A quarter of Indian microfinance companies may fail after a clampdown last month in their biggest market pared debt payments and curtailed bank financing, said N. Srinivasan, who consults on the industry for the World Bank.
As many as 60 to 70 of the nation’s 260 microfinance institutions are likely to collapse in coming months as banks halt lending to them to curb risks, Srinivasan said in an interview Nov. 19 in New Delhi. That would have a “devastating effect” on the poorest borrowers in remote regions, he said.
Lending and collections by micro-lenders have ground to a near halt in southern Andhra Pradesh state after the local government introduced new rules in mid-October aimed at protecting borrowers. A slump in microfinance loans may trigger a chain reaction of defaults by borrowers with multiple debts, Srinivasan said.
“Multiple loans help people manage money, like juggling balls,” he said, adding that every poor household in Andhra Pradesh has 9.6 microfinance-loan accounts on average. “What’s happening is that right in the middle of it, you remove a ball. Suddenly there is no ball to throw.”
Andhra Pradesh, the largest market for most micro-lenders, on Oct. 15 capped interest rates that companies can charge and ordered them to collect payments monthly rather than weekly. It also barred them from using coercive measures to force borrowers to repay debt.
Straining Capital
The move led to a slump in micro-lenders’ cash flows, strained capital levels and spooked banks, which account for most of their funding needs. Microfinance companies are seeking 10 billion rupees ($221 million) from banks for a liquidity fund, Vijay Mahajan, head of a lobbying group that represents about 44 micro-lenders, said Nov. 16 in New Delhi.
The new rules sent shares of SKS Microfinance Ltd., the largest such lender in the nation, plummeting 47 percent before Chairman Vikram Akula said on Nov. 19 that the firm had received bank funding and didn’t have a cash shortage. The comments helped shares of SKS, more than a quarter of whose loans are in Andhra Pradesh, rally 5.4 percent that day.
Rival Share Microfin Ltd., backed by New Zealand billionaire Christopher Chandler, plans to delay an initial public offering until customers restart payments and state and central governments deal with the current upheaval. Banks need to regain confidence in the companies’ operations, M. Udaia Kumar, its managing director, said in a Nov. 18 interview.
‘Trickle-Down Effect’
“Even if a single MFI defaults, it might have a trickle- down effect on the entire sector,” he said pay day loans. “Institutions with stronger net worth have a possibility of survival for a period of time.”
Share Microfin, based in Andhra Pradesh’s capital of Hyderabad, had planned to raise 10 billion rupees in early 2011.
Microfinance, which focuses on loans in poor areas largely shut out from traditional banking services, gained prominence globally when Muhammad Yunus won the Nobel Peace Prize in 2006 for his role in founding Bangladesh’s Grameen Bank. India, where banking services are available in about 5 percent of cities and towns, is the largest market for such credits.
India’s micro-lending has expanded at an average annual rate of 62 percent over the past five years in terms of number of customers, and 88 percent in terms of credit, according to Micro-Credit Ratings International Ltd., a Gurgaon, India-based ratings agency for the industry.
Moneylenders
A shortage of microfinance funding may force borrowers to turn to moneylenders, said Dipak Gupta, executive director of Mumbai-based Kotak Mahindra Bank Ltd. These unauthorized lenders operate outside the formal credit-delivery system and charge usurious interest rates.
“Money has stopped and a borrower is used to getting that money and circulating it,” he said. “If you don’t create an alternate system or don’t allow the system to rotate, he will go back to the moneylender.”
SKS, whose stakeholders include George Soros, has received 3.67 billion rupees from eight lenders including Axis Bank Ltd. in the past two weeks, Chief Financial Officer Dilli Raj said on Nov. 19 from Hyderabad, where the company is based.
Axis, India’s fourth-largest lender by market value, is awaiting a report by a committee set up by the central bank last month to review concerns about the microfinance industry, CFO Somnath Sengupta said.
The report, due in January, “will be the guiding principles for lending to the sector,” he said in an interview on Nov. 19. “We will continue to be prudent. There is no reason to panic.”
Axis’s loans outstanding to microfinance companies account for about 1 percent of the total, he said.
Still, the industry is bracing for consolidation, said Mahajan, who is also chairman of Hyderabad-based microfinance company Basix Group.
“We could see casualties among small microfinance institutions,” he said.
MONTREAL â Power Financial Corp. said its net profits plummeted nearly 29 per cent to $323 million in the third quarter due to a litigation charge by its insurance subsidiary.
The main operating arm of Montreal-based Power Corp. said it earned 42 cents per share for the three months ending Sept. 30, compared to 61 cents a year earlier when it earned $452 million.
Its share of a $225 million litigation provision established by Great-West Lifeco was $144 million or 20 cents per share.
Operating earnings grew 1.1 per cent to $467 million, or 62 cents per share, compared with $455 million or 61 cents in 2009.
Great-West Lifeco said its operating earnings excluding the litigation charge were $479 million, up 7.2 per cent from $445 million in the year-ago period.
The stronger Canadian dollar had a negative $22 million impact on earnings in the quarter. Power Financialâs share of the currency hit was $16 million.
IGM Financial Inc. operating earnings were $178 million in the third quarter, compared to $167 million a year earlier. Net earnings including a $8 million share of the litigation charge was $170 million.
Power Financialâs stake in European-based Pargesa Holding S.A. generated $59 million in operating earnings, down from $72 million in 2009.
Power Financial declared a 35-cents quarterly dividend payable Feb. 1 to shareholders of record Dec. 31.
The litigation charge results from a $455.7 million settlement of a class-action lawsuit over the financing of a 1997 takeover of London Insurance Group.
Nearly two million policyholders of Great-West Lifeco Inc. and its London Life subsidiary could get payouts of an average $300.
A judge in London, Ont., rule that Great-West breached sections of the Insurance Companies Act. when it transferred money from the accounts of subsidiaries London Life Insurance Co. and Great-West Life Assurance Co. to finance the takeover.
Great West Life has said it will appeal the decision and that several aspects of the decision are âin error.â
Stocks ended in slightly positive territory Tuesday after seesawing throughout the session, as investors weighed readings on consumer confidence and housing against a slew of earnings reports.
The Dow Jones industrial average (INDU) ticked up 5 points, the S&P 500 (SPX) rose less than a point, and the Nasdaq (COMP) gained 6 points.
Stocks climbed to six-month highs Monday, propelled higher by a stronger-than-expected report on existing home sales. But with so much uncertainty underlying the daily economic and corporate reports, volatility will continue to dominate.
"We’ve had a big run-up, so I don’t see how they can go much higher," said Karl Mills, president and CIO at Jurika Mills & Keifer.
With the Nov. 2 elections approaching and the Federal Reserve’s next policy meeting on tap early next month, the possibility of quantitative easing is also in the back of investors’ minds.
"The belief is that quantitative easing is a done deal, and to a great extent that’s why the market has been as buoyant as it has despite the fact that many leading indicators have stalled or gone down," said Ryan Atkinson, vice president of Balestra Capital. "But it’s now late October, so a lot of players are sitting on the sidelines until the elections and FOMC meeting."
Economy: The Case-Shiller 20-City index of home prices in major metropolitan areas indicated that the housing market remained sluggish in August, with prices falling 0.2% from July. From a year earlier, prices edged up a modest 1.7%, missing the 2% rise economists had been expecting.
"[The report] is consistent with what we’ve been seeing," said Mills. "Housing isn’t going to be coming back robustly any time soon here. We’re going to have a long recovery period."
After the start of trading, the Conference Board released a report showing that consumer confidence inched up in October, but remained at historically low levels. The index rose to 50.2 from 48.6 in September, coming in slightly higher than the reading of 49 economists had forecast.
"Confidence may be improving, but with the housing market still real early in what may be a turnaround and unemployment running so high, there are still a whole lot of people out there not feeling so confident," said John Wilson, chief technical strategist at Morgan Keegan.
Companies: After the market close Tuesday, Barnes & Noble (BKS, Fortune 500) unveiled a new full-color, touchscreen version of its Nook e-reader. The company did not immediately announce the price of the new Nook Color.
Shares of Coach Inc. (COH) jumped 12% after the company posted a 34% rise in first-quarter profit and earnings of 63 cents a share — topping analysts’ estimates.
Ford (F, Fortune 500) reported third-quarter earnings that beat analysts’ expectations. The automaker reported a profit of $1.7 billion, or 43 cents per share. Ford also announced plans to further pay down its debt. Shares rose 1.5%.
DuPont (DD, Fortune 500) exceeded forecasts by reporting quarterly earnings of 40 cents per share early Monday, despite a decline in pharmaceutical income related to patent expirations. Shares of the company slipped 1%.
Shares of Sony (SNE) rose 1% Tuesday, on media speculation that the electronics maker might be a takeover target for Apple (AAPL, Fortune 500).
Shares of Lexmark (LXK) tumbled 21% after the printer-maker’s CEO Paul Curlander announced that he will retire in the spring of 2011.
Late Monday, insurance giant AIG (AIG, Fortune 500) disclosed that its chief executive, Robert Benmosche, has been diagnosed with cancer and is undergoing "aggressive" treatment. AIG shares jumped 2.3%.
World markets: European stocks finished with losses. Britain’s FTSE 100 dropped 0.8%, and the DAX in Germany was down 0.4%. France’s CAC 40 slipped 0.5%.
Asian markets ended the session lower. The Shanghai Composite was off 0.3%, while the Hang Seng in Hong Kong was 0.1% lower. Japan’s Nikkei fell by 0.2%.
Currencies and commodities: The dollar strengthened against the euro and the Japanese yen, but fell against the British pound.
Oil for December delivery added 3 cents to settle at $82.55 a barrel.
Gold futures for December delivery fell 30 cents to $1,338.60 an ounce.
Bonds: The price on the benchmark 10-year U.S. Treasury fell, pushing the yield up to 2.65% from 2.57% late Monday.
Pop and R&B diva Beyonce Knowles ranks among the 20 most powerful entertainers in the world, according to an analysis of revenue and earnings potential by Entertainment Weekly.
The 29-year-old Houston singer and actress was ranked at No. 19 in the listings released this week in the magazine’s Oct. 15 issue.
According to the magazine, Beyonce has sold 11.3 million CDs, 21.2 million digital download tracks and has had 603 million video plays on YouTube during her career as a solo artist and with Destiny’s Child.
Beyonce dominated the 2010 Grammy Awards with six trophies.
Actor Johnny Depp topped the list as the most powerful entertainer, with his films having grossed nearly $6 billion at the box office; followed by pop singer Lady Gaga — who collaborated with Beyonce on the YouTube sensation video “Telephone” at No. 2 and daytime talkshow guru Oprah Winfrey at No. 3, with a net worth of $3 billion.
Baptist Medical Center Beaches on Friday said its new cancer center would be named The Wilson Cancer Care Center at Baptist Medical Center Beaches, in recognition of philanthropic support from Tylee and Pat Wilson.
The center will provide comprehensive services to cancer patients and their families to assist them through the diagnosis, treatment and healing process. It will also serve as a community resource center.
The Wilson Cancer Care Center will house the Baptist Beaches Multidisciplinary Breast Care Clinic, the offices of Hematology Oncology Associates/Integrated Community Oncology Network and the Florida Radiation Oncology Group, a multimedia library that includes computers with access to specialized health and research information and a conference room to host classes and cancer support groups.
The Center will be located on the Baptist Beaches campus on the first floor of the current Medical Office Building B. The current space will be remodeled over the next few months to accommodate the center. The project is expected to be completed in early 2011.
Canada will acquire 65 F-35 aircraft from Fort Worth-based Lockheed Martin Aeronautics Co. to replace its military fleet of CF-18 Hornets.
Kim Testa, senior manager of international communications for Lockheed Martin, said the contract doesn’t mean new jobs in Fort Worth, but it does mean long-term work for teams in D-FW who will be handling a significant portion of the assembly and rollout.
The contract value was not disclosed, but F-35 aircraft on average are priced at $60 million per unit payday loans for self employed. The fighter jets are a fifth-generation aircraft with pricing levels that include fuel tanks and emission equipment in the final marketed price, Testa said. Previous generations of aircraft did not include all of the additional equipment in the final marketed price.
The F-35 is a supersonic, multiple-role aircraft and stealth fighter developed by a consortium of nine countries, including Canada.
Former University of Texas star quarterback Colt McCoy is leading an effort to raise $50 million to transform a Temple hospital into a pediatric emergency and care center.
Scott & White Healthcare acquired the King's Daughters Hospital in April 2009, and officials plan to renovate the facility into a medical and surgical pediatric hospital beginning in the fall. It is slated to open in late 2011.
McCoy, who was recently drafted on the NFL's Cleveland Browns, is acting as a spokesperson for the fundraiser.
"Children and their families will no longer have to drive great distances to receive the highest standard of care," McCoy said payday loans. "We all need the support of family and friends during difficult situations and now these kids will be able to stay close to home. It's my privilege to lend my support in making this children's hospital a reality for so many people in my home state."
Scott & White hopes to raise about $35 million before construction and another $15 million after work finishes. The organization was established in 1897 and operates 10 hospitals and more than 60 clinics in Central Texas, including the recently merged Trinity Medical Center in Brenham.
Retail gasoline prices are expected to steadily increase into the summer, thanks to a rise in the price of crude oil as more data indicated the U.S. economy may be on the rebound.
The price of crude oil jumped to $84.87 on Thursday on the New York Mercantile Exchange.
Meanwhile, a pickup in manufacturing jobs and production was reported in the U.S., China, Japan and Europe, and is viewed as evidence of a rebound in international trade. In addition, U.S. companies added 162,000 jobs in March, with fewer Americans filing for unemployment, according to the U.S. Labor Department.
“We will most likely see crude oil stay above $80 a barrel for quite some time, causing retail gasoline prices to steadily increase into the summer,” said Jessica Brady, manager of public relations at AAA.
The national average price of regular retail gasoline is $2.82, a 2-cent increase from last week. Florida’s average price is $2.84, a 1-cent increase from last week, while Orlando’s average is $2.78, also up 1 cent from a week ago.
Japanese businesses cut spending for an 11th quarter even as their earnings rebounded, signaling a revival in exports remains insufficient to prompt investment that would spur the recovery.
Capital spending excluding software fell 18.5 percent in the three months ended Dec. 31 from a year earlier, the Finance Ministry said today in Tokyo. Sales declined and profits doubled.
Sony Corp. and Panasonic Corp. are among companies cutting costs to protect earnings even as demand from abroad picks up. A stronger yen is forcing exporters to invest overseas rather than at home, and deflation is discouraging spending by domestic service companies, said Hiroshi Miyazaki, chief economist at Shinkin Asset Management Co.
“We’re seeing a clear contrast between the rapid recovery in profits and the weakness in capital spending,” Tokyo-based Miyazaki said. “The recovery’s spillover to capital spending has been particularly weak this time, even in comparison to the economic recoveries of the past.”
The yen traded at 88.34 per dollar at 3:12 p.m. in Tokyo after earlier touching 88.31, the highest since Dec. 11. Japan’s currency has gained more than 5 percent this year, eroding the value of exporters’ repatriated profits. The Nikkei 225 Stock Average fell 1.1 percent, extending its losses to 3.8 percent for the year.
Slower Growth
Based on today’s data, the Cabinet Office may revise fourth-quarter economic growth figures lower on March 11. Gross domestic product probably expanded at an annual 3.9 percent pace, slower than the 4.6 percent reported last month, according to the median forecast of 13 economists surveyed by Bloomberg News after today’s figures were released.
The capital spending component likely rose 0.3 percent from the previous quarter, compared with a 1 percent increase in the preliminary report, economists said.
“Capital spending may have hit bottom, but the strength of the rebound is still in question,” said Naoki Tsuchiyama, market economist at Mizuho Securities Co. in Tokyo, who estimates a GDP downgrade to 3.7 percent. “The economic recovery is largely dependent on government stimulus and companies are still cautious about the outlook for final demand.”
Companies’ sales slid 3.1 percent last quarter after tumbling 15.7 percent the previous three months, the ministry said. Profits surged 102.2 percent, the first increase in 10 quarters and the second biggest advance since the survey began in 1955.
Weak Link
Business spending remains the weak link of a recovery that’s being driven by exports and showing signs of improvement in the labor market. About a third of factory capacity is sitting idle in the wake of the nation’s worst postwar recession, discouraging companies from buying equipment free credit score.
“Capital spending may start growing later this fiscal year, but the pace of the recovery will be very moderate,” said Junko Nishioka, chief economist at RBS Securities Japan Ltd. “Companies still have excess capacity, so they will try to utilize existing facilities rather than building new plants.”
Sony last month narrowed its forecast for a net loss, saying it is approaching its target of trimming 330 billion yen in costs by eliminating jobs and shutting factories. Capital spending for this fiscal year will probably total 220 billion yen, 34 percent less than a year earlier and lower than the 250 billion yen estimated in October, Sony said on Feb. 4.
Raising Forecasts
Panasonic last month raised its operating profit forecast, as cuts in fixed and material costs lead to a recovery in earnings from consumer electronics and appliances. Capital investment for the nine months ended Dec. 31 stood at 275.6 billion yen, 22 percent less than the same period a year earlier, according to a company statement.
Slumping prices also are squeezing profit margins. Consumer prices excluding food and energy dropped 1.2 percent in January, matching December’s record decline, the government said last week.
Finance Minister Naoto Kan renewed calls on the Bank of Japan to help arrest deflation this week, saying he hopes prices will rise this year.
The government has been encouraging spending by providing incentives to buy cars and consumer electronics. Those initiatives are becoming less effective, said Tetsufumi Yamakawa, chief Japan economist at Goldman Sachs Group Inc.
“Not only is capital investment slack but the demand boost from policies to stimulate replacement purchase of energy-saving electrical goods and environment-friendly autos is fading,” Yamakawa said.
Asia Rebound
Still, some companies are benefiting from rebounding demand in Asia, particularly China, the world’s fastest-growing major economy and Japan’s biggest overseas market.
Hitachi Construction Machinery Co., Asia’s second-largest excavator maker, may double sales in China this quarter, beating its forecast as the nation’s spending on railroads and mining fuels demand, Chief Executive Officer Michijiro Kikawa said in an interview on March 1.
Japanese manufacturers increased output in January at the fastest pace since May and exports climbed the most in almost 30 years, government reports showed last month.
Luxembourg’s Jean-Claude Juncker said the group of euro-area finance ministers, which he heads, may not reach a decision next week on a successor for European Central Bank Vice President Lucas Papademos.
“Whether we do this on Monday evening or in February, I cannot yet say,” Juncker said at a press conference in Luxembourg today. The so-called eurogroup of finance chiefs is scheduled to discuss the three candidates to succeed Papademos at a regular monthly meeting on Jan. 18 in Brussels.
The candidates to take over the central bank’s vice- president post on June 1 are ECB Governing Council members Yves Mersch and Vitor Constancio and Peter Praet, a director at the Belgian central bank who also is chairman of the Frankfurt-based ECB’s Banking Supervision Committee low interest rate personal loans.
Juncker said he lobbied French President Nicolas Sarkozy on behalf of Mersch, who is head of Luxembourg’s central bank, at a meeting yesterday in Paris.
“I’m in touch with all the euro-zone countries. I outlined the merits of Mersch’s candidature to President Sarkozy,” Juncker said. “It’s not my intention to reveal publicly the various reactions I’ve had.”
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