Oil dealer scandal in Singapore hits European banks

Bangkok Lim Oon Kuin worked on his raw material empire for more than half a century, which made him one of the most important oil traders in Singapore. Given the crash in the oil markets, a few weeks were enough to bring his company down. What remains are investigations by Singapore’s law enforcement officers and a mountain of debt of almost four billion dollars with several international banks – including the one German bank.

Hin Leong is the name of Lim’s company that became the first major victim of the oil crisis in Asia. Translated, the company name means “prosperity”. But there seems to be little left of the billion dollars Lim used to juggle the oil market and recently bet against a drop in prices.

Hin Leong filed for bankruptcy protection at the end of last week after the banks asked for the loans to be repaid. Now the auditing and consulting firm PwC should take control of the group during the debt restructuring talks, as the local newspaper “Straits Times” reported on Thursday, citing insiders.

The credit institutions threaten to remain on a large part of their claims. The remaining oil traders in the Southeast Asian financial metropolis are also facing a severe crisis: In response to the turbulence at Hin Leong, the banks are cutting their credit lines. The industry is now afraid of massive liquidity shortages. “Banks cancel their positions wherever possible,” commented industry consultant Jean-Francois Lambert. Singapore’s central bank was forced to warn the financial industry of a complete lending to the oil sector.

Hidden losses

The loss of confidence is also responsible for the impending credit crunch: Lim Oon Kuin, known in Singapore as O.K. Lim, admitted in an affidavit that he had hidden losses of $ 800 million. “I told the finance department not to let the losses show up in the books,” Lim wrote in the court document, according to the Bloomberg news agency.

The balance sheet for 2019 thus showed a profit of $ 78 million. “In truth, the company hasn’t made a profit in the past few years,” said Lim, whose assets the US magazine “Forbes” estimated in early April at $ 1.3 billion. The 76-year-old founder also admitted to having secretly sold millions of barrels of oil, which he guaranteed to the banks as collateral.

With the admission, Lim may be trying to avert harm from relatives who are also involved in the family business. His son, Evan Lim, who runs the Ocean Tankers spin-off with a fleet of around 100 oil tankers, said they hadn’t known about the events. As announced on Monday, Singapore’s police opened an investigation into Hin Leong.

The company’s approximately $ 4 billion in debt was only offset by assets of $ 700 million recently, the company reportedly told creditors. The losses at the 23 banks that loaned Hin Leong money could total $ 3.3 billion.

HSBC most affected

The UK Bank HSBC, which owes the company $ 600 million, is hardest hit. ABN Amro and the Rabobank from the Netherlands and the French Société Générale and the British Standard Chartered Bank has loaned Hin Leong between $ 200 million and $ 300 million each. Three local banks from Singapore collectively have claims of nearly $ 700 million.

Deutsche Bank and DZ Bank were also reportedly involved in the business with Hin Leong – with relatively low amounts. According to Reuters, Deutsche Bank is about $ 70 million and DZ Bank is about $ 40 million. Both banks did not want to comment on this on request.

Hin Leong was one of the largest suppliers of marine fuel in Singapore and played an important role in Southeast Asian gasoline trading. The group also owns a stake in a huge fuel depot. Sales talks with the Chinese company are now reportedly under way Sinopec.

More: How the Saudi Crown Prince gambles in the oil price war

.

Wall Street on the upswing after oil price collapse

Dusseldorf After the turmoil of the past few days, Wall Street is breathing a little more. The prospect of further stimulus measures on Wednesday lured investors back into the US stock market. The standard value index Dow Jones closed two percent higher at 23,475 points. The technology-heavy Nasdaq advanced 2.8 percent to 8495 points. The broad S&P 500 gained 2.3 percent to 2799 points.

Impaired by the historic oil price chaos, the Dow Jones ended Tuesday trading 2.7 percent lower at 23,018 points. The technology-heavy Nasdaq dropped 3.5 percent to 8,263 points. The broad S&P 500 lost 3.1 percent to 2736 points.

“Stock markets seem to think that stimulus from governments and central banks will be enough to neutralize the economic damage caused by the coronavirus pandemic,” said Rabobank economist Teeuwe Mevissen. “As long as this mood persists, economic data don’t seem to matter.”

The Federal Reserve (Fed) pumps trillions of dollars into the financial markets through the purchase of securities. In parallel, the US Senate launched another $ 500 billion stimulus package. That is certainly not the last, said analyst Joshua Mahony from the brokerage IG. “US President Donald Trump has demonstrated his willingness to increase debt in the name of economic growth.”

With the overall market, oil stocks also went on a recovery course. They had come under pressure in the past few days because of the price hype of the US variety WTI. The shares of Exxon and Chevron grew up to 3.4 percent.

Look at the individual values

One of the biggest winners on Wall Street Biontech with a course increase of almost 27 percent. The Mainz biotech company, which works together with the US pharmaceutical company Pfizer researching a vaccine against the lung disease Covid-19 has received approval for a clinical study in Germany.

In the USA, too, the active ingredient will soon be clinically tested after approval. While in the Dow Pfizer shares In line with the market, increasing by 1.8 percent, the Biontech stocks listed on the Nasdaq gained almost 27 percent.

The titles of Chipotle, which rose by twelve percent. The strong online business cushioned the slump in the stationary business of the fast food chain, the analysts of the investment bank BMO wrote. The company, which also has branches in Germany, made a surprisingly high quarterly profit of $ 0.18 per share.

The papers from Netflix On the other hand, they fell by 2.8 percent, although the online video store was able to win twice as many new customers as expected due to the coronavirus restrictions. However, the company warned that the boom would slow down as soon as the restrictions on public life were relaxed again.

But that doesn’t change the positive long-term business prospects, wrote the analysts of the asset manager Cowen. They also considered Q2 user numbers to be too conservative because of the still widespread exit restrictions.

Quarterly numbers, among other things Texas Instruments, AT&T and Biogen in front. The chipmaker had lost less revenue and profit in the first quarter than feared, which gave the shares an increase of 4.8 percent. The telecom company’s papers, on the other hand, lost 1.3 percent after a drop in sales and a withdrawn outlook.

Biogen fell by 9.4 percent to the end of the Nasdaq 100. The biotech company was not only in the spotlight with its quarterly figures, but also with its active ingredient aducanumab against Alzheimer’s.

The application for approval of this product is to be submitted later than previously announced. That raised more questions than answers, complained about RBC analyst Brian Abrahams and immediately lowered the price target for the share.

There was also news too United Airlines and Facebook. The shares of the battered airline dropped 7.2 percent because United wants to raise fresh money through a billion dollar capital increase.

Facebook on the other hand, jumped 6.7 percent after strong losses from the previous day. The network giant wants to penetrate further into India and buys almost ten percent of the Jio Platforms for $ 5.7 billion (€ 5.25 billion). This is the subsidiary of a leading mobile operator.

In the US bond market, ten-year government bonds lost 17/32 points to 108 10/32 points and returned 0.624 percent. The euro was trading at $ 1.0820 at the close on Wall Street. The European Central Bank set the reference price at $ 1.0867 (Tuesday: 1.0837). The dollar thus cost 0.9202 (0.9228) euros

With agency material.

More: Read here what happened on the German stock market this Tuesday.

.

Turkish central bank cuts interest rates again

Istanbul The Turkish central bank cut its key interest rate for the eighth time in a row. On Wednesday, central bank boss Murat Uysal set the one-week repo rate at 8.75 percent – one percentage point or 100 basis points lower than before.

The central bank classifies the risks for the inflation forecast as declining at the end of the year. “In this context, the Board of Directors has decided to cut the base rate by 100 basis points,” said a statement by the monetary policy council of the Turkish Central Bank (TCMB).

In the course of a possibly several-month standstill of the global economy due to the spread of the new corona virus, the government in Ankara is using cheap money to keep the domestic economy alive.

Since July 2019, the central bank has cut key interest rates eight times: from 24 percent to 8.75 percent. This repo interest rate describes the conditions at which commercial banks can borrow money from the central bank within a week. As a rule, such transactions take place to lend fresh money in the form of loans to consumers or companies.

The rule is: the lower the key interest rate, the more frequently new loans are requested. This will boost the economy and create jobs. At the same time, the newly spent money dilutes the value of the domestic currency. The exchange rate then usually falls and inflation rises.

Piotr Matys, strategist at Rabobank in London, says: “Another significant rate cut is a clear indication that supporting the economy is a priority despite the risk of recession.” But it also means “that the lira will be even less attractive, and that the central bank may have to spend even more on currency interventions ”.

Not a priority for exchange rate and price stability

The analysts of the Turkish investment company Oyak had expected an interest rate cut of exactly this amount. In a phase such as during the corona crisis, the economy is threatened by the “significant risk” of a recession, the Oyak experts write. “We therefore expect that the central bank will not give priority to exchange rate and price stability.”

The Turkish lira initially remained stable after the interest rate decision and was down 0.2 percent in the afternoon (local time) at 6.9966 lira per dollar. A euro therefore cost 7.6086 lira or minus 0.39 percent. Within a quarter, the Turkish currency lost around eleven percent against the dollar and eight percent against the euro. According to the Bloomberg agency, Turkish state banks have intervened in the markets with up to $ 300 million to support the lira.

Subtracting inflation from the last 11.9 percent, Turkey currently has one of the lowest real interest rates in the world. Central bank president Murat Uysal said that the central bank believes that inflation will hardly increase in the wake of the corona crisis, since the oil price has dropped so sharply.

The central bank is currently anticipating inflation of 8.2 percent for the year as a whole. “Although the unit cost increases associated with the decline in production and sales are being tracked, the inflation-limiting effect of overall demand conditions is expected to increase,” said the TCMB monetary policy council.

Pressure is growing on indebted companies

The Turkish economy, like many countries, is severely affected by measures to curb the novel virus. The lines at the automotive suppliers have been idle for weeks since March because the major car manufacturers could not use any intermediate products at the moment. The situation is similar in tourism, one of the most important sources of foreign currency in the country. Food producers, on the other hand, can look forward to. “The demand from Europe for Turkish fruits and vegetables is great,” explains Yüksel Tavsan, President of the Association of Turkish Wholesalers.

The renewed rate cut is likely to continue to weigh on the value of the lira in the coming months, especially as the central bank cannot forever intervene against the currency downturn. Companies that are heavily exported should benefit from this: their products become cheaper abroad.

For companies with high dollar debt, the pressure on the balance sheet will increase. The lower the lira is, the more expensive your foreign debt will be. These include analysts from Oyak companies such as Anadolu Efes, Odas, Migros and Zorlu Energy.

More: Brazil, South Africa and Turkey: three emerging markets in the debt trap.

.

Dividend waiver at banks – LBBW postpones decision

Frankfurt, Zurich, Stuttgart Numerous banks suspend their dividend payments according to instructions from the European Central Bank (ECB).

Landesbank Baden-Württemberg (LBBW) now also wants to postpone the decision on a dividend to its owners until autumn. The board decided to propose to the state of Baden-Württemberg, the Sparkassenverband and the city of Stuttgart, the largest German state bank announced on Thursday.

The board of directors had originally planned to propose a distribution of 259 million euros to the three owners at the general meeting in May after 250 million euros in the previous year.

Despite the ongoing low interest rate phase, LBBW had significantly increased its profit last year. At around 444 million euros, earnings after taxes were 7.5 percent higher than in 2018.

Many banks had previously declared that they would not distribute profits, most recently Aareal Bank.

Helaba and BayernLB have also suspended their dividends. According to financial circles, DZ Bank also wants to postpone the decision and payment of the dividend.

The second largest German cooperative bank after DZ Bank, the Deutsche Apotheker- und Ärztebank (Apobank), on the other hand, wants to maintain a dividend payment.

At the end of March, the Commerzbank announced in an ad hoc announcementthat she will not propose a dividend for 2019. “For the current fiscal year 2020, the Executive Board will not provide for a dividend payment until the uncertainties caused by Covid 19 have ended. After that, he will decide about it again, if necessary, ”it said.

The Dutch institutes had previously ABN Amro, ING, Rabobank and the Italian UniCredit, as well as numerous smaller financial houses in the euro area, have announced that they will not initially distribute any money to shareholders.

ECB had asked banks to waive dividends

In March, the ECB asked banks not to pay dividends for 2019 and 2020 due to the virus pandemic until at least October 1.

A similar request came from the Swiss authorities. They advised banks to “carefully consider” how high the dividends should be in the current environment. The ECB has no supervisory powers over Swiss banks.

“Although we are well capitalized and financed, we believe it is wise to follow the ECB’s recommendations,” said ING chief Ralph Hamers, who will become UBS’s chief executive officer later this year.

This gives the bank more flexibility to help customers and society fight the corona crisis. “These are exceptional times for all of us.” After October 1, ING will make further decisions about its dividend policy.

ABN Amro said that the consequences of the virus crisis for customers, the quality of the loan portfolio and the entire economy could not yet be estimated. The bank expects a record loss in the first quarter, also because a customer in the US had gambled on risky securities. ABN Amro will therefore follow the advice of the ECB and initially put the dividend plans on hold.

The major Spanish bank Santander had also announced that the planned interim dividend would be canceled. The funds should be used to help people and companies in need, the largest bank in the euro zone justified the move.

UniCredit also planned not to make a profit distribution and also to suspend share buybacks. The Munich HypoVereinsbank, which belongs to UniCredit, can, however, transfer a dividend of almost 3.3 billion euros to the Italian parent company, as Bundesbank board member Joachim Wuermeling told the “Handelsblatt”.

“With the recommendation, we want to prevent that in the current uncertain situation, distributions that may be urgently needed later flow out of the banking system. This is not the case with payments between parent companies and subsidiaries within banking groups. “

The Deutsche Bank does not meet the ECB’s dividend council, as it had already announced that it would not distribute profits for 2019 and 2020 due to its restructuring of the group.

More: The European banking supervisors are asking the credit institutions not to squander their equity but to use it primarily in Europe.

.

More and more banks are foregoing dividends

ECB in front of the Frankfurt skyline

The European Central Bank asked banks last week not to distribute profits.

(Photo: Jan Huebner)

Frankfurt, Zurich Numerous banks suspend their dividend payments according to instructions from the European Central Bank (ECB).

The Dutch institutes ABN Amro, ING, Rabobank and the Italian UniCredit, as well as numerous smaller financial houses in the euro area, are not distributing any money to shareholders for the time being. The Swiss banks UBS and Credit Suisse however, are sticking to their dividend plans, as announced on Monday.

The ECB asked banks last week not to pay dividends for 2019 and 2020 until at least October 1 because of the virus pandemic.

A similar request came from the Swiss authorities. They advised banks to “carefully consider” how high the dividends should be in the current environment. The ECB has no supervisory powers over Swiss banks.

“Although we are well capitalized and financed, we think it is wise to follow the ECB’s recommendations,” said ING chief Ralph Hamers, who is to become chief executive officer of UBS later this year.

This gives the bank more flexibility to help customers and society fight the corona crisis. “These are exceptional times for all of us.” After October 1, ING will make further decisions about its dividend policy.

ABN Amro said that the consequences of the virus crisis for customers, the quality of the loan portfolio and the entire economy could not yet be estimated. The bank expects a loss in the first quarter, also because a customer in the US had gambled on risky securities. ABN Amro will therefore follow the advice of the ECB and initially put the dividend plans on hold.

The major Spanish bank Santander had also announced that the planned interim dividend would be canceled. The funds should be used to help people and companies in need, the largest bank in the euro zone justified the move.

UBS maintains dividend

UBS, on the other hand, still wants to pay out $ 0.73 per share to shareholders. The institute has a strong capital base and is strategically well positioned, said a spokeswoman for the money house, which had to be supported by the state during the global financial crisis of 2008/09. “As the largest Swiss bank, UBS is able to support the economy and at the same time pursue an appropriate dividend policy.”

Credit Suisse also said it was pursuing a sustainable dividend policy and would continue to do so. “There are no plans to change existing policies.

UniCredit already announced at the weekend that it would not make a profit distribution and would also suspend share buybacks. The Munich HypoVereinsbank, which belongs to UniCredit, can, on the other hand, transfer a dividend of almost 3.3 billion euros to the Italian parent company as planned, as Bundesbank board member Joachim Wuermeling told the “Handelsblatt”.

“With the recommendation, we want to prevent that in the currently uncertain situation, distributions that may be urgently needed later flow out of the banking system. This is not the case with payments between parent companies and subsidiaries within banking groups. “

The Deutsche Bank does not meet the ECB’s dividend council, as it had already announced that it would not distribute profits for 2019 and 2020 due to its corporate restructuring. The Aareal Bank and the Commerzbank put question marks behind their dividend plans, but haven’t made a final decision yet.

More: The ECB demands that dividends be waived. DZ Bank and top public law institutions may still distribute profits.

.

Commodity exchanges are also reacting to the corona crisis

DThe Dax share index closed Friday with a clear drop of more than 3.6 percent and 9632 points. The reason was the growing uncertainty about the Corona crisis.

Market participants are still very nervous, said Andreas Lipkow from Comdirect Bank. In the United States, the world’s largest economy, the coronavirus pandemic is still accelerating and leading to high infection rates. The weak Wall Street reflects this and the German financial market cannot escape this trend.

Meanwhile, the death toll in Italy is still rising significantly, and British Prime Minister Boris Johnson has also been infected, causing the British stock exchange to collapse.

On a weekly basis, however, the Dax posted an increase of almost 7.9 percent. Sixt shares performed particularly well on a weekly basis, growing by almost 30 percent, followed by Thyssen-Krupp and the event service provider CTS Eventim.


– (-)


To detailed view

The commodity markets are also affected by the crisis. For example, grain prices rose because Russia announced export restrictions on wheat, rye, corn and barley. “It’s a symbolic gesture, but a disturbing one,” said a European trader. “Is this a first step in reducing exports to maintain Russia’s own food supply in the midst of the corona crisis? That’s the worry. ”Wheat prices have already risen on the European stock exchanges. Russia exported around 25.2 million tons of wheat, rye, barley and corn from July-December 2019.

The corona crisis is also driving up the price of orange juice on the commodity exchanges. In New York, the price of a pound (0.454 kilograms) of orange juice rose within 20 days by 20 percent to 1.22 euros on Thursday – a level that was last reached a year ago. Orange juice is currently “one of the biggest winners in the markets,” said Stephen Innes of AxiCorp. The reason for the sharp increase in demand is its ability to stimulate the immune system.

Such course development is “not uncommon during flu epidemics because consumers are demanding healthier drinks,” said François Sonneville, an expert at Rabobank, the AFP news agency.

In addition to the increased demand, problems on the supply side also contribute to the price increase. “With most planes stuck to the ground, it becomes difficult to move the oranges and concentrate,” said Innes. At the same time curfews and the recommended distance keeping fruit harvesting difficult.

By far the largest orange juice producer in the world is Brazil, according to Rabobank. The majority of the deliveries come from there to Europe, even if some higher quality orange juice products come from Spain, for example. Thanks to high stocks in Brazil, orange juice will not become scarce, according to Sonneville.

.