Entries Tagged 'Credit and Debt' ↓

The recession hasn’t been bad to all business. MasterCard, the second largest international network of credit cards, recently reported a profit of $349 million for the second quarter.

Last year, during the same period, the company announced losses of 747 million dollars. MasterCard’s profit was generated by increasing fees on customer accounts and reducing internal costs.

In contrast to this year’s profit, MasterCard reported a loss of $5.7 billion for the first six months of last year.

This year, the company’s American group expenses decreased by 13%, reaching 722 million dollars. The company also reduced funds allocated for advertising and marketing by 36% and trimmed administrative and staff costs.

Higher commissions and increased use of credit cards by customers increased Mastercard’s revenue by 2.7%, reaching up to 1.3 billion dollars. Value of MasterCard transactions processed increased by 7.9% to 5.6 billion dollars.

As a result of the recession, many consumers are turning to prepaid credit cards.

The European Central Bank decided to keep unchanged the current interest rate at 1%, says Bloomberg News. The Bank of England took a similar decision, with the reference interest rate remaining at 0.5%.

“The end of free fall of the world economy would help the ECB to no longer feel pressure, to act over the benchmark interest rate”, said Laurent Bilka , economist at Nomura International in London.

“Things are evolving in a good way”.

Efforts of the European Central Bank President Jean Claude Trichet to reconcile strategies of the bank divided because of the acquisition of assets, could be facilitated by signs that the world economy is recovering from crisis , writes Bloomberg.

Although the strategy had a number of divergences in terms of volume of assets that will be purchased, it is unlikely that the ECB to make acquisitions of secured bonds, more than 60 billion euro.

Regulatory authorities in Washington have announced that 10 banks are in need of additional capital in the amount of $74.6 billion to restore confidence in the banking sector and to survive the recession, write Reuters.

The results of stress tests, organized by the U.S. central bank, Federal Reserve have drawn a line between the banks with a better financial situation and those facing problems, indicating the amounts they need to stabilize finances.

The tests have shown that 10 banks needed additional capital to make against future losses, if the recession will worsen. Bank of America needs 33.9 billion U.S. dollars, while Citigroup needs 5.5 billion dollars.

Also, Wells Fargo must collect 13.7 billion U.S. dollars, and GMAC 11.5 billion U.S. dollars. Obama Administration hopes that these banks will fill gaps from private sources, although the Fed chief, Ben Bernanke, said that the government is prepared to take action, if it’s necessary.

“Government, through Treasury, is prepared to provide additional capital necessary to ensure that the bank will cross this tough economic period, “said Bernanke.

Transactions of leveraged buyout (acquisitions on loans) could contribute to an increase in the number of bad loans by companies to a record level of 14.7% this year, according to agency Standard & Poor’s, quoted by Bloomberg.

Between 90 and 112 European companies in the category of those who made speculative transactions monitored by S&P could come in incapacity to pay this year, according to a report released recently by the company from New York.

Previous estimates indicated a level of 11.1%. Bad loans will be “considerably more” among the companies that made acquisitions in debt, according to S&P.“Foresee the risk considering the fact that these lenders have no appetite or capacity to provide further funding to help them pass this period of decline” shown in the rating agency analysts.

At the end of the fiscal year 2010-2011, “Refinancing can be very difficult to insure” for companies unable to pay its debt to maturity, is shown in the report.

In 2010, the level of bad loans could be similar to that of this year, estimated analysts S&P. Companies from industries that base on consumer spending, such as retail food and non-manufacturers of automobiles, will remain under pressure, while commercial property sector could attend a “severe correction”; shows analysts S&P.

U.S. banks want to repay the emergency Federal aid received in recent months as fast as possible in order to escape from the restrictions imposed by the government. The federal government, however, may not let this repayment start for some time.

Accessing the 700 billion dollars program, to support the banking sector, has become a negative factor for the image and operations of credit institutions, although the payment of state aid was in the autumn of last year, a signal that the bank is solid and offers promising prospects.

In the initial phase of the program, provision of government loans, in this program, was seen in a positive light for each beneficiary bank, as the government suggested that “poor” credit institutions; will not be included in the initiative.