Finance

An ambassador of an African country to China on Thursday criticized the International Monetary Fund and the World Bank for restrictive lending policies.
“My sincere belief is that IMF officials, World Bank officials, they are sincere in their belief that their debt sustainability framework works and works for the greater good,” said Jang Ping Thia, lead economist and manager of the economics department at the Asian Infrastructure Investment Bank.
“The loan itself matters, infrastructure matters, but timing and debt management and absorption capacity matters, coordinating and staggering out and having a plan,” AIIB’s Thia said.

Yellow taxi cabs drive down a road in Senegal’s capital city of Dakar on Sept. 6, 2023.
John Wessels | Afp | Getty Images

BEIJING — An ambassador of an African country to China has criticized the International Monetary Fund and the World Bank for restrictive lending policies.
“The problem is that the ratings we are making for the African [countries] should be different,” Ibrahima Sory Sylla, ambassador for the West African country of Senegal, said Thursday at an event at Peking University.

He said ratings from Fitch or Standard and Poor’s don’t take into account local factors such as food security — but they are the basis for IMF and World Bank assessments of economic sustainability.
The number of people in West Africa experiencing an acute lack of food surged by nearly 40% in a year, according to a Reuters report in December citing the United Nation’s World Food Programme. The figure surged 60% during that time for the number of East Africans, the report said.
Senegal significantly increased its borrowing from China in 2021 and 2022, according to the Chinese Loans to Africa database managed by Boston University’s Global Development Policy Center.

While that reflected a spike in West African borrowing, such loan activity was more muted in other parts of Africa — reversing a growth trend of the last 20 years, the data showed.
“What we can understand is that so many [multilateral development banks] through the G20 [debt] suspension initiative, they said you have to go through this initiative, but when you [do so], they suddenly decided to downgrade your risk,” Senegal’s Sylla said. “And most of the developed countries, the Western countries, they can go beyond to 200% of the ratio between the debt and the GDP. Their rating is not downgraded.” 

The IMF, World Bank and S&P did not immediately respond to CNBC’s request for comment.
A Fitch Ratings spokesperson told CNBC all its sovereign rating decisions are “taken solely in accordance with one globally consistent and publicly available rating criteria.”
“Rating decisions are based on independent, robust, transparent and timely analysis,” the person added.

I cannot deny that the financing cooperation between China and Africa are facing some challenge or difficulties, because [of] some countr[ies] defaulting…

China’s foreign ministry, African affairs

“My sincere belief is that IMF officials, World Bank officials, they are sincere in their belief that their debt sustainability framework works and works for the greater good,” said Jang Ping Thia, lead economist and manager of the economics department at the Asian Infrastructure Investment Bank.
“Many times, the IMF chief at the desk, try their best to stretch the envelope for the country,” Thia said at the same event Thursday.
Thia said he just returned from a trip to Africa two weeks ago and saw a “brand-new city” being built by many Chinese contractors — but with very low occupancy.
“That makes me very worried,” he said, declining to name the specific African country.
“The loan itself matters, infrastructure matters, but timing and debt management and absorption capacity matters, coordinating and staggering out and having a plan,” said the AIIB economist. “Build slowly, get people in, build more, is sometimes much more efficient, maybe not as big [a] bang.”

Belt and Road Forum

The event about Chinese financing to Africa came just days before the country was set to hold its third Belt and Road forum, a gathering of countries involved in the China-led initiative for regional infrastructure development. Russian President Vladimir Putin is set to attend the forum, scheduled for Tuesday and Wednesday in Beijing.
Critics say the Belt and Road Initiative is a way for China to expand its global influence, while forcing poor countries to take on debt for infrastructure development, only to find themselves unable to repay the loans.
From 2000 to 2020, China loaned $160 billion to African countries, according to a report released Thursday by Peking University’s Institute of New Structural Economics. The research claimed every 1% increase in Chinese loans resulted in an increase of 0.176% in African economic growth.
Allan Joseph Chintedza, ambassador of Malawi to China, said the report should look also at the repayment period for Chinese loans.
“The gesture and what the [Belt and Road Initiative] is trying to do is perfect. It would be very sad if we actually lost out because we are not addressing some of the key issues that we need to address that you gave,” Chintedza said, without specifying.
The East African country needs to provide a “sustainability letter” from the Chinese government in order to borrow more from the IMF, Chintedza added. “Instead of us concentrating on implementing these agent programs, we are caught in between negotiations of trying to raise [funds], to improve or at least justify the debts that we have.”
“I think the majority of the loans has to be extended because that’s the only way we can be given breathing space to be able to meet the requirements but also to invest in the social sense,” he said.

Malawi has borrowed $484.6 million from China since 2000, according to the Chinese Loans to Africa Database, which does not track repayments.
“I cannot deny that the financing cooperation between China and Africa are facing some challenge or difficulties, because [of] some [countries] defaulting and the debt problem is in front of us,” said Wu Peng, director-general for the department of African affairs at China’s foreign ministry.
“So we cannot ignore this challenge. But I have … confidence that we still can cooperate in this field,” Wu said, adding that he is working with Chinese banks on loans for railway projects in Western Africa, which will likely be announced “in weeks.” More

When jinzhou bank, in north-eastern China, showed signs of distress at the start of the year, state media suggested that a billionaire named Li Hejun might be behind its problems. Mr Li, a solar-panel tycoon, was once China’s richest man. His firm was known to have tight links to the bank. And it was not long after word spread that he had been arrested that Jinzhou Bank suspended trading in its shares and told investors it would restructure its operations.Oddly, the bank’s finances look to have been in good shape. Its overall bad-debt level was low in the first half of 2022, the last period for which detailed information is available. Although one concerning figure sticks out—more than 50% of its personal-business loans had become non-performing—this type of loan comprised just 1% of its total. Small- and micro-enterprise loans, which make up about half of the bank’s loan book, appeared normal, with only 3% having gone sour.But is this the whole story? In theory, there is no meaningful distinction between personal-business loans and small- and micro-enterprise loans, says Jason Bedford, a veteran banking analyst. The two types are used in similar ways and should offer similar risk. In practice, though, there is a crucial difference: small- and micro-enterprise loans remain covered by a covid-era moratorium allowing banks to avoid recognising bad debts. Thus it is possible that a large portion of Jinzhou’s lending book is unrecognised bad debt. The bank has said almost nothing about its condition since earlier this year.If hidden bad debts such as these lurk at Jinzhou Bank, they may lurk elsewhere, too. This is a worrying prospect, for Chinese finance is already beset by problems. Local governments are struggling to repay lenders at least 65trn yuan ($9trn) in off-balance-sheet debts. Many of the country’s largest property developers have already defaulted on offshore bonds and owe trillions of yuan-worth of unbuilt homes to local residents. China’s largest wealth-management firms have started to default on payments owed to investors. Given that these types of hidden debts have so far attracted little attention, Jinzhou’s troubles ought to come as a warning.Problems with loans to the smallest companies began with the onset of covid-19. As China’s economy shut down in January 2020, the central bank put a moratorium on the repayment of loans for small- and micro-enterprises until June that year in order to halt a wave of defaults. After less than three months of the policy, officials estimated that about 700bn yuan in payments had been deferred. The moratorium has been extended several times since then, with officials citing the continued impact of covid. No estimate for the total amount of unpaid loans exists and banks will not be required to disclose them publicly until next year.The moratorium has also coincided with another state initiative. In order to stimulate the economy, the central government has leaned on banks to extend loans to the smallest firms, and to do so at the lowest possible interest rates. Although such policies have been tried for years, banks have been resistant, preferring to lend to the large, often state-owned firms with which they have relationships already. This time the policy has worked, however. A crackdown on the banking industry, culminating in the arrest of the president of one of China’s largest commercial banks last year, has made bosses more willing to follow official edicts.As a result, at the beginning of the year about 28% of all loans in China had been given to small- and micro-enterprises, up from 24% at the end of 2019. Many of these loans represent simply the renewal of older, unpaid debts. It is well known that small firms struggled during the pandemic. Despite this, there has hardly been an uptick in non-performing loans, notes Alicia Garcia Herrero of Natixis, a bank.Another result has been what some analysts view as a catastrophic mispricing of assets. Small firms are usually judged to pose the greatest risks, but loans to small- and micro-enterprises have nevertheless been provided at rock-bottom interest rates. Banks have offered them at an average of 4% annual interest, down from 6% or so in 2019. To make matters worse, a recent surge in long-term deposits, which are remunerated at higher rates, means banks’ margins have been squeezed even tighter.Only a few lenders have hinted at the amount of loans they have deferred. Minsheng Bank, one of China’s largest, said in its mid-term report last year that it had provided 212bn yuan in renewed loans and deferred payments in the previous six months, equivalent to 9% or so of its entire corporate-loan book. Since then, it has declined to make similar disclosures. The central bank is providing funds to banks, which can be used to support specific parts of the economy. In a recent report it said that it had handed out 2.7trn yuan in loans for small firms in the first half of this year.Any loan moratorium comes with a gamble: that a short period of forgiveness and renewal will allow struggling companies to get back on their feet after an economic shock. The initial decision may have saved tens of thousands of companies and even a few banks from going under. Now the fate of the murky pile of debt—however big it might be—depends on China’s economic fortunes over the coming months. Although the purchasing-managers’ index for manufacturers shows that the outlook for large companies has improved slightly in recent months, the one for small and medium-sized companies has continued to contract. The economic hangover from the covid era has lingered. It could now be about to intensify. ■ More

A dusty, scuffed slab of concrete is the last hope that many Gazans have of escaping the nightmare which will accompany Israel’s coming ground assault. Cut off from electricity, food imports and water, and under constant bombardment, more than 2,000 people have already been killed and nearly half the population displaced. Gaza’s inhabitants are flooding roads to the south after an Israeli warning to clear the north. Yet the Rafah gate, which punctures the 11km-long wall separating southern Gaza from Egypt, and is the only non-Israeli route out of the territory, has been closed since October 7th, when Hamas launched its brutal attack on Israel.America is reportedly trying to get its own citizens out through the gate; many in the region hope that, to avoid a humanitarian disaster, Mr Sisi might change his mind and allow refugees to flee Gaza. On October 15th Antony Blinken will arrive in Cairo on a last-minute addition to the American secretary of state’s tour of the Middle East. Could a potential rescue for Egypt’s crisis-stricken economy offer foreign diplomats a means of influence?Egypt has done such a deal before. In 1991, three months after the Gulf war, America and other Western countries let Egypt off the hook for $10bn of borrowing, which represented a quarter of its external debt at the time. This was also a reward for a geopolitical favour. As other Arab countries amassed troops and watched from Saudi Arabia, Hosni Mubarak, then Egypt’s president, was one of the first leaders to send his armed forces in to join America’s fight against Iraq.Once again, Egypt’s economy is crumbling. Annual inflation is at 38%, its highest ever; the Egyptian pound is plummeting, as the central bank prints cash to foot the government’s excessive bills from bread subsidies and support for state-owned companies. The imf, which agreed to a $3bn bail-out last December, has refused to hand over the latest two instalments, because it lacks faith its lending will be repaid. From cash injections to cover Cairo’s budget deficit to a deal on imports, there is no shortage of inducements that other countries could offer.If foreign diplomats are to succeed, there are three challenges they must overcome. One is that Mr Sisi may not be desperate just yet. Egypt’s economy may be struggling, but the government is not in immediate danger of default, as was the case in 1991. It has few big payments to make until 2024 and its $30bn of foreign reserves are sufficient to cover four months of imports.Another complication is that Egypt currently owes America next to nothing. Most of the country’s borrowing comes from private banks and local-currency bonds, meaning that America could not offer to whittle down its debts. Some diplomats hope that Mr Blinken will instead speed along funds from the imf, or even shave off some of the $16bn Cairo owes the multilateral lender. Yet the fund only offers modest hand-outs, limiting the attractiveness of such an approach. That leaves America one option: pumping new cash into Egypt, which would find opposition in Washington.A second challenge concerns the countries to which Egypt does owe money. More than half of the country’s external borrowing, and almost all its foreign reserves, come from the United Arab Emirates, Qatar and Saudi Arabia. Each has provided billions of dollars in deposits at Egypt’s central bank; recent packages include $5bn from Saudi Arabia and $3bn from Qatar in November last year. This type of lending can be withdrawn at short notice, and such a withdrawal would be big enough to drain Egypt of dollars. As a result, the Gulf, unlike America, does have leverage with Cairo. Any deals would therefore need the involvement of countries in the region.
Finally, Egypt needs reassurance that it would not be left to deal with Gazan refugees on its own. The worry about letting hundreds of thousands across the border, who will need education, health care and housing, is that they will stay. There is huge uncertainty about when Israel would let Gazans return and what will be left when they do. In Jordan and Lebanon, which took hundreds of thousands from Palestine in the 1940s and Syria in the 2010s, refugees have become a painful political issue. Mr Blinken and Gulf countries would need to convince Egyptian officials that other countries would be willing to pay for, and perhaps even house, some of those who make their way through the Rafah gate. Otherwise Egypt’s economy would struggle to cope, something of which Mr Sisi is all too aware. ■ More

It may be a risk-taker’s market.
Investor and personal finance author Ric Edelman believes it’s a practical strategy to take chips off the table right now.

“It comes down to behavioral finance. It comes down to human emotion,” the Edelman Financial Engines founder told CNBC’s “ETF Edge” this week. “Do you have the stomach? Does your spouse have the stomach to hang in there if things get ugly like they did in ’01, ’08, 2020? Can you hang in there?”
Edelman added there’s a “laundry list of reasons” to be cynical right now. He includes struggles in the real estate market, high interest rates, government shutdown risks and the Israel-Hamas war.
“It’s easy to be negative and that can cause you to say, ‘Why do I want to put myself in a position of maybe losing another 20% or 30% of my money when I’ve already amassed an awful lot of money and I am already in my ’60s or ’70s and I need the safety and protection and by the way get five percent in my bonds or U.S. Treasury or my bank CD? Why don’t I just park it? Earn 5%. Call it a day,’ he said.
Edelman acknowledges the strategy could be less profitable, but he suggests it’s important to sleep better at night.
“I’m not sure everybody in the investment world is acting logically as opposed to emotionally. You’ve got to know yourself,” said Edelman.

The Capital Group’s Holly Framsted is also seeing investors de-risk, and her firm is trying to cater to them by offering a new batch of exchange-traded funds focused on fixed income.
“We’re seeing increased interest in short-duration fixed income,” said the firm’s head of global product strategy and development.
Framsted speculates the investors are making the move to short-duration funds in response to the volatility of today’s market.
“[The Capital Group Core Bond ETF] was among the original six funds that we launched,” Framsted said. “We’re seeing interest among our client base who tend to be longer-term oriented in nature across the full spectrum. But certainly, a lot of conversations in the short-duration space given the environment that we’re in.”
The firm’s bond ETF is virtually flat since its Sept. 28 launch. The Capital Group managed more than $2.3 trillion as of June 30, according to the firm’s website.

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Two experts see major challenges facing the adoption of new obesity drugs.
Dr. Kavita Patel, a physician and NBC News medical contributor, believes fresh data from Novo Nordisk on Ozempic’s ability to delay the progression of chronic kidney disease is among the strongest supporting evidence for secondary uses of the drug.

However, she considers data supporting the use of obesity drugs for other conditions including Alzheimer’s and alcohol addiction as underdeveloped.
“Those trials … are nowhere near as robust as the data we have on [Novo Nordisk trial] FLOW, on sleep apnea, cardiovascular risks, on diabetes control — double-blind placebo, randomized controlled trials that are incredible,” she told CNBC’s “Fast Money” on Wednesday. “We have a long way to go for that. I’ve seen a lot of miracle drugs before.”
Novo Nordisk halted FLOW on Tuesday. According to the company’s press release, it happened more than a year after an interim analysis showed that Ozempic could treat chronic kidney disease in Type 2 diabetic patients.
As of Friday’s close, Novo Nordisk is up 9.82% since its announcement. Its obesity drug maker competitor Eli Lilly is up 5.16% in the same period.
Patel believes efficacy is just one of the major hurdles the medication needs to clear before it can be approved for uses outside of diabetes management.

“We know this drug works really well in diabetics. But there are so many barriers to getting there —including cost, adherence, prescriber rate,” said Patel, who also served as a White House Health Policy Director under President Obama.
Patients opting to use GLP-1 drugs — a group of medications initially designed to control diabetes — for weight management often must pay out-of-pocket.
“Right now, we are seeing active employers, entire states that are declining to cover on the weight loss indication,” Patel said.

If the U.S. Food and Drug Administration approves Ozempic for use in Type 2 diabetics with chronic kidney disease, which Patel believes will happen, it could force the hand of insurance companies to expand their coverage of the drug.
“We’ll see a final package of data that will just be so compelling, that it would be wrong not to cover this, because it should be superior to what we have available to us,” she noted. “That is something that I think the insurance companies will have a difficult time [with].”
Mizuho Health Care Sector Strategist Jared Holz also expects challenges related to insurance coverage as more patients begin taking GLP-1 drugs, which could limit overall adoption.
“The payers, at some point, are going to be saying, ‘We get it, but we cannot pay for these at this volume without seeing the benefit, which may be 10 years from now, 20 years from now, 30.’ We have no idea when the offset is going to be,” he also told CNBC’s “Fast Money.”
Holz also pointed out the divide emerging in the health care sector between Novo Nordisk, Eli Lilly and their pharmaceutical peers.
“We haven’t seen this kind of valuation disconnect between the peer group, maybe in the history of the sector,” he said.
The growth trend may not be sustainable for Novo Nordisk and Eli Lilly, based on current supply constraints that have left patients unable to secure dosages.
“The companies can’t make enough, I don’t think, to actually put out revenue that’s going to appease investors, given where the stocks are trading,” said Holz.
A Novo Nordisk spokesperson did not offer a comment due to the company’s quiet period ahead of earnings. Eli Lilly did not immediately respond to a request for comment.

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A Wells Fargo customer uses the ATM at a branch in San Bruno, California, on Aug. 8, 2023.
Justin Sullivan | Getty Images

Wells Fargo on Friday surpassed Wall Street expectations for third-quarter earnings and revenue as the benefit from higher interest rates offset slowing lending activity.
Shares of the bank rose 2.4% in premarket trading.

Wells Fargo posted earnings per share of $1.48 in the quarter, or $1.39 excluding discrete tax benefits. It was unclear what the exact comparable number was to Wall Street’s expectations, but both figures are higher than the LSEG consensus EPS of $1.24. The earnings are also significantly higher than the 86 cents per share earned in the same quarter a year ago.
Total revenue came to $20.9 billion during the quarter, beating the consensus estimate of $20.1 billion, according to LSEG, formerly known as Refinitiv. Revenue was 6.5% higher than the $19.6 billion recorded in the third quarter of 2022.
“Our revenue growth from a year ago included both higher net interest income and noninterest income as we benefited from higher rates and the investments we are making in our businesses,” Wells CEO Charlie Scharf said in a statement.
“While the economy has continued to be resilient, we are seeing the impact of the slowing economy with loan balances declining and charge-offs continuing to deteriorate modestly,” Scharf added.
Net income rose to $5.77 billion in the three months ended Sept. 30 from $3.59 billion a year earlier, driven by an 8% increase in net interest income.
Wells Fargo said provision for credit losses in the quarter included a $333 million increase in the allowance for credit losses for commercial real estate office loans and higher credit card loan balances. More

JPMorgan topped analysts’ expectations for both profit and revenue in the third quarter.
“This may be the most dangerous time the world has seen in decades,” CEO Jamie Dimon said in a release, referring to conflicts in the Ukraine and Israel and the possible impacts on global markets.

JPMorgan Chase on Friday topped analysts’ expectations for third-quarter profit and revenue as the bank generated more interest income than expected, while credit costs were lower than expected.
Here’s what the company reported:

Earnings: $4.33 a share
Revenue: $40.69 billion, vs. $39.63 billion LSEG estimate

The bank said profit surged 35% to $13.15 billion, or $4.33 a share, from a year earlier. That figure was not immediately comparable to the LSEG estimate of $3.96 a share; JPMorgan had a $665 million legal expense in the quarter that if excluded from results would’ve boosted per share earnings by 22 cents.
Revenue climbed 21% to $40.69 billion, helped by the stronger-than-expected net interest income. That measure surged 30% to $22.9 billion, exceeding analysts’ expectations by roughly $600 million. At the same time, credit provisioning of $1.38 billion came in far lower than the $2.39 billion estimate.
JPMorgan shares climbed 1% in premarket trading.
CEO Jamie Dimon acknowledged that the biggest U.S. bank by assets was “over-earning” on net interest income and “below normal” credit costs that will both normalize over time. While surging interest rates caught some smaller peers off guard this year, causing upheaval among regional lenders in March, JPMorgan has navigated the turmoil well so far.
Dimon warned that while American consumers and businesses were healthy, households were spending down cash balances and that tight labor markets and “extremely high government debt levels” meant that interest rates may climb even further from here.

“The war in Ukraine compounded by last week’s attacks on Israel may have far-reaching impacts on energy and food markets, global trade, and geopolitical relationships,” Dimon said. “This may be the most dangerous time the world has seen in decades. While we hope for the best, we prepare the firm for a broad range of outcomes.”
The report comes after a period of uncertainty for U.S. banks.
Bank stocks plunged last month after the Federal Reserve signaled it would keep interest rates higher for longer than expected to fight inflation amid unexpectedly robust economic growth. The 10-year Treasury yield, a key figure for long-term rates, jumped 74 basis points in the third quarter. One basis point equals one-hundredth of a percentage point.
Higher rates hit banks in several ways. The industry has been forced to pay up for deposits as customers shift holdings into higher-yielding instruments like money market funds. Rising yields mean the bonds owned by banks fall in value, creating unrealized losses that pressure capital levels. And higher borrowing costs tamp down demand for mortgages and corporate loans.
Shares of JPMorgan have climbed 8.7% this year through Thursday, far outperforming the 19% decline of the KBW Bank Index.
Wells Fargo posted results on Friday, and so did Citigroup. Bank of America and Goldman Sachs report Tuesday, and Morgan Stanley discloses results on Wednesday.
This story is developing. Please check back for updates. More

Revenue and net income rose by 9% and 2%, respectively, year over year.
Citigroup’s institutional clients unit reported $10.6 billion in revenue, up 12% year over year and 2% from the second quarter.
Citigroup’s stock was down 8% for the year entering Friday.

Citigroup reported its third-quarter results on Friday morning, with solid growth in both institutional clients and personal banking fueling higher-than-expected revenue.
Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by LSEG, formerly known as Refinitiv:

Earnings per share: $1.63. Not comparable to the expected $1.21 due to divestitures. Excluding divestitures, earnings per share were $1.52.
Revenue: $20.14 billion, vs. expected $19.31 billion

Revenue and net income rose by 9% and 2%, respectively, year over year.
Citigroup’s institutional clients unit reported $10.6 billion in revenue, up 12% year over year and 2% from the second quarter. The personal banking and wealth management division generated $6.8 billion in revenue, up roughly 10% year over year and 6% from the second quarter.
“Despite the headwinds, our five core, interconnected businesses each posted revenue growth resulting in overall growth of 9%,” CEO Jane Fraser said in a press release.

Jane Fraser CEO, Citi, speaks at the 2023 Milken Institute Global Conference in Beverly Hills, California, May 1, 2023.
Mike Blake | Reuters

Shares of the bank rose 2% in premarket trading. Citigroup’s stock was down 8% for the year entering Friday.
Among other banks that reported quarterly results on Friday morning, JPMorgan and Wells Fargo both showed stronger-than-expected revenue numbers in their third-quarter reports.

Citigroup reported $1.84 billion in total cost of credit at the end of the quarter, up slightly from $1.82 billion at the end of the second quarter and $1.37 billion a year ago. That metric includes a net build of $125 million in the allowance for credit losses during the third quarter.
Citigroup will discuss the results in a conference call later Friday morning. Investors will be looking for more detail about the reorganization of the bank under Fraser.
Friday’s earnings report includes the period during which Fraser announced that the bank would be divided into five main business lines, the latest change for the CEO since taking over in March 2021. The new structure, announced on Sept. 13, is expected to include job cuts.
Another initiative under Fraser has been Citi selling off its retail banking business in some international markets. The latest move on that front came on Oct. 9, when the bank announced that it had struck a deal to sell its onshore consumer wealth portfolio in China. More