Financial

Three Eurozone Countries Among Top 10 Countries With Highest Bad Debt Ratio

Of the top 10 countries in the world with the highest bank bad debt to gross loans ratio, three are eurozone countries – Cyprus, Greece and Italy. Two of them, Cyprus and Greece, rank within the top five.
San Marino, one of the world’s smallest countries and one of the world’s oldest republics, had the highest bad-loan ratio in the world in 2015 with 46% of total loans classified as non-performing according to data from The World Bank.

San Marino, which uses the euro as its official currency is not a eurozone member. A traditional tax haven for dodgers, the landlocked European country’s financial sector-oriented economy suffered a sharp contraction since the beginning of the global financial crisis partly due to a massive outflow of non-resident deposits.

Ratio of bank NPL to gross loans in 2015, selected countries - LD Investments

San Marino had the highest bank bad debt to total loan ratio in 2015.

Since the 2008 financial crisis, Cyprus, Greece and Italy saw steep increases in bad debt. Currently, the bad debt ratio in all three countries along with Portugal exceed 10% of total loans which is considerably higher than the U.S. where even at the height of the 2008-2009 financial crisis, it was only 5%.
The Monte dei Paschi di Siena, the world’s and Italy’s oldest bank which traces its origins to 1472, is Italy’s most troubled financial institution. An EU-wide stress test of 51 banks conducted by the European Banking Authority (EBA) this year found the Italian bank to be the weakest from the assessment.

Bank non-performing loans to gross loans (%), 2008-2015, selected European countries - LD Investments

Eurozone countries Cyprus and Greece are among the top five countries with the highest bad debt ratio.

Elsewhere around the world, while China has been getting much attention lately for its rising bad loans, India’s bad debt ratio has also been on an uptrend since 2009 and currently stands at 5.8% of total loans, considerably higher than China’s 1.5% figure. India’s bad debt situation is impeding the country’s ability to extend credit; gross bank lending grew by 9.3% in the six months to March this year compared with an average growth rate of 20% between 2010 and 2012.

Bank non-performing loans to gross loans (%) ratio, 2008-2015, selected Asian countries - LD Investments

India has seen a steep increase in the proportion bad debt tot total loans since 2008.

Over in the Americas, Latin America’s largest economy, Brazil, is currently in a recession, having contracted by 3.8% last year, leading to a rise in bad debt at Brazilian banks.

Bank non-performing loans to gross loans (%), 2008-2015, selected North and South American countries - LD Investments

With its economy in recession, Brazil has seen an increase in bad debt.

 

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China: Record-Breaking Outbound M&A YTD 2016

China’s surge in outbound M&A activity this year is helping drive Asian annual outbound M&A to record levels, hitting a high of US$ 200 billion between January to September 2016, surpassing 2015’s full year M&A Asian outbound deal value of US$ 199.6 billion according to data from Mergermarket. The data includes recent purchases such as Zhongwang International’s US$ 2.3 billion acquisition of U.S. aluminum manufacturer Aleris which was announced in August this year.

Asia outbound M&A deal value (US$ billion)

Driven by China’s booming outbound M&A activity, Asian outbound M&A deal value for the first nine months pf 2016 has surpassed last year’s total Asian outbound M&A deal value.

With 173 deals worth US$ 128.7 billion, China has accounted for 64.3% of Asian outbound M&A value so far this year. Nearly 60% of China’s outbound M&A deal value (US$ 76.5 billion) and volume (101 deals) went into European businesses.

US$ 72.3 billion worth of Chinese outbound M&A deals have been made in businesses in the Industrials and Chemicals sector commanding the lion’s share of Chinese outbound investment so far this year.

Chinese outbound M&A deal value by sector (%) Jan-Oct 2016

36% of Chinese outbound M&A involved businesses in the Industrials and Chemicals sector while 27% of deals were in the Technology sector.

China’s outbound M&A deal value between January and October this year has increased 228% from the same period last year according to data from Bloomberg.

China total outbound M&A deal value - LD Investments

China’s outbound M&A deal value for the first ten months of 2016 is more than double compared to the total M&A deal value in 2015.

India, China Non-Cash Payments Per Capita Among The Lowest In The CPMI Countries

Cash is still the dominant mode of transaction for Indians and Chinese currently. According to a report released last month by the Bank for international Settlements (“Statistics on payment, clearing and settlement systems in the CPMI countries – Figures for 2015”) India’s and China’s non-cash payment transactions per capita are among the lowest in the CPMI countries.

11 non-cash transactions were made per inhabitant in India in 2015, which is lower than China which recorded 17 non-cash transactions per inhabitant in 2014 (data for 2015 is unavailable) and Russia which recorded 106 transactions per inhabitant in 2015. Non-cash transactions per capita was 403 for the United States in 2014 (data for 2015 is unavailable).

At 728 non-cash transactions per capita, Singapore has one of the highest non-cash transactions per inhabitant among the CPMI member countries, ranking higher than the United States, United Kingdom, Sweden and Switzerland.

Non-cash transactions per capita, selected countries, 2014 and 2015

Non-cash transactions per capita in India and China are among the lowest in the CPMI countries while Singapore has one of the highest.