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Tuesday, 27 January 2009

National Bank of Kuwait profit drops 78%

National Bank of Kuwait has reported a 78% decline in fourth-quarter profit. Net income in the three months to December fell to 11.61 million dinars ($40.1m) from 53.1 million dinars a year earlier, according to calculations by Bloomberg. Full-year profit declined 6.7$ to 255.3 million dinars.

‘Unprecedented’ inflows into oil ETFs

Goldman Sachs’ energy analysts are the latest to warn of the unprecedented inflows into oil ETFs in their most recent research note. In fact they attribute the small spike in oil prices in the last few weeks largely to this, a US cold snap, storage demand for products, fuel switching and a spike in refining margins.

Most interestingly, however, the Goldman oil bulls believe the spike is only transient as most of these factors are likely to reverse in the near term, hence they do not believe it represents the impending end to the current bear market (which they are still expecting before the end of the year).

The above certainly fits their view that the new bullish cycle will only reappear when the contango flattens out, in itself only likely to happen when most spare production (most likely from non-Opec producers) is brought offline.

Obama vows to listen to Muslims

Barack Obama on Monday night granted an Arabic-language television channel his first formal interview as president – an unprecedented gesture that appeared aimed at offering the Muslim world a sharp contrast with his predecessor, George W. Bush.

Mr Obama, who in his inaugural address last week promised the Muslim world a “new way forward based on mutual respect and mutual interest”, told the Al Arabiya television channel that his administration wanted listen to the Muslim world and re-examine America’s “preconceptions” towards the region.

Mr Obama also went further than he had at any point during the general election in speaking openly about his own personal ties to the Muslim world.

Fuld ‘sold’ mansion to wife for $100

The controversial former chief executive of Lehman Brothers transferred ownership of a $14m Florida mansion to his wife for $100 in a possible attempt to move assets beyond the reach of infuriated investors of the collapsed bank, reports The Times. Dick Fuld, who led the 158-year-old investment bank to its demise last September, sold the beach-front house to his wife, Kathleen, for $100 on Nov 10, according to Marin County real estate records. The couple had previously jointly owned the Jupiter Island property, which was valued at $13.75m when they bought it in March 2004.

Investors to cut stakes in China banks

Sales of Chinese bank shares by overseas investors are expected to accelerate this year as western financial institutions divest stakes to help bolster balance sheets. Over the past few weeks, UBS and RBS have sold their holdings in Bank of China, raising a combined $3.2bn, while Bank of America raised $2.8bn by selling a chunk of its stake in China Construction Bank. Sale of the stakes, acquired in 2005 and 2006, come as Bejing tries to support domestic banks amid the economic slowdown. The next wave could come late April when lock-ins expire on stakes in Industrial & Commercial Bank of China. Goldman Sachs’s 5% ICBC stake could fetch more than $7bn. Temasek, Allianz and HSBC also own lucrative stakes in Chinese banks.

To save the banks we must stand up to the bankers

If you hid the name of the country and just showed them the numbers, there is no doubt what old International Monetary Fund hands would say when confronted by the current situation of the US: nationalise the banking system. The government has already essentially guaranteed the system’s liabilities , bank assets at market value must be massively lower than liabilities and a severe global recession may yet turn into the Greatest Depression.

Nationalisation would simplify the job of cleaning up bank balance sheets, without which no amount of recapitalisation can make sense. An asset management company would be constructed for each nationalised bank, and loans and securities could be clearly divided into “definitely good” and “everything else”.

Good loans would go into a recapitalised bank, where the taxpayer would not only hold all the risk (as now) but also get all the upside. Careful disposal of bad assets would yield lower losses than feared, although the final net addition to government debt would no doubt be in the standard range for banking fiascos: between 10 and 20 per cent of gross domestic product.

Norway dips into oil fund for NKr20bn stimulus

Norway on Monday unveiled a NKr20bn ($3bn, €2.25bn) fiscal stimulus package as it starts to use its massive oil wealth to boost growth and employment in its struggling economy.

The Nordic country of just 4.7m people has amassed $370bn in oil revenues – the world’s second largest sovereign wealth fund, after Abu Dhabi’s – and is now starting to use it to soften the effects of an expected recession.

The new spending package comes on top of a previously announced expansionary budget that was equivalent to 0.7 per cent of gross domestic product and takes total government spending on the crisis to 2.3 per cent of GDP – one of the most aggressive spending plans in Europe.

Counterproductive currency quarrel

President Barack Obama’s choice for Treasury secretary, Tim Geithner, was playing with fire last week when he told US senators that China was “manipulating” its currency. To manage the economic imbalances at the heart of today’s crisis, the US must bring China on board. Rattling sabres will only complicate that task.

Since China abandoned its dollar peg in 2005, the renminbi has in fact gained more than 20 per cent against the greenback. No wonder the Chinese feel slighted by Mr Geithner’s rebuke. Pandering to anti-China sentiment in the US Congress may have helped to smooth the confirmation process for the new secretary, under pressure for underpaying his taxes. But given the virulence of some US politicians on the US-China trade relationship, it may even have been a way to forestall more radical congressional demands in the future.

The episode highlights how managing Congress risks getting in the way of a responsible international economic policy. Mr Obama must start to see the crisis as a global economic problem, not something the US can solve by itself.

Buy-out groups chase elusive targets

The Middle East has been fertile ground for fundraising by big international private equity firms but it has proven less so for acquisitions.

Several large partnerships have set up in the Middle East recently – most notably Kohlberg Kravis Roberts , the Carlyle Group and Colony Capital – but deals have been few and far between.

In 2007, KKR bought UN Ro-Ro, a Turkish shipping company, for €910m ($1.15bn), while the property oriented Colony Capital bought control of Tamoil, a Libyan refiner, for €4bn and is developing a $2bn resort in Morocco. Yet not one deal has been closed in the Gulf even after years of oil-soaked growth.

Worries weigh on Saudi banks

Fourth quarter profits of $380m might be something to be celebrated – particularly given the state of the global economy. But Al-Rajhi Bank, the Gulf’s biggest bank, said last week that its profits of SR1.4bn had been depressed by higher provisions and were almost 10 per cent lower than a year earlier.

At the same time, Samba Financial Group, another prominent Saudi bank, reported a 13.5 per cent decrease in fourth quarter earnings.

In October, as global recession loomed and credit from international banks dried up, the Saudi government injected $3bn into banks to finance private sector projects and help the lenders cope with a tightening local currency money market. It has also twice dropped reserve requirements on demand deposits to 7 per cent.

Karachi index falls for ninth day

Karachi: Pakistan stocks fell for a ninth day, as selling by foreign investors outweighed purchases by a market stabilisation fund. Pakistan Petroleum Ltd, the biggest gas producer led declines.

The Karachi 100 Index lost 114.2, or 2.32 per cent, to 4,815.34 at the 3.30 pm. local-time close. This is the lowest since February 25, 2004, when the index closed at 4,809.52.

"The buying by the fund isn't enough to compensate for the selling pressure," said Atif Malik, JS Global Capital's director of international equity sales.

Bank Sarasin aiming to raise $100m

Dubai: Bank Sarasin's Dubai-based asset management firm on Monday launched an equity fund worth $100 million (Dh367 million) to target Gulf Arab bourses which it believes are undervalued.

Sarasin-Alpen & Partners said it aimed to raise an initial $100 million in the first quarter of 2009 from both international and regional investors, which it would invest in the markets of the six-member Gulf Cooperation Council (GCC).

"The economic outlook, government finance and regional stability in the GCC are much better than in the developed world and than in some of the other emerging markets," said Paul Cooper, senior executive officer at Sarasin-Alpen & Partners.

Kuwait to own 16% of Gulf Bank

Kuwait City: The Kuwait Investment Authority, the country's sovereign wealth fund, will own 16 per cent of Gulf Bank KSC after the commercial bank's capital increase.

Gulf Bank shareholders subscribed to 68 per cent of the capital increase, which ended late on Sunday, Fawzy Al Thunayan, general manager for board affairs at the bank, said in a phone interview yesterday from Kuwait.

Gulf Bank, which last November announced 375 million dinars (Dh4.77 billion) of losses from derivatives trading, doubled the bank's capital by issuing 1.25 billion shares to existing investors at a nominal value of 100 fils and a premium of 200 fils, to raise an amount equal to the losses.

Mixed reaction to Central Bank initiative

The Central Bank’s request that banks delay their quarterly reports until they have fully reviewed their loan and investment books is prompting analysts to question the financial sector’s transparency. For others, however, it is further proof that the authorities want to ensure reporting is up to international standards.

“There are 50-odd banks here in the UAE and the likelihood of inconsistencies remains high. With this step the Central Bank wants to assure a certain level of consistency of how the [accounting] rules are applied,” said Sanjay Uppal, the chief financial officer at Emirates NBD, the country’s largest bank by assets.

Other bankers echoed his sentiments, adding that the financial body was merely trying to ensure that banks did not use accounting loopholes or off-balance-sheet vehicles to hide losses.

Growth stalls at DP World

The financial crisis forced global trade to slow sharply in the fourth quarter, creating one of the toughest operating environments ever in the shipping and terminals business, DP World said today.

“We ended (the year) with some of the worst market conditions the container terminals industry has ever seen. There has been a sharp downturn in global conditions,” said Yuvraj Narayan, the senior vice president of corporate strategy at DP World, the world’s fourth largest ports operator, in a conference call today.

Despite a poor fourth quarter DP World said its annual container handling traffic at its 26 consolidated terminals — or terminals in which it has a controlling stake in — still grew 15 per cent last year, to 27.7 million containers. However, it said excluding the contribution from new terminals which joined the portfolio during 2008, DP World’s volume growth was six per cent.

Dubai Economic Department prepares proposal to secure jobs in major sectors

The 2008 GDP breakdown is:

- Wholesale and retail: 37 per cent

- Real estate and business services: 15 per cent

- Manufacturing: 15 per cent

- Construction, transport and financial services: Around 10 per cent each