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New payday loan rules to cap fees, total cost and default charges …

The UK’s financial watchdog is clamping down on payday loans, with new rules to ensure that borrowers are never forced to repay more than double the amount of their original loan.

The Financial Conduct Authority (FCA) said interest and fees will be capped at 0.8% a day, lowering the cost for most borrowers, while the total cost of a loan will be limited to 100% of the original sum. Default fees will be capped at £15 in an effort to protect people struggling to repay their debts.

The changes, which will come into force on 2 January, mean that someone borrowing £100 for 30 days will not pay more than £24 in fees and charges if they repay the loan on time.

But the Labour MP Stella Creasy, who has led the campaign against doorstep lenders, slammed the FCA plans – unchanged from an original draft published in July – as an early Christmas present to the “legal loanshark” industry.

The FCA said it did not want to drive payday lenders out of business. The regulator estimates the lenders will lose 70,000 borrowers, 7% of the total market, as a result of the changes, as they restrict less profitable loans.

Martin Wheatley, the FCA chief executive, said: “I am confident that the new rules strike the right balance for firms and consumers. If the price cap was any lower, then we risk not having a viable market, any higher and there would not be adequate protection for borrowers. For people who struggle to repay, we believe the new rules will put an end to spiralling payday debts. For most of the borrowers who do pay back their loans on time, the cap on fees and charges represents substantial protections.”

In the five months since the FCA took over regulation of consumer credit, the number of loans and the amount borrowed has dropped by 35%.

The chancellor, George Osborne, said: “We created a powerful new consumer regulator to regulate the payday lending industry and legislated to require the FCA to introduce a cap on the cost of payday loans. This is all part of our long-term economic plan to have a banking system that works for hard-working people and make sure some of the absolutely outrageous fees and unacceptable practices are dealt with.”

But critics accused the FCA of allowing “legal loan sharks” to slip through the net. “Today’s news will be welcomed as an early Christmas present for Britain’s legal loansharks,” said Creasy. “This cap is just £1 lower than their current charges. This is an industry where some firms are making nearly three quarters of a million pounds a week from British customers – such a high cap will do little to tackle these rip-off charges.

“We’ve warned regulators this cap needs to be much lower to really change the behaviour of these companies, but today’s announcement shows they are still not listening. Other countries are much stronger at taking on these companies.”

She said borrowers in Japan, Australia, Canada and parts of the US have better protection than UK consumers.

Debt charities gave the plans a cautious welcome, but urged the regulator to ensure that lenders did not simply change their business model to flout the rules.

Joanna Elson, chief executive of the Money Advice Trust, which runs National Debtline, said: “We hope that these measures will bring an end to the inappropriate lending that we have seen from this industry. However, the FCA will need to be vigilant to ensure that lenders do not simply change their business models to try to evade the rules.”

She added that even under the new rules, many people will still end up repaying very high amounts when they would be better off with free debt advice from charities.

The Consumer Finance Association (CFA), which represents some of the best-known payday lenders, has said the plans will drive some firms out of business. It estimates that only four players will remain in the market: three online lenders and one high street chain. “We will inevitably see fewer people getting fewer loans from fewer lenders,” said Russell Hamblin-Boone, chief executive of the CFA.

Wheatley said payday lenders could disappear from the UK high street within a year, although the FCA’s modelling suggested it was more likely that a few players would remain. Speaking on BBC Radio 4’s Today programme, he said: “We don’t want to close the industry, we want to change it so that it operates in a way that delivers good outcomes.”

He dismissed industry claims that thousands of people would lose out as a result of tighter access to credit, saying there were “a lot of myths in this space”.

According to FCA modelling, a majority of the 70,000 people who will no longer have access to payday loans will make do without getting a loan; others would borrow from family or an employer and only 2% would go to a loan shark.

The biggest online payday lender, Wonga, said it “looks forward to launching a cap-compliant product”.

[…]

Megabanks’ $800 Billion Cash Pile Shows Abe's Next Challenging Task

Prime Minister Shinzo Abe has succeeded in wrestling down the yen and snapping a 15-year deflationary spiral. The challenge of spurring lending by the country’s cash-hoarding megabanks remains.

The nation’s three largest lenders increased their cash and deposits with other financial institutions 5.7 percent in the quarter to June to 82 trillion yen ($800 billion) from the previous three-month period, earnings data show. New loans by Mitsubishi UFJ Financial Group Inc., Mizuho Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. fell 329 billion yen to 239.1 trillion yen.

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Abe needs to spur lending after the world’s third-largest economy shrank at an annualized 6.8 percent in the second quarter due to an April sales-tax increase aimed at curbing the world’s biggest debt burden. While the banks can no longer park excess cash in sovereign debt amid expectations for higher yields, falling loan rates have narrowed the spread over deposit payments to levels that discourage extending credit, according to Moody’s Investors Service.

“The big three are at a turning point,” said Graeme Knowd, an associate managing director who oversees corporate and financial institutions at Moody’s in Tokyo, in an interview. “They haven’t really taken credit risk for a long time. If Abenomics works, they need to reorient the business model.”

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Excess Cash

Deposits at Japanese financial institutions exceeded loans by 192.5 trillion yen last month, according to Bank of Japan data. The surplus reached a record high 194.2 trillion yen a month earlier.

Cash and funds held at lenders soared 47.4 trillion yen since March 2013, a month before the central bank introduced its stimulus program. Reserves at the BOJ in excess of the minimum requirement, which pay a 0.1 percent interest, rose 82.3 trillion yen in the period to 134.9 trillion yen as of Aug. 12.

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Abe’s policies and the BOJ’s about 7 trillion yen in monthly sovereign bond buying succeeded in depreciating the yen more than 18 percent last year. The infusion also reduced borrowing costs in the country, forcing banks to charge lower interest.

New loan rates dropped to 0.779 percent in May, the least in BOJ data going back to 1993, before rising to 0.905 percent in June. The spread on what Mitsubishi UFJ charges for domestic loans over deposit interest rates fell to 0.96 percent in the first quarter, a record low.

Risk Averse

“Japan’s banking sector is a little bit unusual,” said David Marshall, a credit analyst at CreditSights Inc. in Singapore. “They’re more risk averse, only willing to take on what they see as the good quality clients and they have been reluctant to lend to weaker companies.”

While some companies in Japan are spending more on capital investments, their cash levels remain high and so it will take time before demand for bank loans increases, Tomoyuki Narita, a spokesman for Sumitomo Mitsui said in an e-mail. Mitsubishi UFJ’s spokesman Takafumi Miyamoto said the bank is actively seeking to engage borrowers.

“Although we continue to make efforts to increase lending, a real rebound in funding demand will take a little bit more time,” Mizuho spokeswoman Masako Shiono said in an e-mailed response to questions. “We are hopeful for a recovery in the fiscal second half starting in October.”

Lending in Japan increased to 414.7 trillion yen in July, the highest level since March 2003, according to data compiled by Bloomberg. The additional income from new loans still fell short of what the banks made on bonds and equities.

Bonds and Stocks

Sumitomo Mitsui increased interest income from loans by 7 billion yen in the most recent quarter from a year earlier, according to calculations by CreditSights. That compares with a 32.7 billion yen gain on equities and a 12 billion yen net gain on bonds.

Japan’s benchmark 10-year bonds yielded 0.5 percent as of 9:29 a.m. in Tokyo today, down 23.5 basis points this year. The Topix stock index has fallen 2.7 percent since Dec. 31, after a 52 percent gain in 2013.

Banks have also turned to more lucrative overseas markets to escape low rates at home. Mitsubishi UFJ boosted loans abroad by 8.4 trillion yen since March 2013, compared with a 1.3 trillion yen increase in corporate lending at home.

“The banks are basically on the sidelines until it becomes clearer what the outcome is going to be” of Abe’s policies, CreditSights’ Marshall said.

To contact the reporters on this story: Finbarr Flynn in Tokyo at fflynn3@bloomberg.net; Takako Taniguchi in Tokyo at ttaniguchi4@bloomberg.net

To contact the editors responsible for this story: Katrina Nicholas at knicholas2@bloomberg.net; Sandy Hendry at shendry@bloomberg.net Pavel Alpeyev

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Watchdog plans cap on payday loan charges | Money | The Guardian

Image Payday-loans-campaigners-011.jpg

Payday loans campaigners on Brighton beach ahead of the Labour party conference, 2013. Photograph: David Levene/tha

Payday lenders stand to lose more than two-fifths of their revenues, with smaller firms forced out of business under a further clampdown proposed by the financial watchdog.

People taking out payday loans will never have to repay more than twice the sum they borrowed under the Financial Conduct Authority plans, which it estimates would cost the £1bn payday loan industry £420m in lost revenues.

A borrower could be expected to save £193 a year in charges, the regulator said.

But money-saving experts warned that customers would still face hefty interest charges under the measures.

The regulator’s plan comes a day after newly appointed Wonga chairman Andy Haste announced that he was axing the payday lender’s cuddly grandparent puppets that appear in adverts during children’s TV programmes, as part of an attempt to clean up its act. Haste said he expected the FCA cap would mean Wonga would become a “smaller and less profitable business” in the short term.

The Church of England has condemned Wonga as “morally wrong” and pledged to compete the industry out of existence by boosting credit unions. But Martin Wheatley, chief executive of the FCA, said it was not the regulator’s intention to drive payday lenders out of business. “We recognise that payday lending has a role in society,” he told BBC Radio 4’s Today programme.

The regulator estimates that 1.6 million people took out 10m loans worth £2.5bn last year. More than half of borrowers had to pay extra charges because they did not repay their loan on time. “Unfortunately that has been a big part of the business model, where the profitability comes from, frankly, people who can’t afford the loan, and that is why the additional cap acts as a backstop to stop people ratcheting up loans many, many times the original amount,” Wheatley said.

Under the FCA proposal someone who borrowed £100 from a payday lender and paid it back within the agreed 30 days would pay a maximum of £24 in charges. Fees for late payment would be capped at £15, with a total price cap of 100% of the original loan to stop default charges spiralling out of control.

The FCA said it had tested other price caps, but double the original loan was easy for consumers to understand.

The regulator will publish its final rules in early November following a consultation period, with the aim of having a price cap in force from January 2015.

Stella Creasy, the Labour MP who has led the campaign against payday lenders, said British consumers would be less well protected than those in the US or Japan.

“Anyone who thinks today’s announcement is the end of legal loan sharking in Britain is in for a nasty shock,” she said. “Without further revision, this total cost cap of 100% of the borrowed amount will leave British consumers less well protected than their counterparts in Japan and most of Canada and the United States. Not everyone who takes out a payday loan gets into financial difficulties, but enough do due to the terms and structure of the loans. It is clear the business model is not fair. If the level of the cap does not remove the incentive to do this it is meaningless. That’s why the FCA should, and could, go much further in providing the protection consumers in Britain need from the vicious cycle of debt these loans all too often create.”

The Labour party has called for the cap to be introduced in October to prevent people from overstretching themselves over Christmas.

Debt charities also warned that a cap on loans would not be enough to protect borrowers from irresponsible lending.

“A payday loan cap is not the final piece of the puzzle; consumers need more choice and access to advice,” said Citizens Advice chief executive Gillian Guy. “Not only is the cleanup of the existing market essential, banks need to step up to the plate to offer a responsible micro-loan. Payday loans are often used to cover the cost of daily essentials like gas and electricity bills or rent. The cap has removed some of the gamble of taking out a payday loan, but it is still an expensive form of borrowing.”

The StepChange debt charity called on the FCA to require lenders to share information to prevent consumers taking out multiple loans.

The FCA had previously shied away from a cap on payday lenders because it feared it would drive people desperate for short-term cash into the arms of illegal loan sharks.

Wheatley acknowledged this was a risk: “The actual number of people who consider loan sharks or use them is very very low … it might increase, but frankly that is an illegal segment of the market and we would work very closely with other authorities to ensure that market doesn’t grow.”

[…]

IMF board approves $17 billion for Ukraine

WASHINGTON (AP) — The International Monetary Fund board on Wednesday approved a two-year, $17 billion loan package for cash-strapped Ukraine as it seeks to regain stability following Russia’s annexation of Crimea.

The IMF assistance pledged in March was hinged on economic reforms in Ukraine, including raising taxes, freezing the minimum wage and raising energy prices — all steps that could hit households hard and strain the interim government’s tenuous hold on power.

“Urgent actions were necessary. Urgent decisions were taken by Ukraine and decisions now have just been taken by the IMF,” IMF Managing Director Christine Lagarde told reporters at the monetary fund’s headquarters.

Ukraine’s interim government finds itself caught between the demands of international creditors and a restive population that has endured decades of economic stagnation, corruption and mismanagement.

The IMF’s decision to approve the $17 billion loan paves the way for Ukraine to receive $15 billion in additional assistance pledged by the World Bank, the European Union, Canada, Japan and other European entities, and $1 billion in loan guarantees from the U.S. that Congress recently approved. As part of the deal, Ukraine will be required to use some of the $17 billion loan to repay money it already owes the monetary fund.

Ukraine, a nation of 46 million, is in turmoil after Russia annexed Crimea. Russian President Vladimir Putin has massed 40,000 troops on Russia’s border with Ukraine in what many fear is the first step to an invasion. Russia’s actions have created a standoff with the United States and many European nations.

“Today’s final approval for the $17 billion IMF program marks a crucial milestone for Ukraine,” Treasury Secretary Jacob Lew said in a statement. “The IMF program, in conjunction with bilateral assistance from the United States and other nations, will enable Ukraine to build on the progress already achieved to overcome deep-seated economic challenges and help the country return to a path of economic stability and growth.”

Lagarde said there were risks to the IMF loan but that Ukraine had demonstrated during the past few weeks that it can undertake reforms, such as ones addressing its exchange rate and the price of natural gas. “We believe that Ukraine has an opportunity to seize the moment,” she said.

Asked about recent sanctions that the U.S. and European Union have imposed on Russia, Lagarde said only that the IMF was not designing sanctions, but was trying to improve the situation in Ukraine so that stability can be restored.

“We very strongly encourage the parties to negotiate to come to terms, and whether it’s a question of the future price of gas, the payment of arrears — we very much hope the partners will find an agreement,” she said.

Politics & GovernmentBudget, Tax & EconomyUkraineChristine Lagarde […]

IMF board approves $17 billion in assistance for Ukraine

WASHINGTON — The International Monetary Fund board on Wednesday approved a two-year, $17 billion loan package for cash-strapped Ukraine as it seeks to regain stability following Russia’s annexation of Crimea.

The IMF assistance pledged in March was hinged on economic reforms in Ukraine, including raising taxes, freezing the minimum wage and raising energy prices — all steps that could hit households hard and strain the interim government’s tenuous hold on power.

“Urgent actions were necessary. Urgent decisions were taken by Ukraine and decisions now have just been taken by the IMF,” IMF Managing Director Christine Lagarde told reporters at the monetary fund’s headquarters.

Ukraine’s interim government finds itself caught between the demands of international creditors and a restive population that has endured decades of economic stagnation, corruption and mismanagement.

The IMF’s decision to approve the $17 billion loan paves the way for Ukraine to receive $15 billion in additional assistance pledged by the World Bank, the European Union, Canada, Japan and other European entities, and $1 billion in loan guarantees from the U.S. that Congress recently approved. As part of the deal, Ukraine will be required to use some of the $17 billion loan to repay money it already owes the monetary fund.

Ukraine, a nation of 46 million, is in turmoil after Russia annexed Crimea. Russian President Vladimir Putin has massed 40,000 troops on Russia’s border with Ukraine in what many fear is the first step to an invasion. Russia’s actions have created a standoff with the United States and many European nations.

“Today’s final approval for the $17 billion IMF program marks a crucial milestone for Ukraine,” Treasury Secretary Jacob Lew said in a statement. “The IMF program, in conjunction with bilateral assistance from the United States and other nations, will enable Ukraine to build on the progress already achieved to overcome deep-seated economic challenges and help the country return to a path of economic stability and growth.”

Lagarde said there were risks to the IMF loan but that Ukraine had demonstrated during the past few weeks that it can undertake reforms, such as ones addressing its exchange rate and the price of natural gas. “We believe that Ukraine has an opportunity to seize the moment,” she said.

Asked about recent sanctions that the U.S. and European Union have imposed on Russia, Lagarde said only that the IMF was not designing sanctions, but was trying to improve the situation in Ukraine so that stability can be restored.

“We very strongly encourage the parties to negotiate to come to terms, and whether it’s a question of the future price of gas, the payment of arrears — we very much hope the partners will find an agreement,” she said.

[…]

Japan lawmaker resigns over $8 mn loan scandal

Tokyo (AFP) – A senior Japanese politician has announced he is resigning as his party’s leader, despite insisting that he spent an undeclared $8 million loan not on politics but on personal items — including an ornamental rake.

Yoshimi Watanabe, the latest lawmaker to be felled by a cash scandal, said he was stepping down from the helm of the small but influential Your Party to try to contain the fallout from the incident.

Watanabe accepted 800 million yen ($8 million) from the chairman of a huge cosmetics company. Japanese law requires that all political donations be made public.

Watanabe said earlier the money had been a personal loan that he had spent on “miscellaneous items” including a decorative “kumade” — a bamboo rake believed to confer luck on its holder.

Announcing his resignation Monday, Watanabe said again he had done nothing wrong and insisted the cash had been unconnected to his electoral ambitions.

“Although there is no legal problem at all, it is true that I caused trouble to the party. I bear all the responsibility for this,” the 62-year-old politician told reporters, adding he would stay in parliament as a lawmaker.

View gallery

Yoshimi Watanabe places a wet towel against his forehead at a Tokyo hotel on July 11, 2010 as his pa …

Your Party plans to hold an election to choose his successor this week, Jiji Press reported, while prosecutors are reportedly looking into the cash transfer to see if charges should be laid.

Watanabe’s fall could be a blow to Prime Minister Shinzo Abe’s plans to remake Japan’s Self Defense Forces as a modern military.

The conservative premier has spoken repeatedly of his desire to revise the US-imposed pacifist constitution and is pushing to broaden the role of the military to permit “collective self-defence”, allowing Japanese troops to come to the aid of allies.

Under Watanabe, Your Party has expressed support for the hawkish agenda, offering at least a veneer of plurality to Abe’s drive while his junior coalition partner, the secular Buddhist New Komeito, has proved reluctant.

The furore surrounding Watanabe is the latest in a long line of cash scandals that surface every few months in Japan, as one high-profile lawmaker after another gets skewered over “loans” from powerful businessmen — bolstering the public impression that influence is for sale.

Politics & GovernmentYoshimi Watanabepersonal loanJapan […]

Abe Loan Push Impeded by Companies Hoarding Cash: Japan Credit

Japanese banks are the most keen to lend companies money in 17 years. Corporate treasurers don’t need the cash.

A Bank of Japan index measuring the prevalence of mid-sized companies saying banks are willing to make loans rose to 19 in March, the highest since June 1997, according to Tankan data. Yet demand for loans from businesses remains below levels before the global financial crisis, other central bank data show.

The BOJ’s unprecedented monthly buying of about 7 trillion yen ($67 billion) of sovereign notes has flooded Japan’s markets with funds to encourage banks to boost lending, as Prime Minister Shinzo Abe tries to beat deflation. Companies including SoftBank Corp. (9984) and Toyota Motor Corp. have built buffers since the financial crisis with total cash holdings of non-financial Topix index members reaching the equivalent of $636 billion in latest filings, from $417 billion in March 2007, data compiled by Bloomberg show.

“It’s a positive that banks are more willing to lend, but the problem is that there’s just not much demand for funds among borrowers,” said Norio Miyagawa, a senior economist at Mizuho Securities Research & Consulting Co. in Tokyo. “We need to see the impact of the tax increase and the economic outlook.”

Japan’s economy will probably shrink 3.5 percent in the quarter started April 1 as the increase in the sales tax to 8 percent from 5 percent this month weighs on spending, according to a survey of economists by Bloomberg. Large manufacturers expect the Tankan sentiment index to worsen to 8 in June from 17 in March, according to BOJ survey released this week.

Lending Rates

Domestic long-term lending rates were at 0.877 percent in February, one basis point from a record low set in December, according to BOJ data. The central bank’s stimulus has dragged down Japanese interest rates, with the 10-year yield at 0.635 percent, the lowest in the world. The yen was unchanged at 103.88 per dollar as of 11:04 a.m. in Tokyo.

BOJ Governor Haruhiko Kuroda and his board started their unprecedented easing policy last April in an effort to stamp out 15 years of deflation in the world’s third-largest economy.

The central bank is trying to fuel investors’ risk-taking by targeting an increase in inflation to 2 percent. Companies forecast that consumer price growth will pick up to 1.5 percent over the next 12 months, reaching 1.7 percent in three years where it will remain through 2019, the BOJ said yesterday. Prices (JNCPIXFF) excluding fresh food rose 1.3 percent from a year earlier in February.

Lending Attitude

This week’s Tankan data signal the turnaround in banks’ lending stance since the global financial crisis. The index which subtracts the percentage of companies saying banks are severe in their lending attitude from those saying they are accommodative was at minus 11 in March 2009 compared with 19 for mid-sized companies in this week’s survey.

Even so, while outstanding lending to companies increased by 2.2 percent from a year earlier in February, the total amount of 275 trillion yen in loans remains below levels in 2009, according to BOJ data.

An index measuring corporate demand for bank loans was 8 in January, versus 9 in mid-2007, a year before the bankruptcy of Lehman Brothers Holdings Inc. sparked global financial turmoil, the BOJ’s quarterly loan officer survey shows.

“There’s no bottleneck for supplying funds,” said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co. in Tokyo. “The problem for most companies isn’t a lack of funds but that there aren’t good investments to make.”

Retained Earnings

Retained earnings by Japanese companies rose to 293.5 trillion yen in the October-December period of 2013, the highest since the data going back to 1954, according to the finance ministry data.

SoftBank’s cash has increased to the equivalent of $19.4 billion in the latest filing from $2.6 billion in March 2007, while that of Toyota, the world’s biggest carmaker, rose $1.4 billion to $17.5 billion, data compiled by Bloomberg show.

The BOJ doubled to 7 trillion yen a loan program to encourage banks to lend in February and said individual firms could borrow twice as much low-interest money as previously under the second facility.

Large companies plan to boost capital spending by only 0.1 percent in the year started April after an estimated 3.9 percent increase in fiscal 2013, according to the Tankan data.

Capital Investment

Capital investment is recovering a bit, but it’s still not that strong,” said Yoshimasa Maruyama, the Tokyo-based chief economist at Itochu Corp. “There’s not much motivation to invest domestically.”

Japanese companies have been borrowing to finance overseas acquisitions.

Billionaire Masayoshi Son’s SoftBank took out a 2 trillion yen loan last year to fund its purchase of Sprint Corp. Takeda Pharmaceutical Co., which bought Switzerland’s Nycomed in 2011, borrowed 80 billion yen in March 2012.

“In the long term, lending will probably increase, but mostly for overseas rather than domestic investment,” said Maruyama at Itochu, Japan’s third-largest trading company. “Companies are cash rich, and funding demand for domestic investment isn’t that strong.”

To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net

To contact the editors responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net; Sandy Hendry at shendry@bloomberg.net; Katrina Nicholas at knicholas2@bloomberg.net Ken McCallum, Pavel Alpeyev

[…]

Emirates Steel cuts margin as loan oversubscribed

DUBAI/ABU DHABI: Abu Dhabi’s Emirates Steel has cut around half the banks who applied to fund its $1.3 billion loan and dropped the margin by around a fifth after the facility was heavily oversubscribed, banking sources said on Tuesday.
The loan, which refinances an existing $1.1 billion facility and raises cash to purchase assets from parent Abu Dhabi’s General Holding Corp. (Senaat), attracted commitments from lenders worth more than $5 billion, three of the sources said.
This level of demand has allowed the borrower to reduce the margin it will pay on the loan from around 200 basis points over the London interbank offered rate (Libor) to around 160 basis points over the benchmark, the sources said, speaking on condition of anonymity as the information isn’t public.
Emirates Steel declined to comment.
While the interest rate earned on the loan by banks will be topped up by fees, the fact Emirates Steel could drop the margin so significantly is a sign of both the quality of the borrower and the substantial liquidity in the Gulf loan market.
“The response was overwhelmingly good, especially from international banks,” said one local banking source. A second banking source added the lower cost of their funding allowed the foreign banks to drive the price down.
While the original deal still has more than three years to run, the company is hoping to take advantage of a lower interest rate environment to reduce its funding costs – a step it will achieve as the existing deal pays 250 basis points.
Around 30 lenders were invited in January to participate in the loan but only around half that number will end up in the final deal, according to two of the sources. Banks in the final deal come from the Gulf, as well as Europe, the United States and Japan, one of them said.
While scaling back lenders is common practice when a deal is oversubscribed, the fact Emirates Steel asked for bids that had already been approved by banks’ credit committees will leave a lot of frustrated bankers at cut institutions.
Often in loan deals, banks will reply to an invitation from a borrower indicating whether they would like to participate and how much money they will offer, only getting sign-off internally for the transaction at the end of the process.
On the Emirates Steel transaction, banks were asked to have this internal approval already secured when replying. At this initial stage, $5.4 billion was pledged, with $3.7 billion of commitments still on the table once the margin was cut, the third source said.
“If you go to committee and get the approval, and do all the hard work, then it is going to be embarrassing for a lot of bankers to not be in the final deal,” said the second banking source.
The loan has an eight-year lifespan and an amortizing structure. This requires both interest and principal to be repaid during the lifetime of the loan, as opposed to a bullet facility where only interest is paid during the tenure.

[…]

Japan's top three banks poised to benefit from spurt in domestic loan growth

By Taiga Uranaka

TOKYO (Reuters) – Japan’s biggest banks, flush with cash from a year-long stock market rally, are poised to benefit this year from a spurt in loan growth at home fuelled by the economic stimulus measures of Prime Minister Shinzo Abe.

Mitsubishi UFJ Financial Group Inc <8306.T>, Mizuho Financial Group Inc <8411.T> and Mitsui Sumitomo Financial Group Inc <8316.T> all booked increased lending in the latest quarter, in a business that contracted before “Abenomics” kicked in at the beginning of 2013.

Domestic loans at major Japanese banks grew 2 percent in December for the quickest annual pace since 2009 and surpassed 200 trillion yen for first time in over three years, central bank data show.

Lending is likely to pick up as around a quarter of Japanese companies, according to a Reuters poll conducted last month, plan to increase capital expenditure in the financial year beginning in April.

In further positive signs, the central bank’s index of business sentiment reached its highest in six years in the latest quarter, and spending on machinery hit a five-year high.

Lending growth so far has been driven by funding for large-scale acquisitions. MUFG is part-financing drinks maker Suntory Holdings Ltd’s $13.6 billion purchase of U.S. whiskey maker Beam Inc .

Other primary customers include utilities such as Tokyo Electric Power Co <9501.T> who want funds to buy fossil fuels, as nuclear plants are closed while the nation debates their safety.

The larger lending volumes may help banks buoy earnings as interest rates fall, with banks undercutting each other to win the increased custom.

The average interest rate of Japanese banks on domestic loans was 0.863 percent in December, a shade above the 0.821 percent of August which was the lowest since the central bank began compiling the information at the end of 1993.

“I don’t expect to see an improvement in loan interest margins in the near future,” said Naoko Nemoto, managing director at Standard & Poor’s Ratings Japan.

ALTERNATIVE INCOME

Banks spent the majority of 2013 booking significant gains from stocks, as share prices reached multi-year highs lifting banks’ income from stock trading and brokerage commission.

Overall net profit at MUFG increased 47.5 percent to 785.4 billion yen in April-December.

Net interest income, or profit from interest on loans, grew to 1.39 trillion yen in April-December, from 1.31 trillion yen a year earlier.

The domestic corporate loan balance of MUFG grew 500 billion yen, or 1.23 percent, over three months to 41 trillion yen at December-end.

The earnings mirrored those of Mizuho and SMFG, where 9-month profit rose 43.7 percent and 28 percent respectively.

At Mizuho, domestic loans reached 55.8 trillion yen at December-end from 55 trillion three months earlier.

Domestic loans edged up to 48.5 trillion yen at SMFG from 47.8 trillion yen during the same period.

(Reporting by Taiga Uranaka; Editing by Christopher Cushing)

FinanceMizuho Financial Group IncJapan […]

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When it comes to attitudes about women in the workplace and having a female boss, Americans have come … More » When it comes to female bosses, women can be their own worst enemy

2014 Cadillac ELR gets Saks Fifth Avenue special edition

For those wishing there were a “white diamond” ELR, you’re in luck: Cadillac and Saks Fifth Avenue have … More » 2014 Cadillac ELR gets Saks Fifth Avenue special edition

Here’s what happened when 17 ordinary people met Steve Jobs

Everyone “knows” Steve Jobs, or thinks they do… More » Here’s what happened when 17 ordinary people met Steve Jobs

Japan’s Nissan says to bring luxury Infiniti badge home

Nissan Motor Co Ltd will start selling Infiniti badged cars in Japan for the first time, the company … More » Japan’s Nissan says to bring luxury Infiniti badge home

BlackBerry’s woes draw Canada’s contrarian mogul into spotlight

The saving of BlackBerry may represent a patriotic calling to V. Prem Watsa, But he is not used to dealing … More » BlackBerry’s woes draw Canada’s contrarian mogul into spotlight

15 high-paying jobs for people who don’t like stress

Want a high-paying job in a low- stress environment? More » 15 high-paying jobs for people who don’t like stress

7 odd things hotels and airlines will loan you

Travelers can borrow iPads, Crock-Pots, curling irons, and even pet goldfish from certain hotels and … More » 7 odd things hotels and airlines will loan you

How to stop Google from automatically using your picture as caller ID

Google this week announced that it would start integrating Android users’ Google+ accounts more deeply … More » How to stop Google from automatically using your picture as caller ID

The 5 R’s of fruitful year-end reviews

The year-end review offers an ideal opportunity to enhance your career in the upcoming year. These five … More » The 5 R’s of fruitful year-end reviews

Even Google Isn’t Sure What Their Barges Are For

More details have come out about the mysterious barges docked in San Francisco and Maine following speculation … More » Even Google Isn’t Sure What Their Barges Are For

Millionaires are lining up to finance broke students’ startups

You’re 25, fresh out of business school and drowning in debt. What if a wealthy investor promised to … More » Millionaires are lining up to finance broke students’ startups

Volvo, regrouping under new Chinese owner, plots return to the US market next year

Volvo has realized that safe is better than sexy. Volvo is building new plants in Sweden and China, … More » Volvo, regrouping under new Chinese owner, plots return to the US market next year

JCPenney’s identity crisis captured in 5 photos

JCPenney executives have said business is… More » JCPenney’s identity crisis captured in 5 photos

Twitter’s market valuation suggests Wall St. sees huge growth potential

Investors are betting that Twitter will become wildly profitable as advertisers pay it increasing amounts … More » Twitter’s market valuation suggests Wall St. sees huge growth potential

These 10 universities have produced the most billionaires

Harvard University has produced nearly twice as… More » These 10 universities have produced the most billionaires

You’ve got to hand it to Virgin Atlantic: This flight attendants as superheroes ad is pretty amazing

The notion of flying in the face of the ordinary, the ad’s premise, is in the DNA of Virgin founder Richard … More » You’ve got to hand it to Virgin Atlantic: This flight attendants as superheroes ad is pretty amazing

SAC Capital is finally busted

Was Steven Cohen really any different from a Mafia don? And should he be treated differently before the … More » SAC Capital is finally busted

Meet John Chen, the new CEO tapped to save BlackBerry

Forgive us for thinking we’ve been here before. When Thorsten Heins took the reins of BlackBerry, then … More » Meet John Chen, the new CEO tapped to save BlackBerry

Why you should never eat lunch at your desk

Think that inhaling a sandwich at your desk while you answer emails is the best way to get more done? … More » Why you should never eat lunch at your desk

Google employees confess the worst things about working at Google

A job at Google. It’s career heaven, right? How… More » Google employees confess the worst things about working at Google

10 biggest supercar flops of all time

History is littered with supercars from builders who ought to have concentrated on producing a good car … More » 10 biggest supercar flops of all time

17 reasons Canada is a better place to live than the US

Many Canadians feel that their country does not compare favourably to the USA, even though Forbes rated … More » 17 reasons Canada is a better place to live than the US

Coming soon: Train your smartphone as you would your dog

Is your smartphone waking you up with late-night callers? Tell that phone it’s a “bad phone” and someday, … More » Coming soon: Train your smartphone as you would your dog

The one thing that threatens workers the most

Many labor experts believe there’s a troublesome “skills gap” in America: Too many workers who specialize … More » The one thing that threatens workers the most

7 tips to cut flight costs during the holidays

Holiday travel can cause a strange mix of excitement and dread. Establish a holiday travel budget that … More » 7 tips to cut flight costs during the holidays

5 vehicles you love and car thieves hate

Thieves steal a car in America every 43.7 seconds on average, but here’s a look at five models you can … More » 5 vehicles you love and car thieves hate

What is it tourists don’t like about Canada?

Our travel deficit keeps growing. More » What is it tourists don’t like about Canada?

World’s most powerful people 2013

Here are the 10 most powerful people in the world, chosen based on their scope of influence and their … More » World’s most powerful people 2013

BlackBerry’s BBM success shouldn’t leave its devices behind

A few months back, while sitting on the subway in Toronto, I heard something I’ve never heard before: … More » BlackBerry’s BBM success shouldn’t leave its devices behind

Vanity Fair has published a vicious takedown of hedge fund billionaire Dan Loeb

Some brutal anecdotes in here. More » Vanity Fair has published a vicious takedown of hedge fund billionaire Dan Loeb

Why Lululemon’s yoga pants cost $30 more than Athleta’s

Lululemon’s $98 pair looks almost exactly like Athleta’s $69 pants. The materials, a mixture of nylon … More » Why Lululemon’s yoga pants cost $30 more than Athleta’s

Retired in Nicaragua, and loving it

This is part of a series in which Americans age 50-plus profile their adopted overseas locales. Send … More » Retired in Nicaragua, and loving it

For American restaurant chains, the future is Mexican

Yum! Brands and Chili’s both smell success in Mexican menus. The burger-and-fries business, meanwhile, … More » For American restaurant chains, the future is Mexican

This robot wants to take the gas pump right out of your hand

Call me crazy, but I actually enjoy filling up at the gas station. It may be the only pleasure of owning … More » This robot wants to take the gas pump right out of your hand

This camping trailer was designed by a former NASA contractor

Photo via Core77 Maybe fewer people would complain about the end of the space program if more NASA folks … More » This camping trailer was designed by a former NASA contractor

Apparently, there are some other Keinz, says McDonald’s

McDonald’s has lost its taste for Heinz ketchup. More » Apparently, there are some other Keinz, says McDonald’s

Jay-Z says hold up on racial profiling accusations at Barneys NYC

The rap mogul made his first statement about the controversy in a posting on his website. He has come … More » Jay-Z says hold up on racial profiling accusations at Barneys NYC

Amazon just got bigger, if you can believe it

Even if it is huge already, Amazon.com can’t help but try to find ways to get even bigger. The e-retailer, … More » Amazon just got bigger, if you can believe it

Monday morning daydreams of off-the-grid hotels

When you don’t want elevators or meeting rooms or anything else that screams corporate hospitality, and … More » Monday morning daydreams of off-the-grid hotels

Holiday family fun at a nuclear power plant

“Hey, kids. Let’s jump in the car and head to the nuclear power plant.” If that sounds like your idea … More » Holiday family fun at a nuclear power plant

GM tinkers with its China strategy

SHANGHAI—With its lead in the world’s biggest auto market threatened, General Motors Co. is tinkering … More » GM tinkers with its China strategy

How guns are made in Kashmir

Workers are seen in a gun manufacturing factory in Srinagar, the summer capital of Indian Kashmir, 25 … More » How guns are made in Kashmir

Laps to laptops: Formula One sells its big data know-how

Wander around the pits at a Formula One car race and you’re as likely to bump into a laptop-wielding … More » Laps to laptops: Formula One sells its big data know-how

Who will get rich from Twitter’s IPO?

Twitter is preparing to sell 70 million shares to the public in an IPO that will value the company at … More » Who will get rich from Twitter’s IPO?

The countries with the most brainpower

Which country has the largest stock of brilliant people? The answer to this question depends … More » The countries with the most brainpower

The 25 countries with the most brainpower

Which country has the largest stock of brilliant people? The answer to the question depends only in part … More » The 25 countries with the most brainpower

BlackBerry, BlackBerry, which suitor will you choose?

How does former Apple CEO John Sculley rank against BlackBerry’s other big-name suitors? More » BlackBerry, BlackBerry, which suitor will you choose?

Do rich people make you sick?

Some say they do. What nonsense. More » Do rich people make you sick?

McDonald’s new ‘dollar menu’ goes up to $5

McDonald’s is rebranding its “Dollar Menu” as the “Dollar Menu & More” with $1 and $2 sandwiches and … More » McDonald’s new ‘dollar menu’ goes up to $5

8 best questions to ask during a job interview

Faced with one pointed question after the next regarding your career, a job interview can quickly take … More » 8 best questions to ask during a job interview

Top 5 secrets of billionaire Rupert Murdoch’s media mogul life

When it comes to Rupert Murdoch’s media empire, there are some aspects of its business strategies that … More » Top 5 secrets of billionaire Rupert Murdoch’s media mogul life

5 things not to do on the Internet while flying

What should we give up when getting online a mile high? Is it better to forgo the Internet altogether … More » 5 things not to do on the Internet while flying

10 tips for picking a place to retire

Once you retire, you’re free to head to the beach or golf course. In some cases, you can even dramatically … More » 10 tips for picking a place to retire

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