Türkiye Finans GM predicts ‘fluctuating year’ for Turkey

Turkey’s economy grew 2.2 percent in 2012, and its sovereign rating rose to investment grade for the first time in 18 years. The Turkish economy grew by three, 4.5 and 4.4 percent respectively in the first, second and third quarters of 2013, making it the 17th-biggest economy in the world that year.

The banking sector is among the industries driving the Turkish economy. Lingering uncertainty was cleared away recently after the FED’s decision in mid-December to decrease asset purchases. The fact that the speed of asset purchases depends on the macroeconomic performance of the US suggests there will be increasing fluctuations in the coming years. This may slow the capital inflow to emerging economies.

Meanwhile, European economies continue to recover despite fragilities. If this recovery gains a healthy and sound momentum, Turkey will be positively impacted by foreign trade and fund inflows. On the other hand, efforts to pull the Japanese economy out of deflation may be perceived as a factor that could affect global capital flows.

[I]t is critical that emerging economies keep up with the recovery rate of the developed economies

Structural problems have begun to stand out more due to the cyclical slowdown experienced in emerging economies. At this juncture, it is critical that emerging economies keep up with the recovery rate of the developed economies. Otherwise, capital flow to emerging economies may lose momentum.

Based on the trends in the second half of 2013 in Turkey, it is possible to say that a general expectation has unfolded with regard to how 2014 will turn out: it will be a highly fluctuating year. The measures that have been taken by the regulatory authorities and the emerging macroeconomic trends may both be understood as signs of slower growth in the banking industry in 2014 compared to 2013.

Among the possible causes may be the actions of the regulatory authorities, rapid increase in costs and non-performing loans. But most of the actions that could be done in terms of regulatory measures have now already been done; therefore, no significant surprises are expected in 2014.

As a result of continuing uncertainties, a rising pressure may be expected in foreign and domestic funding costs in the banking industry. On the other hand, the gravity of the effect that increasing costs will have on economic activity could be crucial in terms of managing credit exposure. If the depreciation that the Turkish lira experienced in 2013 becomes permanent, a better analysis will have to be done to understand its impact on the balance sheets of industry players.

Another pressing issue to watch out for will be the impact of the depreciation of Turkish lira on the profitability and capital adequacy ratio of the banking industry in general.

We at Türkiye Finans project a modest GDP growth of 3.5 to four percent in 2014, due to both foreign and domestic risks and the measures taken by the economic administrators. In the current climate, there is a downward trend regarding the risks on growth. Nevertheless, if the factors that are considered risks do not have as much of an adverse effect on economic activities as feared, the growth may be close to historic averages.

Steady growth
Türkiye Finans improved its growth and profitability figures over the course of 2013. We started initial preparations to issue lease certificates in Turkish lira and US dollars, and successfully completed our first Sukuk issue.

Turkey’s economy

17th

Biggest economy in the world, 2013

4.4%

Growth in 3rd quarter, 2013

Through Sukuk issuances and syndicated murabaha facilities, we continued to support small- and medium-sized enterprises (SMEs), the building blocks of our economy, and introduced numerous innovative products to the industry. These included Finansör Card and Siftah Card, which were firsts in participation banking.

In addition to entering into agreements with chambers of commerce and industry, we also sped up efforts to improve customer satisfaction. Our accomplishment was acknowledged once again with the significant awards we have won. Türkiye Finans placed emphasis on technology investments in 2013, as was the case in previous years. The mobile banking application we developed was chosen in a survey as the most liked in its field.

As of September 2013, the asset size of the bank climbed to TRY 23.3bn – a 32 percent growth year-on-year. Attaining high growth rates without compromising profitability is the strategy we are implementing. The bank’s net profit for the period was TRY 236.8m.

As of the end of 2012, our loans total had reached TRY 17.1bn, while the size of the non-cash loan portfolio grew to TRY 7.8bn. There was also a 21 percent improvement in deposits, amounting to TRY 13.8bn, and the number of branches increased to 250.

Türkiye Finans has a five-year strategy in place: we are aiming to reach an asset size of over TRY 40bn by the end of 2016. Our priority is to grow in the SME and retail segments. We are also planning a similar international Sukuk issue in 2014. We issued Sukuk in the amount of TRY 100m for the domestic market in January 2014. We also funded the first ever corporate Sukuk issuance in participation banking in the country.

Participation banking
Türkiye Finans believes there is significant potential in Turkey’s young population, development of innovative products and a relatively low penetration rate compared to other countries. Thus, we think that growth dynamics will develop even more in the coming term. Our opinion is that new players in the industry are going to bring fresh momentum to participation banking.

Türkiye Finans believes there is significant
potential in Turkey’s
young population

We see continued profitability as well as sound return on equity in comparison to similar countries. There is a critical relationship between the market share of personal deposits and the share of banks with more branches. This fact makes it clear that increasing the number of branches is crucial.

Furthermore, we also see banks opting for the bond issuance route in order to obtain non-deposit funds – a trend that is going to continue, in our opinion. We project that efforts to provide funding through lease certificate issuances are going to swell compared to previous years.

We can assume that monetary policy, which will be operated according to a medium-term programme cyclically, is going to remain a consequential parameter for the banking sector.

In our opinion, the project to turn Istanbul into a financial centre will help put Turkey among the top-10 economies in the world by 2023. We feel that Istanbul’s geographical location will be a major contributor in helping the country become a global financial centre. Currently, Turkey is one of the biggest economies in the Middle East, Eastern Europe and Central Asia regions. Thus, it has the potential to become the financial centre of the region.

The golden hello: the politics of CEO bonuses

In the wake of the global financial crisis, executive pay packages have come under far closer scrutiny than ever before, and as a consequence, support for those that detach pay from performance is quite understandably beginning to fall by the wayside. Among the worst received executive extras are sign-on bonuses; otherwise known as the ‘golden hello’, which has quietly crept into the vernacular of executive recruitment and, in recent years, far too often flagged irresponsible and disastrous appointments.

Far from a simple sign-on bonus, a golden hello is a more specific mechanism intended to draw candidates, typically senior executives, away from competing companies and to the fray. The thinking behind this method quite plainly is that the value the incoming candidate will bring to the company will exceed the initial sign-on sum by some degree.

In the boom years preceding the crash, sign-on bonuses were part-and-parcel of a buoyant job market, acting as a means of distinguishing one employer from another in times of labour shortages. Nowhere was this more so the case than in the thriving IT, finance and consulting sectors, as employers then scrambled to acquire the very best of the bunch and in that same vein pay whatever sum was required to secure their services.

Skip forward a good few years and the sign-on age of yesteryear has served to exasperate the financial pressures that already loom large over companies in the present climate, not least of which being bonus incentives that have since spiralled quite out of control.

Failed at the first hurdle
Boards today are without the luxury of what were previously bottomless budgets, and given that those in power are encouraged to keep an ever-watchful eye on the bottom line, executives are far more unlikely to be welcomed with a fat pay packet than they were previously. “New executive pay reporting requirements mean that companies have to be more explicit than they were previously about their policy and practice regarding recruitment arrangements. In this context, the prevalence of recruitment bonuses may decline further at the executive director level,” said Richard Belfield, Director for Towers Watson’s UK Executive Compensation Practice.

Johnson was ousted by shareholders after having instigated a 25 percent fall in sales

That’s not to say that the practice has ceased to be, only that sign-on bonuses for top executives have arisen only in exceptional instances, and often with less than exemplary results. “Unfortunately, these payments are often a sort of Hail Mary, where a struggling company is looking to make a big hire and offers an enormous inducement package to lure the executive aboard,” says Greg Ruel, Senior Research Analyst at GMI Ratings, an independent governance and accounting research firm.

The casual observer need only look as far as Middle America’s JC Penney for an example of how golden hellos can expose companies to financial risks. In November 2011 the department store secured the services of Apple’s then hugely influential Ron Johnson with a view to rejuvenating its brick-and-mortar sales and advancing its digital offerings.

However, the executive did not come on the cheap, and the company was forced to roll out a $52.7m in shares sign-on bonus to secure the retail guru’s services and spearhead the company on to bigger and better things. A mere 17 months on from his appointment and Johnson was ousted by shareholders after having instigated a 25 percent fall in sales, a 50 percent drop in stock, and incurred $1bn worth of losses.

A further few months on and Johnson has been all but wiped from the company’s memory, as the newly instated Myron Ullman has since reversed the overwhelming majority of his failed contributions and meandering initiatives.

Another company that fell foul of the golden hello was Hewlett-Packard, which cut Leo Apotheker’s term short 10 months in after it paid out a hefty $8.6m sign-on bonus. It was here that, despite HP’s shares slumping 46 percent under his reign, Apotheker was entitled to $34.7m in cash and stock for less than a year’s worth of work.

While these circumstances are unusually tragic, they should act as a sobering lesson for onlookers; proving that pay without performance can have disastrous consequences. “I see nothing but difficulties on pay detached from performance.

Payments outside of performance benefit only the executive and not shareholders, those who truly own the company,” says Ruel. “At GMI Ratings, we have seen that many companies paying sign-on bonuses are the same companies that pay bonuses for performance below company peers, lack sufficient disclosure of performance targets, and pay golden parachutes – large payments upon termination that are untied to company performance.

“We note 107 North American companies that have paid a golden hello within the last 12 months and about half of them have below average ESG Ratings. That could be because golden hellos are often a symptom of a compensation policy that is comfortable rewarding executives even when company performance is not strong.”

It’s true that golden hellos appear to be a lesser concern for shareholders in general, in stark contrast with golden parachutes, which have assumed a far more visible position on shareholder agendas worldwide, yet the practice should be assumed only in exceptional circumstances.

“Recruitment bonuses for executive directors can be unpopular with shareholders and as a result they tend to come under a lot of scrutiny from the investor community,” says Belfield. “In general, shareholders expect any such recruitment arrangements to be linked to performance.”

Shrewd decision-making
Many believe golden hellos to be in part responsible for disincentivisation and an overly zealous job-hopping mentality at top level; this aside from the obvious financial risks. It may well sound sentimental but the incentive should instead be that once the executive in question has performed well, they will be rewarded accordingly, whether that be financially or otherwise.

Having said this, there are certainly situations in which sign-on bonuses are unavoidable, and must be seen instead as par for the course. In select instances, those hiring cannot help but concede to a golden hello as a means of compensating executives for any losses incurred on leaving their current position.

At a very basic level, the question of a sign-on bonus boils down to an issue of supply and demand, and no small amount of foresight on the part of recruiters to identify the right talent for the right job. Although the circumstances under which the bonuses are awarded are far from ideal, golden hellos can turn a profit in certain instances, as can be seen in the case of Best Buy and Hubert Joly.

The American consumer electronics corporation baited the former Carlson CEO with a cash bonus of $3.5m, on top of equity and options worth around $13m in what later proved a shrewd gamble on the company’s part. Best Buy has since gone on to rank amongst the world’s hottest stocks, making JPMorgan’s list of nine companies forecast to outperform growth stocks this year and exhibiting gains of 255 percent through 2013.

Best Buy’s reasons for offering a sign-on bonus are in part illustrative of the legitimate reasons why a company might tempt executives with a welcome bonus. Golden hellos can act as a means of bridging the gap between the pay a candidate wants, and the wage the organisation can offer. Alternatively, if the executive in question will be missing out on stock that hasn’t quite matured or any annual bonuses, a golden hello can be utilised as compensation for any losses in this department.

The biggest problems with golden hellos arise when there is little to no retention incentive for the executive in question

The biggest problems with golden hellos arise when there is little to no retention incentive for the executive in question, although this is something can be combatted by staggering sign-on payments through a specified term. Instead of issuing a fat sum on the first day, shrewd companies are resorting instead to awarding incoming executives with a percentage of the agreed-upon bonus, only for the rest to follow once they have performed certain duties or stayed for a specified amount of time.

However, this is broaching the issue of golden handcuffs, which relates more specifically to retention incentives and is so often detached from a golden hello.

What must be avoided at all costs is the introduction of a CEO whose appointment depends entirely upon pay. If a candidate is unwilling to join simply because of monetary matters, then questions should be asked about whether they are the right person for the job in the first place.

Provided that those appointing incoming executives can accurately assess the long-term benefits to be gained from an incoming candidate, a golden hello, as was the case with Best Buy, can be good value for money. The fundamental problem with the practice, however, is that the resulting benefits are near impossible to calculate with any reasonable degree of certainty, which in essence de-couples performance from pay and should be seen as unnecessary risk-taking by all accounts.

Top 5 countries with billionaires

1. US

The US is by far the country with the most billionaires in the world. For 27 years it has outranked all other countries when it comes to wealth, with the percentage of global billionaires hailing from the US constantly hovering just under one third, 31 percent. The US’s 492 billionaires are worth a combined $1.87tn, representing just over one third of total billionaire wealth in 2013.

The world's richest man, Bill Gates, is just one of many billionaires to call the US home. Several other wealthy Americans have also made their riches in the tech industry, such as Google's Larry Ellison and Facebook's Mark Zuckerberg
The world’s richest man, Bill Gates, is just one of many billionaires to call the US home. Several other wealthy Americans have also made their riches in the tech industry, such as Google’s Larry Page and Facebook’s Mark Zuckerberg

2. China

China has climbed wealth rankings in recent years following the country’s explosive economic growth. In 2013, the amount of wealthy in China pushed the country into the second spot in global billionaire rankings. As such, a total of 152 Chinese people residing in China had a total net worth of $1bn or over. That’s a 25 percent increase in the past year.

Wang Jianlin, Chairman of Dalian Wanda Group, is China's richest man
Wang Jianlin, Chairman of Dalian Wanda Group, tops Forbes’ China Rich List. He is closely followed by Zong Qinghou, who made his money in beverages, and Robin Li, an internet search mogul

3. Russia

Russia, with its 111 billionaires in 2013 came in third in the global ranking of billionaires per country. The Russian billionaires are worth a combined $422bn, equivalent to one-fifth of Russia’s GDP. The majority of these billionaires have achieved their wealth by privatising former Soviet assets in steel, oil, coal and mining, which are now worth billions.

With a net worth of approximately $18.6bn, Alisher Usmanov is Russia's richest man. He made his fortune in metals and now has his fingers in more than a few pies, from telecommunications to fencing
With a net worth of approximately $18.6bn, Alisher Usmanov is Russia’s richest man. He made his fortune in metals and now has his fingers in a few pies, from telecommunications to fencing

4. Germany

Of the 1,645 billionaires in the world, 85 are German. The highest placed German is the 94-year-old supermarket king Karl Albrecht, valued at $25bn. The wealth of the German billionaires amounts to $364bn. This compares to the total wealth of billionaires across the world, which at $6.4tn grew 18.5 percent last year – an all time high.

Susanne Klatten is Germany's richest woman, largely thanks to inheriting her father's business - the car company BMW
Susanne Klatten is Germany’s richest woman, largely thanks to inheriting her father’s business – the car company BMW

5. India

India is home to the fifth largest group of billionaires in the world – 56 – amounting to a staggering collective net worth of $191.5bn. This is a slight decline from 2012, as the wealth of Indian billionaires has weakened along with the country’s economy and falling rupee. Mukesh Ambani, chairman of pharma firm Reliance Industries, is the country’s richest man with a personal fortune of $18bn.

Mukesh Ambani's fortune may have declined along with India's economy, but the country's richest man is still a billionaire and doesn't look to wind back any of his businesses any time soon
Mukesh Ambani’s fortune may have declined along with India’s economy, but the country’s richest man is still a billionaire and doesn’t look to wind back any of his businesses any time soon

Zoltán Áldott on economic development in Croatia | INA | Video

As Croatia is developing, business is key in driving its economy forward. Zoltán Áldott, President of the Management Board of INA, the top oil company in the country, talks about investment opportunities in Croatia and how to succeed in this market.

World Finance: Zoltán, INA has over 50 years of experience, tell me, what has been the key to your success?

Zoltán Áldott: [INA] is Croatia’s leading oil and gas business, it’s also strong in the whole former Yugoslavia regions, south-eastern European territories, and it’s predominantly accumulated experience in the oil and gas exploration and production, in oil refining, and oil product marketing. Our fate has been an experience accumulated as coming from a transformation from a former national company, and becoming from a national player, basically inter-regional, strong actor, with transacting big on different markets and extending it’s presence in the downstream business in the region and in upstream internationally.

World Finance: How has your company contributed to Croatia’s development?

Zoltán Áldott: INA is not only the largest industrial company in the country, and one of the largest in the region, but at the same time is also the largest investor in the country. Just last year we invested around $350m into the development of our upstream and downstream businesses, and we are set to grow that figure in the future.

We are, at the same time, one of the leading exporters, especially in the branch of crude oil largest markets surrounding Croatia, Bosnia and Herzegovina, as well as Slovenia and to the Mediterranean market in general. And at the same time, we are by nature of the business one of the largest contributors to tax payments in the country, as well as one of the largest employers into the country. Through the investments we also give work to a lot of Croatian and other enterprises.

World Finance: Well clearly INA is a leading company when it comes to economic development in Croatia, but what potential is there for future development in the country?

The onshore Croatia is a well explored area, but new technology and new ideas can bring new results

Zoltán Áldott: Our business is a vertically integrated oil and gas business. Of course, the investment operators differ in the different branches of the business. The leading activity of ours, and the most significant is the upstream activity, so exploration and production, and all of Croatia is a relatively well explored area. Still, with new technology, new ideas, new concepts, new partners there is the possibility to do more, so therefore we are focusing on the upstream to run projects which basically in the shorter term and medium term increase our production.

At the same time, we also intend to increase our exploration effort. In exploration efforts, basically we can talk about two important basins, the onshore Croatia is a well explored area, but new technology and new ideas can bring new results, and the relatively less explored area, which is the Adriatic Sea, where there is some existing joint production with Italian partners, but still there is the possibility to do more.

World Finance: Can you be more specific about INA’s upstream activities in Croatia and abroad?

Zoltán Áldott: Today we produce around 40,000 barrels today of oil and gas equivalent. We would like to increase it significantly, around 20-25 percent in the coming years, based on certain projects that we already have initiated, so these things are very tangible. These include in-house recovery projects and new gas development projects. There is a good gas and oil market in the Croatian region to take this product, so I think this is very feasible. And also applying new technologies, basically which previously were not available, and today they can stimulate more of the oil from our fields. We also try to test unconventional potential, but this is still in infancy in our region.

Basically our intention is to grow, besides the already existing portfolio, in new investments primarily in the Mediterranean region, where we have a broader knowledge and a lot of experience, but also potentially in other countries. It could be greenfield exploration activities, it could be also some acquisitions.

World Finance: Considering your business optimisation program, what do you think is the key to surviving an economic crisis?

We don’t know how the market competition will develop, so therefore it’s very important that we keep our ambitions set to the maximum

Zoltán Áldott: Commodities, oil and gas is maybe more resilient than some other sectors to economic rise or stagnation. It’s not immune to it, people have less money to spend to travel in the cars, so therefore we also see a pressure on our top line, which means we cannot grow the revenue so easily. Sometimes even year on year we see some declines. So in those circumstances it’s very important to manage the costs of the business.

We have been running in order to achieve objectives of running efficiently a three year cost optimisation program, driving out around $400mn from our cost base. It was a very successful and essential program. At the same time it was also very important to manage our balance sheet, to retain enough financial flexibility, so if even tougher circumstance come or there are some new opportunities, we have enough firepower on the market.

World Finance: INA also has a very impressive corporate governance structure, what does it involve and why is it so important?

Zoltán Áldott: Corporate governance and the business structure is very important, to be flexible enough and give the right answers in an environment, whether it’s staff, whatever it can be. Our corporate governance is resembling, given size of the company, very similarly to let’s say Anglo Saxon oil and gas businesses, so we have the three levels.

We are a supervisory board, which in our case basically is a body which ensures the representation of the largest shareholders, we have two large shareholders, basically one is a regional oil and gas group which owns about 49 percent of the shares, and the government of Croatia, which has 44 percent of the shares. Both sending a representative to the supervisory board, and this body selects the management board.

The management board, you can imagine like a board of directors, in Anglo Saxon terms, so it’s a body which is responsible for strategy directions, major projects, selection of lower level executives. And below this basically there are professionals, who we call executive directors, who are responsible for a given branch of the business, upstream, downstream, retail, finance, and they are responsible to run the operations.

World Finance: Finally, looking forward, what are going to be some of the key challenges that INA has to tackle?

Zoltán Áldott: The first, as we can call bread and butter part of the operation, is to continue to be efficient. We don’t know how the market competition will develop, so therefore it’s very important that we keep our ambitions set to the maximum, we drive out further costs that are not necessary to run the business and carry out business optimisation in our assets. That is number one.

The other is of course growth. In our business it’s very important that you find the right venue for the right project. Our growth will be based, as far as we foresee, in the upstream activity, exploration and production, in Croatia and abroad. And we need to find the right projects and the right partners there to create value for the shareholders. And of course, at the same time, it’s very important to develop the company culturally, to be able to tackle new challenges as a freshly transformed business, from a state-owned, state-managed operation, into a market driven operation.

World Finance: Zoltán, thank you.

Zoltán Áldott: Thank you also.

Vietnam State Bank cuts rates to boost lending and growth

Vietnamese officials have announced plans to cut refinancing rates in order to support businesses. This is the latest in a series of measures announced to help boost the country’s floundering economy. The rate will be reduced from the current seven percent to 6.5 percent on March 18, according to Le Duc Tho, Chief Administrator at the State Bank of Vietnam.

The idea is to stimulate lending to business, in order to support more sustainable growth. The refinancing rate is at the level at which the State Bank loans money to other Vietnamese financial institutions, and by reducing interest Le is hoping to boost the flow of capital into the economy. It is a direct response to Prime Minister Nguyen Tan Dung’s request that the central bank step up its efforts to lower lending rates.

This is the latest in a series of measures announced to help boost the country’s floundering economy

Le will also be cutting rediscount rates to five percent, after lowering them to six percent at the end of March. “The government is more active in pushing for credit and growth,” Le Dang Doanh, a former advisor to the Prime Minister, told the WSJ.

The World Bank has recently announced it expects the Vietnamese economy to grow 5.4 percent this year, much lower than the government’s original target of 5.8 percent. Weak domestic demand has negatively impacted inflation expectations, and credit only grew around 1.4 percent in the first quarter.

The local government is aiming to stimulate demand, particularly in the property market, as a number of new property developments remain unsold as access to credit remains limited. According to its website, the State Bank will be making 30trn dong, around $1.44bn, available as affordable credit to homebuyers.

Though the economy grew 4.89 percent in the first quarter- more than the same period last year- it is still significantly slower than the 5.44 percent expansion recorded in the last quarter of 2013. However, the number of business closures has soared by 12 percent in February. As a result the government has revised growth estimates to 5.5 percent for 2014.

Vodafone snaps up Ono in €7.2bn deal

Months after UK telecom multinational Vodafone announced it was retreating from its US operations, the company has made an effort to refocus its expansion plans on Europe. This morning a deal to buy Spain’s Ono telecom firm added to a number of strategic acquisitions across Europe in recent months.

The deal, worth €7.2bn, comes almost eight months after Vodafone announced it was selling its stake in US giant Verizon Wireless for a colossal $130bn, and six months after Vodafone bought Germany’s largest cable firm Kabel Deutschland for €7.7bn.

The company is looking to press ahead with expansion throughout mainland Europe as it tries to wrestle back control of the telecom market from a number of competitors that have sprung up in recent years.

CEO Vittorio Colao has told reporters that the Ono deal represented an “attractive value creation opportunity” for his firm. “Demand for unified communications products and services has increased significantly over the past few years in Spain, and this transaction – together with our fibre-to-the-home build programme – will accelerate our ability to offer best-in-class propositions in the Spanish market.”

The company is looking to press ahead with
expansion throughout
mainland Europe

While Vodafone has cut its ties with Verizon, another US telecoms giant has been rumoured to be looking at buying a stake for many months. AT&T was reportedly set to take a position in Vodafone as a result of its Verizon sale, but in mid-March the firm’s CEO, Randall Stephenson, played down the prospects of such a bid.

He told an investor conference that time is running out for his firm investing in European wireless operators, after UK regulators forced it to rule out making a bid for six months earlier this year. He pointed to the number of operators boosting their LTE operations in recent years, meaning there was little value to be found for US investors. “Europe way underinvested for quite some period of time in terms of LTE. What we had always believed was going to transpire is now transpiring.”

He added, “As you see these investments happening, you may kind of begin to think the window may be closing on perhaps owning wireless assets.”

Alibaba looks set to become largest US IPO of all time

Alibaba, the world’s largest e-commerce company, is readying itself for what many believe could be one of the largest US IPOs of all time. Realistically, analysts expect the Hangzhou-based internet group to seek approximately $15bn as part of the share sale, which would put the business’s value at somewhere in the region of $150 and $200bn.

Assuming the valuation comes in at the upper limit of analyst expectations, the company would rank second-only to Google in terms of the most valuable internet companies worldwide. As a means for comparison, the world number one is valued at $394bn whereas both Amazon and Facebook are valued at a lesser $172bn.

Realistically, analysts expect the Hangzhou-based internet group to seek approximately $15bn as part of the share sale

‘Alibaba Group has decided to commence the process of an initial public offering in the United States,’ reads a statement released by the company. ‘This will make us a more global company and enhance the company’s transparency, as well as allow the company to continue to pursue our long-term vision and ideals.’

Alibaba’s efforts to extend its presence overseas have long been anticipated by analysts, and come as the internet group last year lost precious market share in China to some of its smaller rivals. The company, therefore, will be hoping that a stronger overseas presence will bump up its international renown and bolster its reputation at home. ‘Should circumstances permit in the future, we will be constructive toward extending our public status in the China capital market in order to share our growth with the people of China’, continued the statement.

London-based market intelligence firm Euromonitor estimates that China’s e-commerce market will be worth over $300bn by 2018, representing a threefold increase on its 2012 equivalent, and owing predominantly to increased smartphone penetration.

A huge number of international firms have made it their mission to penetrate the lucrative Chinese market, and it would appear that the introduction of developed Western players is beginning to spook the internet giant somewhat.

Parpública: Portugal’s airport network attracts investment

The privatisation of Aeroportos de Portugal, (ANA) was one among many of the demanding and challenging commitments undertaken within the Financial and Economic Assistance Programme signed between the European Commission (EC), the ECB, the IMF, and the Portuguese government.

ANA, together with Aeroportos e Navegação Aérea da Madeira (ANAM) manages 10 airports across Portugal – Lisbon, Porto, Faro, Beja – four airports in Azores and two airports in Madeira – that account for almost the entirety of the commercial air traffic in the country. Portugal’s airport operator was sold to Vinci Group for €3.08bn. This represents over 15 times the company’s €199.8m earnings before interest, taxes, depreciation and amortisation (EBITDA) in 2011. According to airline-industry data, the average multiple of recent deals in the sector is eight times 2011 EBITDA.

However, the importance of this transaction derives not only from the amount of cash paid by Vinci Group to the Portuguese state, but more importantly, from its role as part of the Portuguese government’s strategy to improve the competitiveness and robustness of the Portuguese economy, which aims at strengthening the development of the Portuguese airport network and encouraging the involvement of the private sector in productive investments.

This achievement constitutes good evidence that, even in times of crisis, Portugal remains appealing to business investments and is capable of attracting foreign investors (see Fig. 1). It is absolutely remarkable that, in less than six months, the Portuguese government, together with its advisors, was able to launch and conclude this privatisation process with such an outcome, in an extremely competitive environment and in full compliance with strict transparency and competition rules.

New regulatory model
Together with the privatisation process and before its conclusion, the government approved a new legal framework and the economic regulation applicable to the airport concession, and signed a concession agreement with ANA for a 50-year period.

There is no doubt that the clear economic regulation established created requisite conditions in the absence of which the successful outcome of the privatisation would not have been possible. In fact, such regulation aligned the public interest with the shareholders’ expectations and established a rational approach to increasing capacity, when and if required.

Moreover, a governance model was also set out in the concession agreement, aiming to balance the relationship between the grantor and the concessionaire, allowing the country’s representatives to reflect the national interest and to influence the management of the airports network, namely through the approval of a strategic plan for each five-year period.

The incentive for the passengers’ growth in the new economic regulation process and in the concession agreement, is for the clear indication to develop additional capacity in the Lisbon region, and the integrated management of the network assets to assure a proper return on the overall employed capital, supporting the process of adding value that has contributed to the positive final outcome.

Privatisation process
The privatisation process was organised to fully ensure the participation of the widest number of adequate bidders, and particularly those with strategic ownership interests. As such, the bidding process ensured a competitive and transparent process, while, at the same time, preserved the value of the assets and their economic importance.

Portugal's-economic-forecast

The process included two separate phases, aimed at achieving the goals outlined above. Phase one – which took more than six weeks – began with extensive market consultations, which involved a wide range of potential strategic investors. The initial consultation process identified 54 entities potentially interested in the privatisation, with 33 entities gaining access to the relevant documentation in order for submitting a non-binding offer. In all, eight non-binding offers were received, three from single entities and five from consortia.

Five interested parties were then selected to participate in phase two, by submitting binding offers within a time frame of four weeks. In this second phase, the interested parties were given access to more detailed information and were able to have individual meetings with the government advisors and the company management. Potential bidders were also allowed to visit the airport infrastructures. At the end of phase two, four binding offers were submitted, one from a single entity, and three from consortia. The fifth potential bidder withdrew its offer.

Selection of the winning bidder
The choice of the winning bidder was based on selection criteria set out in the Terms of Reference, which included (without limitation) the maximisation of the revenue arising from the privatisation. It also included the quality of the strategic plan for the company, aiming to reinforce the growth potential and efficiency of ANA and therefore, increasing its competitive position and the long-term value of the airports. The final point included in the Terms of Reference is the minimisation of the Portuguese state’s exposure to risks related to the implementation of the privatisation procedure, notably by ensuring that its framework fully protects the national interest and maximises revenues.

ANA then assessed the four binding bids on its suitability, particularly in relation to its technical and strategic components, with a view to achieving compatibility with the company’s strategic interests and future development. Parpública, the state’s holding company which owned ANA, drew up a reasoned report assessing each of the four bidders, taking into account the aforementioned assessment from ANA.

Parpública and ANAs reports were sent to a special monitoring committee set up to oversee the privatisation process. The committee then issued a reasoned opinion on the regularity, impartiality and transparency of the process, and concluded on its appropriateness.

After analysing the referred two reports and the reasoned opinion issued by the special committee, the Portuguese government chose Vinci as the winning bidder. The final price of €3.08bn offered by Vinci was higher than the pre-sale estimate given by the independent consultant and 26 percent higher than the offer of the second highest bid. The highest bidder also offered the best strategic project.

[E]ven in times of crisis, Portugal remains appealing to business investments and is capable of attracting foreign investors

Indeed, the superior quality of the strategic plan submitted by Vinci, currently documented in The Framework Agreement signed between the parties, will allow ANA to expand its activities and to develop the airports of Lisbon, Porto, Faro, Madeira and Azores, and will therefore contribute to the development of each of the regions served by those infrastructures. The Framework Agreement also ensures the endurance of ANAs corporate identity and the preservation of the value of its assets, including the Portuguese Hub, as a key link between Europe, South America and Africa.

Moreover, the integration of ANA in the Vinci Group will not only promote job creation but also constitutes a major opportunity for projecting Portuguese know-how and capabilities of ANAs technicians, internationally recognised by all stakeholders in this market. For Vinci Group, this transaction was also a milestone, since ANA became the major airport manager of its portfolio, permitting Vinci to gain critical mass in this sector to foster its activities as a world reference player.

Creating solid aviation management
Recognising the openness and transparency of the privatisation process, the EC has given the green light to ANAs sale to Vinci. This is referenced in the ECs statement, where “The Commission concluded that the negotiation process used by Portugal was open and transparent, and the eligibility criteria in effect were not discriminatory as regards clauses on company operational scale and track record in airport management,” before stating that the “proposal accepted from Vinci was the best proposal received and clearly exceeded the evaluation of the assets made by an independent entity prior to the sale.

It should also be noted that all documents relating to this process were submitted by the government both to the special monitoring committee and to the Portuguese Court of Auditors, in order to allow those entities to validate the regularity, impartiality and transparency of the process.

Therefore, it is the Portuguese government’s strong belief that the privatisation of ANA, together with the new regulatory framework and the concession agreement in place, will boost ANAs economic growth and increase its efficiency and competitive position in the European and global aviation market, for the benefit of the civil aviation sector, tourism, the users of the national airport infrastructures and the Portuguese economy as a whole.

Portuguese privatisation programme
It is worth mentioning that ANAs transaction was not the only well succeeded deal undertaken by the Portuguese government during the Assistance Programme. Actually, so far the government has completed seven privatisations in utilities, health, airport operations and postal services, amounting to more than €8bn.

It has undertaken the sale of 21.35 percent plus 4.14 percent stakes in EDP (a leading Portuguese power company), 40 percent in REN (the gas and electric grid operator), one percent in GALP (a leading Portuguese oil and natural gas integrated operator), 100 percent of CGD Saúde (a leading private health player in Portugal), 100 percent of ANA, 70 percent in CTT (a leading Portuguese postal services provider), and 85 percent in Caixa Seguros (a leading Portuguese insurance company).

The particular benign conditions in which all these transactions took place, regarding favourable pre-requisites and specific regulations, permitted the price to be maximised in all cases. The diversification of strategic investors set forth the interest and confidence in the Portuguese companies and in the Portuguese economy.

Other transactions are being prepared by the government in order to continue to foster the competitiveness, transparency and growth of the economy. The openness of the Portuguese economy is a proof of its strength in the global markets and of the competitiveness of its companies.

Social media key for brokerage firms, say Tradenet execs

Brokerage firms want to increase trades, but they don’t want to be hard influencers for customers to do so. Technology can play a role to subliminally stimulate trades and encourage a customer to be an active trader while keeping the brokerage firms far from blame. However, brokerage firms need to think beyond the traditional way of doing business, and to modernise their trading platform to do so. Brokerage firms should provide their customers with intelligent solutions to help them trade easier, in a more convenient and efficient manner.

Customer behaviour can be influenced by a number of means without necessarily incurring huge costs. Rather, it can be achieved by just doing things a little differently. Brokerage firms need to capitalise on the request moments.

Trading platforms need to combine financial trading and the best features of social networks and make them available to their users in a fast and easy way

When a customer requests something, information or transaction, it is the instance that she or he is in the “receiving mode”. This is the instance that brokerage firms need to capitalise on to stimulate trades. The information is usually already with the firm. It is only a matter of shaping and presenting it.

For example, when a customer requests the performance chart of a stock, the brokerage firm can, instead of just putting forward the request chart alone, put the requested chart in addition to two more charts for two other stocks that share something with the one requested by the customer. They could be from the same or complementing industry, have the same risk profile or future outlook, or produce the same fundamental ratios on their business.

Additionally, the brokerage firm can display statistics relating to customer behaviour with regards to this stock during the day. Specifically, the number of customers who viewed this stock, or the number of customers who bought it, the number of customers who sold it, and the number of stocks traded by the firm in the day.

Such information gives the customer a sense of relativity. The customer will think, “oh, I am doing what everyone else is doing. I am safe”, or, depending on the customer’s investment attitude, “oh, I am doing what everyone else is doing. There is no money in it”. However, regardless of the sentiment of the customer, behavioural statistics are likely to stimulate trades.

Deciphering the competition
Comparative information is also intriguing for real time customers. “How am I doing compared to others?” is an eternal question in everyone’s mind, all the time. Brokerage firms have plenty of information that can be used to show each customer how they are doing comparatively, without disclosing confidential information.

For example, letting the customer know the percentile they are in with respect to today’s profitability, where do they stand with respect to stock concentration per industry, or how they did this month versus last month in terms of their ranking.

Comparative information is useful not only to know if someone is doing well or not, but also to know if they are with the main trade or not. Investors vary in their appetite and it is important for some to know if they are with the main stream or taking their own path. Changing the media for providing information can contribute to higher chances of receiving information and, therefore, increased trades. People prefer watching to reading.

The trading platform should also allow users to share trading ideas and opportunities socially

Instead of providing research reports to customer mail or email boxes, which usually get skipped, deliver the research in video to their mobiles and laptops. It is the same research. Just have someone read it. Technology is already available to convert text to voice, which is a step that costs little.

Social networks are becoming an integral part in our daily life these days. Trading platforms need to combine financial trading and the best features of social networks and make them available to their users in a fast and easy way. Expressing one’s self is the main human desire driving the prosperity of social media. It is the same in trading. People want to express themselves.

This could mean enabling customers to share wins and losses with a pre-defined group, or those following them on Twitter. It also means enabling customers to state their opinion on a stock from within the system to their chat rooms, Facebook friends or Twitter followers. The key is to provide this ability from within the trading platform itself in order to make the experience seamless.

A smarter trading platform must reshape inter-activity with customers by making it more personal and relevant to them. It should leverage the power of modern technology to drive customer engagement and motivate changes in their trading behaviour. To achieve the required effect, trading platforms should encourage peer pressure and competition for more active trading behaviour.

To further engage customers, the trading platforms should provide a facility to reward best-performing traders for their good performance and allow other users to mimic their trading activities.

Modernising the platforms
Trading platforms today should facilitate toward their users to connect with other traders using the same platform. It should also allow them to view in all trading activities of other traders whom seem interesting to them. The trading platform should also allow users to share trading ideas and opportunities socially. The platforms should transfer the trading experience into a social experience that is more fun and rewarding at the same time.

Another way to encourage an active trading behaviour is by influencing the crowd, which can be achieved by connecting experienced traders with individuals willing to follow them and copy their trading activities. Today social trading is becoming of great interest.

Providing customers with a facility to follow more experienced traders will be an important vehicle to create broker loyalty and increase customers’ trading volumes, especially for non-experienced customers or new to equity trading.

In general, attitudes vary toward trading as an individual or as part of a group based on the trust, given to successful traders within the group. In the Middle East region, social trading will be highly accepted, where many traders are giving special importance on the credibility of a broker or a successful trader than on the brokerage firm itself.

Furthermore, to capture the maximum customer time in anticipation of trades, brokerage firms should bring to their trading platforms everything their customers are interested in. This means messaging from their Facebook account or the incoming stream from selected Twitter accounts they wish to follow in order to make investment decisions. This needs to be done to maintain a single customer experience. The customer should see the incoming content as part of their trading platform.

It should be as easy as ‘Buy 300 stocks on market price’ from within Facebook

Brokerage firms should also inversely develop their trading platforms to receive orders from social media sites, and in plain language. So, for example, the customer can be chatting with their friends on Facebook and decide to place an order. It should be as easy as ‘Buy 300 stocks on market price’ from within Facebook.

All functionality should be fully integrated and provided to the customer as one solution. Today’s users want a simple, clean solution, not a complicated group of mixed applications with the hassle of integration. The whole process, from signing up to follow a successful trader, watching an analyst’s video, or announcing what he is doing on Facebook or Twitter must be straight-forward, easier, more convenient and efficient.

Another way to facilitate encouraging an active customer trading behaviour is to have a multi-channel platform. To allow customer trading on the move, brokerage firms have to provide their services over multiple channels – in branch, on the phone, online, on tablets, and on the mobile. As smartphones and tablets become more compact, convenient and more powerful, the variety has increased tremendously, as has the introduction of devices that support multiple kinds of inputs.

With all these advancements, it is clear that trading platforms have to be more flexible and accommodate more choice for their users.

The idea is to provide a consistent experience to customers across channels, while giving them seamless access to their financial information and services where and when they are needed. The customer should always be in control of which channel he or she feels more convenient to use in a certain moment. For example, as it is nearly impossible for anyone to be in front of the computer screen constantly, customer could begin a transaction using one channel, say on a PC, and close it using a mobile phone while on the move.

TradeNet allows brokerage firms to provide different channels for their customers to interact with their services, providing them with a seamless, pleasant experience. A customer has a single real-time updated view for their information, positions and holdings regardless from which channel is connected.

The suggested way of thinking and some of the ideas resulting from it, might require issues around security and regulations to be resolved, but the aim is to minimise the time and effort between information, decision and action.

IBM strikes shine light on China’s labour laws

Though the strike at the IBM plant in Shenzhen last week was highly disruptive, it had much wider implications than simply halting production for a few days. The strike, which involved over 1,000 workers, was the latest in a series of walk-outs to hit Chinese industries over the last three years, signalling the cementing of a new trend of industrial activism.

According to advocacy group China Labour Bulletin, there were 1,171 strikes and protests in the 18 months to December 2013, with the majority occurring in Guangdong Province, one of China’s main industrial hubs.

Chinese workers have been increasingly prone to strike action as labour shortages have tilted the balance of power in their favour

Chinese workers have been increasingly prone to strike action as labour shortages have tilted the balance of power in their favour. Shortages have also meant that employers have been forced to offer more attractive remuneration and benefit packages to workers, in order to entice them into staying.

Workers have started to protest when companies are bought and sold – often without their being notified – in order to ensure their favourable working conditions are preserved under the new owners.

Though it is down to circumstances that Chinese workers have suddenly found themselves with the upper hand in negotiations, it is an unprecedented situation that the government would do well to exploit.

In many of the recent strikes, workers have been arrested and convicted of a range of public order offences. Not only are these arrests misguided, they are downright damaging. Nothing will be gained by imprisoning strikers. China should instead take this opportunity to upgrade its labour protection provisions.

Though China has profited greatly from its cheap and vast labour force by attracting international companies to its industrial hubs; now is the time to protect its workers. A healthy and well-provided for workforce is by far more sustainable than an exploited one.

Furthermore, now that workers have realised how effective their actions can be, the Chinese government will do better to compromise than to instigate further actions by workers. Repression by authorities will likely only escalate actions by workers and may push them towards unionising.

Twenty workers were fired during the IBM strikes, and another 300 to 400 are said to have quit work entirely. Workers who agreed to return to work were offered a bonus by IBM – a dangerous and potentially costly move from the company. If adequate provisions for compensation had been in place, IBM and Lenovo, who are taking over the plant, would have budgeted adequately and not lost a week of production and half their workers.

By protecting workers rights, the government can ensure that conditions remain attractive for foreign companies looking to relocate to China, but also that the workforce is looked after and contented. By repressing protests violently, and with morally questionable arrests, authorities will only be increasing the risk for companies settled in the country, rather than mitigating them.

US Environmental Agency lifts BP government contract ban

BP has come to an agreement with the US Environmental Protection Agency (EPA), bringing an end to the ban on government contracts imposed as a result of the 2010 Deepwater Horizon disaster. First put in place in November of 2012, the EPA enforced ban effectively ruled the British-based oil and gas giant out of any federal government contracts, and slammed the brakes on one of the company’s four “key areas”.

BP has ploughed $50bn into its US operations over five years – more than any other energy firm

The restrictions were first introduced after the company pleaded guilty to numerous offences – amongst them being 11 counts of homicide – and followed a $4.5bn settlement with the Department of Justice, prompting BP to label EPA’s actions as “inappropriate and unjustified as a matter of law and policy.”

“After a lengthy negotiation, BP is pleased to have reached this resolution, which we believe to be fair and reasonable,” said John Mingé, chairman and president of BP America in a company statement.

“As a result of this agreement, BP is once again eligible to enter into new contracts with the US government, including new deepwater leases in the Gulf of Mexico.”

Under the terms of the agreement, which is set to expire in five years time, the company has agreed to certain parameters, concerning safety and operations, ethics and compliance, and corporate governance. BP has also decided to withdraw the lawsuit it filed against the EPA last year for improper statutory disqualification and suspension.

The deal also follows an appeal made by the UK government late last year, which read: “The government is concerned that such a broad sanction can and will have serious and unjustified economic consequences.”

BP has ploughed $50bn into its US operations over five years – more than any other energy firm – and employs approximately 20,000 people in all 50 states, so communication between the government and themselves is vital if the firm is to make progress.

Bad spell for Shell as it struggles to profit from US shale market

Even though the US shale revolution continues to gather pace, some of the world’s largest oil firms are having difficulty profiting from it. Royal Dutch Shell – the Anglo-Dutch oil and gas giant and biggest revenue making company in the world – has announced that it plans to scale back its US operations as a result of competition from shale operators.

While smaller firms have enjoyed great success in profiting from shale oil and gas reserves in North America, the likes of Shell, BP and Exxon Mobile have struggled to match them. While at the start of March BP spun off its onshore US oil and gas subsidiaries into a separate business, Shell has announced it will cut jobs in North America and reduce spending in the region by a fifth.

Financial performance there is frankly
not acceptable

Blaming a number of failed exploration efforts for shale in the region, Shell CEO Ben van Beurden said in a statement that the company was looking to undergo a “fundamental shake-up.” He added, “Financial performance there is frankly not acceptable. Some of our exploration bets have simply not worked out.”

Last year the company saw a huge fall in profits for its North American business. While in 2012 it made gains of $670m, 2013 saw it make a loss of $900m, as a result of lower gas prices and increased competition. He said that the company will continue to target divestments of assets worth $15bn for the coming year. These include over 700,000 acres of US shale assets, as well as cuts to onshore oil and gas staff in North America of around 30 percent.

Although Shell hasn’t had the success in shale that it had hoped, it will still make up a part of its strategy in the long-term, says van Beurden. “From 2014, tight-gas and liquids-rich shale will have a different role in our strategy. We see them as an opportunity for the longer term rather than the immediate future. And we are reducing the number of these opportunities in our North American portfolio as we strive to improve our financial performance.”

New Zealand bumps up interest rates as GDP flourishes

New Zealand’s interest rates are to rise to 2.75 percent, the Reserve Bank of New Zealand (RBNZ) Governor Graeme Wheeler has announced. New Zealand’s economic growth has gained momentum in recent months, with the bank estimating that GDP has grown 3.3 percent in the year up to March.

The increase is supposed to be the first in a set of rate rises as the RBNZ aims to keep inflation near its two percent target midpoint. “With inflation now rising and inflationary pressures building, there is a need to return interest rates to more-normal levels,” the Central Bank said in its Monetary Policy Statement, stressing that rate rises “will depend on economic data and our continuing assessment of emerging inflationary pressures.” Surging house prices in the nation’s largest city, Auckland, have led to concerns of a bubble and have added to the country’s inflationary worries.

The FT is reporting that the rate may be increased by a total of 125 basis points in 2014, depending on economic data.

The growth of the economy in New Zealand has been driven by soaring dairy prices and also the $40bn rebuild of Christchurch, the city damaged in 2011’s earthquake. Demand for milk, particularly in China, has made New Zealand the world’s principal milk supplier and has stoked the flames of growth in the country’s $175bn economy.  Official figures show that the country maintained a three-month trade surplus in January, as exports to China grew 45 percent year-on-year from 2013.

Demand for milk, particularly in China, has made New Zealand the world’s principal
milk supplier

The news comes as the US Federal Reserve is not expected to raise interest rates until the third quarter of next year. The US central bank cut rates to a record low in December 2008 and promised to keep them there until the economy was on the mend. Meanwhile, the Bank of England Governor Mark Carney this week stressed that interest rates rises in the UK would have to be gradual to avoid choking the economy.

Wheeler said that “growth is gradually increasing in New Zealand’s trading partners” and that “global financial conditions continue to be very accommodating” for the country.

KIB receives top credit rating

There is indeed a lot to celebrate and cheer about. From stalwart beginnings, when Kuwait International Bank started operations in 1973, the bank had an all-encompassing approach and modelled its banking portfolio to cater to all international markets. Its business covers banking services, including the acceptance of deposits, financing transactions, direct investment, Murabaha (auto, real estate and commodities), Ijara Muntahia Bittamleek (lease-to-own), Istisna’a, Tawarruq, credit cards, Wakala and many other products.

KIB also provides corporate projects and finance, treasury services, letters of credit, letters of guarantee, real estate dealings and management of properties. This huge gamut of services has given KIB a wide customer base and has made it a market leader. KIB was one of the early banking institutions to embrace Islamic banking. The bank’s management recognised the interest that investors and the community at large expressed in Islamic banking and decided to adopt it early on.

This gave KIB a natural edge over competition. KIB’s large role in trading using Islamic financial products such as Islamic Sukuk made KIB rather crucial and one of the most recognised Islamic financial institutions in Kuwait.

Investors flocked to KIB and continue to do so. The key to stay ahead of the game has been to constantly innovate and embrace change, and KIB has mastered the art of it. Over the years, the opportunities in Kuwait’s banking industry have increased and the government has been keen to develop it further. The Kuwaiti banking sector is also by-and-large strong and stable in comparison to other economic sectors.

Taking responsibility seriously
KIB has been an active supporter and participant in the government’s plan for the banking industry. In the recently announced $130bn national development plan, KIB has formulated its own strategy with regard to the government’s initiative. The bank has studied the plan in depth – in particular the projects that are related to the banking and finance industry – and has prepared itself technically and financially to fulfil the government’s objectives by providing support to contractors, traders and service providers, while always adhering to the market and banking regulations set by the Commercial Bank of Kuwait (CBK) and the Capital Markets Authority.

With regard to international compliance, KIB is committed to work in accordance with all international regulations and is well placed to meet the demands of Basel III. The bank holds sufficient high-quality liquid assets and is committed to meeting Basel III’s requirements as prescribed by the CBK. We also have an independent Anti-Money Laundering Unit in order to detect and prevent money laundering, terrorism financing and other illegal activities.

KIB is also well prepared to face the fallout of the crisis in Egypt and Syria. Not only does it have a contingency plan in place, it has also taken certain measures based on the political situation in the region. KIB has and will always act in the best interests of its customers, striving to provide them with complete and uninterrupted banking solutions that enable them to carry on with their professional and personal lives as usual.

Ensuring customer satisfaction
Since July 1, 2007 – when KIB became sharia-compliant – the bank has worked for economic renaissance in Kuwait, with the objective of fulfilling its responsibility towards society and its people. KIB has worked hand-in-hand with the government and the private sector to achieve economic prosperity in the country.

As part of its social responsibility, KIB has drawn up an annual calendar of activities that include supporting sports, cultural, charitable, and religious activities, and providing for hospitals, nursing homes and children with special needs.

KIB has worked hand-in-hand with the government and the private sector to achieve economic prosperity in the country

KIB concentrates on doing a few things very well, which includes the active management of non-performing loans (NPL), which have improved overall ratios, profitability, liquidity and strong capital ratios, coupled with improved diversified growth in business. The excellent standards that KIB has achieved today are based on two significant elements: strong leadership and keeping up-to-date with technology.

KIB places great emphasis on attracting and retaining able and experienced leadership from inside and outside of Kuwait. Staff are trained regularly with a view to upgrading their capabilities in all necessary fields. Significant efforts have also been made to offer the latest electronic and online services to its customers. Customer satisfaction is a vital part of the bank’s strategy, and it has developed a range of services to enhance the banking experience, whether clients are domestic or operate internationally.

KIB also rewards its loyal customers with a host of special services and privileges wherever in the world they may be. One such privilege that is offered to its Visa Platinum and Gold cardholders is access to VIP lounges in airports around the world.

Furthermore, KIB is committed to offering modern, sharia-compliant products and to reach out to its customers by increasing its presence through various banking channels, including a wide network of branches, ATMs, mobile banking, and internet banking, to provide access to as many customers as possible.

A positive future ahead
Being one of the early adopters of Islamic banking presented KIB with both an advantage and a challenge. It transformed from what was once known as the Kuwait Real Estate Bank into Kuwait International Bank, one that offers a wide range of Islamic finance products. Today, almost all local banks have adopted Islamic banking. This works as a trigger for KIB to keep on innovating and enhance its products and services, so that it is way ahead of competition and remains a pioneer of local banking.

The continuous awards and achievements that KIB
has received are a
positive testimony to the bank’s success

Today, KIB operates with assets in excess of $4.9bn (as of September 2013) and offers a full range of Islamic finance products. KIB posted exceptional financial results in 2012, where operating profits exceeded KWD 21m and shareholders received seven percent in cash dividends. The bank continued this steady growth in the first nine months of 2013 by attaining operating profits of more than KWD 24m, and the last quarter looks promising and encouraging too.

In 2014, KIB will continue on its growth trajectory by providing appropriate Islamic financial products to its customers, such as Al Murabaha and Al Mussawamma, two important Islamic financial instruments. KIB will also expand its network by adding new branches in Kuwait, thereby increasing its reach and becoming more accessible to customers. KIB is also working closely with its corporate customers to identify their unique banking needs and to work out ways in which it can meet these needs. The bank believes this will further fuel growth and take it to greater levels of success.

Strong relationships
KIB has been widely recognised as a progressive, profitable and performance-oriented banking institution that has been pioneering and paving the way for growth and economic reform across Kuwait and the wider region. Fitch has upgraded KIB’s credit rating by two notches from A- to A+ due to its strong capitalisation, liquidity profile and strong capital ratios. This is no mean achievement given the financial crisis that has engulfed large parts of the globe.

The continuous awards and achievements that KIB has received are a positive testimony to the bank’s success: this, and the fact that its customers have placed so much trust in it. Most of KIB’s customers are loyal to the bank, providing valuable insight into how banking needs to evolve over time and how a bank can help them grow in their own businesses.

KIB has exceptional relationships with all of its corporate and retail customers. This has led to widespread satisfaction among its customers and has given KIB the opportunity to innovate for the betterment of its customers and the industry at large. This has also led to greater progress, profitability, and has been an impetus for top performance.

KIB has also been honoured with the Best Islamic Bank, Kuwait, 2014 award in World
Finance’s Islamic Finance Awards. The bank also received the Golden Medal Award of Merit 2013 from the Tatweej Academy for Excellence and Quality in the Arab Region, and it is one of the few leading financial institutions to publish its corporate governance manual in both Arabic and English, emphasising its commitment to transparency.

In conclusion, it is only apt to quote famous pastor and author Charles Spurgeon, who once said: “It’s not the having, it’s the getting.”  This seems truly pertinent for KIB – be it in the ‘getting’ of customers or the receipt of awards.

Gulfstream Aerospace flies ahead of the pack

The past decade has seen the business aviation industry expand its international presence and exhibit promise in emerging markets. However, the economic downturn has resulted in a bifurcated market, impacting on sales of smaller aircraft more so than those of large-cabin, long-range aircraft.

World Finance spoke to Gulfstream Aerospace’s Vice President of Communications, Steve Cass, about recent developments in the industry, and how they have impacted on the General Dynamics subsidiary.

Tell us about your business and how you have capitalised on industry changes
We’ve been in the business of business aviation for more than 55 years. Since we delivered our first business jet (a GII in January 1968), we have delivered over 2,100 business jets to our customers. We’re focused solely on the business aviation sector, and our ability to provide technologically advanced products that are safe, comfortable and reliable is definitely a differentiator for us.

In terms of the industry’s future, we envision the widespread acceptance of business aviation as a powerful and impactful worldwide economic engine that not only provides countless benefits to its users but to people around the world who work in the industry.

Gulfstream Aerospace

3,800

Employees

2,100

Business jets delivered

In 2007, Gulfstream saw its sales shift from primarily domestic to primarily international. This catapulted us from being a Georgia company with a worldwide presence to a worldwide company with a Georgia presence. Since then, the domestic/international breakdown has remained steadily at 50:50.

Nevertheless, as our international fleet continues to grow, so too does our network. In 2012, we opened Gulfstream Beijing and became the first original equipment manufacturer to establish a factory service centre in Asia.

We also enhanced our presence in Latin America with a Gulfstream service centre in Sorocaba, Brazil, and expanded our spare parts inventory, positioning more than $1.4bn in spare parts strategically around the world. At the same time, we increased customer access to aircraft sales support around the world and enhanced our sales presence in Africa, the Middle East, Russia and Dubai.

Last year we opened a Sales and Design Centre in London, the company’s first such facility outside the US. The nearly 5,500-square-foot centre, located in the Mayfair district of central London, gives international customers more convenient access to Gulfstream’s sales and design staff.

What differentiates your services from those of your competitors?
We have the largest company-operated product support organisation in business aviation, with more than 3,800 employees, 11 company-owned service centres, seven factory-authorised service centres and 14 authorised warranty facilities. To further facilitate this growth, in 2013 we added 150 employees worldwide in product support.

Gulfstream aircraft are known for their performance, cabin size, comfort, technology and reliability. The Gulfstream G650, which we announced in March 2008 and began delivering to customers in December 2012, had one of the most successful product launches in the business-aviation industry. After the aircraft’s introduction, we received in excess of 200 orders, in no small part due to the G650’s reputation for speed and comfort.

To what extent is technological investment key to your success and the success of the wider industry?
Technological investment is paramount to the success of both our business and the industry as a whole. Throughout the downturn, we continued to invest heavily in research and development, so that we’d be well positioned for a market recovery. This included investment in our two newest products, the G650 and G280, which were announced shortly before the downturn in 2008 and entered service in 2012, as well as continued investment in our existing products.

What are your plans for the future?
We’ll continue with the $500m, seven-year facilities expansion we announced in November 2010 for our Savannah site. Emerging markets that previously seemed hesitant about business aviation have begun to accept, and even embrace it. China, in particular, has made tremendous strides in terms of streamlining flight planning and establishing the infrastructure necessary to make the country a business aviation hub. We’ll continue to see the growth of this region and others, as well, including Brazil, Russia and India.

There’s plenty of room for these regions to grow: the US still has the lion’s share of business aircraft, with more than 11,000, compared to the remaining 8,000 worldwide, and those figures alone demonstrate the tremendous potential of this industry.