Author: Max Tomlin

Former Barclays executives face trial over crisis-era cash deals with Qatar

Posted on by Max Tomlin

Four of Barclays’ most senior bankers will stand trial today in London in what is set to be one of the most high-profile financial crime cases since the 2008 market crash.

The case relates to an £11.8bn ($15bn) emergency fund that investment firms Qatar Holdings and Challenger Universal gave to Barclays in 2008

Former Barclays chief executive John Varley, along with colleagues Roger Jenkins, Tom Kalaris and Richard Boath, face charges relating to a bailout deal the bank secured from Qatar in the midst of the financial crisis.

All four men are charged with conspiracy to commit fraud by false representation. Varley and Jenkins also face separate charges of unlawful financial assistance, the practice by which companies provide loans to facilitate the purchase of its own stock. Qatar has not been accused of any wrongdoing.

The case relates to an £11.8bn ($15bn) emergency fund that investment firms Qatar Holdings and Challenger Universal gave to Barclays in 2008, to help the British lender avoid a government bailout. Under the terms of the deal, the British lender also lent £2.3bn to Qatar Holdings.

It is alleged that these reciprocal loans were used to unlawfully fund, either directly or indirectly, the Qatari purchase of Barclays shares.

The trial is expected to last up to four months. It has been brought by the UK’s Serious Fraud Office, partly in a bid to restore its reputation after two previous prominent cases were scrapped before going to trial.

Charges brought against a group of senior Tesco officials accused of orchestrating a major accounting scandal were thrown out in December 2018 after a judge decreed that the SFO’s evidence was not strong enough to warrant a trial.

A separate case brought by the SFO relating to the Qatari funding was also dismissed by a Southwark court last year. The organisation’s attempt to reinstate the case was unsuccessful. As such, the SFO is hoping to avoid a third consecutive embarrassment in this case against Varley and his compatriots.

World Finance Oil & Gas Awards 2018

Posted on by Max Tomlin

In 2014, the oil sector received a huge shock. After a few years of prices hovering around or above $100 per barrel, a combination of falling demand and new production methods resulted in a monumental price crash. Continuing declines saw the price fall to just $35 a barrel in early 2016. Due to factors linking crude oil and natural gas markets, the two fuels have historically exhibited a price relationship. As such, natural gas also experienced a fall in price over the period.

The most strategic oil and gas producers have invested in productivity improvements and new technologies even when prices remained some way below their highest levels

Today, optimism has returned to the oil and gas sector. Prices, although not at historically high levels, are largely stable. In 2018, oil mostly remained between $60 and $70 a barrel, while natural gas prices climbed steadily during the second half of the year. Higher prices reflect a multitude of factors. The decision by the Organisation of the Petroleum Exporting Countries (OPEC) and other major oil producers such as Russia not to increase supply had an impact, as did rising geopolitical tensions. US President Donald Trump’s decision to re-impose economic sanctions on Iran, as well as the ongoing crisis in Venezuela, has raised concerns over both countries’ ability to maintain their current export levels.

Price rises are good news for producers, obviously, but they do not mean oil and gas firms have nothing to worry about. Challenges remain aplenty, not least of all the worldwide movement away from fossil fuels and towards renewable energy sources. The World Finance Oil and Gas Awards 2018 recognise the companies that are not only aware of these challenges, but are overcoming them by forging a long-term strategy in an industry fraught with volatility.

Up and down
One of the biggest changes the oil and gas industry had to contend with in recent years is the development of hydraulic fracturing, or ‘fracking’. The process, during which high-pressure fluid is injected into the ground to release subterranean oil or gas, has had a major impact on the energy sector, particularly in the US.

Although the US has always been a major player in the petrochemical sphere, the use of fracking has caused production volumes to be ramped up. In 2011, the country became a net exporter of refined petroleum products, and forecasts indicate it will overtake Saudi Arabia as the world’s top oil exporter in 2019. America’s oil exports have boosted supply at a time when demand is falling. The IMF has predicted that global growth is set for a slowdown, indicating that oil consumption is about to take a hit too.

While prices experienced suppression in 2018, some factors have helped prop up the sector, especially supply-side issues in Iran and Venezuela. This has contributed to an unpredictable market, a situation not helped by the erratic behaviour of the US president: in November, Trump used his Twitter account to express his thoughts on OPEC’s proposed cuts to supply. Prices fell in response.

Greasing the wheel
Market volatility is, to some extent, part and parcel of operating in the oil and gas trade. However, there are steps businesses can take to limit the impact sudden price movements will have on their finances. The most strategic oil and gas producers have invested in productivity improvements and new technologies even when prices remained some way below their highest levels. Digitalisation has been a key concern for these firms, whether in the form of digital twins, drones or data analytics. Some companies are even making investments in green energy as a way of future-proofing their operations.

Not all businesses have taken a long-term approach, however. Understandably, many oil and gas companies were reluctant to invest while prices – and revenues – were low. Away from the US shale market, investment in conventional oil and gas supplies has fallen significantly over the last few years. As a result, the International Energy Agency’s World Energy Outlook 2018 notes that an additional 2.5 million barrels of oil per day must be produced annually just to keep output level.

Maintenance has also been affected by lower prices. Some companies saw maintenance as a noncritical cost in 2018 and chose to defer it until prices increased. This resulted in many rigs suffering from outdated infrastructure. Similarly, employee numbers have been reduced. Between 2014 and 2016, one major oil producer cut staff numbers by as much as 16 percent.

However, businesses that have adopted a short-term outlook could see their approach come back to haunt them. Increasing production now that prices have recovered will not be easy, particularly with failing assets and a limited number of employees. It is not as simple as turning the tap back on.

Digging deep
Even considering recent price increases, many oil and gas companies are well aware that they face significant long-term challenges. Consumers are demanding their governments and energy companies take the health of the planet more seriously and a move to a low-carbon world seems inevitable. It is a question of when, not if, businesses move away from fossil fuels.

This does not mean traditional oil and gas firms do not have a role to play in the planet’s future energy make-up. The transition to renewables will certainly be a gradual process, but one that businesses need to react to immediately. Investing in smart drilling technology will be necessary, as will incorporating real-time analytics and best-in-class smart sensors.

If demand does fall because green technologies are being embraced on a larger scale, oil and gas firms will have little choice but to become more productive and efficient to survive. Investment in new technologies will allow them to achieve this.

Some in the oil and gas industry are beginning to explore alternative uses for their products in anticipation of renewables fully replacing combustible fuels. Oil and gas, for example, can be used in the creation of other petrochemical products, so they are unlikely to disappear even if their utility as a fuel source is diminished.

The most forward-looking fossil fuel firms are investing in renewable energy. Often, the engineering expertise possessed by major oil and gas companies translates well into renewable technologies. Nevertheless, businesses that are used to the high-risk, high-return world of oil and gas should not run headfirst into the renewable energy market: businesses would do well to ensure they take the necessary time to acquaint themselves with the renewable market before making investments.

Long-term environmental challenges persist even when firms have finished drilling for oil or gas. Decommissioning rigs that have come to the end of their lifespan is a sensitive issue, with environmental considerations often coming into conflict with safety concerns. Globally, there are more than 600 rigs that must be decommissioned by 2021, and this figure may rise if supply-side challenges become more pronounced.

The future may hold challenges for the oil and gas industry, but they are not insurmountable. In recent years, agile businesses have proven themselves capable of withstanding a price crash and growing demands from environmentally conscious consumers. The best among them have turned their biggest challenges into new opportunities, investing with the future in mind. These are the businesses that have been recognised by the World Finance Oil and Gas Awards 2018.

World Finance Oil & Gas Awards 2018

Best Fully Integrated Company
Africa: Sonangol
Asia: PETRONAS
Middle East: Saudi Aramco
Eastern Europe: LUKOIL
Western Europe: BP
Latin America: YPF
North America: Chevron

Best Independent Company
Africa: Shoreline Natural Resources
Asia: Cairn India
Middle East: Genel Energy
Eastern Europe: Irkutsk Oil Company
Western Europe: Wintershall
Latin America: GeoPark
North America: Apache Corporation

Best Exploration & Production Company
Africa: Tullow Oil
Asia: JX Nippon Oil & Gas Exploration
Middle East: Petroleum Development Oman
Eastern Europe: Novatek
Western Europe: Equinor
Latin America: Pluspetrol
North America: Concho Resources

Best Downstream Company
Africa: Petrolex
Asia: PETRONAS
Middle East: ADNOC
Eastern Europe: Tatneft
Western Europe: Repsol
Latin America: Ecopetrol
North America: Motiva Enterprises

Best Upstream Service & Solutions Company
Africa: Aquashield Oil & Marine Services
Asia: Sapura Energy
Middle East: MB Petroleum Services
Eastern Europe: Rosneft
Western Europe: Halliburton
Latin America: Baker Hughes
North America: Schlumberger

Best Downstream Service & Solutions Company
Africa: Puma Energy
Asia: PTTEP
Middle East: Kuwait Petroleum International
Eastern Europe: LITASCO
Western Europe: VARO Energy
Latin America: Ipiranga
North America: Marathon Petroleum

Best Drilling Contractor
Africa: Shelf Drilling
Asia: COSL
Middle East: ADES International Holding
Eastern Europe: Eurasia Drilling Company
Western Europe: KCA Deutag
Latin America: San Antonio Internacional
North America: Rowan Companies

Best EPC Service & Solutions Company
Africa: Amec Foster Wheeler
Asia: JGC
Middle East: NPCC
Eastern Europe: ZAVKOM
Western Europe: Wood Group
Latin America: Techint Engineering & Construction
North America: McDermott

Best Sustainability Company
Africa: SPDC
Asia: PTTEP
Middle East: ADNOC
Eastern Europe: Gazprom
Western Europe: Total
Latin America: YPF
North America: Pioneer Natural Resources

Best CEO
Africa: Benedict Peters, Aiteo Group
Asia: Wan Zulkiflee, Petronas
Middle East: Ahmed Al Jaber, ADNOC
Eastern Europe: Alexey Miller, Gazprom
Western Europe: Patrick Pouyanné, Total
Latin America: James Park, GeoPark
North America: Timothy Dove, Pioneer Natural Resources

Best Oil & Gas Law Firm
Africa: Templars
Asia: Weerawong C&P
Middle East: White & Case
Eastern Europe: CMS Russia
Western Europe: Ashurst
Latin America: Canales Auty
North America: Maalouf Ashford & Talbot

Best CTRM Company
Global: Allegro Development

World Finance Global Insurance Awards 2018

Posted on by Max Tomlin

From small-scale insurance policies on personal technological goods to vast national guarantees that protect nations from natural disasters, insurance plays a role in the lives of everyone. This has been the case since 3000 BC, when Chinese and Babylonian sailing merchants would seek out wealthy lenders to underwrite their goods in case they were lost when crossing treacherous waters. While modern-day policies are far more sophisticated, the underlying principles of the insurance sector have remained constant since its inception.
In its simplest form, an insurance policy is a guarantee against unforeseen circumstances that is designed to protect against financial loss. As the definition of ‘unforeseen circumstances’ has expanded to encompass things like cyberattacks and mass data breaches, insurers have had to adapt to meet the challenges posed by the modern world. This protective attitude must then be weighed against actions that can increase revenue and drive the industry forward – a fine balance to strike. With this in mind, World Finance has selected those firms that succeeded in maintaining this delicate equilibrium for the 2018 edition of the Global Insurance Awards.

Macro concerns
At an institutional level, the past year has principally been characterised by an increased willingness by insurers to expose themselves to risk, as evidenced by BlackRock’s Global Insurance Report 2018. By surveying 372 senior executives in the insurance and reinsurance industries across 27 countries, BlackRock learned that almost half of insurers plan to increase portfolio risk exposure over the next 12 to 24 months, compared with just nine percent in 2017.

In a strange twist, an increase in macro issues facing insurers has actually reduced the overall perception of risk, with companies now inclined to see this consistent level of risk as the new normal. Global trade tensions, geopolitical instability and the risk of currency inflation are all issues that have been rumbling on for some time; it appears their longevity has led insurers to be more sanguine about the overall environment. With this in mind, insurers have moved away from the climate of constant concern into a more risk-inclined space.

Think green
One macro concern that has featured heavily in insurers’ minds over the past year is the environment, which remains a significant concern on a national and multinational level. The largest insured loss year to date was 2017, which saw three Atlantic hurricanes classed as category four or higher, the Puebla earthquake in Mexico and wildfires that ripped through California, collectively accounting for over $135bn in losses. The total for 2018 could be set to overtake 2017 although, at the time of printing, calculations for the deadly California wildfires that took place over the course of November are yet to be finalised.

Environmental, social and corporate governance (ESG) policy has been high on the insurance industry’s priority list this year, with 83 percent of BlackRock respondents considering it imperative to have one in place. This is symptomatic of a wider corporate shift towards social responsibility as insurers recognise the significance of safeguarding the planet, as well as their public image, by being more environmentally conscious.

Companies must overcome a number of challenges before ESG policies can be implemented, including a general lack of expertise in modelling ESG variables, given their relatively recent introduction into the marketplace. Changing geopolitical factors also make it difficult for insurers to ascertain a clear picture of the return on investment for these policies.

Many insurers have called for better clarity and global consistency regarding ESG policies. In Europe, the European Commission has responded to these demands by suggesting rule changes that would explicitly require the integration of sustainability risks into investment decisions or advisory processes. The changes are currently under consideration by key EU financial supervisory bodies.

In the black
Financially, the domestic insurance industry entered 2018 on strong footing after positive premium growth in the previous year. According to the OECD’s Insurance Markets in Figures report, life and non-life premiums of domestic insurance increased in 40 out of 43 countries surveyed in 2017; these countries include all members of the OECD and the Association of Insurance Supervisors of Latin America, as well as India and Russia, among others.

Global insurance growth has remained in the black this year. Experts, however, are divided as to whether this profitability will continue. The Swiss Re Institute has predicted that global premiums will rise up to three percent annually in real terms, driven by economic momentum in Asian markets, where premiums are forecast to increase at three times the global rate. Others, including PwC, are advising insurers to exercise caution as the introduction of new regulatory frameworks has the potential to stall the market by making processes more complex and time-consuming.

Meanwhile, the global industry continues to prepare for the introduction of the International Financial Reporting Standard (IFRS) 9 and 17. IFRS 9 measures how an entity should classify and measure financial assets, and is likely to increase volatility in quotidian profits and losses sheets for most insurers. The regulation technically came into force on January 1, 2018, but many qualifying insurers have opted to take advantage of the policy’s deferral option to January 1, 2021. IFRS 17 requires insurance providers to provide high-quality financial information that is globally comparable and consistent. The directive is designed to increase transparency in the industry and is set to come into force on January 1, 2021.

On its toes
With regards to key industry players, the insurance behemoths continue to be disrupted by the rise of ‘insurtech’ firms – insurance companies employing digital technologies – challenging multinationals for a percentage of their market share. These technologies include the Internet of Things, robotic process automation, advanced consumer analytics, artificial intelligence and blockchain. Smaller start-up firms have the advantage of being highly agile in terms of their business approach. As such, they are able to adopt and implement new technologies more quickly and efficiently than larger firms. Confidence in these firms’ transformative abilities is reflected in investor interest, with the insurtech sector experiencing a 36.5 percent uplift in investment annually between 2014 and 2017.

Innovation is also an effective tool for companies to better engage with consumers. According to Capgemini’s World Insurance Report: Past, Present and Future, digital technology is a “game changer” with the “potential to redefine insurers’ ability to manage customers’ evolving preferences via seamless, real-time and direct communication”. While many companies have boosted their technological capabilities over the past 12 months, the constantly evolving nature of the industry means the most successful players are those that remain nimble and responsive to developments by becoming digitally agile.

As ever, the firms that keenly evaluate risks and make intelligent investment choices while remaining engaged with their customers are most likely to come out on top. The World Finance Global Insurance awards celebrate those industry leaders that commit to maintaining the highest standards of efficiency and transparency while forging a path for others to follow.

World Finance Global Insurance Awards 2018

Argentina
General – Caja de Seguros
Life – BNP Paribas Cardif

Australia
General – IAG
Life – BT Financial Group

Austria
General – UNIQA Group
Life – SparkassenVersicherung

Bahrain
General – Gulf Union Insurance
Life – Bahrain National Life Assurance

Bangladesh
General – Nitol Insurance
Life – Popular Life Insurance Company

Belgium
General – Baloise
Life – Baloise

Brazil
General – Allianz Brazil
Life – Brasilprev

Bulgaria
General – Armeec Insurance
Life – SiVZK (TUMICO)

Canada
General – Intact Insurance
Life – BMO Insurance

Caribbean
General – National Commercial Bank
Life – ScotiaLife Financial

Chile
General – ACE Group
Life – SURA

China
General – China Pacific Insurance
Life – Ping An Life Insurance

Colombia
General – Liberty Seguros
Life – Seguros Bolivar

Costa Rica
General – ASSA Compañía de Seguros
Life – Adisa

Cyprus
General – General Insurance of Cyprus
Life – Universal Life

Czech Republic
General – Komercní banka
Life – Allianz pojišt’ovna

Denmark
General – Skandia
Life – Danica Pension

Egypt
General – Allianz Egypt
Life – Allianz Egypt

Finland
General – OP Financial Group
Life – Nordea Life Assurance

France
General – Covéa
Life – SCOR

Georgia
General – Aldagi
Life – Aldagi

Greece
General – INTERAMERICAN
Life – NN Hellas

Hong Kong
General – China Taiping Insurance
Life – Habib Bank Zurich Hong Kong

Hungary
General – Allianz Hungária
Life – Magyar Posta Eletbiztosito

India
General – ICICI Lombard
Life – Max Life Insurance

Indonesia
General – PT Asuransi Jasa Indonesia
Life – Asuransi Jiwasraya

Israel
General – Harel Insurance
Life – Clal Insurance

Italy
General – UnipolSai
Life – Poste Vita

Jordan
General – Middle East Insurance Company
Life – Arab Orient Insurance

Kazakhstan
General – Nomad Insurance
Life – Kazkommerts-Life

Kenya
General – CIC Insurance Group
Life – Britam

Kuwait
General – Kuwait Insurance
Life – Al Ahleia Insurance

Lebanon
General – AXA Middle East
Life – Bancassurance

Luxembourg
General – AXA Luxembourg
Life – Swiss Life

Malaysia
General – Etiqa
Life – Hong Leong Assurance Berhad

Malta
General – GasanMamo Insurance
Life – HSBC Life Assurance Malta

Mexico
General – GNP
Life – Seguros Monterrey New York Life

Netherlands
General – Univé
Life – ING Netherlands

New Zealand
General – Tower Insurance
Life – Asteron Life

Nigeria
General – Zenith Insurance
Life – FBNInsurance

Norway
General – Gjensidige
Life – Nordea Liv

Oman
General – Oman United Insurance
Life – Dhofar Insurance

Pakistan
General – Adamjee Insurance
Life – EFU Life

Panama
General – ASSA Compañía de Seguros
Life – Pan-American Life Insurance

Peru
General – RIMAC Seguros
Life – MAPFRE

Philippines
General – Standard Insurance
Life – BPI-Philam Life Assurance

Poland
General – UNIQA Group
Life – MetLife

Portugal
General – Allianz Seguros
Life – Ocidental Seguros

Qatar
General – Qatar General Insurance
Life – Q Life and Medical Insurance

Romania
General – ERGO
Life – Allianz-Tiriac

Russia
General – AlfaStrakhovanie
Life – Renaissance Zhizn Insurance

Saudi Arabia
General – Al Rajhi Takaful
Life – Medgulf

Serbia
General – Generali Osiguranje
Life – Generali Osiguranje

Singapore
General – United Overseas Insurance
Life – Great Eastern Life

South Korea
General – Samsung Life
Life – Hanwha Life

Spain
General – BBVA Seguros
Life – Seguros RGA

Sri Lanka
General – Sri Lanka Insurance
Life – Ceylinco Life Insurance

Sweden
General – Trygg-Hansa
Life – Nordea Liv

Switzerland
General – Helvetia
Life – Swiss Life

Taiwan
General – Cathay Century Insurance
Life – Fubon Life Insurance

Thailand
General – The Viriyah Insurance
Life – Thai Life Insurance

Turkey
General – Zurich Sigorta
Life – Anadolu Hayat Emeklilik

UAE
General – ADNIC
Life – ADNIC

UK
General – AXA UK
Life – Legal & General

US
General – Progressive
Life – Lincoln Financial Group

Uzbekistan
General – Uzagrosugurta
Life – O’zbekinvest Hayot

Vietnam
General – PVI
Life – Bao Viet Life

GCC Investment and Development Awards 2018

Posted on by Max Tomlin

Since its inception in 1981, the Gulf Cooperation Council (GCC) has pushed an ambitious programme of infrastructure development and economic reform, with the aim of reducing the region’s dependence on oil. The importance of this diversification project has become clear over the past 12 months, as fluctuations in crude oil prices have revealed weaknesses in the region’s economies.

All GCC countries have been opening up their economies to foreign direct investment over the past year as part of their respective diversification strategies

Global trade tensions and the reimposition of US sanctions on Iran have also contributed to a challenging fiscal environment. However, this has only spurred the GCC’s programme further, with countries including Qatar and Saudi Arabia accelerating development projects. Investment has also been catalysed by the renewed drive for diversification, with foreign investment increasingly encouraged by regional governments. This has led the IMF to raise its economic growth predictions to 3.9 percent over the next 12 months, according to its Regional Economic Outlook.

In the quest for growth, the most successful players are, as ever, those that balance speed and sustainability by implementing structural reforms alongside investment. The World Finance GCC Investment & Development awards recognise those that are taking action now to safeguard the future economy.

Leaving oil behind
Economic growth in the GCC bottomed out in 2017, falling by 0.2 percent across all six member states. Saudi Arabia saw its first economic contraction since 2009, due for the most part to oil production cuts introduced by the so-called ‘OPEC+’ group. Historic heavy reliance on oil revenues has left many GCC nations beholden to the fluctuations of the market, which has been particularly volatile since hitting a low point in 2014.

The outlook for oil was far brighter in 2018, with prices climbing to four-year highs of $82.16 per barrel in September. This provided a spell of relief for the GCC’s five oil-exporting nations, with Oman registering the region’s leading GDP recovery of 3.8 percent. Nevertheless, past oil fluctuations have clearly spooked the GCC states, with all opting to pour additional funds into non-oil ventures in 2018.

Infrastructure development in particular has accelerated in the context of several high-profile global events, notably Expo 2020 Dubai and the 2022 FIFA World Cup in Qatar. Qatar is forecast to spend $220bn in preparation for the tournament, which includes the construction of an entirely new city, Lusail, featuring a 90,000-seat stadium where the final game will be held. Once complete, the city is expected to house 250,000 future residents. Meanwhile, Dubai has allocated AED 56.6bn ($15.41bn) to Expo preparations, which comprise the conference site itself, an extension of the metro line to access the area, and the AED 735m ($200m) Museum of the Future, which is widely considered to be one of the most complex buildings in the world.

In Kuwait, construction forms part of the country’s seven-pillar New Kuwait Vision 2035 strategy, which aims to transform the country into a financial and trade centre. At the annual Leaders in Construction Summit, the country’s chief of development, Talal Al-Shammari, announced a 46 percent increase in capital expenditure on infrastructure projects for the 2018-19 financial year, to $14.4bn.

Supportive substructure
Many GCC countries have also embarked on a programme of bureaucratic reform to complement infrastructure development and allow the private sector to thrive. In February 2018, Bahrain introduced a wage protection scheme that seeks to end the exploitation of staff by ensuring they are paid on time. It was launched in May and will be rolled out in a controlled release programme until May 2019.

Qatar’s visa-free entry programme, launched in 2017 in an effort to boost tourism, has been expanded this year to include Indian and Ukrainian nationals in a sign of increased openness from the Qatari Government. It has also pledged to put an end to the notorious kafala system that disadvantages migrant workers. However, more transparency is needed with regards to workers’ rights.

In May, Kuwait’s parliament voted to delay the introduction of VAT until 2021, ensuring operating costs remain at the current rate for private companies. To date, Saudi Arabia and the UAE are the only GCC countries to have implemented VAT.

With regards to the international sphere, all GCC countries have been opening up their economies to foreign direct investment (FDI) over the past year as part of their respective diversification strategies. In terms of volume, the UAE is the region’s largest destination for FDI, drawing in around $9bn in 2018. The country has also announced key changes to its residency programme, offering foreign investors a 10-year residency visa with the aim of boosting FDI by 15 percent over the next year. Meanwhile, FDI inflows to Bahrain grew 138 percent over the first three quarters of the year, the fastest rate of all GCC nations. In May, the country announced it would extend the term of residence visas for qualified investors and professionals from two years to 10 to further attract foreign interest.

In the past 12 months, under its Saudi Vision 2030 plan to transform economic and social infrastructure, Saudi Arabia has implemented more business-related reforms to boost international investment than any other GCC country. The World Bank noted it introduced reforms across six of its 10 pillars in its Doing Business 2018 report, from reducing documents needed for customs clearance to implementing online systems for administrative tasks.

The kingdom has welcomed western banks in particular, with Citibank becoming the latest firm to receive a banking licence, joining JPMorgan Chase and HSBC. International fiscal interest was reignited at the beginning of 2018 when Saudi Arabia announced it would float five percent of state oil giant Saudi Aramco. This was predicted to be the largest IPO in history before it was called off in August, with the company’s chairman, Khalid al-Falih, announcing in a statement: “The government remains committed to the IPO of Saudi Aramco at a time of its own choosing when conditions are optimum.” He added that the timing of the IPO will depend on “favourable market conditions” and a “downstream acquisition”, which the company will pursue in 2019. London, New York and Hong Kong exchanges have been vying for some time to list the Saudi oil giant, which is expected to be valued at around $5trn at IPO.

Looking ahead
The GCC has plenty to look forward to over the next few years, with high-profile events bringing prosperity and new interest to the region. The IMF named the FIFA World Cup and Kuwait’s implementation of five-year growth plans as key stimuli over the next 12 months. Increased FDI and further progress on key infrastructure development projects will also help diversify the economies of all six member nations.

As ever, those that are committed to economic diversification, welcoming foreign investment and opening up their nations are the firms that are reaping the rewards of the affluent region. It is these individuals and companies that World Finance recognises in the 2018 GCC Investment & Development Awards.

World Finance GCC Investment and Development Awards 2018

Individual Awards

Chairman of the Year
Sheikh Mohammed Jarrah AI-Sabah
Chairman of Kuwait International Bank, Kuwait

Banker of the Year
André Sayegh
Deputy CEO of First Abu Dhabi Bank, UAE

Best CEO in the Investment Industry
Faisal Mansour Sarkhou
CEO of KAMCO, Kuwait

Most Employee-Focused CEO
Mohammad Nasr Abdeen
CEO of Union National Bank, UAE

Best Jewellery Designer
Fatima bint Ali Al Dhaheri
Founder of Ruwaya, UAE

 

Companies

Best Custodian
HSBC, Middle East

Best Fund & Asset Management
Qatar National Bank, Qatar

Best CSR Business Model
Kuwait International Bank, Kuwait

Best Commercial Bank 
Samba Financial Group, Saudi Arabia

Best ISLAMIC Bank
Kuwait International Bank, Kuwait

Best Brokerage House
NBK Capital, Kuwait

Best SME Finance program
Bank Muscat, Oman

Best Islamic Insurance Company
Tawuniya, Saudi Arabia

Best Banking & Finance Software Solutions 
International Turnkey Systems, Kuwait  

Best Real Estate Investment Company
Mohammed Al Subeaei & Sons Investment Company, Saudi Arabia

Best Luxury Car Dealer
Al Ghassan Motors, Saudi Arabia

Best Financial Centre
Dubai International Financial Centre, UAE

Best Tourism Development Strategy
Saudi Commission for Tourism and National Heritage, Saudi Arabia

Outstanding Employee Engagement Strategy
Union National Bank, UAE

Best Investment Banking Advisory & Research Company
KAMCO, Kuwait

Top 5 mistakes to avoid when you’re new to trading

Posted on by Max Tomlin

In today’s world, you do not have to be a billionaire with significant capital to begin trading. Previously, there has been a belief that trading is too complicated or risky for beginners to try but the reality is that as long as you understand the rules and how to approach it, it is simple.

The advances and developments in technology have meant that anyone with an internet connection and an understanding of the rules is able to trade on the market. Plus, with innovations such as Artificial Intelligence (AI) now being used in the trading sector, producing top-level results and streamlining the whole process, there is no better time for beginners to enter the industry. Here we outline the five most common mistakes made by new traders.

1 – Trading without a strategy
It is vital that you approach trading as a business and create a strategic plan that includes short- and long-term goals, the amount of capital you have available and a plan of action. You need to determine what you will be trading – stock, commodities, currency pairs and so forth – as well as how you want to trade. A good trading plan needs to be concise, objective, researched and continually evaluated at regular intervals. Even professionals struggle with the analysis needed for a strategy, which is why the development of AI technology is useful for both experienced and new traders and can support you in making the right decisions.

2 – Not taking advantage of technology
AI (or automated) trading consists of a computer programme that does the hard work for you, significantly simplifying and streamlining both the planning and trading process. Not only does it collect the mass amounts of data needed for the analysis, allowing you keep up to date with price development patterns and real-time quotes, but it acts as a guide for the best times to trade, using machine learning to train itself and its strategies over time. Particularly volatile markets need technology that recognises developments in pricing, overvaluations, undervaluations or anticipates reactions to market events. Additionally, new traders can gain valuable experience without the risk of a live environment through ‘backtesting’, which operates a trading simulation.

3 – Underestimating the time commitment
While you can trade on the side, make sure you have a plan that accounts for that and that you stick to the time schedule. You must devote substantial time and effort if you want to be successful. Lots of new traders are anxious to get into the market and begin trading but be careful not to rush straight in. Those who put their money in the market too soon without a thought-out trading strategy or automated trading program often find themselves back at the beginning, but with less capital.

4 – Having unrealistic expectations
There is a very steep learning curve involved with trading. Often new and inexperienced traders underestimate how difficult it is to be successful and mistake the ease with which you can start trading with being able to make sustainable profits quickly. If you treat trading as a serious business venture – not just as a hobby or a get-rich-quick scheme – and develop a realistic outlook for what you believe could happen, it will relieve some of the pressure on getting an immediate return on investment. Alternatively, some traders like to ensure emotional human elements are fully removed from the decision-making process by using automated trading systems.

5 – Getting cocky
Being unaware of the risks associated with trading is one of the biggest mistakes new traders experience – risk management is the cornerstone of trading. It is important that new traders can handle the volatility and constant ups and downs of the markets as well as keeping sight on their capacity to take on risk. High volatility, as seen on the crypto markets, further emphasises the importance of a good risk management. By handling the risks with a strategic plan or an AI trading platform in place, you can immensely improve your trading performance and significantly curtail any losses.

Trading technology can seem quite daunting to those new to the industry, but recent innovations have introduced greater freedom and flexibility for all types of traders. This, paired with the vast amount of information you can access at your fingertips, is a winning combination. Crucially, being successful in trading requires hard work, stamina and as much support as possible. Ultimately, though, this can produce fantastic results.

Ukraine secures fresh IMF funding amid Russian tensions

Posted on by Max Tomlin

On December 18, amid increased tensions with Russia and with a presidential election on the horizon, Ukraine secured a new $3.9bn lending commitment from the International Monetary Fund (IMF). The assurance should help maintain stability within the nation – currently under martial law – as it approaches a critical period.

President Petro Poroshenko tweeted the news, which will see the first disbursement of $1.4bn head to Ukraine on December 25. Further payments are scheduled over a 14-month period. Approval of the loan by the IMF was granted to the country following a conscientious 2019 budget that targets a deficit reduction to 2.3 percent of GDP and predicted growth of three percent. Concurrently, the World Bank announced a $750m loan to aid Ukrainian reforms in banking, anti-corruption, agriculture, pensions, utility subsidies and healthcare.

Last year, a $17.5bn IMF aid package was frozen due to Ukraine’s lack of progress implementing reforms to erase corruption. To re-secure the funding, Ukraine’s government pledged to establish an anti-corruption court in 2019 and to raise energy tariffs by 23.5 percent, despite vocal opposition within the country.

GDP growth in the country saw two years of significant contractions on the back of the annexation of Crimea and the outbreak of war with Russian separatists in the eastern Donbass region. Since 2016, however, growth has remained stable.

Recently, uncertainty in the region surfaced once more when three Ukrainian naval vessels were attacked and seized by Crimea-based Russian forces as they attempted to sail through the Kerch Strait. Ukraine accused Russia of implementing an economic blockade on export-reliant Ukrainian ports in the Sea of Azov.

In March of next year, Ukraine will head to the polling booths to elect a new president, in what is expected to be a tightly contested race. Mr Poroshenko’s approval ratings have slumped in recent months, allowing former two-time prime minister Yulia Tymoshenko, of the pro-EU ‘Fatherland’ party, to amass a lead in opinion polls.

British Airways to resume flights to Pakistan

Posted on by Max Tomlin

British Airways has announced it will resume flights to Pakistan in 2019 after a decade-long absence due to security concerns, the carrier said on December 18. The UK’s national airline ceased all flights to Pakistan in 2008, after an Islamist militant truck bomb killed over 50 people at the Marriott Hotel in Islamabad. It will be the first Western carrier to resume flights to Pakistan after the incident.

The recommencement of flights by BA is a positive symbol of a renewal of international confidence in Pakistan’s national security

Following decades of devastating Islamic militant action across the South Asian nation, security has drastically advanced. Thomas Drew, the British High Commissioner to Pakistan, said that the resuming of BA flights was a “reflection of the great improvements”.

“The return of British Airways will give a particular boost to our growing trade and investment links,” Drew added.

BA, which is owned by Spanish-registered carrier IAG, will begin the London Heathrow–Islamabad service on June 2, with three weekly flights by the airline’s newest long-haul aircraft, the Boeing 787 Dreamliner. Tickets will go on sale today.

Robert Williams, BA’s head of sales for Asia Pacific and the Middle East, said: “It’s exciting to be flying between Islamabad and Heathrow from next year, which we believe will be particularly popular with the British Pakistani community who want to visit, or be visited by, their relatives.”

At present, only the unprofitable national carrier Pakistan International Airlines (PIA) flies directly between the UK and Pakistan. However, after decades of poor management, political interference and a dwindling budget, passengers have little confidence in the airline and its ageing fleet.

Middle Eastern carriers Qatar Airways, Etihad Airways and Emirates have a strong presence in Pakistan, which is eating into PIA’s declining market share.

Islamabad has embarked on an ambitious international tourism campaign in recent months, in an effort to revive the ailing sector that was badly hit by Islamist militant violence in the aftermath of the 9/11 attacks and the US-led war in Afghanistan.

Last month, Prime Minister Imran Khan called the National Task Force on Tourism together to develop a framework for the tourism sector that seeks to facilitate public-private partnerships and boost foreign investment.

The recommencement of flights by BA is a positive symbol of a renewal of international confidence in Pakistan’s national security. This move may encourage other Western carriers to resume flights to Pakistan, boosting tourism and trade opportunities for the South Asian nation.

Top 5 surprisingly easy countries to do business in

Posted on by Max Tomlin

Now into its 16th edition, the World Bank’s Doing Business index continues to champion both regulatory quality and efficiency. With 128 economies all introducing substantial improvements, this year’s report recorded a total of 314 regulatory reforms between June 2017 and May 2018. Unsurprisingly, New Zealand, Singapore, Denmark, Hong Kong and South Korea once again make up the top five; however, many other countries performed better than expected.

1 – Georgia (6th)
Georgia continued its impressive climb as it registered sixth in this year’s rankings. Last year’s report recorded 44 business reforms in the Eurasian nation, with 673 improvements launched overall across the past 15 years. Georgia outranked countries such as Sweden, Finland and Australia. Registering a business in Georgia involves just two procedures – taking an average of only 20 days – and, as such, it is regarded as the second most accessible place to start a business. Other recent reforms include granting protection to minority investors, where it also ranks second in the world, and improvements to the insolvency resolution process.

2 – Macedonia, FYR (10th)
Macedonia, currently in the process of changing its name to the Republic of North Macedonia, climbs into the top 10, leading the way for Balkan states. Second place in the region is Slovenia, 30 places below. As with Georgia, Macedonia ranks well in terms of protecting minority investors (seventh), while also fairing well in dealing with construction permits. Getting electricity and enforcing contracts – both of which became more difficult in 2017 – are currently the most significant challenges in the country.

3 – Lithuania (14th)
This year Lithuania climbed to its highest ever ranking, as neighbouring nations fell down the table. Lithuania is ranked as a top 10 country in three categories: dealing with construction permits, registering property and enforcing contracts. Registering property is a particular highlight, with the country ranking third in the world, but resolving insolvency requires work, ranking 85th. The report noted improvements in four different categories: protecting minority investors, paying taxes, trading across borders and labour market regulation. This progression follows consistent reform since 2011.

4 – Estonia (16th)
Touted as ‘E-stonia’ – in 2000, the country declared internet access a human right – this Baltic state has long been a champion of digital technologies. Once aged 15, Estonians are granted e-identities, providing means of entry to over 4,000 different services. Despite falling four places when compared to the previous year, Estonia remains a leading nation within Eastern Europe. Known for having one of the most competitive tax regimes in the developed world, this year’s Doing Business report ranked Estonia 14th for paying taxes. Where the country falls down is in protecting minority investors, where it ranks a disappointing 83rd.

5 – Mauritius (20th)
This tiny island in the Indian Ocean – located 2,000km east of the African coast – climbs into the top 20 of the rankings for the first time since 2013. The report recognised improvements in eight different sectors, with its best ranking coming in terms of paying taxes, where the nation ranked sixth overall. Prime Minister Pravind Jugnauth, leader of the Militant Socialist Movement, said: “Mauritius has been transformed into a huge construction site, with projects being implemented across the country.” The government’s determination to improve the lives of the entire population is clearly paying off.

Malaysia files criminal charges against Goldman Sachs over 1MDB scandal

Posted on by Max Tomlin

Malaysia has brought criminal charges against Goldman Sachs, along with two of its former employees, in connection with a corruption and money-laundering probe at state fund 1Malaysia Development Bhd (1MDB).

These charges are the latest progression in a scandal that has shocked the investment banking industry

The US investment bank has faced scrutiny in recent months for its role in helping raise $6.5bn through three bond offerings for the 1MDB.  It is currently under investigation in at least six countries.

Malaysia’s Attorney General Tommy Thomas said in a statement on December 17 that charges had been filed against “subsidiaries of Goldman Sachs investment bank,” along with “key employee” Tim Leissner and former 1MDB employees Jasmine Loo Ai Swan and Low Taek Jho. A second Goldman Sachs employee, Roger Ng Chong Hwa, will be charged shortly.

The charges “arise from the commission and abetment of false or misleading statements by all the accused in order to dishonestly misappropriate [$2.7bn] from the proceeds of three bonds issues by subsidiaries of 1MDB, which were arranged and underwritten by Goldman Sachs,” Thomas continued in the statement.

Goldman Sachs has denied all wrongdoing. In an emailed statement, it described the charges as “misdirected,” adding that the bank continues to cooperate with all authorities in their investigations.

The investment bank is alleged to have pocketed $600m in fees from underwriting the three bonds, which have a total face value of $6.5bn. Thomas described the fees as “several times higher than the prevailing market rates and industry norms.” Leissner and Ng reportedly received part of the misappropriated Bond proceeds, along with “large bonuses and enhanced career prospects… in investment banking.”

Thomas labelled the allegations “grave violations of our securities laws,” adding that Malaysia will seek criminal fines “well in excess” of the value of the original misappropriated capital. The country will also seek jail terms of up to ten years for each of the individuals accused.

“Having held themselves out as the pre-eminent global adviser / arranger for bonds, the highest standards are expected of Goldman Sachs. They have fallen far short of any standard. In consequence, they have to be held accountable,” Thomas’ statement concluded.

Both Leissner, Goldman Sachs’ former South East Asia chairman, and Ng, a managing director, were served with criminal charges relating to the 1MDB case in the US last month.

Leissner pled guilty in the US to conspiring to launder money and the Foreign Corrupt Practices Act. Ng continues to be detained in Malaysia and is facing extradition to the United States.

These charges are the latest progression in a scandal that has shocked the investment banking industry in its scope. According to US authorities, the $2.7bn embezzled from the state fund was used to purchase art, property, a private jet, and even to finance the production of the Wolf of Wall Street film.

No date has yet been set for legal action to begin in Malaysia. Lawyers representing Leissner and Ng were not immediately available for comment on the charges.

 

Green sukuk will be vital to achieving COP21 goals

Posted on by Max Tomlin

The Paris Agreement – commonly referred to as COP21 – set out to limit the rise in global temperature to two degrees Celsius above pre-industrial levels. In October, the Intergovernmental Panel on Climate Change (IPCC) recommended reducing this cap to 1.5 degrees Celsius, stating that “rapid, far-reaching and unprecedented changes” must be taken to curb the harmful effects of global warming.

As such, it’s terribly disappointing that the US pulled out of the Paris Agreement. In the G20’s latest meeting, the group of industrialised nations were unable to reach an agreement regarding COP21, with the US reiterating its desire to withdraw from the accord and its intention to use all available energy sources.

Unsurprisingly, these actions sent shockwaves around the world, with many speaking out against the US’ decision. “We will no longer sign commercial agreements with powers that do not respect the Paris accord,” said French President Emmanuel Macron during the 73rd session of the UN General Assembly in New York. Just one day later, Macron confirmed the unfortunate impasse at the second One Planet Summit, but refused to admit defeat: “The Paris Agreement was supposed to be dead because of one decision. [But] climate change is not an agreement or a decision made by heads of states and governments.”

US President Donald Trump, meanwhile, has added fuel to the fire, using the ‘gilets jaunes’ (yellow vests) movement to attack the Paris Agreement. And yet, the movement arose as a response to rising fuel prices – it’s not an anti-environment movement. The recent protests on December 8, for example, took place at the same time as a climate march, which a number of yellow vests joined.

These immature actions from the Trump administration will decelerate the progress of environmental protection efforts. I believe the US must fulfil its moral responsibility and rejoin the Paris Agreement, perhaps even taking the lead in this global effort. Indeed, the world is in need of a binding environmental deal – agreeing to anything else would be worthless.

Arresting climate change
Our generation is the last to avoid – or, at least, the last to still have the opportunity to minimise – the catastrophic effects of climate change. In other words, we now know the impacts of global warming and it’s up to us to implement smart initiatives to arrest it.

During a recent IPCC meeting, South Korean President Moon Jae-in proposed a number of significant goals for climate change adaptation and elimination. But in order to reach Moon’s targets, the whole world has to contribute – we must uphold our moral responsibility, otherwise there will be no future generations left. To do so, we have to propose an energy strategy that discourages the use of fossil fuels and nuclear power in favour of natural gas and renewable energy sources, such as wind, solar and hydroelectric power. This involves phasing out coal-fired power stations and improving facilities to cut toxic emissions. Finally, we must suspend the construction of new nuclear reactors and shut down existing nuclear reactors.

Fortunately, the One Planet Summit saw a number of political and business leaders commit to tackling climate change: BlackRock, for example, promised to launch an investment fund to finance the development of renewable energy and low-carbon transport in Africa, Asia and Latin America; the World Bank pledged to launch a $1bn platform for developing battery storage technology; and the EU promised to allocate 25 percent of its next budget, earmarked at €320bn ($363.8bn), to climate initiatives. Of course, these are great gestures, but are they enough?

Laws of nature
Islamic banking is a natural fit when trying to meet the goals set out by both Moon and COP21. Sharia law has long laid out basic provisions for protecting the environment – unfortunately, these have not always been recognised. It also addresses the need for all community members to preserve the environment in all respects. As such, Sharia law has proven its absolute leadership in protecting the environment and, in turn, the climate.

The world is in need of a binding environmental deal – agreeing to anything else would be worthless

There are several categories of Islamic banking products, with sukuk being the best known among them. A sukuk is similar to a bond, but it complies with Sharia law. Broadly speaking, a sukuk buyer has the ownership interest of the underlying, Sharia-compliant asset. In recent years, the sukuk market has been attracting more and more conventional investors, who increasingly favour ethical investment funds. Consequently, the industry is expanding at a rapid pace.

In 2002, the Luxembourg Stock Exchange became the first European exchange to list sukuk. Since then, it has listed sukuk from issuers in Malaysia, Pakistan, Saudi Arabia, Qatar, Bahrain, the UAE, the US, Hong Kong and South Africa. What’s more, Luxembourg issued the first sovereign sukuk, which was denominated in euros, in 2014.

Given this growing interest, the Islamic banking market is expected to reach $4trn by 2025. Encouraging and favouring investments in sustainable, renewable and responsible projects will further enhance this growth, while also helping to diversify its funding sources.

Green sukuk
Since the European Investment Bank issued the first green bond in 2007, the market has grown substantially, with total green bond issuance now nearing the $500bn mark. Moreover, S&P Dow Jones, Barclays MSCI and Bank of America Merrill Lynch have all launched green bond indices in recent years.

Green sukuk are similar to other debt instruments and offer attractive returns, but they also come with the added promise of using the proceeds to finance the world’s transition to a low-carbon economy. As such, green sukuk can help to combat climate change by paving the way for climate-smart investments in environmentally friendly projects that are based on sustainable resources. Tadau Energy, for example, issued the world’s first green sukuk in July 2017 for MYR 250m ($59.6m) in order to finance a solar power plant in Malaysia. Indonesia issued the first green sovereign sukuk for $1.2bn soon after.

As defined by Climate Bonds Initiative, eligible assets for green sukuk include: solar parks, biogas plants, wind energy projects, renewable transmission and infrastructure projects, and electric vehicles. Equally, they can be used to subsidise a government’s green payments. The Climate Bonds Initiative is an international, investor-focused, non-profit organisation, and is the only body of its kind working solely to mobilise the $100trn bond market towards climate change solutions.

Extraordinary opportunities
In its recent report on green sukuk issuance, S&P Global explained that a large number of countries are targeting a higher contribution of clean energy within their energy mix. For example, the Association of South-East Asian Nations and the Gulf Cooperation Council (GCC) have set ambitious targets to invest in renewable energy.

This promises vast opportunities for investors. Indeed, directly after the Paris Agreement was signed, the International Finance Corporation, a member of the World Bank Group, calculated investment opportunities in infrastructure and climate-smart solutions to be worth a whopping $23trn.

Green sukuk can help to combat climate change by paving the way for climate-smart investments in environmentally friendly projects that are based on sustainable resources

The International Energy Agency, meanwhile, expects energy demand to increase significantly over the next 25 years. As such, substantial investments will be required to meet growing demand. What’s more, BP’s yearly forecast for the global energy market, published in February, suggests that renewable energy will play a commanding role in the future. In fact, BP estimates that, if current trends continue, renewables will grow by some 400 percent by 2040.

In my opinion, sukuk have proven their practicality for financing projects that are socially and ethically responsible, especially when it comes to infrastructure. Sukuk are becoming more common and attracting a greater number of investors – both conventional and Islamic – who are interested in socially responsible finance.

Based on my 25 years of experience in global banking, I believe green sukuk are a unique ‘win-win’ product for investors from cash-rich GCC and Islamic countries. They also offer a great opportunity for stakeholders seeking to generate excellent returns on their capital and for the large number of people who will benefit from the resultant employment opportunities.

A growth industry
The Islamic banking sector is charged with promoting the green sukuk market. It can do so by driving demand for climate-smart investments, while also enticing the Islamic capital market, takaful and retakaful operators (insurance companies that comply with Sharia law), sovereign wealth funds and Islamic banks to mobilise funding for green asset funding.

Over time, the sukuk market will become established – particularly as more green sukuk come to market – attracting conventional and Islamic investors alike. As a result, more players will realise their credibility and profitability, which, in turn, will help achieve greater growth. This will finally catalyse the move towards environmentally friendly projects, leading to heightened climate resilience. All of this will be achieved while creating a profitable market that presents great employment opportunities and reduces living costs for billions of people around the world.

Personally, I wish to see sukuk – especially green sukuk – occupy an enhanced position in the global market. I believe that Islamic banking has a responsibility to act as a guardian of natural wealth for future generations. I also believe that green sukuk can change the world for the better by contributing significantly to the financing of climate-smart projects.

Mourad Mekhail is a former Wall Street banker and an expert in financial services. He earned his MBA in International Economies from Trier University, Germany. Mekhail has served as Advisor to the Board of Directors at Kuwait International Bank since 2011, following stints at Merrill Lynch, UBS, LBBW and Credit Suisse.

Credit Suisse reveals $1.5bn share buyback for 2019

Posted on by Max Tomlin

Credit Suisse has announced that it will buy back ordinary shares up to the value of CHF 1.5bn ($1.5bn) in 2019, as the bank completes its ambitious three-year restructuring programme.

The Swiss lender also plans to increase its share dividend by at least five percent from 2019 onwards, according to a statement released by Credit Suisse ahead of its investor day on December 12. “The actions taken during the restructuring mean that the bank is now more resilient in the face of market turbulence,” said Credit Suisse CEO Tidjane Thiam.

Credit Suisse expects to achieve a pre-tax income of up to $3.4bn in 2018, signalling its first full-year profit since Tidjane Thiam became CEO

Since Thiam’s appointment in 2015, Credit Suisse – Switzerland’s second-largest bank – has embarked on a major reshuffle of its business operations. During his tenure, the CEO has restored Credit Suisse’s wealth management business to profitability, reduced operating costs across the board and eliminated a number of key risks from its global operations.

The Swiss bank now expects to achieve a pre-tax income of up to CHF 3.4bn ($3.4bn) in 2018, signalling its first full-year profit since Thiam took up his post. This figure represents a 20 percent increase in profits from 2015.

In the press release, Credit Suisse stated that it aims to “distribute at least 50 [percent] of net income” to shareholders in the coming years through its combined share buyback and increased dividend programme. It also hopes to increase profitability in 2019 and 2020, despite anticipating economic headwinds caused by geopolitical tension and central bank policy changes.

The bank has identified ultra-high-net-worth and high-net-worth individuals as key growth points for its wealth management division, and will aim to leverage its “full suite of investment banking solutions to meet their private wealth and business needs”. Thanks to these measures, Credit Suisse hopes to achieve a reported return on tangible equity of at least 10 percent in 2019.

Although Credit Suisse was one of the lenders least affected by the 2008 financial crisis, it has been embroiled in several tax evasion scandals since, paying out a number of costly settlements as a result.

To turn a profit in 2018, therefore, would be clear vindication of the bank’s strategy under Thiam’s leadership, and an excellent omen for its future operations. This success would not have been possible without the loyalty of Credit Suisse’s shareholders and, as such, the proposed buyback scheme is an opportunity to reward them financially.

Macron seeks to curb violent ‘gilets jaunes’ protests with tax cuts and concessions

Posted on by Max Tomlin

French President Emmanuel Macron has announced a catalogue of emergency measures – including a rise in minimum wage and the scrapping of additional tax for pensioners – in an attempt to quell the violent protests that have raged across the country for the past two weeks.

In a televised mea culpa on December 10, Macron acknowledged that the protestors’ anger was “deep and in many ways legitimate”. The French president pledged to “respond to the economic and social urgency with strong measures, by cutting taxes more rapidly, by keeping… spending under control, but not with U-turns”.

In response to the civil unrest, Macron has promised to increase the minimum wage by €100 ($114) per month, starting in January. Taxes on overtime pay will also be abolished, while a tax hike planned for pensioners will be scrapped.

In response to the civil unrest, Macron has promised to increase the minimum wage by €100 ($114) per month, starting in January

However, the defiant president refused to reinstate the controversial wealth tax that once applied to anyone with assets over €1.3m ($1.5m). The tax was replaced in January 2018 by a levy that solely applies to property. Macron, a former banker, has been dubbed the “president of the rich” by critics due to his pro-business and pro-wealth policies.

The emergency measures to appease protestors will cost between €8bn ($9.1bn) and €10bn ($11.4bn), according to Olivier Dussopt, a junior minister who oversees public accounts. Dussopt told BFM TV: “We are in the process of fine-tuning and seeing how to finance [the measures].”

Demonstrations by a protest group, dubbed the ‘gilets jaunes’ (yellow vests), turned violent on the first weekend of December, when the grassroots revolt against a rise in fuel tax was quickly hijacked by fringe dissidents determined to cause havoc across the nation.

In the latest round of demonstrations, shops and buildings were burned, smashed and looted, cars were set on fire, and police used water cannons and tear gas to restrain protestors. Across the country, 1,723 people were arrested, 1,220 of whom remained in custody overnight. As many as four people are thought to have died since the revolts began.

In his speech, Macron openly condemned the violence, stating that “no anger justifies attacking a gendarme or a police officer”. The French president also acknowledged the long-running nature of many of the protestors concerns: “These are 40 years of malaise that have come to the surface. Without doubt we haven’t been able to provide a response that was strong or quick enough.”

In an interview on the RTL radio station, France’s finance minister, Bruno Le Maire, warned that fallout from the protests could cause GDP to fall 0.1 percent in Q4 2018, leading to “fewer jobs” and “less prosperity for the whole country”. He added: “What is important now is to put an end to the crisis and find peace and unity in the country again.”

While street uprisings have been a fairly consistent feature of French life since the May 1968 protests, which effectively shut down the government, the level of violence seen during this round has shocked citizens and politicians across the nation. The introduction of emergency measures signifies that Macron is treading a fine line between appeasing protestors and protecting citizens, while also remaining committed to his campaign promises.

The real test will come on December 15, when the president, and indeed the country, will find out whether he has done enough to prevent a fifth weekend of anti-government demonstrations.

Violence in France is the latest setback for Macron’s reform agenda

Posted on by Max Tomlin

On December 2, French President Emmanuel Macron landed in Paris following the G20 summit in Buenos Aires contemplating the declaration of a state of emergency. Earlier that same day, flames engulfed the Avenue des Champs-Élysées as 36,000 disgruntled citizens took to the streets of central Paris.

Critics claim the tax will disproportionally hit those on low incomes living in rural areas

Heading straight to Avenue Kléber from the airport, a chorus of cheers and boos greeted the president as he observed the damage. Overturned cars, smashed shop windows and destroyed ATMs demonstrated the extent of the anger that has gripped the nation. For three weeks, the ‘gilets jaunes’ (yellow vests) have peacefully protested against Macron’s proposed fuel tax. The first weekend of December, however, saw the clashes turn violent: at least 412 arrests were made, while 263 people were injured and three others killed.

Shopkeepers had prepared for a fruitful weekend following the switch-on of the Champs-Élysées’s iconic Christmas lights, but were forced to close their doors as a battle between police and protestors ensued in the French capital.

Touted as the ‘president of the rich’, Macron’s pro-business reforms have been criticised by students and those on the political left as favouring the wealthy over the poor. During his brief presidential reign, protests and scandals have been a common occurrence. With a commanding majority in the National Assembly, opposition to En Marche! has taken to the streets.

The price of diesel, the most commonly used fuel in French vehicles, has risen 23 percent over the last 12 months. The fuel tax is part of an ambitious plan for France to become carbon neutral by 2050. The plan includes detailed commitments to end coal power by 2022, cease French oil and gas production by 2040 and a proposed ban on the sale of petrol and diesel cars by 2040.

Critics claim the tax will disproportionally hit those on low incomes living in rural areas, who have no choice but to drive to work. With fuel prices at their highest level since the early 2000s, a proposed increase of 6.5 cents on diesel and 2.9 cents on petrol effective from January 1, 2019, was the tipping point.

Macron insisted he would never make a U-turn on policy because of street protests in an attempt to distance himself from former presidents. However, on this occasion, the substantial response has forced Macron to rethink his strategy. On December 4, Prime Minister Édouard Philippe announced the suspension of the tax for six months.

Growing inequality
Along with other developed or developing nations, income inequality has skyrocketed in France. With an estimated 8.8 million people living in poverty, the bottom 20 percent of the population earn almost five times less than the top 20 percent. “The problem for Macron is that this has moved so quickly from being a protest against fuel taxes to becoming a whole catalogue of social and economic grievances,” says James Shields, Professor of French Politics at the University of Warwick.

Unemployment has consistently stood above nine percent – one of the highest rates of any EU member state. Macron has pledged to cut this to seven percent within five years. One of the president’s first reforms was to make it easier for businesses to hire and fire staff.

Parisian technician Idir Ghanes told the Guardian: “We have low salaries and pay too much tax and the combination is creating more and more poverty. On the other side, there are government ministers and the president with their fabulous salaries.” He added: “I just want a fairer distribution of wealth in France. I’m unemployed; it’s harder and harder to find a job and, even when you find this famous job, the salaries are so low you find you’re in the same situation as before, if not worse.”

Macron’s anti-populist En Marche! movement, described as “neither left or right”, pledged to unite a divided nation following the 2017 presidential election. Elected as the country’s youngest ever president, Macron was seen as a slick operator, a Europhile who embraced tolerance and internationalism. What French citizens have found instead, is a lofty arrogance and an unwillingness to hear criticism of his reform agenda.“Opposition to Macron is partly about policy but also largely about style,” Shields explains.

Out of touch
As the former economy minister under his predecessor Francois Hollande, economic reforms became a key aspect of Macron’s 2017 presidential campaign. Having afforded an estimated €40bn ($44bn) in tax breaks during the last government, Macron pledged to continue reducing taxes when in office – corporation tax, for instance, will gradually be reduced to 25 percent.

France is famed for having one of the world’s largest public sectors, where 56.5 percent of GDP is allocated to public spending. A key manifesto pledge was to cut that spending by €60bn. When it was announced that €25bn worth of savings would result in the loss of 120,000 public sector jobs over the next five years, a one-day nationwide strike – involving millions of public sector workers and supported by all nine of the country’s public sector unions – represented the first sign of discontent.

GDP growth has remained steady in France since the 2009 financial crash, though the rate has rarely exceeded two percent. However, months of rail strikes earlier in the year caused growth to slump to 0.2 percent during the first two quarters of 2018. In September, it was announced that France would show a deficit of 2.8 percent next year, compared to 2.6 percent this year, due to slowing growth and Macron’s changing tax regime.

The ‘gilet jaunes’ – a reference to the high-visibility yellow clothing worn by protestors – is a grass-roots movement attributed to the French working-class. It has encompassed a wide range of participants: both the left and right have joined forces in their opposition. Surveys have revealed the vast majority of French citizens support the protests, while Macron’s approval rating has hit rock bottom, standing at just 26 percent.

Shields believes Macron has responded too slowly to this crisis, giving time for the protests to gain momentum and, crucially, for French public opinion to solidify in support of the protesters.His promise upon election, to use his five years in office to ensure that none of those who felt driven to vote for the extremes will have cause to do so again, is looking rather fragile.

Top 5 philanthropic business leaders

Posted on by Max Tomlin

With every year that goes by, global inequality widens. According to a 2017 report by Credit Suisse, the globe’s richest one percent owns half of all wealth, equating to around $140trn. By contrast, the world’s 3.5 billion poorest adults account for less than 2.7 percent of global wealth, despite representing 70 percent of the working-age population.

In an attempt to close the wealth gap, many of the world’s richest donate a percentage of their earnings to help tackle societal ills, such as inadequate education, fatal diseases and malnutrition. World Finance takes a closer look at the planet’s five most generous business leaders.

5 – Michael Dell
As a freshman pre-med student at the University of Texas at Austin, Michael Dell set up PC’s Limited, an informal business that sold upgrade kits to his classmates for their personal computers. Just eight years later, Dell’s business – renamed Dell Computer Corporation – was booming. The company’s success saw Dell become the youngest CEO of a Fortune 500 company, aged just 27.

Alongside running his technology empire, Dell spends much of his time managing a philanthropic foundation with his wife, Susan. Funded by Dell’s personal wealth, the Michael & Susan Dell Foundation supports projects relating to urban education, child health and family economic stability, and seeks to provide aid in times of crisis. It recently pledged $36m to support relief efforts relating to Hurricane Harvey, which tore through the US in 2017.

In an attempt to close the wealth gap, many of the world’s richest donate a percentage of their earnings to help tackle societal ills

All in all, Dell has donated a whopping $2bn to philanthropic endeavours over the course of his lifetime – that’s nine percent of his estimated net worth.

4 – Phil Knight
It’s fair to say that Phil Knight’s fortune was born from his love of running. A prolific runner while studying at the University of Oregon (UO) in the 1950s, Knight decided to set up a sports apparel business called Blue Ribbon Sports in 1964, following an inspirational trip to Japan. That business would later become Nike, the world’s largest supplier of athletic shoes and clothing.

Knight is a noted philanthropist, having donated $3bn – 10 percent – of his $30bn personal wealth to charitable causes. Knight supports his alma maters – Stanford University and UO – the Oregon Ducks sports team and the Knight Cancer Institute at Oregon Health and Science University, to which he has donated over $600m. In 2016, Knight disclosed that he had also given $112m-worth of Nike stock to various charities.

3 – Michael Bloomberg
Michael Bloomberg’s accumulation of astonishing personal wealth began – somewhat ironically – with a firing. In 1981, the investment firm at which Bloomberg was a partner was bought out and he was laid off. While Bloomberg received no severance pay, he took $10m in equity, using the funds to set up the eponymous financial news and information provider we all know today.

During that time, Bloomberg’s personal fortune skyrocketed and, in 2009, he added $4.5bn to his pile in just 12 months, the world’s greatest wealth increase that year. Today, Bloomberg is estimated to be worth $50bn.

Bloomberg has always been a keen philanthropist and decided to set up his own foundation, which focuses on environmental, educational and arts causes, in 2009. In January 2014, he established a five-year, $53m initiative called Vibrant Oceans, which helps support the creation and maintenance of sustainable fish populations worldwide. In total, Bloomberg has donated an estimated $6bn to charitable causes, equating to 12 percent of his net wealth.

In January 2014, Michael Bloomberg established the Vibrant Oceans initiative, which helps support the creation and maintenance of sustainable fish populations worldwide

2 – Bill Gates
Bill Gates’ fate as a technology magnate was set when, at the age of 13, he received a computer from General Electric to help him learn Beginner’s All-purpose Symbolic Instruction Code – an opportunity he gladly took. Gates was instantly captivated, and his continued fascination with how computers work led him to found Microsoft in 1975.

For the next 30 years, Gates took charge of the company’s product strategy, overseeing the implementation of numerous programs, from Windows to Excel. By the time he left Microsoft in 2008 to pursue philanthropic projects full time, the company was bringing in $60m a year in revenue. The Bill & Melinda Gates Foundation (BMGF) was set up in 2000 to support a range of agricultural, health and policy causes, including helping developing countries combat malaria and support basic nutrition.

Through the BMGF – as well as on a personal basis – Gates has given away $41bn, representing 46 percent of his total wealth. This figure is set to almost double if Gates fulfils his 2010 pledge to donate 95 percent of his wealth before he dies.

1 – Warren Buffett
Often referred to as the “Wizard” or “Sage” of Omaha by media outlets for his legendary financial knowhow, Warren Buffett displayed an interest in economics at a young age, going on to graduate from the prestigious Columbia University as a Master of Science in Economics in 1951.

Buffett’s shrewd business sense made him a millionaire by 1962, having merged a number of key partnerships into one holding company, which later became Berkshire Hathaway. He became a billionaire in 1990, when his company began selling Class A shares. Today, Buffett is the world’s third-richest man, with a personal wealth of around $84bn.

Buffett has long stated his intention to give much of his fortune away to charity: in June 2006, he pledged to gradually give 85 percent of his Berkshire stock to five leading foundations, with the BMGF identified as the principal beneficiary. Today, much of his philanthropy is achieved through the Susan Thompson Buffett Foundation – named after his late wife – which supports causes such as reproductive health, family planning, education and conservation.

In 2010, Buffett, along with Gates and Facebook CEO Mark Zuckerberg, set up the Giving Pledge, which commits signees to donating at least 50 percent of their personal wealth to charity. Buffett has already succeeded in this noble goal, having donated $46bn to charity – a staggering 55 percent of his net wealth.

High corporate debt puts the US economy in jeopardy, says Fed

Posted on by Max Tomlin

The US Federal Reserve has identified high corporate debt, deteriorating credit standards and elevated asset prices as the largest risks to the US economy in its inaugural Financial Stability Report, released on November 28.

The report, which was produced by the Fed’s board of governors, indicates that business-sector debt relative to GDP is “historically high”, particularly in riskier forms of business debt such as high-yield bonds and leveraged loans. This is a significant source of concern, as a hike in federal interest rates could make these loans untenable for high-risk borrowers.

Credit standards were also flagged as a particularly high-risk area, with poor underwriting making a comeback in a manner not seen since before the 2008 financial crisis. While the US’ strong economic performance has ensured concerns surrounding leveraged loans have not come to fruition, a slowdown in overall growth could hit borrowers particularly hard.

Credit standards were flagged as a particularly high-risk area, with poor underwriting making a comeback in a manner not seen since before the 2008 financial crisis

The report said: “[Asset valuations are] generally elevated, with investors appearing to exhibit a high tolerance for risk-taking, particularly with respect to assets linked to business debt.”

Meanwhile, the Fed flagged potential concerns in commercial real estate, as prices “have been growing faster than rents for several years”. Agricultural land prices are also “near historical highs”, signalling a potential crisis for farmers in 2019, particularly in the context of President Donald Trump’s threats of retaliatory tariffs on agricultural commodities.

Nevertheless, the report did state that “banks appear well positioned to maintain capital through maintained earnings”, while also noting that many were keeping “regulatory buffers” in case of a crisis.

The Fed regularly conducts stress tests on the nation’s largest banks to ensure they are able to survive catastrophic global financial circumstances. The results of the latest test, published in June, demonstrate that banks would be able to continue lending even during a severe global recession.

Looking ahead, the report identified Brexit and “euro area fiscal challenges” as significant risks to US markets and institutions, with “market volatility and a sharp pullback of investors… from riskier assets” likely in the near future. Slowing economic growth in China and increases in emerging market debt have also been signalled as potentially damaging to the US economy.

The Fed has previously lagged behind other countries’ reserve banks in producing stability data, but recently committed to releasing this type of report on a biannual basis in order to “promote public understanding and increase transparency and accountability” of its views on financial resilience.

The unknown financial effects of Brexit and Italy’s budget crisis, as well as the potential for further deterioration in the US-China trade war, has meant that investors have endured a nail-biting few months. By identifying these key risk areas, the Fed is signalling that it is highly aware of potential crises and is taking steps to ensure that their effects are limited. This level of mindfulness and action was certainly not present before the 2008 financial crisis and that, in itself, should provide some relief for investors.