Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
Settings
Settings
Dynamic quotes 
OFFON

4-Traders Homepage  >  Equities  >  Nyse  >  Citigroup    C

CITIGROUP (C)
Mes dernières consult.
Most popular
Report
Delayed Quote. Delayed  - 01/12 10:00:37 pm
76.84 USD   +1.69%
02:20p CITIGROUP : Earnings Wiped Out by Tax Charge
02:00p CITIGROUP : Reports Fourth Quarter 2017 Financial Results
01:40p Dow on track to top 26,000 at open
SummaryQuotesChartsNewsAnalysisCalendarCompanyFinancialsConsensusRevisions 
News SummaryMost relevantAll newsSector newsTweets

Citi: Financial engineering alone not enough

share with twitter share with LinkedIn share with facebook
share via e-mail
0
10/04/2017 | 11:34pm CET

BEIRUT: Citi Research warned Wednesday that Lebanon cannot keep counting on more financial engineering by Banque du Liban alone to create a sustainable source of bank and government financing.

“The BDL interventions have been successful in attracting new funds into the market only on a temporary basis and then only at the potential expense of future inflows. They do not, by themselves, create a sustainable source of bank financing and, by extension, government financing,” Citi Research, the research arm of Citibank, said in a comprehensive report about the performance of the financial markets in Lebanon and the region.

Lebanon’s Central Bank was compelled to intervene in two separate occasions to secure funds for Lebanese banks and the government.

Commercial banks have been heavily financing the state’s public debt for many years through the subscriptions to sovereign bonds.

One of the primary conditions for financing the annual budget deficit is that commercial banks continue to receive a steady flow of deposits of not less than $4 billion to $5 billion annually.

“Lebanon’s sovereign debt sustainability is largely dependent on continued growth in bank deposits, the main driver of which has traditionally been nonresident deposit inflows, mainly from the large and affluent Lebanese global diaspora. The basic calculus is simple: The banks attract diaspora funds and use these to fund the government deficit (directly through the purchase of government securities, or indirectly by placing excess reserves with the Central Bank, which then goes on to purchase government securities),” Citi said.

It added that when the flow of money into the banking sector started to look a little uncertain during the first half of 2016, the Central Bank was compelled to carry out a set of extraordinary measures.

“The basic mechanics of the BDL’s financial engineering were as follows. First, the BDL offered to discount at face value T-bills held by the banking sector, which would be hugely profitable to the banks. But the discount facility would only be available to the extent that banks provided the BDL with FX [foreign exchange] funds through the purchase of BDL Certificates of Deposits of an equivalent amount,” the report said. To achieve this task, the Lebanese commercial banks sought to draw fresh foreign currencies from outside Lebanon.

“To do so, they offered extraordinary terms to their clients: In return for a fixed term deposit (one to three years), the banks offered to share the profits from the discounting of Lebanese pound T-bills with the BDL (amounting to a 25 percent upfront payment in LBP), as well as the standard annual deposit rate (around 5 percent on a dollar deposit),” Citi explained.

It added that the total size of this transaction was very substantial by all standards and was estimated at $13 billion, or 20 percent of GDP.

“Although the strategy was successful in reversing the trend in falling deposit inflows, it was only a temporary fix. We estimate that at least one-third of the money that came into Lebanon last year was one year in tenor, implying that around $4 billion in term deposits under the scheme are due to expire this year,” the report said.

Citi cited market sources in Lebanon as saying that BDL offered depositors (via the banks) the opportunity to reinvest their money for a period of five to 10 years at a rate of around 7 percent each year.

“To sweeten the deal, the BDL is also offering depositors the opportunity to borrow up to 125 percent of the deposited amount at a deeply discounted rate of 2 percent, and to reinvest the proceeds into LBP bonds at around 7 percent. The net result is a return in excess of 13 percent per annum,” it added.

Citi revealed that recent financial engineering conducted by the Central Bank was more successful than last year. “Judging from BDL data showing the central bank’s borrowing from banks, the latest scheme has been an even greater success than last year’s. Indeed, figures show that financial sector deposits with the BDL jumped by $10 billion between May and August of this year, compared with a rise of $6 billion in the same period last year,” the report said.

Citi noted that the government was receptive to the new scheme carried out by the Central Bank as it allowed banks to keep financing the Treasury. “From a government perspective, these interventions are desirable in that they help attract and retain funding in the banking system without a generalized rise in interest rates (which would be highly costly given debt-GDP in excess of 150 percent). They also provide a source of fresh FX reserves in an environment of a gaping current account balance,” the report said.

(c) 2017, The Daily Star. All rights reserved. Provided by SyndiGate Media Inc. (Syndigate.info)., source Middle East & North African Newspapers

share with twitter share with LinkedIn share with facebook
share via e-mail
0
Latest news on CITIGROUP
02:20p CITIGROUP : Earnings Wiped Out by Tax Charge
02:00p CITIGROUP : Reports Fourth Quarter 2017 Financial Results
01:40p Dow on track to top 26,000 at open
11:40a EXCLUSIVE - SAUDI ARAMCO SNUBS UBS A : sources
07:11a CITIGROUP : Citi boosts pay for women and minority staff
01/15 CITIGROUP : Citi to raise pay for women and minorities in U.S., UK, Germany
01/15 CITIGROUP : says it will use raises to narrow pay gap
01/15 Business events scheduled for Tuesday
01/15 IT EXECUTIVE MONICA EATON-CARDONE : Blockchain Likely To Outshine Bitcoin in 201..
01/13 CITIGROUP : Citi's Earnings Seen Hurt by New Tax Law -- Earnings Preview
More news
News from SeekingAlpha
08:14a Citigroup up 2.5% after topping estimates
08:00a Citigroup beats by $0.09, beats on revenue
07:11a WALL STREET BREAKFAST : More Records In Store For Equities
03:57a Citi addresses pay equity in memo
01/15 Notable earnings before Tuesday?s open (1/15/2018)
Financials ($)
Sales 2017 71 389 M
EBIT 2017 27 842 M
Net income 2017 -5 587 M
Debt 2017 -
Yield 2017 1,25%
P/E ratio 2017 -
P/E ratio 2018 12,39
Capi. / Sales 2017 2,85x
Capi. / Sales 2018 2,75x
Capitalization 203 B
Chart CITIGROUP
Duration : Period :
Citigroup Technical Analysis Chart | C | US1729674242 | 4-Traders
Technical analysis trends CITIGROUP
Short TermMid-TermLong Term
TrendsNeutralBullishBullish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus OUTPERFORM
Number of Analysts 31
Average target price 80,7 $
Spread / Average Target 5,0%
EPS Revisions
Managers
NameTitle
Michael Louis Corbat Chief Executive Officer & Director
James Anthony Forese President & CEO-Institutional Clients Group
Michael E. O'Neill Chairman
Don Callahan Head-Operations & Technology
John C. Gerspach Chief Financial Officer
Sector and Competitors
1st jan.Capitalization (M$)
CITIGROUP3.27%203 165
JP MORGAN CHASE & COMPANY5.36%390 934
INDUSTRIAL AND COMMERCIAL BANK OF CHINA0.81%343 484
BANK OF AMERICA5.66%325 331
WELLS FARGO3.10%308 238
CHINA CONSTRUCTION BANK CORPORATION2.73%269 411