Source 1:

Financial crisis, five years on: trust in banking hits new low

Nearly three-quarters of people surveyed by Which? do not think banks have learnt their lesson from the financial crisis.

Royal Bank Of Scotland. A Which? survey says that trust in banking has hit a new low. Photograph: Matthew Lloyd/Getty Images

Five years on from what is considered the start of the credit crunch –dubbed “the day the world changed” by the former boss of Northern Rock – the public are more disillusioned with the banking sector than ever, a consumer group has claimed.

Nearly three-quarters – 71% – of people surveyed by Which? do not think banks have learnt their lesson from the financial crisis, up from 61% in September last year.

Consumers have low expectations of a parliamentary inquiry into banking ethics, with only 26% confident that it will lead to positive change among the UK’s lenders.

The survey was published on the fifth anniversary of the start of the credit crunch, the subject of the now well-known phrase from ex-Northern Rock chief Adam Applegarth.

On 9 August 2007, the final wake-up call to the world’s banking system occurred after many early warnings over the toxic nature of high-risk mortgage debt. “Sub-prime” was about to enter the vocabulary.

France’s biggest bank, BNP Paribas, had been forced to suspend three of its funds with major exposure to bonds backed by US sub-prime mortgages – it was unable to value them because the market for these products, or “securities”, had dried up completely.

Default levels among high-risk US borrowers had soared as the US Federal Reserve hiked interest rates to 5.25%.

This shattered confidence in the bonds, which were used by most banks as collateral for the commercial paper they used as a source of short-term funding.

There had been early signs of the crisis – notably the first-ever profit warning from HSBC in February and the collapse of two Bear Stearns hedge funds exposed to high-risk mortgage debts in July. But BNP caused other banks, concerned at the possibility of more bad debts coming out of the woodwork, to cut back on everyday lending to each other by hiking their own interbank rates – and so began the credit crunch.

Since then, the economy has suffered two recessions and consumers have been hit by a series of bank scandals, which have further exposed the broken culture and mismanagement in the UK industry.

Which? chief executive, Peter Vicary-Smith, said: “Five years on from the beginning of the financial crisis, public confidence in the banking industry is at an all-time low, with a series of scandals exposing mismanagement and corruption at the very heart of the banking system that have cost UK consumers dear.”

In the wake of 9 August 2007, heightened inter-bank lending rates, along with the closure of the mortgage securities market, placed the finances of Northern Rock under intolerable pressure.

The way the group financed itself, “a reckless business model excessively reliant on wholesale funding”, according to MPs, had been caught short by the credit crunch. Panicking customers queued to grab back their savings and the UK’s first bank run in 140 years was under way.

The Rock – the fast-growing banking success story of the previous decade – was on the road to nationalisation, a £27bn taxpayer bailout and huge political embarrassment for the government.

Many of the UK high street’s biggest names – such as Barclays, Royal Bank of Scotland and Halifax Bank of Scotland (HBOS) – have been forced to raise billions of pounds in extra capital from their shareholders to shore up finances.

Since the crunch, house prices have fallen, consumer confidence has plummeted and prices and unemployment have risen.

The Bank of England slashed interest rates to 0.5% and has held them at the historic low since March 2009. It has also pumped £375bn of emergency cash into the economy to kickstart recovery.

But the economy continues to falter as the country struggles to grow under the tough austerity measures drawn up by the chancellor, George Osborne, in a bid to reduce the national debt, and pressure from the debt crisis on the continent.

Android widens smartphone lead

Samsung and others helped Google’s Android grow more dominant in the global smartphone market, capturing 68 percent in the latest quarter. Apple’s iPhone got 17 percent.

NEW YORK — Got an iPhone? You’re in the minority.

There were four Android phones for every iPhone shipped in the second quarter, research firm IDC said Wednesday. That’s up from a ratio of 2.5 to 1 in the same period last year.

The success of Samsung’s Android phones helped Google’s operating system extend its dominance in the smartphone market.

Samsung Electronics Co. and other phone makers shipped nearly 105 million Android smartphones in the April-June quarter, giving Android 68 percent of the worldwide market, up from 47 percent last year.

The gains came largely at the expense of BlackBerry phones made by Research in Motion Ltd. and Symbian phones made largely by Nokia Corp. Each saw its market share drop below 5 percent. Nokia is now making phones that use Microsoft’s Windows system.

The market share for Apple Inc.’s iPhone, powered by its iOS software, fell to 17 percent, from 19 percent. But the company shipped more iPhones than a year ago. Apple is the No. 2 smartphone maker, behind Samsung, and is likely to get a boost when it releases a new iPhone model as expected this fall.

Apple shook up the smartphone market when it released its first iPhone in 2007. It showed that phones can do much more than make calls and send email.

But in recent years, Google has mounted a serious challenge with Android and benefits from having several manufacturers as partners, including Samsung, HTC Corp. and Motorola Mobility, which Google ended up buying this year.

Apple still dominates in tablet computers, with 68 percent of the market in the second quarter, according to IDC. Google is trying to close the gap with its own branded Android tablet, the Nexus 7. Amazon.com Inc. and Barnes & Noble Inc. have made some in-roads will lower-cost tablets that run modified versions of Android.

Samsung’s Galaxy S III phone received good reviews when it was released late in the second quarter. It benefits from the company’s strategy of making various devices that target a range of consumers. By contrast, Apple targets only the high-end market with its iPhone.

According to IDC, Samsung accounted for 44 percent of all Android phones in the second quarter and shipped more Android phones than the next seven Android phone makers combined.

IDC estimates that Samsung shipped 50.2 million smartphones in the quarter, but that includes a few million phones running the Bada system based on Linux. Apple shipped 26 million iPhones.

Worldwide smartphone shipments grew 42 percent to 154 million in the second quarter. Combined, Android and Apple had 85 percent of the market, up from 66 percent a year ago.

Microsoft and RIM are coming out with new versions of their operating systems — Windows in October and BlackBerry early next year. The share of Windows phones grew to 3.5 percent, from 2.3 percent, in the latest quarter, largely because of its adoption by Nokia. Windows was the fifth-largest system and gaining on No. 3 BlackBerry.

Source 3:

China data spurs hopes of government intervention

Annual growth in China’s factory output slowed to its weakest in more than three years in July, missing market forecasts and increasing expectations that Beijing will take further policy steps to support an economy that has been sliding for six straight quarters.

Official data released today also showed China’s annual consumer inflation fell to a 30-month low in July, suggesting that the central bank has ample scope to ease policy again after rate cuts in June and July to keep the economy on track to meet an official 2012 growth target of 7.5 per cent.

China’s economy faces powerful headwinds as the eurozone debt crisis and a sluggish US recovery keep global growth at a low ebb, the main factor that pushed China’s new export orders in July into their steepest fall in eight months.

“The government underestimated the pace of slowdown and there needs to be more aggressive stimulating policies,” said Alistair Thornton, an economist at IHS Global Insight in Beijing.

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“The government has signalled that it’s taking a more aggressive line on stimulus measures … But it’s yet to feed into the real economy, which is why we are seeing such weak activities data for July.”

Hopes of further easing from China boosted riskier assets, with Asian shares rising to a three-month high and the commodity-sensitive Australian dollar testing a 4-1/2-month peak.

China’s industrial output growth slowed to 9.2 per cent year-on-year in July, its weakest since May 2009, down from 9.5 per cent in June and below the 9.8 per cent forecast in a Reuters poll.

Annual growth in fixed-asset investment, in the likes of real estate, roads and bridges, came in at 20.4 in January-to-July, unchanged from the January-to-June period and just below the 20.5 per cent forecast.

Growth of retail sales, the biggest driver of the economy’s expansion in the first quarter, eased to 13.1 per cent, short of the forecast of 13.7 per cent.

Economic growth has been sliding since the beginning of 2011, reaching 7.6 per cent in the second quarter, the weakest pace since the global financial crisis.

Analysts polled before the data had expected to see a pick-up in growth in the third quarter to 7.9 per cent and full-year growth of 8 per cent, above the official target.

COOLING INFLATION

The government is on track to ease policy to cushion the impact of the global downturn on the world’s second-largest economy, but needs to tread cautiously to avoid reigniting property sector risks and fuelling renewed consumer price rises.

Annual consumer inflation eased to 1.8 per cent in July from 2.2 per cent in June, pulling back further from a three-year high last July of 6.5 per cent, official data released today showed. Economists polled by Reuters had forecast inflation to ease to 1.7 per cent in July.

“This number gives more room for policy easing,” said Zhang Zhiwei, chief China economist at Nomura in Hong Kong.

“It is now pretty clear that CPI will likely be below the official 4 per cent target for the year, so the policy focus for the government can stay clearly on growth.”

Consumer prices edged up 0.1 per cent in July from the previous month, compared to expectations of a 0.1 per cent drop.

Still, there is little sign of inflationary pressures coming from factories. July’s data showed that producer prices fell in July by 2.9 per cent from a year earlier, a sharper decline than the 2.5 per cent forecast and the steepest fall since October 2009.

It marked a fifth straight month of falling producer prices, reflecting the pressures eating into corporate earnings and capping capital spending.

President Hu Jintao and Premier Wen Jiabao have promised to step up policy “fine tuning” in the second half of the year to support the economy.

Apart from lowering interest rates, Beijing has also cut the amount of cash that banks must hold as reserves to free up an estimated 1.2 trillion yuan ($191 billion) for lending in a series of moves since November 2011.

Source 4:

German Business Sentiments Slide Further

Frankfurt: Business sentiment in Germany fell for the fourth consecutive month in August as concern mounted in the corporate sector that the eurozone’s largest economy was headed for a downturn.

The Ifo Institute’s business climate index reached its lowest level in more than two years, falling slightly more in August than analysts had on average expected, although the rate of decline slowed month on month.

The survey results were broadly in line with previous indications that German companies see business deteriorating. Hans-Werner Sinn, president of the Ifo Institute, said export expectations were slightly negative for the first time in almost three years. “The German economy continues to falter,” he said.

While the economy of the eurozone as a whole shrank in the second quarter, Germany’s economy’s grew, but at a slower rate than in the first three months. Many economists and businesses fear conditions are getting worse as the performance of the country’s industries – particularly those that generate significant exports – will increasingly be put at risk by the eurozone crisis.

“Today’s release confirmed our view that weaker global demand will soon be felt in Germany and weigh on exports, while domestic investment will continue to suffer from uncertainties created by the euro area crisis,” analysts from Barclays Capital said.

“Household consumption, residential investment and steady public demand should support the economy throughout the soft patch ahead, but will likely not in themselves be sufficient to outweigh the negative factors at play.”

Stephan Winkelmeier, finance chief of BayernLB, the Munich Landesbank, said in a conference call on Monday: “We expect a weakening of the German economy in every sector.”

Ifo said the current business situation deteriorated only slightly but companies expressed greater pessimism regarding future business developments.

Dominique Barbet of BNP Paribas said: “The declining growth rate in Germany shows that the country is not immune from the general slowdown in Europe and outside Europe.”

Equities were little changed following the data release, with Frankfurt’s Xetra Dax index edging down just 0.05 per cent to 6,967.4.

The Ifo index is based on responses from companies in manufacturing, construction, wholesaling and retailing, which assess the business situation and their expectations for the next six months. August’s level fell to 102.3, from 103.2 in July.

Source 5:

Microfinance institutions must be responsible lenders: Rangarajan

C. Rangarajan. File Photo: P.V. Sivakumar

Faulting microfinance institutions (MFIs) for adopting strong-arm tactics, Prime Minister’s Economic Advisory Council Chairman C. Rangarajan, on Wednesday, said MFIs must modify their business models and become responsible lenders.

Business models

“Microfinance institutions which were becoming an effective alternative to money lenders can recapture that position only if they modify their business models and become responsible lenders,” Dr. Rangarajan said at the Dainik Bhaskar Financial Inclusion Conclave.

Critical of the working of the MFI sector, he said “strong-arm tactics adopted in recovering loan repayments have evoked much resentment. Equally, the business models adopted by many of the large MFIs were wrong. Multiple loans to borrowers for non-productive activities are a self-defeating exercise.” The overall cost to borrowers must be maintained at a level that was consistent with the repaying capacity of the borrowers, he said, adding “loans must also be reoriented towards income earning activities”.

LIMIT ON INTEREST RATES

The regulatory framework for the MFI sector, he said should prescribe a reasonable limit on interest rates and restrict multiple borrowing. “… A network of strong microfinance institutions can play significant role in achieving financial inclusion.”

Dr. Rangarajan also made a case for introduction of new products and simplified procedures by banks to meet the needs of customers in rural areas.