Connect with us

International

China-run troubled AIIB loans rise amid pandemic

Published

on


HONG KONG – After nearly five years of operations, the asset quality of the Chinese-led Asian Infrastructure Investment Bank is showing initial signs of decline.

The recent financial statement of the multinational lending institution shows that the bank’s impairment provisions have increased almost tenfold during the first half of 2020 from a year ago, reducing its net profit by more than half over the same period. Although the results did not affect AIIB credit ratings, one expert said he was “not at all surprised” by the jump in injury provisions given the global coronavirus pandemic and the deteriorating global economy.

The bank’s depreciation provisions, while still small compared to its loan investments in the first half of nearly $ 3.5 billion, were $ 105.82 million from January to June, compared to $ 10.99 million a year earlier. This mainly contributed to the 54% drop in net profit to $ 100.17 million in the first half.

The sharp rate of provisions for impairment is mainly attributed to “increased investment exposure”, particularly with the launch of “Crisis Repair Facility” in April, an AIIB spokesman told the Nikkei Asian Review in an email response to questions about with its financial statement.

The emergency plan provides funding for both the public and private sectors for its members to meet the financial needs under the pandemic. The bank has pledged to provide $ 13 billion by October 2021. The AIIB, in which China holds a stake of more than 30%, has grown from 57 founding members to 103 approved members worldwide.

Another key factor pushing for devaluation forecasts, according to the spokesman, is “deteriorating macroeconomic forecasts mainly due to the pandemic”.

Troubled loans, especially those held by emerging economies, have been recognized this year as a global concern.

The Asian Development Bank has also seen its loan loss provisions rise amid the pandemic. During the first three months of the year, provisions increased to $ 64 million from $ 1 million a year earlier, largely due to the adoption of a new accounting standard this year, which expanded the scope of expected credit losses and off-balance sheet exposures compared to a previous standard.

The bank’s official finding reveals that “the change in the macroeconomic forecast stemming from the COVID-19 pandemic resulted in a higher level of expected losses” for its loans. ADB is expected to unveil its second-quarter results later this week, coinciding with the three-day annual meeting that began Wednesday.

“The financial collaboration we need right now is about debt restructuring for emerging markets and developing countries,” said Joseph Stiglitz, a professor at Columbia University, this week. Speaking via teleconference from the US to the Foreign Correspondents Club in Hong Kong, the Nobel Prize-winning economist stressed: “[The] “The pandemic means that many countries will not be able to pay what they owe.”

The jump in provisions for impairment reflects the increase in future credit loss allowances as defined by International Financial Reporting Standards, or IFRSs, which the AIIB has adopted since its launch in January 2016. During the first half of the year, part of the loans were reclassified from stage 1 loans – meaning no significant credit risk – to stage 2 loans, in which credit risk is “significantly increased”.

These Phase 2 loans are concentrated in South and West Asia, where there is overlap with countries engaged in the Belt and Roads Initiative, a key geopolitical strategy for Beijing.

Among the newly increased depreciation provisions, about 20% was obtained from the reduction of a portion of its bond investments in Phase 3 – the lowest rating under the IFRS rule and defined as “bad credit”.

The bank said this was mainly caused by two bonds issued by the same entity. Emitter details have not been revealed, but he is currently undergoing restructuring. The bank launched a bond investment portfolio during the third quarter of last year.

The top three global rating agencies, however, have maintained their highest “AAA” or “Aaa” ratings for the bank, with a “stable” outlook, despite the revelation of the final results of the first half.

Alexis Smith-juvelis, an analyst at S&P Global Ratings, told the Nikkei in an email that “COVID-19 has created economic stress globally, affecting key macroeconomic estimates and variables used in estimating expected credit losses and is a main factor of increasing provisions for depreciation “.

She said that with the average level of non-performing loans in multilateral financial institutions at around 4% to 6%, “we naturally expect NPLs to grow as the AIIB expands its lending book in combination with asset quality pressures as a result of COVID- 19. “However, with ‘extremely strong capitalization’ and ‘strong risk management policies’, the current situation ‘will not necessarily result in valuation pressures,'” she said.

By the end of June, the AIIB had paid $ 19.3 billion in capital.

Asian Infrastructure Investment Bank President Jin Liqun, a former Chinese deputy finance minister, won a second five-year term in July. © Reuters

Fitch Ratings provided a similar rating. Nicholas Perry, associate director of sovereign valuations and Arnaud Louis, senior director and chief of national valuations, said in an email that “over the last six months, we have seen an increase in the transfer of Phase 1 to Phase 2 assets in lots. [multilateral development banks] we estimate, given the current uncertainty of credit rating and the economy. “

Since no Phase 3 loans have been reported, Fitch analysts estimate that AIIB impaired loans will remain around 2%, unchanged from what it announced in early July. Going forward, they see the quality of governance as one of the key points when assessing the potential impact of ratings, but the agency “currently rates AIIB governance as low-risk,” as its system is similar to that of its peers. its regional.

Moody’s Investors Service, which has assigned an “Aaa” rating to AIIB, declined to comment further.

Andrew Cainey, a senior fellow at the Royal United Services Institute in London, credits AIIB operations under the leadership of President Jin Liqun, a former Chinese deputy finance minister who won a second five-year term in July. .

“Its not [an] easy task to build a development bank almost from scratch with the right systems, culture, governance and processes, “Cainey said in an email. But he noted potential challenges for the bank in terms of credit quality control. It’s not “certainly a sign that risk assessment is difficult in many of the economies that the AIIB lends to – and that it takes time to build, you have to learn as you go.”

Robert Bestani, an assistant professor at Georgetown University in Washington, told the Nikkei: “I’m not at all surprised that the damaged AIIB assets have been extinguished.” The former director general of private sector operations and finance at ADB noted that the global economic outlook was “very sensitive even before the COVID-19 pandemic”, including the Chinese economy itself which is slowing down due to various structural issues.

“All of these reasons will make it very difficult for the developing world to repay their already inflated debts,” he said. Although the AIIB has tried to maintain a certain distance from the Belt and Roads Initiative economies, “they lend separately many of the same countries that have been or are now very concerned about the BRI debt trap,” he said.

Bestani also questions the AIIB’s dependence on sovereign lending, saying “it is not clear to me that the AIIB has been – or could be – as successful as we at ADB in promoting private sector lending.”

Due to various restrictions on lending by multilateral institutions, competition with private sector lenders tends to end in declining interest rates on loans, which has led traditional players like ADB and the World Bank to turn to its members too often for new capital “, although all were intended to be financially self-sufficient.

“It is an open question how long – especially in bad economic times – this can go on,” Bestani said. “I doubt the same is true for the AIIB.”



What Are The Main Benefits Of Comparing Car Insurance Quotes Online

LOS ANGELES, CA / ACCESSWIRE / June 24, 2020, / Compare-autoinsurance.Org has launched a new blog post that presents the main benefits of comparing multiple car insurance quotes. For more info and free online quotes, please visit https://compare-autoinsurance.Org/the-advantages-of-comparing-prices-with-car-insurance-quotes-online/ The modern society has numerous technological advantages. One important advantage is the speed at which information is sent and received. With the help of the internet, the shopping habits of many persons have drastically changed. The car insurance industry hasn't remained untouched by these changes. On the internet, drivers can compare insurance prices and find out which sellers have the best offers. View photos The advantages of comparing online car insurance quotes are the following: Online quotes can be obtained from anywhere and at any time. Unlike physical insurance agencies, websites don't have a specific schedule and they are available at any time. Drivers that have busy working schedules, can compare quotes from anywhere and at any time, even at midnight. Multiple choices. Almost all insurance providers, no matter if they are well-known brands or just local insurers, have an online presence. Online quotes will allow policyholders the chance to discover multiple insurance companies and check their prices. Drivers are no longer required to get quotes from just a few known insurance companies. Also, local and regional insurers can provide lower insurance rates for the same services. Accurate insurance estimates. Online quotes can only be accurate if the customers provide accurate and real info about their car models and driving history. Lying about past driving incidents can make the price estimates to be lower, but when dealing with an insurance company lying to them is useless. Usually, insurance companies will do research about a potential customer before granting him coverage. Online quotes can be sorted easily. Although drivers are recommended to not choose a policy just based on its price, drivers can easily sort quotes by insurance price. Using brokerage websites will allow drivers to get quotes from multiple insurers, thus making the comparison faster and easier. For additional info, money-saving tips, and free car insurance quotes, visit https://compare-autoinsurance.Org/ Compare-autoinsurance.Org is an online provider of life, home, health, and auto insurance quotes. This website is unique because it does not simply stick to one kind of insurance provider, but brings the clients the best deals from many different online insurance carriers. In this way, clients have access to offers from multiple carriers all in one place: this website. On this site, customers have access to quotes for insurance plans from various agencies, such as local or nationwide agencies, brand names insurance companies, etc. "Online quotes can easily help drivers obtain better car insurance deals. All they have to do is to complete an online form with accurate and real info, then compare prices", said Russell Rabichev, Marketing Director of Internet Marketing Company. CONTACT: Company Name: Internet Marketing CompanyPerson for contact Name: Gurgu CPhone Number: (818) 359-3898Email: [email protected]: https://compare-autoinsurance.Org/ SOURCE: Compare-autoinsurance.Org View source version on accesswire.Com:https://www.Accesswire.Com/595055/What-Are-The-Main-Benefits-Of-Comparing-Car-Insurance-Quotes-Online View photos



picture credit

ExBUlletin

to request, modification Contact us at Here or [email protected]

Please disable the ad-blocker on this page to see the content

plus