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Credit Suisse CEO sees business ‘going in right direction’

Credit Suisse CEO sees business ‘going in right direction’

FILE PHOTO: The logo of Swiss bank Credit Suisse is seen at a branch office in Basel, Switzerland March 2, 2020. REUTERS/Arnd Wiegmann
ZURICH (Reuters) – Business conditions are improving after a tough start to the year, Credit Suisse (CSGN.S) Chief Executive Thomas Gottstein said in a presentation released on Wednesday.

“Those early indications that we have seen now in the last couple of weeks have been actually quite promising and going in the right direction. We clearly had a lot of stress in the system in the second half of March but things really calmed down in April and they continue to be quite robust in May and June,” he said in an audiocast for a Goldman Sachs conference.

“So far, so good. Clearly we expect very bad economic data for Europe and the U.S. for Q2 but overall actually if I speak to my colleagues on the corporate banking side in Switzerland, to my colleagues in investment banking, we actually see high engagement with our clients and that makes me actually feel quite optimistic in the circumstances.”

Increased activity within its private banking business was more than compensating for a reduction in recurring revenues caused by a drop in the level of managed assets, Gottstein said, adding asset levels were now also recovering.

Switzerland’s second-biggest bank was also seeing a “very high degree” of appetite from its corporate customers to refinance themselves either through equity or debt, Chief Financial Officer David Mathers said, adding capital markets activity was picking up across the market.

Gottstein reiterated the bank’s mid-term return on tangible equity target, repeating comments made in April that for 2020, the bank could not commit to its 10% target due to ongoing uncertainty.

The bank still expects to pay the second half of its 2019 dividend in the fourth quarter, and would consider resuming a share buyback suspended during the coronavirus pandemic after seeing the financial results of the second and third quarters, he said, noting decisions on both were still pending.

Reporting by Brenna Hughes Neghaiwi and Oliver Hirt, Editing by Michael Shields

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What rebound? North Dakota in economic crunch as virus batters oil, agriculture

Laila Kearney, Karl Plume
7 MIN READ

NEW YORK/CHICAGO (Reuters) – When the novel coronavirus first appeared in the United States, North Dakota was in the envious position of having more money in its state coffers than it had budgeted.

Now, it is making sweeping cuts to state agencies in a bid to stem the financial bleeding from a historic oil price collapse sparked by the coronavirus pandemic, and a battered farm economy still struggling with the fallout from the U.S.-China trade war.

Governor Doug Burgum has asked state agencies to begin slashing upcoming budgets between 5% and 15% to weather what he has described as an economic Armageddon as energy-related revenues plummet.

North Dakota is among the states most dependent on both energy and agriculture. The impact of the virus and trade war on its lifeblood industries could ripple through its budget for years through cuts to education, government and highway services.

With North Dakota generally maintaining a balanced budget and carrying little debt, its current struggles point to a long road to recovery for other U.S. states dependant on commodity production, many that were already on shakier financial ground when the virus hit. For a graphic, click tmsnrt.rs/2YqeVYr

Oklahoma, one of the top producers of oil and wheat in the country, is projecting a $1.36 billion hole in its budget from the downturn. Alaska has suffered a credit downgrade, while New Mexico and Oklahoma have been given negative credit outlooks, meaning they’re are on the verge of being downgraded.

“Never after 25 years of working on the state budget have I been through a more volatile period of tremendous and multi-faceted changes,” said Joe Morrissette, director of the state’s Office of Management and Budget.

The state’s unemployment rate jumped to 8.5% in April, up from just 2% in March. Rising unemployment could cut North Dakota’s tax revenues in half, according to North Dakota State University economists. State GDP may drop by 15% to 25% within a year, the economists said, putting it near the lowest in a decade.

Signs of trouble are appearing across the state. At truck dealerships in the more-populous east, untouched rows of shiny vehicles are finding few buyers.

There was a 29% drop in sales of medium and heavy-duty vehicles, and a 4% decline of lighter auto sales, in the first four months of 2020 compared to the same period last year, according to the latest data from the National Automobile Dealers Association.

Extended stay hotels in the state’s oil patch, normally buzzing with oilfield workers, sit largely unoccupied.

“This energy slowdown happened right in conjunction with coronavirus. Our hotels went from a 70% to 80% occupancy rate to a 20% occupancy rate,” said Rachel Richter Lordemann, president of the Williston Area Chamber of Commerce.

Mineral rights owners, many who supplement their retirement income with royalty payments from oil and gas production in the state, have seen an 85% cut in payments compared to January, said Bob Skarphol a retiree with mineral rights and head of the Williston Basin Royalty Owners Association.

“If you’re someone who’s living month to month on oil revenue, a drop like that is very significant and can force you to choose what not to pay – do you not pay your utility bill, do you not buy your drugs, do you not buy food?” Skarphol said.

In Williston, an oil hub that has more than doubled in population over the last decade, specialty kitchen store Cooks On Main is selling far fewer pricy espresso machines and cutlery sets and far more staples like yeast, flour and coffee amid the pandemic and the oil crisis.

“Everybody, no matter what industry you’re in, is feeling some sort of negative impact,” said owner Angela DeMars-Skogen.

TAX REVENUES ERODE
Taxes collected on oil production – the biggest contributor to North Dakota’s tax revenue – more than halved to $95 million in March from around $200 million previously, said Morrissette.

Oil producers have cut output quickly in North Dakota as benchmark prices fell below their costs of production. North Dakota’s shale patch is prolific – the second largest in the country – but it’s more expensive to pump oil from the state than from the giant shale fields of Texas.

Half of those revenues, which were projected to total $4.9 billion over the state’s two-year budget, are redistributed to the school districts and localities where energy is produced, which will now get less than what was budgeted for.

The rest goes into a series of special-purpose state funds and to North Dakota’s general fund, the primary cash account that pays for day-to-day operations of the widest range of state agencies, from its university system to law enforcement.

DOWN ON THE FARM
Farming, the state’s biggest industry and responsible directly or indirectly for nearly a quarter of all its jobs, is in a prolonged downturn, North Dakota Agriculture Commissioner Doug Goehring said. The sector has suffered a string of crises in the past three years, from low prices due to global oversupply to crop-damaging storms and the U.S. trade war with China. North Dakota typically sells about two-thirds of its soybean crop to China, but those sales have been curtailed since 2018 due to the trade war.

North Dakota’s farmers are cutting spending and hoarding grain instead of selling at loss-making prices, with spring stockpiles of corn and soybeans reaching the second highest on record for the state.

Paul Sproule, a farmer in Grand Forks, would normally trade in tractors and combine harvesters every two to three years for new ones. He is sticking with his existing farm fleet this year instead.

“The economics aren’t there,” said Sproule. “You get what you absolutely need and repair what you’ve got. We’ll be doing no purchasing at all.”

Five months after the two countries signed an interim trade deal that should have revived sales from North Dakota, tensions with China have risen over the virus, as well as China’s policies toward Hong Kong.

A survey by the Minneapolis Federal Reserve Bank found that 82% of agricultural lenders expect second-quarter farm incomes in North Dakota to fall from a year earlier, and 76% expect farm capital spending to decrease.

The impact from the downturn will be more acutely felt once harvesting begins in late summer and farmers are unable to turn a profit on grain sales, said Frayne Olson, an agricultural economist at North Dakota State University.

“There are only one or two crops, given today’s prices, that a farmer can make any money on, and they are not the major ones like corn, soybeans or wheat,” Olson said.

Editing by Simon Webb and Edward Tobin

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Wall Street and Fed fly blind as coronavirus upends annual stress tests

Pete Schroeder
5 MIN READ

WASHINGTON (Reuters) – U.S. financial regulators, banks and their investors will get their first glimpse into the health of the nation’s banking system as it confronts soaring corporate and consumer defaults in the economic crisis sparked by the novel coronavirus.

And no-one, including the U.S. Federal Reserve which sets the annual bank “stress test” exams, has a clue what to expect.

“That is the $100,000 question. Actually, it’s much bigger than that and I am sure the Fed is working hard to get it right. We’re curious, and we don’t have clarity,” said Kevin Fromer, CEO of the Financial Services Forum, which represents the biggest banks in the U.S.

Factbox: What’s new with the Fed’s 2020 bank stress tests?
That could mean banks may be on the hook for billions more in capital than they had anticipated, which could ultimately force them to slash dividends, slim down their balance sheets or reduce lending.

Since the 2009 financial crisis, the Fed has tested annually a snapshot of big bank balance sheets against an extreme hypothetical economic shock. The results ultimately dictate how much capital banks can dish out to shareholders.

This year, however, the real life economic blow dealt by the pandemic has by several measures exceeded the doomsday scenario the Fed unveiled in February, leading some banks to grumble it may as well scrap the tests this year.

Instead, the Fed told banks after they had handed in their exam papers in April that it was adding an extra test to reflect the rapid deterioration of economic conditions in recent months.

That eleventh-hour change combined with other tweaks the Fed passed last year has thrown the stress test playbook out the window.

“Unnecessarily increasing bank capital could serve to limit bank balance sheets at exactly the wrong time, likely chilling economic recovery,” the Securities Industry and Financial Markets Association wrote in a note on Friday in which it urged the Fed to stick to its original plan.

While the banking sector has so far proved resilient, some Fed officials worry it will come under greater stress as mass unemployment leads to more corporate and consumer debt defaults, according to minutes from the Fed’s April meeting

The country’s largest four lenders – JPMorgan Chase & Co (JPM.N), Wells Fargo & Co (WFC.N), Bank of America Corp (BAC.N), and Citigroup Inc (C.N) – combined put aside $20 billion to cover expected loan losses in the first quarter alone. Those lenders, alongside Goldman Sachs Group Inc (GS.N) and Morgan Stanley (MS.N), are among the 34 banks to best tested this year.

Banks say they are in the dark about the potential outcome because the Fed hasn’t provided any details on how the extra analysis will work or which factors it plans to probe.

Some analysts expect the central bank to adjust for more job losses, which has already blown through the 10% level outlined in its February scenario, and to significantly raise lenders’ potential loan loss rates from the roughly 6% of previous years.

Nellie Liang, a former Fed official who is now a senior fellow at Brookings Institution, said the central bank will likely also probe banks’ exposures to struggling sectors like hotels.

“From a credibility standpoint, they need to be very severe, not just try to catch up with what’s already happened,” said Tim Clark, another former Fed official who helped build the stress tests and now works with the advocacy group Better Markets.

Regulatory changes to the tests agreed before the pandemic have created another unknown. This year the Fed will integrate the stress test results with other capital rules so as to better tailor banks’ overall capital level to their business mix.

Analysts at Keefe, Bruyette & Woods and Evercore ISI have said they expect the tests to result overall in less excess capital which may force banks to cut dividends. While the Fed declined to comment, some officials have said lenders should be prepared for that outcome, according to the April minutes.

But with pressure from the government and lawmakers to keep banks lending, some analysts are leaning the other way. Goldman Sachs said in a note last week that while the Fed could order higher bank capital, it may actually lower requirements “given the extra-ordinary demands on balance sheets.”

Reporting by Pete Schroeder; editing by Michelle Price and Edward Tobin

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Money markets raise bets that British interest rates will drop below zero

LONDON (Reuters) – Money markets ramped up expectations of negative interest rates in the United Kingdom for the first time ever as policymakers debated further steps to support the struggling British economy, yanking the pound to more than a three-week low.

Unlike the United States where Federal Reserve officials have portrayed a more unified stance in dismissing negative interest rate talk, comments by Andy Haldane, the Bank of England’s chief economist, over the weekend fuelled speculation that British officials are not averse going down that path.

“While we don’t think that negative interest rates are a near term possibility as the central bank has a few more bullets left, Haldane’s comments opens the door to that possibility,” said Lee Hardman, an FX strategist at MUFG in London.

The central bank is looking more urgently at options such as negative interest rates and buying riskier assets to prop up the country’s economy as it slides into a deep coronavirus-driven slump, Haldane was quoted as saying in the Telegraph newspaper over the weekend.

Top BoE officials have previously expressed objections to taking rates below zero – as the central banks of the euro zone and Japan have done – because it might hinder the ability of banks in Britain to lend and hurt rather than help the economy.

But with the BoE’s benchmark at an all-time low of 0.1% and Britain facing potentially its sharpest economic downturn in 300 years, talk of cutting rates to below zero has resurfaced.

Futures contracts from December 2020 have dipped into negative territory while contracts maturing in June 2021 are pricing in as much as minus 0.03% in benchmark policy rates.

The possibility of negative interest rates would also hurt the pound more at a time when the stalemate between Britain and the EU on Brexit talks is keeping investor sentiment downbeat.

The latest round of Brexit negotiations has raised the prospect that there will be no deal struck on Britain’s formal departure from the bloc after the end of the current transition period at the end of this year.

Reporting by Saikat Chatterjee; Editing by Simon Jessop and Toby Chopra

Source: Reuters.com

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Africa’s GDP to grow by $300 billion a year should countries adopt technology

Finance Minister Ken Ofori-Atta says research has revealed that Africa’s Gross Domestic Product (GDP) will grow by $300 billion a year by 2025 should African countries adopt digital technology.

He said there is the need for African countries to fast-track policies and programmes towards leveraging on technology for economic growth.

“If we digitise as a continent, we can see 10 per cent growth of our GDP because of technology.
“South Africa reduced cost by 22 per cent and revenues picked up in Rwanda by six per cent because of digital technology,” he said.

Mr Ofori-Atta made these remarks when speaking at the launch of an Integrated ICT System for Microfinance and Small Loans Centre(MASLOC) at the Jubilee House, in Accra.

The IT system is an innovative solution to address payment and settlement challenges facing MASLOC to enhance transparency and accountability in the disbursement and recovery of loans.

Mr Ofori-Atta lauded Vice President Bawumia for championing the government’s digitisation agenda saying it is the way forward towards formalising and transforming the Ghanaian economy.

However, the Minister admitted that the country has not reached digital maturity yet, and underlined the need to continue pursuing digital infrastructure to accomplish that agenda.

Commenting on the impact of the COVID-19 pandemic on the Ghanaian economy, the Finance Minister admitted that it was practically impossible for government to sustain the economy following the imposition of a partial lockdown in Accra, Tema, Kasoa and Greater Kumasi.

He explained that it was largely due to the fact that, majority of the country’s population worked in the informal sector, therefore, after three weeks of lockdown, government was left with little choice to lift the restriction on movements.

“When you look at what happened during the lockdown. It was quite clear after a point that given that 90 per cent of our population is informal and they go out each day to earn wages, it became increasingly impossible to continue with such a policy,” he added.

SOURCE: NEWSGHANA.COM

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Global oil demand forecast slightly improves as lockdowns ease, says International Energy Agency

Global oil demand is likely to increase slightly during 2020 as lockdowns are gradually eased around the world, according to the International Energy Agency (IEA).

Better than expected mobility across the countries which form the Organisation for Economic Co-operation and Development has also helped increase demand, it said.

The IEA has now revised upward its global oil demand outlook for 2020.

The organization now expects oil demand to fall by 8.6 million barrels per day in 2020 instead of 9.3 million barrels per day which was the estimate in its previous forecast, published in April.

This is still sharply down on demand from 2019 and marks a record drop in global oil demand.

“The gradual relaxation of restrictions on movement is helping demand. We estimate that from a recent peak of 4 billion, the number of people living under some form of confinement at the end of May will drop to about 2.8 billion worldwide,” the organization said in a report.
“Mobility still remains limited for many citizens, but businesses are starting to reopen gradually and people are returning to work, which will provide a boost to oil demand, albeit a modest one at first.”
The IEA noted that economic activity was beginning a gradual but fragile recovery but warned that major uncertainties remain.

“The biggest is whether governments can ease the lockdown measures without sparking a resurgence of Covid-19 outbreaks,” it said.

SOURCE: REUTERS.COM

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Storm clouds gather over U.S. stocks as hopes of quick recovery fade

(Reuters) – A lightning-quick rally in U.S. equities is showing cracks, as investors face mounting evidence that the economy’s coronavirus-fueled woes may be far longer-lasting than many had anticipated.

FILE PHOTO: The New York Stock Exchange (NYSE) is seen in the financial district of lower Manhattan during the outbreak of the coronavirus disease (COVID-19) in New York City, U.S., April 26, 2020. REUTERS/Jeenah Moon
For weeks, hopes that massive stimulus from the Federal Reserve and U.S. government would set the stage for a recovery later in the year fueled a blistering rebound in stocks even as the worst drop-off in jobs since the Great Depression slammed the economy.

But recent comments from top officials have undercut the case for a speedy economic recovery even as states ease lockdown restrictions, forcing investors to factor in a protracted downturn that would likely weigh on stocks while fueling flows to bonds and other safe-haven assets.

After surging over 30% in just over a month, the S&P 500 .SPX benchmark stock index has edged down about 4% since late April. Equity-focused funds have seen three straight weeks of outflows totaling around $30 billion, analysts at Deutsche Bank said in a report. In contrast, bond funds have notched inflows for four consecutive weeks, drawing nearly $47 billion, the bank said.

“There’s still a lot of uncertainty out there,” said Nela Richardson, investment strategist with Edward Jones. “There’s corporate earnings uncertainty, there’s economic uncertainty, and then there’s just the behavioral adjustment of consumers … facing down a health risk and trying to restart their lives.”

Federal Reserve Chairman Jerome Powell warned on Wednesday of an “extended period” of weak economic growth, citing concerns over how well future outbreaks of the virus can be controlled and how quickly a vaccine or therapy can be developed.

Those comments came a day after the nation’s top infectious disease expert, Dr. Anthony Fauci, told Congress that U.S. states lifting sweeping lockdowns could touch off new outbreaks of COVID-19, the respiratory disease caused by the coronavirus, which has killed over 80,000 Americans.

In addition, there are renewed tensions between the United States and China, a reminder of the trade tensions between the world’s two largest economies that rattled stocks throughout 2019, and some predictions of deflationary pressures on prices.

“Skepticism abounds regarding the likelihood the rally will continue,” analysts at Goldman Sachs said in a recent note to clients. “A single catalyst may not spark a pullback, but concerns exist that we believe … investors are dismissing.”

Concerns include $103 billion in expected bank loan losses over the next four quarters, a lack of stock buybacks and domestic and global political uncertainty, the bank said.

Several big-name investors have warned in recent days about the rally in equities becoming overextended. David Tepper of hedge fund Appaloosa Management told CNBC on Wednesday that the current market was the second most overvalued he has ever seen.

Famed hedge fund manager Stanley Druckenmiller told the Economic Club of New York here on Tuesday that the risk-reward here in today’s market was “maybe as bad as I’ve seen it in my career.”

The concentration of the market’s gains in a small group of technology and internet stocks, obscuring the underperformance of other areas, is also sending a cautionary note.

The average stock in the S&P 500 is down 8.7% since April 29, more than double the index’s losses since that date, according to an analysis by Bespoke Investment Group.

An extended resurgence of stock market volatility could accelerate flows into fixed-income assets, which have recently drawn investors seeking to benefit from the Fed’s expanded bond-buying program.

“The stock market is indicating that we are going to continue to move toward recovery whereas the bond market is just kind of sitting there,” said Walter Todd, chief investment officer at Greenwood Capital.

The yield on the benchmark 10-year Treasury note US10YT=RR has stayed in a tight range in recent weeks after falling sharply in late March. Bond yields move inversely to prices.

The rally in stocks may have left equities more vulnerable to bad news, including problems that U.S. states may encounter as they move to reopen their economies in coming weeks, said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute.

“There is probably more downside in equity prices than there is in bond yields,” Samana said. “The bond market is already fairly cautious in its positioning in terms of the view of the world that it has.”

(This story has been refiled to correct typographical error in headline.)

Reporting by Lewis Krauskopf; Additional reporting by Ross Kerber in Boston; Writing by Ira Iosebashvili; Editing by Leslie Adler

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SOURCE: REUTERS.COM

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Credit Suisse proposes crisis manager Meddings for board seat

ZURICH (Reuters) – Credit Suisse (CSGN.S) proposed on Monday Richard Meddings, a British banker with long experience of crisis management, for election to its board in its first non-executive nomination since the Swiss bank was rocked by a spying scandal.

Two incidents of spying on some of Credit Suisse’s top executives have drawn scrutiny of both the executive and non-executive management of Switzerland’s second-biggest bank.

Meddings, chairman of Britain’s TSB Bank, has wide experience helping lenders navigate challenging times, including previously at Deutsche Bank DBGKn.DE and Standard Chartered (STAN.L).

His appointment will need to be approved by shareholders at an annual general meeting on April 30.

Switzerland’s market supervisor FINMA is examining Credit Suisse’s oversight of Chief Executive Tidjane Thiam and his top lieutenants, as well as possible control failures at the bank’s board of directors.

Credit Suisse Chairman Urs Rohner, in a statement announcing Meddings’ nomination, highlighted the Briton’s record in the financial industry and managing risk.

“Through his wealth of knowledge and experience in the financial industry and his expertise in audit and risk management, Richard will make a valuable contribution as a new member of our board of directors,” Rohner said.

As chairman of Britain’s TSB Bank, Meddings assumed executive responsibility after the lender’s chief executive was forced out following a botched migration of customer data which locked out nearly 2 million customers and wiped millions off parent Sabadell’s (SABE.MC) 2018 profits.

Meddings also served on the board of Deutsche Bank when it paid more than $7 billion to settle U.S. allegations of mis-selling mortgage-backed securities.

He was finance director of Standard Chartered when it faced pressure from U.S. authorities over $250 billion worth of transactions tied to Iran.

Reporting by Brenna Hughes Neghaiwi and Silke Koltrowitz, editing by John Revill and Susan Fenton

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Source: Reuters.com

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Bloomberg ranks cedi as best performing currency in the world against the dollar by

Bloomberg ranks cedi as best performing currency in the world against the dollar

Bloomberg has adjudged the Ghana cedi as the best performing currency against the US dollar among the 140 currencies it currently tracks.

According to Bloomberg, the local cedi has so far appreciated by 3.4 percent against the dollar as at Monday, February 3, 2020.

The fortunes of the cedi look even brighter considering the country is on the verge of issuing a US$3 billion Eurobond which is expected to provide more dollar inflows that would further cushion the cedi from volatilities.

The local currency’s performance is a stark contrast to the 2019 performance where the cedi cumulatively depreciated by about 13 percent.

The cedi’s strong performance comes on the back of a number of measures put in place by the central bank as well as the Finance Ministry to resolve the cedi’s perennial struggles against its major trading partners.

The central bank, among other things, announced the commencement of forward fx auctions which basically allows banks and other dealers to make advance purchases of foreign currency to be supplied at an agreed rate later on.

The Bank of Ghana adopted this to help in regulating the supply of foreign currency and to stabilize the cedi for some time.

The central bank’s auction committee in a statement issued last week said it accepted less than fifty percent of the total amount of bids submitted by banks in the forex forward sales for Tuesday, January 28, 2019.

The forty million dollars accepted by the central bank is about 38 million dollars less than the amount the banks bid for.

source: citibusinessnews.com

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Absa Group concludes agreement with MIGA to bolster financing

Absa Group Ltd., one of the largest diversified financial service providers in Africa, has concluded an agreement with the Multilateral Investment Guarantee Agency (MIGA) – a member of the World Bank Group, helping Absa expand financing across seven countries in sub-Saharan Africa.

In terms of the agreement, MIGA will issue guarantees of US$497million to Absa. The guarantees are valid for as long as 15 years and apply to Absa’s subsidiaries in Ghana, Kenya, Mauritius, Mozambique, Seychelles, Uganda and Zambia.

The guarantees will help to protect Absa against risks related to the mandatory capital reserves that Absa and other banks are required to hold with central banks. They will free-up financial capacity, enabling Absa’s subsidiaries to provide additional lending and generate more revenue. The subsidiaries will increase sustainable financing for corporates and small- and medium-sized businesses, as well as projects with co-climate benefits.

“We are pleased to work with MIGA. Their guarantees allow us to provide additional financing in our subsidiaries in Ghana, Kenya, Mauritius, Mozambique, Seychelles, Uganda and Zambia,” said Jason Quinn, Absa Group Financial Director.

Absa is the first African banking group to enter into this type of guarantee transaction with MIGA.

SOURCE: thebftonline.com