Losses escalate at Countrywide
Financial…
Contrite Credit Suisse
apologises quickly for child labour
link…
Australia’s NAB unveils ‘Customer
Promise’…
Fortis, SocGen get India
insurance thumbs up…
Allianz in major
Turkish retail insurance push…
RESULTS
Losses escalate at
Countrywide Financial
Go deeper with GlobalData
Embattled US mortgage lender Countrywide Financial,
soon to be acquired by Bank of America for a knockdown $4 billion
in stock, has reported an $893 million loss for the first three
months of 2008 as a result of more than $3 billion in write-downs
and bad loans.
The worse-than-expected figures compared with a profit of $434
million in Q1 2007.
Countrywide, for a long time the largest mortgage lender in the US,
put aside $1.5 billion for bad loans and wrote-down a further $1.5
billion on separate securities and claims, saying that one in 11 of
its borrowers has fallen behind on home loan repayments and one in
three subprime borrowers is now in default.
The group, which made a loss of $703.5 million in 2007, has now
reported three consecutive quarterly losses as a result of the
subprime crisis.
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By GlobalDataMARKETING
BNP Paribas branches out
into New York
BNP Paribas unveiled a new sponsorship initiative
designed to aid New York mayor Michael Bloomberg’s campaign to
plant one million new trees across the city by 2017.
The BNP Paribas Greenhouse, launched by BNP Paribas North America
CEO Everett Schenk and Hollywood actress Bette Midler, travelled
across New York at the end of April in an effort to encourage
citizens to take part in the project.
“The launch of the BNP Paribas Greenhouse was a huge success and
garnered a lot of attention. We think it will have a very positive
impact on the amount of trees that are donated and help make New
York City a lot greener,” Schenk told RBI.
BNP Paribas has also set an internal fundraising target of $50,000
for its employees, with the aim of adopting a school in order to
“revitalise” its schoolyard as part of the MillionTreesNYC
initiative.
RESULTS
India’s ICICI reports strong
annual figures boosted by UK growth
ICICI Bank, India’s biggest private sector bank, has
reported a strong set of annual results for the year to 31 March
2008. ICICI said profit after tax rose by 34 percent to $775
million, with net interest income up by 30 percent to $1.4 billion.
Fee income, meanwhile, rose by 30 percent to $1.8 billion.
It benefitted from a 27 percent rise in current and savings account
deposits, which totalled $15.9 billion and made up 26 percent of
total deposits as at 31 March.
ICICI says it now has 1,308 branches in India compared with 755 a
year earlier – the second largest network in India after State Bank
of India’s 10,000 outlets.
Overseas, particular progress has been made at the group’s UK
subsidiary, ICICI Bank UK, which has achieved notable success with
its HiSave 6.16 percent online savings account. The bank says it
now has 25 percent penetration within the bankable Indian community
in the country; the retail deposit base almost doubled to $4.3
billion over the year, with the balance sheet rising by 80 percent
to $8.8 billion.
ICICI added that a quarter of its consolidated assets are now
sourced from its international operations.
MARKETING
Contrite Credit Suisse
apologises quickly for child labour link
Credit Suisse has issued a full and comprehensive
apology in connection with its ‘Footballs for Switzerland’
campaign, a marketing initiative tied in with its sponsorship of
the forthcoming 2008 European Championships taking place in
Switzerland and Austria in June.
Launched on 14 April, the campaign involved Credit Suisse giving
away 200,000 children’s footballs in all 183 of its branches and
was a joint project between Credit Suisse and the Swiss Football
Association.
But the group quickly received criticism for the possible
involvement of child labour in Pakistan during the manufacture of
footballs for use in the campaign.
Quickly addressing the situation head-on, Credit Suisse issued a
statement saying: “Credit Suisse regrets that, despite relevant
contractual precautions and confirmations when placing the order,
it cannot at this time completely rule out the possible involvement
of child labour. This contravenes its principles and values.
“Credit Suisse sets high ethical standards and is aware of its
social responsibility. Even the mere hint of suspicion that the ban
on child labour may have been violated in the manufacture of the
footballs is unacceptable to Credit Suisse.”
An investigation of internal and external processes has now been
put in place to investigate the issue, it said.
STRATEGY
E*Trade says it is
on the road to recovery
E*Trade, the troubled US online brokerage which
suffered a near-terminal decline in business last year (see RBI
582), has announced worse-than-expected first quarter results
but pointed to a number of factors which it sees as returning it to
quarterly profitability by the end of 2008.
E*Trade posted a net loss of $91 million for the first three months
of 2008 on the back of net revenue of $316 million, which included
a $234 million provision for loan losses.
However, the brokerage also revealed that it managed to add 60,000
net new customers – the highest quarterly figure since Q4 2005 and
up from just 7,000 in Q4 2007 – and 305,000 gross new accounts
during the quarter. Total accounts now stand at a record 4.8
million.
Chief financial officer Robert Simmons and general counsel Arlen
Gelbard have resigned, E*Trade also said this month, a development
seen as
furthering the rebuilding process.
MARKETING
Australia’s NAB unveils
‘Customer Promise’
National Australia Bank (NAB), the second largest
bank in Australia by assets, has published a formal ‘Customer
Promise’, clarifying and consolidating in a single document the
bank’s commitments to its retail customers.
The three central tenets of the promise are the provision of
smarter banking products and services, facilitating easier business
dealings with the bank and providing support and assistance to
NAB’s communities. The bank says it views the initiative as a
mechanism by which it can gauge its performance.
NAB cited examples of how it intends to fulfil the trio of
obligations: through offering low and fee-free current accounts to
a wide cross-section of society including students and retirees; by
updating and modernising every ATM by 2009 and increasing the
number of in-branch and on-call staff; and by continuing to provide
its employees with two days’ worth of annual volunteer leave.
STRATEGY
National City joins flood of capital
raisers
National City, the 10th-largest US bank which at the start of April
said it was undertaking a comprehensive assessment of its entire
business, has joined the growing list of banking institutions
raising capital – announcing it will raise $7 billion of additional
equity.
A range of strategic options had been on the table for National
City, including an all-out sale, following rapidly declining
business flows off the back of the credit squeeze.
National City’s CEO Peter Raskind said the raising of equity
capital would enable the bank to have the financial flexibility to
grow the business and return it to profitability. National City
announced a first quarter net loss of $171 million, compared to a
$333 million net loss in the fourth quarter of 2007.
The deal follows high profile capital raising announcements from
banks stretched by the credit crunch, including Wachovia,
Washington Mutual and Royal Bank of Scotland (see RBI
590). National City’s Tier 1 capital ratio, the measure most
used by regulators to gauge a bank’s strength, was at 6.65 percent
on 31 March, prior to the announcement. It will rise to 11.4
percent following the strengthening of its capital base.
RESULTS
Bank of America profits fall despite retail
gains
Bank of America (BofA), the US’s largest retail bank and a
bellwether for the country’s consumer banking industry, announced a
77 percent dip in first quarter profits despite increased revenues
in most of its businesses.
The bank earned $1.21 billion in the first quarter, down from $5.26
billion a year earlier. Kenneth Lewis, the bank’s CEO, said
weaknesses in the US economy and prolonged disruptions in the
capital markets had taken their toll on performance. But he
maintained the bank’s earnings power from its core businesses was
“strong and growing”.
BofA’s main hit came from provision expenses, which increased by
$4.78 billion from a year ago to $6.01 billion because of rising
credit costs, particularly in home equity. On the plus side, retail
sales increased 10 percent to 13 million products, net new retail
checking accounts grew 14 percent and retail deposits increased 11
percent to $463 billion.
Some 974,000 customers signed up for its Keep the Change debit
card-based savings product, meaning that eight million customers
have signed up to the service since its inception in 2006. It also
activated 224,000 mobile banking accounts in the first quarter,
taking its total to 840,000.
PRODUCTS
Halifax targets low income UK savers with new Christmas
account
Halifax, the primary retail banking brand of fourth-largest UK
banking group HBOS, has launched a Christmas Saver Account aimed at
low income households looking to put money aside for the Christmas
season, the first such product for the UK market.
The account will be available by invitation only to around 70,000
of its customers. It offers a competitive interest rate and
requires £5 ($10) to open, followed by a minimum contribution each
month from May to October. It was initially trialed in 2007 and the
results were encouraging enough for the bank to extend its scope
this year.
A HBOS spokesman told RBI it had identified a gap in the
market following the high-profile collapse of a separate low income
savings programme, Farepak, in 2006. The maximum amount that can be
saved every month is £200 and customers can save a total of £1,200.
When the account matures in October 2008, customers can choose
between taking their savings in cash or high street vouchers.
HBOS claims to be the UK’s largest provider of social bank
accounts. It opened 19 percent of all such bank accounts in
2007.
STRATEGY
Fortis, SocGen get India insurance thumbs
up
Separate life insurance joint ventures set up by Société Générale
and Fortis have been given the green light by domestic regulators
in India.
Société Générale (SocGen) has signed a final agreement with
Indiabulls Financial Services, a non-bank financial business, to
create Indiabulls Société Générale Insurance. The deal will combine
Indiabulls’ nationwide distribution network and SocGen’s insurance
products and pricing expertise.
A rival joint venture between Fortis and two Indian financial
conglomerates has also been given permission by regulators to
launch life insurance and long-term savings products in India. The
Benelux bancassurer has teamed up with India’s IDBI, a development
and commercial bank, and domestic retail bank Federal Bank, to form
IDBI Fortis Life Insurance.
IDBI Fortis has already recruited 400 employees servicing 490
branches of IDBI and 550 bank branches of Federal Bank. Together,
the banks have five million customers, including 800,000
non-resident Indian account holders. The company will primarily
focus its bancassurance activities on cross-selling across top-tier
client segments.
RESULTS
ANZ hit by credit costs but robust Asia-Pacific business
increases 47%
ANZ’s CEO Mike Smith blamed increased credit costs and market
volatility after the bank announced a decline in half-yearly
after-tax profits of 7 percent. After-tax profit was A$1.96 billion
($1.83 billion), boosted by record revenue growth of 12 percent but
hit by significantly higher provision charges of A$980 million, up
A$740 million.
But the bank’s retail business delivered profit growth of 11
percent and revenue growth of also 11 percent. Profit from
mortgages, which make up 25 percent of the profit of the bank’s
Personal division profit, fell 3 percent – the area most severely
hit by higher funding costs.
The bank, the winner of RBI’s 2007 Best Cross-Border
Expansion Strategy award, recorded its best results in the
Asia-Pacific region. Net profit was up 47 percent, or 58 percent
when adjusted for exchange rates. Investment in the region
continued, with expense growth of 38 percent.
MERGERS AND ACQUISITIONS
Allianz in major Turkish retail insurance
push
Allianz, Europe’s largest insurer, has stepped up its commitments
in Turkey, taking control of two of its insurance joint ventures in
the country. Both stakes were bought from Koç Holding, a Turkish
conglomerate, and brings to an end Allianz’s and Koç’s
partnership in the two businesses.
The German insurer has bought 47.1 percent of shares in the
non-life insurer Koç Allianz Sigorta for €248 million ($387
million), taking its overall stake to 84.2 percent. It also
increased its holding in Koç Allianz Hayat ve Emeklilik, the life
insurance and pension company, from 38 percent to 87 percent,
paying €125.2 million. Koç Allianz Sigorta has a diverse business
mix, focusing most strongly on motor (35 percent of the portfolio)
and health insurance (27 percent). Koç Allianz Hayat ve Emeklilik
is split between pensions (47 percent) and life insurance (53
percent).
Enrico Cucchiani, a board member at Allianz, said in a statement:
“The agreement strengthens our long-term commitment to the Turkish
market, where we see a high potential for future growth.”
