Melody, the real estate investment banking arm of CB Richard Ellis, has arranged fixed, first mortgage financing in the amount of $2.75 million for a 16,300 s/f boutique office building located in Long Beach, N.Y
Melody, the real estate investment banking arm of CB Richard Ellis, has arranged fixed, first mortgage financing in the amount of $2.75 million for a 16,300 s/f boutique office building located in Long Beach, N.Y. Keith Braddish and Jason Gaccione, both from CBRE | Melody’s New York office, in conjunction with CB Richard Ellis’ Louis Buffalino secured the financing.
Barclays Bank selects F-Secure Anti-Virus solution for online banking customers
An agreement has been signed by Internet security provider F-Secure to provide the 1.6m online banking customers of UK bank Barclays Bank with a free two-year licence for F-Secure Anti-Virus.
Barclays Bank reportedly selected the solution for its technical strength, speed of response to emerging Internet security threats and service and customer support levels. It said the Anti-Virus product will provide its customers with peace of mind when using the Internet and online banking, with easy set-up and regularly updated protection.
The agreement enables the bank to provide a free service to its online customers that would usually cost more than GBP45 for two years.
Customers will also be able to upgrade to F-Secure’s Internet Security product, offering parental control, personal firewall, spam filters and application control, for a reduced GBP9.95 per year, compared to the usual GBP38.95 price.
Banking & financial services: the trends, the issues, the solutions
Latin American banks and financial service providers are looking ahead to 2006 with a positive outlook. Stronger economies throughout the region are creating growth opportunities in trade finance, private banking, corporate card issurance, electronic payments and insurance benefits.
At the same time, the deployment of new technology allows financial companies to deliver their services more quickly and efficiently. “International banks are using technology to serve their customers effectively over longer distances,” says Agustin Abalo, immediate past president of the Florida International Bankers Association (FIBA) in Miami. “And we are still only at the beginning of their revolution in technology.”
In Brazil alone, more than 18 million clients use the Internet for banking transactions, according to Aldo Luiz Mendes, vice president, Banco do Brasil. “For 2006, we are investing in options like mobile banking to bring us closer to our clients,” he says.
Increased responsiveness to customers is becoming even more important as financial service providers respond to the pressures of globalization, as well as regulatory and compliance requirements. “Financial institutions must satisfy requests for information from their customers, as well as from regulators,” adds David Konfino, president, International Division, Regions Bank in Coral Gables, Florida.
Other challenges for financial service providers include ensuring the security of data, and building customer awareness of new electronic tools like the corporate card and automated supply chain payment programs. And it’s not just technology–employers must provide attractive benefits programs to recruit and retain skilled managers.
Here’s a closer look at the key challenges and opportunities for Latin America’s banking and financial service sector.
BRAZIL TO ENJOY EXPANSIVE MARKET
Thanks to continuing job growth, stable prices and increased purchases of consumer goods, the Brazilian financial sector is expected to expand in 2006. “We believe there are market opportunities on the credit side, such as lending for micro and small businesses, as well as for foreign trade,” says Aldo Luiz Mendes, vice president of finance, capital markets and investor relations, Banco do Brasil. “We also expect to see increased demand for non-banking services, such as credit and corporate cards, as well as insurance products.”
Mendes believes online banking volume will grow significantly as well. “Most of the Brazilian financial providers are already online,” he says. “This is part of a continuous move toward greater efficiency throughout Latin America’s financial system.” In 2004, for instance, 83.5 percent of all Brazilian transactions were made through non-traditional delivery channels, he adds.
To build revenue, Brazilian banks will be seeking to increase their client bases by adding consumers who do not currently have accounts. Other growth strategies include cross-selling products and services to existing customers, increasing the volume of credit operations and cutting costs through automated technology and strategic partnerships. Mendes says banks will also invest more in hiring and training of their employees.
“Banco do Brasil invests systematically in new technology to improve its services to customers, its profitability for shareholders and its support for the community,” says Mendes. “For 2006, we are investing in the development of options like mobile banking to bring our bank closer to our clients,” he adds. For more information, visit: www.bb.com.br.
ELECTRONIC PAYMENT THE MISSING LINK IN SUPPLY CHAIN EFFICIENCY
In today’s global economy, improvements in how supply chains are managed allow raw materials for a personal computer to be sourced in Brazil, manufactured in China, assembled in the US, and shipped anywhere in the world. Such a complex flow requires planning to be successful. In the words of Professor Warren H. Hausman from the Department of Management Science & Engineering at Stanford University, “tremendous strides have been made regarding product supply chain efficiencies–resulting in sharply reduced lead times, lower inventories, more responsiveness and variety, collaboration on planning and forecasting, and improved customer service.”
However, financial flows have not been addressed with the same sense of urgency as material and product flows. As a result, business-to-business payment has not seen a corresponding increase in efficiency in the last 10 years, despite the availability of automated payment programs such as Visa Commercial Solutions. Most companies have not integrated payment into their supply chain management systems, resulting in inefficient financial processes.
What is it meant by “inefficient financial processes”? Most companies manage their financial flows manually, using paper-based invoicing and payment systems; initiating, tracking and reconciling these paper-based invoices and payments can be a significant part of a company’s treasury costs. In a white paper on supply chain efficiencies, Professor Hausman uses the example of a major hotel in Latin America that moved from operating several chains with numerous hotels per chain, to a Shared Services Center across all their hotels chains for procurement, A/P, and A/R. By unifying the business process of all the hotels, they have increased productivity and estimate $2.5 million-$3.5 Million (USD) in annual benefits.
Banking on the poor: banker wins Nobel peace prize for loans to poor
DHAKA, Bangladesh–Millionaire banker Muhammad Yunus will never forget the famine that struck Bangladesh in 1974. He was teaching economics at a university near the nation’s capital. “Hungry people were everywhere. Often they sat so still that one could not be sure whether they were alive or dead. They all looked alike: men, women, children. Old people looked like children, and children looked like old people,” he wrote in Banker to the Poor, a book he coauthored.
As the famine got worse, Yunus remembers, he had a hard time teaching abstract economic theories. “Nothing … I taught reflected the life around me.”
While visiting the village of Jobra, he met a 21-year-old mother of three named Sufia Begum, who was selling bamboo stools she’d woven by hand. She told Yunus she had borrowed the equivalent of 9 cents from a village moneylender to buy the materials for each stool. But the moneylender charged such a high interest rate, she made only 2 cents per stool after she paid back the loan. (Interest is a charge for a loan, usually a percentage of the amount borrowed.)
Yunus learned that many of the women in the village owed the same moneylender a total of $27. Yunus gave them the money out of his own pocket. By eliminating the money-lender and high interest fees, the women made more money and repaid their loan to Yunus in full.
Yunus then realized that poor people can be as creditworthy as the rich. And he wanted to do more. In 1983, he founded Grameen Bank to make small loans to poor villagers. Since his loan to the women of Jobra, Yunus and Grameen have made $5.72 billion in small loans to more than 6.6 million Bangladeshis, most of them women.
For their work, Yunus and Grameen Bank recently won the prestigious Nobel Peace Prize. Half of the $1.4 million prize will go to Yunus; the other half will go to Grameen Bank.
The Nobel Prize committee says it honored Yunus because “lasting peace cannot be achieved unless large population groups find ways in which to break out of poverty.”
Breaking the Cycle
Poverty is rampant in Bangladesh. Half of the country’s approximately 150 million people earn less than $1 a day. Most of the Grameen loans are tiny–some as little as $12. Though the loans are small, they aren’t easy to get. Because borrowers have no collateral to borrow against, they must pledge to follow a strict set of rules, including a vow never to be late with a payment. Loans are made only to groups of five or more people. If one person doesn’t make a payment, the entire group loses its credit rating–and cannot get another loan. Payments are small but frequent.
Ahmena Khatoon used her loan to buy two rickshaws (transportation vehicles). She rents them to villagers who pay a small fee. “I had a baby to feed, no job, no income. So I joined a unit of 41 other women who took out loans from Grameen,” she told the Chicago Tribune. “We all have our own businesses. One bought chickens, another a cow, and someone else breeds fish.”
Though the terms of the loans are strict, Khatoon thinks they help the Grameen system work. “If the bank was not so tough, all of us would have defaulted a long time ago. Then we would all be poor again,” she says.
Khatoon says having her own business gives her a sense of pride and confidence. The majority of Grameen loans go to women because Yunus set out to help women thrive in the extremely male-dominated society. He has found that women in Bangladesh are more likely than men to use their earnings to help their families and pay back their loans.
A Poverty-Free World
Since its founding, Grameen Bank has inspired similar loan programs in 100 countries and has been copied by thousands of institutions.
Yunus hopes that his winning the Nobel Peace Prize will call attention to the problem of poverty. He says he wants people to “start believing we can create a poverty-free world.”
Yunus told London’s Independent that one day “our grandchildren will go to museums to see what poverty was like.”
Critical Thinking … What are some other ways to help eradicate poverty around the world?
Banking on the Poor
Get Talking
Have students define the word peace. Ask: How might ending poverty contribute to world peace?
Notes Behind the News
* The Grameen Bank is now majority owned by the rural poor it serves, with a ten percent stake held by the Bangladeshi government. Grameen Bank boasts a repayment rate of 98.5 percent, much higher than traditional banks.
* Muhammad Yunus says he will use his portion of the prize to “find more innovative ways” to help the poor launch businesses. He also wants to start a company that will make low-cost, high nutrition food for the poor. Yunus is responsible for many innovative programs benefiting the rural poor. In 1974, he pioneered the idea of Gram Sarker (village government) asa form of local government based on the participation of rural people. This concept proved successful and was adopted by the Bangladeshi government in 1980.
Recent trends in Australian banking
This paper discusses the performance of Australian banks over the past decade, focusing on the forces that have shaped bank strategies and outcomes. The robust Australian economy and associated demand for credit, particularly from the household sector, have been significant drivers of bank success. Intensifying competition in lending and deposits has also played a role, manifesting itself largely as price pressure, but also spurring product innovation and the easing of lending standards. While the combination of these forces has allowed bank balance sheets to grow rapidly, the sector has remained well capitalised and has low levels of non-performing assets.
Keywords: Banking, Macroeconomics, Funds management
1 Introduction
When the ‘Wallis Inquiry’ (Financial System Inquiry, 1997) was undertaking its stock-take of the Australian financial system ten years ago, it drew attention to a number of forces that were expected to have a bearing on the performance of banks and other deposit-taking institutions. These included heightened competition from specialist lenders and overseas financial service providers as well as a potential pick-up in the trend towards disintermediation. On the funding side, the Inquiry also accurately predicted that a smaller proportion of household savings would be placed on deposit with banks as a growing proportion was invested in retirement savings schemes.
Notwithstanding these competitive pressures, the Australian banks have grown strongly over the past decade with their domestic assets now equivalent to over 155% of GDP, compared to less than 100% in the mid-1990s. Banks continue to account for about half of the assets of the Australian financial system and have become even more prominent at a group-wide level by expanding into wealth management and other businesses. They have also remained profitable, generating an average pre-tax return on equity in excess of 20%.
This paper reviews recent trends in Australian banking and, in doing so, highlights a number of important influences over the performance of the sector, including:
* first and foremost, the underlying strength of the domestic economy, which is now in its fifteenth year of continuous expansion. As a result, and in contrast to the early 1990s, Australian banks have not had to manage a general increase in bad debts;
* an extended period of exceptionally strong demand for credit from Australian households, particularly for housing–itself a manifestation of a more stable macroeconomic environment, including low inflation, low interest rates and, by extension, cheaper borrowing costs for households;
* until recently, relatively subdued demand for credit from the business sector which has been able to draw more heavily on retained earnings to meet its funding needs;
* a spate of product innovation among financial intermediaries, both banks and non-banks, particularly around lending for housing, but also in the personal and business lending segments; and
** on the funding side, increased recourse to wholesale markets, particularly offshore, to make up the shortfall between the household sector’s demand for bank credit and the flow of household savings into bank deposits.
The paper is organised in the following way. Section 2 provides some detail on the external operating environment faced by banks over the past decade, in particular the important changes occurring in household balance sheets. The third section highlights the intensity of competition among financial intermediaries to service the household sector’s demand for credit. The fourth section discusses banks’ expansion into wealth management. The fifth section focuses on funding issues, while the sixth considers some of the factors underpinning recent performance. The concluding, section reflects briefly on some future challenges.
2 The Macroeconomic and Financial Environment
For more than a decade, the strength of the domestic economy has provided a favourable operating environment for Australian banks. The economy is now in its fifteenth consecutive year of expansion, and real GDP has grown at an average annual rate of around 3 1/2% since 1995. At the same time, the unemployment rate has fallen to around thirty-year lows of around 5%, compared to a peak of over 10% in 1992. Against this backdrop, there have been significant changes in the structure of household balance sheets, while the business sector has benefited from a run of strong profitability.
2.1 The Australian Household Sector
As noted in the introduction, developments in household balance sheets over the past decade or so have had a profound impact on the performance of the banking sector. The most important of these has been the substantial increase in the size of household balance sheets as households have taken on significantly more debt, mainly for housing. Since the mid-1990s, household debt has increased at an average annual rate of 14%, with household credit growth peaking at an annual rate of over 20% in early 2004 (see Figure 1). As a result of this rapid growth, the ratio of household debt to disposable income has more than doubled over the past ten years–to around 150% as at end 2005–and is now at the upper end of the range observed in developed countries
Touring Caravan Security – Don’t Become A Crime Statistic
Around 3000 or so touring caravans are reported stolen each year in the UK, representing a major inconvenience to their owners. Unlike a car, a caravan is an extension to your home and caravan theft not only has the usual financial implications but can be very emotional for the individuals involved.
There are a number of ways that caravan owners can help with the security of their caravan. All caravans should have a VIN number that can be written or etched in various places in the caravan. For example, labelling the underside of drawers, in cupboards and on other areas of bare wood will help the police to identify a touring caravan if it is ever stolen. Obviously, the method of labelling should be permanent and not easy to remove or disguise.
There are various security devices available to the touring caravan owner and owners should consider using as many as convenient.
These include using a good quality hitchlock and lockable cover as well as fitting locking wheel nuts. A wheel clamp of some description is essential whilst the caravan is in storage and most touring caravan insurance companies insist that some form of wheel clamping is used to comply with the exclusions in the policy. A tracker device similar to those fitted to high value vehicles is also available for caravans and enables a better chance of recovery if the caravan is stolen. Some systems are capable of phoning an owner’s mobile phone if the caravan is moved without warning. Of a course a traditional alarm system will alert owners to an attempted theft.
Any of these products should come with the “Sold Secure” approval. Sold Secure is an independent test authority that puts all kinds of security devices through rigorous testing. Again, some caravan insurance policies insist that the security devices employed by owners are Sold Secure approved.
All caravans manufactured by members of the National Caravan Council since 1992 have been automatically registered with a system called The Caravan Registration and Identification Scheme (CRiS). The CRiS scheme is an important tool in the fight against caravan crime and is a central database for caravan owner registrations. The CRiS system is not only used to identify stolen caravans, but is also used in combating finance and insurance fraud. The system uses the well known HPI Check ltd.
It is essential that when buying a used caravan that the purchaser carries out a CRiS check. For a small fee, they can then buy confidently knowing that the caravan they are buying is what the seller claims it to be in the same way that a HPI Check is conducted on used cars. All caravans since 1997 have been electronically tagged using the CRiS system.
There are many other precautions that a touring caravan owner can take and the Government has a web site detailing some sensible precautions such as securing rooflights when leaving the caravan and not leaving caravan registration documents in the caravan. Do an internet Search for the UK Home Office car crime web site.