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Cash rich lenders bankroll Japan Inc's shopping spree

Flush with cash from the Bank of Japan (Tokyo Stock Exchange: 8301.T-JP)‘s (BOJ) stimulus effort, lenders won’t be put off from financing Japan Inc’s habit of paying too much for overseas acquisitions, even as a weaker yen makes those deals more expensive, analysts say.

“The banks need someone to lend to and M&A (merger and acquisition) financing is one of the few growth areas for them,” said Barclays (London Stock Exchange: BARC-GB) bank analyst Shinichi Tamura. As long as a company “looks creditworthy enough to pay back the loan, the banks will be happy to back the deal.”

Deal volumes sank to a twelve-year low in 2014, but a recent flurry of M&A deals suggests Japanese companies are ready to shop overseas again.

Last week, Japan Post made a $5.12 billion bid for Australia’s Toll Holdings (ASX: TOL-AU). On Monday, chemicals company Asahi Kasei (Tokyo Stock Exchange: 3407.T-JP) announced it would buy U.S.-based Polypore (NYSE: PPO)‘s energy storage business for $2.2 billion. On Tuesday, Hitachi (Tokyo Stock Exchange: 6501.T-JP) announced it would buy Finmeccanica (Milan Stock Exchange: FNC-IT)‘s transportation operations for 800 million euros ($909 million).

Whether the companies pay too much for overseas acquisitions is not the banks’ problem, according to Japan Macro Advisors chief economist Takuji Okubo: “That’s the company’s problem – the banks only care about the creditworthiness of the acquirer’s parent company.”

Desperate for borrowers

Japanese banks have faced a predicament for years: despite low interest rates, they can’t find enough borrowers.

The situation took a turn for the worse after the BOJ launched an unprecedented asset purchase program in April 2013. The program involves buying government bonds – the main source of yield income in the past for banks. Yields have trended ever lower but failed to stimulate any new demand for loans.

As a result, margins on bank loans in Japan continue to skim record lows. For example, the lending rate on domestic loans at Mitsubishi UFJ Financial Group (Tokyo Stock Exchange: 8306.T-JP), one of the country’s biggest banks, slipped to 1.10 percent in the last three months of 2014, from around 1.3 percent in early 2013, before the BOJ started its massive asset purchase program.

Read More Is Japan Post overpaying for Toll?

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Flush with cash from the Bank of Japan’s stimulus effort, lenders will keep on financing Japan I …

That makes shorter M&A financing package loans that carry higher risk premiums and yields more attractive for banks, said Barclays’ Tamura. A typical loan will be rolled over into a three- to five-year syndicated loan, he said.

“The banks are desperate and are willing to take on the risks,” said Japan Macro Advisors’ Okubo.

But banks aren’t overly concerned about the risk factor.

“Private sector banks believe the loans carry implicit government guarantees” because public sector banks like Japan Bank for International Cooperation lead the M&A financing consortiums, Okubo said.

Race against time

Japanese companies may not need to worry about financing their overseas shopping sprees, but they should worry about the potential for further yen weakness, analysts said.

Prime Minister Shinzo Abe’s economic policies, dubbed Abenomics, and the BOJ’s quantitative easing efforts have weakened the yen by over 40 percent since Abe returned to power in December 2012. Many analysts expect the yen to weaken further.

“It makes sense for companies to be pre-emptive and do deals before the yen weakens anymore,” said BNP Paribas chief credit analyst Mana Nakazora.

Given strong cash balance sheets and a shrinking domestic market, that appears likely, according to PwC Corporate Finance director Gregory Bournet. He expects the number of outbound M&A deals to rise to 20 percent of all deals in fiscal 2015 from 10 percent in 2014.

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How To Dodge Mortgage Insurance Fees When Applying For A Home Loan [Infographic]

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How To Dodge Mortgage Insurance Fees When Applying For A Home Loan [Infographic]

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Lenders Mortgage Insurance (LMI) is a one-off fee payable when borrowing more than 80 per cent of a property’s value. It’s yet another expense that can make life difficult for cash-strapped home buyers; even for a modestly priced property. This “hustler’s guide” from Home Loan Experts outlines the various ways you can reduce — or completely avoid — your LMI fee.

Australian house picture from Shutterstock

LMI can be a pain in the butt. It’s designed to protect the bank’s interests and can result in serious money woes if you default on your mortgage. As Home Loan Experts explains on its blog, if you borrowed $510,000 for a property worth $550,000, you could be paying over $23,000 upfront just to get your loan settled: not exactly small change.

The below infographic explains how to reduce or even avoid mortgage insurance altogether. Some of the advice will be unfeasible to most readers (you’re probably not going to become a doctor just to avoid an LMI fee) but there are also some viable tips that could save you a bunch of money. See for yourself!

[Home Loan Experts]


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Micro-loan program Kiva.org launches Philadelphia initiative

Last updated: Wednesday, December 3, 2014, 1:08 AM
Posted: Tuesday, December 2, 2014, 6:16 PM

When Carl Lewis needed a refrigerated dessert display case for his 48th Street Grille in West Philadelphia, he applied for a $5,000 zero-interest loan from crowdfunding website Kiva.org.

“I envisioned opening this restaurant. I applied to several banks for a loan, and they all turned me down,” said Lewis, whose Kiva Zip loan was underwritten by 185 lenders as far away as Sweden and Australia.

The money-raising initiative will now be available to more small-business owners and aspiring entrepreneurs with the launch of Kiva City Philadelphia on Tuesday. The program was announced jointly at Lewis’ restaurant by Kiva.org president Premal Shah, Mayor Nutter, and Alan Greenberger, director of the city Commerce Department.

Philadelphia is the 10th U.S. city to join the Kiva program, aimed at starting or expanding businesses that might not otherwise qualify for traditional lending.

The nonprofit Kiva has facilitated “micro loans” to small-business owners in 80 countries for a decade, with 1.2 million lenders funding $650 million in loans.

Borrowers are vetted and must be endorsed by a “trustee,” such as a community group, that’s been approved by the nonprofit. The entrepreneurs must find 15 friends or associates to underwrite them online before the Kiva loan proposal is listed publicly for crowdfunding.

The borrower can receive an initial Kiva Zip loan of up to $5,000 (pledges start at $5). In Philadelphia, loans will be matched dollar for dollar by PNC Bank, the Zisman Family Foundation, Nancy and Greg Wolcott, and Friends of Kiva City Philadelphia, the nonprofit said.

Grants to help the program get started will come from the Barra Foundation, the Philadelphia Foundation, the city Commerce Department, the Zisman Family Foundation, and the Mayor’s Fund for Philadelphia.

Lewis’ lifelong dream was to open his own restaurant, after working nearly four decades in the restaurant and hospitality industry for InterContinental Hotels and Marriott Corp., and as executive chef at Temple University Health Center.

When he learned that Kiva “was giving out these micro loans,” he applied. With his first $5,000, plus a $15,000 interest-free loan from the Hebrew Free Loan Society of Greater Philadelphia and a Small Business Administration loan from the Enterprise Center in West Philadelphia, Lewis then was able to get a bank loan.

Five weeks ago, he opened the 48th Street Grille near 48th and Spruce Streets, serving fresh Caribbean American fare.

Fourteen Philadelphia entrepreneurs have received Kiva loans thus far. Among them are Peter Merzbacher, founder of Philly Bread, a bakery in the Olney section, who received a $5,000 loan underwritten by 135 lenders. Arthur Verbrugghe, who started a custom-clothing workshop in Roxborough, Atelier Arthur L.L.C.. received a $3,000 loan from 86 lenders.

At Kiva.org/Philadelphia, small-business owners can apply for micro loans “with zero percent interest, no fees, no mandatory credit check, and no collateral requirement,” he said.

“We call it social underwriting,” said Johnny Price, senior director of Kiva Zip, on hand for the announcement. “Normally, a bank will employ financial underwriting. They will look at your credit score, your collateral, and cash flows.”

Kiva looks at a borrower’s character, Price said. “We ask borrowers to recruit 15 people from their network to fund their loan in private before we post it publicly on the website. Since we rolled out that innovation, we’ve seen a significant improvement in our repayment rate: 90 percent in the United States right now.”

“It’s kind of how banking was done 100 years ago, where people vouch for people,” said Ziva.org president Shah. “When businesses pay back the loan, they can qualify for larger loans from the Internet community. It becomes almost a public credit score, where local banks can get off the sidelines and begin loaning to people like Carl.”


lloyd@phillynews.com 215-854-2831 […]

Australia's Westpac profit up 8%

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Saeed Khan | AFP | Getty Images

People walk past an ATM machine of Australian banking giant Westpac in the central business district of Sydney.

Australia’s Westpac Banking booked a fifth straight year of record profit with an 8 percent rise in full-year cash earnings on robust loan growth and declines in bad debts.

Bolstered by a strong focus on mortgage lending, a rapidly growing property market and tight cost controls, three of Australia’s “Big Four” banks have notched up five consecutive years of record income in current earnings season.

“Housing credit growth has increased over 2014 and we expect growth at similar levels to continue through 2015, driven by strong demand and continued low interest rates,” Chief Executive Gail Kelly said in a statement.

Kelly said there were signs of improving prospects for non-mining investment and expected a moderate pick-up in business credit growth.

The nation’s No. 2 lender by value said cash profit was A$7.6 billion ($6.64 billion), meeting the average forecast from seven analysts polled by Reuters. Revenues rose 7 percent in the year.

Read MoreIs Australian housing facing a repeat of 2003?

Net interest income, the difference of interest earned and paid out, rose 5 percent to A$13.5 billion, while net interest margin, a key measure of profitability for a bank, fell 7 basis points to 2.08 percent.

Impairment charges fell 23 percent, it said.

Expenses at Westpac grew at 6 percent, faster than revenues, while underlying profit and revenue growth came in below expectations, Omkar Joshi, a Sydney-based investment analyst at Watermark Funds Management, said in a note.

[…]

Banks offer cash to lure customers

BANKS are offering steep interest rate discounts and even throwing money at home buyers as they compete for a slice of Australia’s booming housing market.

WITH demand from home buyers heating up across most capital cities, lenders are doing all they can to snare new customers.

National Australia Bank stepped things up a notch on Monday by offering a free $1,000 gift card for customers who take out a loan of $300,000 or more. Canstar research analyst Mitchell Watson said with interest rates low across the board and most banks offering similar terms and conditions on loans, lenders were increasingly looking for extra incentives to attract customers. “There does seem to be a trend with offering incentives,” he said. “Home loan features are now fairly homogeneous and rates are fairly competitive across the board so offering incentives like this will make a product stand out.” University of New South Wales economist Tim Harcourt said the incentives and discounts on offer were a sign that competition was strong in the banking sector. “It shows even with the four pillars system there is still plenty of competition,” he said. NAB is not the only bank offering a cash incentive to borrowers, with the Commonwealth Bank providing a $1,000 rebate to first home buyers . Meanwhile, Westpac says it is not currently providing any additional monetary incentives but does offer a discount of 0.7 per cent or more on its standard variable rate. ANZ did not respond to questions about what incentives it offered. A recent report by JP Morgan found all the major banks were offering significant home loan rate discounts, with wealthy borrowers receiving the best deals. The report found first home buyers were often only able to access a discount of 20 percentage points, while richer and apparently safer borrowers were receiving up to 140 percentage points off their loan. Mr Watson warned buyers not to be taken in by the incentives and to instead focus on getting the lowest rate and most flexible loan available. “While $1,000 will help you now, a lower rate will help you over the next five to 15 years,” he said. Meanwhile, ratings agency Moody’s recently warned banks were lending money at a faster rate than they were taking in deposits, meaning they were increasingly reliant on international wholesale funding markets. That could affect the banks’ credit ratings, especially if lending continued to grow, the agency warned. But Dr Harcourt said there were no signs banks were taking on too many risks to increase their loan books. “I don’t think any of those major four banks would do anything too silly given the experience of the GFC,” he said.

[…]

Illegal Online Payday Loans – Light Build Design


Illegal Online Payday Loans

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Educating on payday loans/ short term loans | The Quick Loan Shop

Payday lenders have spread across the globe with their offers of short term, immediate loans, either helping those who are in dire need for the credit that banks refuse to offer, or feeding off of the poor and desperate, depending on who is looking at it and why. Most of the Payday controversy comes out of the UK, the USA, Australia, and South Africa. Across the pond a teacher from Reading, Ohio recently decided to take his students out on a field trip. His mission: to show these young adults that pitfalls of the dreaded Payday and Pawn shop industry. Packing 40 odd students into a bus, they set off to visit the world of quick cash.

Mr. Page is the economics teacher at one of the local high schools and as is faced daily with the struggle that his students go through to survive. Many have served prison sentence, some are already parents or have to work after school to help their families financially. Part of this teacher’s mission is to instill sound financial values in these kids; good saving habits, the need for a great credit rating.

The first stop is LoanMax, a short term lender where you can use your paid off car as surety. The students were informed that the interest rate for a short term loan would be 24.99% and that should the client default on even one payment, the car could be instantly repossessed.

Second stop is CheckSmart. The welcome is not very enthusiastic to say the least and when the students begin to ask about Payday lending and tax refund anticipation loans they are informed that the manager is not available to answer their questions.

Third stop is at CashAmerica. This establishment is bustling with activity. It is Friday and everyone is in to pay on their loans. There is an array of goods that have been used to pay off loans on sale. Here a friendly member of staff happily explains how things work at CashAmerica. She mentions that most of the repossessed goods on display are bargains worth looking at should one be shopping for hi-tech equipment, jewelry or other valuables. Interestingly it is here that the kids meet a somewhat ethical approach to the Payday loan industry. As they leave the establishment they are strongly urged to protect their credit scores.

Mr. Page is amazed, “I was taken by her honesty. She said that this is where you go when you’re in trouble, and she worked there! Everything in there had been taken from somebody.”

The day ends back at the school library where a representative a Credit Union as well as one of the local banks came to address the students. Finally the students fill out a work sheet with resources and information on the different Payday, Pawn, and Quick Loan options on the market today.

It is innovative teachers like Mr. Page who can really make a difference by educating the public on how to use these services, when to use these services, and how not to get into difficulty by taking out cash loans when one shouldn’t do so.

This entry was posted in Short term loans on September 22, 2014 by . […]

Australian cycling shaken up, gets A$2 million loan

MELBOURNE (Reuters) – Cash-strapped national governing body Cycling Australia has had a board shake-out and will receive a A$2 million (US$1.81 million) loan to help lift the sport out of its financial struggles, officials said on Tuesday.

Outgoing president Gerry Ryan, owner of pro cycling team Orica-Greenedge, will step aside for Malcolm Speed, a veteran Australian sports administrator and former boss of the International Cricket Council who will lead a seven-person board from Friday.

The Australian Sports Commission, the agency in charge of channeling government funding into national sports, will kick in A$1.5 million of the loan, with the rest to come from state member associations and Mountain Bike Australia, the ASC said.

“The ASC undertook an independent and rigorous financial analysis of CA including assessment of the various options available,” ASC president John Wylie said.

“After much consideration, the ASC determined that the most effective way of protecting the sport’s strongest assets – its high performance athletes and mass public appeal – was to grant the existing organization a loan on the condition it continues its reform agenda.

“The interest-bearing loan has been provided with a strict set of conditions, including the co-contribution by the sport’s member states, complete governance overhaul, and ongoing financial oversight of the high performance program by the AIS.”

(Reporting by Ian Ransom; Editing by Greg Stutchbury)

Sports & RecreationInternational Cricket Council […]

Must-know: Will Walter Energy survive the downturn?

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Being a pure play met coal producer isn’t good for Walter Energy (Part 9 of 9)

(Continued from Part 8)

Will Walter Energy survive the downturn?

Walter Energy (WLT) has been burning cash continuously for the past several quarters. The cash burn has forced the company to refinance the term loan with high cost notes. The move has simply extended the lifeline at the cost of higher interest expenses going forward. The company now has no major repayment obligation until 2018.

While the refinancing was possible in this case, the possibility of refinancing the maturing 2018 obligation will be weak given the recent downgrade by rating agencies. Also, if the company keeps burning cash for the next few quarters, the financial position of the company will deteriorate leading to the possibility of further downgrades.

One positive

One positive thing about the company during the quarter was that it has finally responded, or was forced to respond, to current oversupply in the metallurgical coal market by idling Canadian operations. The move along with similar initiatives, although “active” ones, taken by peers (KOL) such as Peabody Energy (BTU), Alpha Natural Resources (ANR), and Arch Coal (ACI) will help curb oversupply in the industry and may support metallurgical coal prices.

The company derives the majority of its revenues from exports to Europe and Asia. The Chinese purchasing managers’ index (or PMI) clocked a reading of 51.7 in July compared to 51 in June. Since PMI is considered to be an indication for the economy, a better reading translates to better days ahead for the economy and in turn fuel demand for steel. Metallurgical coal is used in steel production, which will make the metallurgical coal demand increase as well.

Will Walter Energy survive?

The answer to the question largely depends on two factors—the trajectory of met coal price and the met coal production in Australia. Right now, the met coal game seems to be the one in which everybody is burning cash hoping for good days ahead. Among its peers, Walter Energy is clearly at a disadvantage due to its “pure-play met coal producer” tag. However, it has bought time until 2018 through refinancing. The concern is whether the current liquidity with the company will last until 2018 or will the company be able to refinance in 2018 if met coal prices remain subdued.

Read the Market Realist’s Coal page to learn more about this important industry.

Browse this series on Market Realist:

Part 1 – Must-know: An overview of Walter Energy Part 2 – Must-know: State of the US metallurgical coal industry Part 3 – Why lower cash costs didn’t help Walter Energy make money FinanceBasic Materials IndustryWalter EnergyPeabody Energy […]

CBA's FY14 cash profit climbs to record

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Ian Waldie | Bloomberg | Getty Images

Customers use the automated teller machines (ATM) at a Commonwealth Bank of Australia branch in Sydney, Australia.

Commonwealth Bank of Australia (CBA), the country’s top lender by market value, said its full-year cash profit grew about 12 percent to a record high, matching expectations, on strong growth in loans and lower bad debt provisions.

CBA said cash profit, a key measure of its earnings, rose to A$8.68 billion ($7.99 billion) in the year to June 30, compared with a consensus forecast of A$8.62 billion – from 10 analysts polled by Reuters. The profit was up from A$7.76 billion a year ago.

Read MoreAustralia central bank sticks to low rate stance

The bank was “cautiously positive” about the outlook for 2015 financial year with business and consumer confidence remaining fragile, chief executive Ian Narev said in a statement.

CBA’s results mark its sixth straight year of record annual profits, with Australia’s banking sector benefiting as low interest rates encourage consumers to take out housing and other loans. Mortgage and consumer loans generate 35 percent to 40 percent of earnings in the Australian banking industry.

Read MoreHousing bubble fears resurface in Australia

It declared a final dividend of A$2.18 per share, taking its full-year dividend payout to A$4.01 a share, a 10 percent rise.

Net interest margin – a core measure of profitability – rose 1 basis point to 2.14 percent during the year. The ratio of cash loan impairment expense to gross loans improved 4 basis points due to lower provisions, the bank added.

[…]