its M-Shwari loansto the Rwandese market, after successfully bringing the products to Kenya,Uganda and Tanzania, the Daily Nation writes.

CENTRALAND SOUTHERN AFRICA

South Africa's FSB backs new stock exchange: The JohannesburgStock Exchange failed in an "urgent application for interim relief"to block the granting of an operating license to ZAR X Stock Exchange, a newrival stock exchange, Reuters reports,citing South Africa's Financial Services Board. The FSB said it found "noevidence that the JSE would suffer harm or prejudice" if it allowed theZAR X Stock Exchange to operate. ZAR X had obtained its operating license Aug.31.

* The South African Revenue Servicesuspended Kelly-Anne Elksie, the common-law wife of SARS head Jonas Makwakwa,amid investigations into suspicious deposits made between both employees, fin24notes.

* The IMF said in its WorldEconomic Outlook Report publishedyesterday that it cut its 2017 economic growth outlook for South Africa to 0.8%from its 1% forecast in July, Bloomberg News writes.The fund also cut its 2017 economic outlook for Nigeria to 0.6% from itsearlier forecast of 1.1%. The outlook cuts were due to the fall in commodityprices, policy uncertainty and weak investor confidence, the IMF said.

* Angolan central bank Governor Valter Filipe and hisPortuguese counterpart, Carlos Costa, recently met in Lisbon to discusscooperation on banking supervision, as Angola plans to gradually adjust itsstandards to fit into the EU banking rules, Jornalde Angola reports.

* The IMF estimates that the Angolan economy will stagnate in2016. In a newly released World Economic Outlook, the fund said Angola, whichwas previously expected to grow 1.5% in 2017, is likely to register zerogrowth, Observador reports.

* Joseph Mwanamvekha, Malawi'sminister of industry, trade and tourism, called on insurers to developinnovative products to boost the uptake of insurance services as low insurancepenetration, currently at 3%, has continued to weigh on GDP growth, The Times of Malawi writes.

IN OTHERPARTS OF THE WORLD

Asia-Pacific: Sompo Holdings to acquire Endurance Specialty; India cuts policyrates

Europe: INGfaces union ire; Novo Banco sees Chinese interest; Russian central bankoverhauls

Latin America: Porto Seguro, AIG Seguros in auto portfolio deal; BNDES shifts focusto clean energy

North America: Wells says loss from Illinois suspension only $50,000, not'millions'

North America Insurance: Hurricane Matthew poses threat to reinsurers; insurer to exit ACAexchange

SherylObejera, Henni Abdelghani, Pádraig Belton and Mariana Aldano contributed tothis report.

TheDaily Dose Middle East and Africa has an editorial deadline of 5 a.m. Londontime. Some external links may require a subscription.


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

Highlights

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.

Learn more about Market Intelligence
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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:https://eba.europa.eu/documents/10180/2419200/2018-EU-wide-stress-test-Results.pdf

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

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