ROME: Italy’s government said Tuesday it will re-nationalize the bankrupt former national carrier Alitalia to make sure crises like the coronavirus pandemic never strand its compatriots abroad.
Prime Minister Giuseppe Conte’s decision was revealed in a government decree published late Monday after more than a week of debates.
It comes as part of a broader $28 billion (€25-billion) coronavirus response plan and will reportedly cost Italian taxpayers up to $670 million (€600 million).
The 74-year-old company filed for bankruptcy in 2017 and looked doomed in January when it failed to secure rescues from either the Italian state railway or Germany’s Lufthansa.
“At a time like this, a flag carrier gives the government more leeway,” Deputy Economy Minister Laura Castelli told Italian radio.
“We all saw the difficulties our compatriots faced in returning to Italy. Our decision stems from this.”
Transport Minister Paola De Micheli said a “national carrier was strategic for our country” at a time of crisis.”
Alitalia faced the threat of closure even before COVID-19 killed more than 2,100 people in the Mediterranean country and grounded the overwhelming majority of most airlines’ flights.
Market intelligence firm CAPA warned that “most airlines in the world will be bankrupt” by the end of May.
But how Conte’s government intends to save Alitalia — a member of the SkyTeam alliance that has been bleeding money for many years — remains unclear.
The government decree provides for the creation of “a new company wholly controlled by the ministry of economy and finance, or controlled by a company with a majority public stake, including an indirect one.”
Italy’s AGI news agency said the government was also setting up an €600-million fund to deal with the damage the pandemic was causing the aviation sector.
Some of the final details of the national economic rescue program are expected to be finalized next month.
Alitalia began to flounder with the emergence of budget fliers such as EasyJet and Ryanair in the 1990s.
But analyst believe that it is also too small — and has too many staff for the number of flights it operates — to compete with full-cost rivals.
It flew only 22 million passengers and saw its market share in Italy slip to 14 percent in 2018.
Lufthansa and the Atlanta-based Delta Airlines each carried around 180 million passengers that year.
Alitalia was privatized by a group of Italian investors for one billion euros in 2008 but went into administration when its staff rejected a proposal to cut jobs in 2017.
It is currently 49-percent owned by Abu Dhabi-based Etihad Airways and 51-percent owned by the Italian management team.
Etihad made no immediate comment.
Italy to re-nationalize Alitalia in response to virus
https://arab.news/56m8k
Italy to re-nationalize Alitalia in response to virus
- Prime Minister Giuseppe Conte’s decision was revealed in a government decree published late Monday
- Alitalia is currently 49-percent owned by Etihad Airways and 51-percent owned by the Italian management team
UK investors urged to enter Saudi sports market, projected to reach $22bn by 2030
RIYADH: UK investors have been encouraged to enter the Saudi sports sector, with an official telling a London event its market value is set to hit SR84 billion ($22.38 billion) by 2030.
During the UK-Saudi Sports Investment and Innovation Forum, the Director of Sports Sector Investment Development at the Ministry of Investment, Basim Ibrahim, stated that the sports market in the Kingdom is estimated at about SR30 billion.
The event, organized by the Saudi Chambers of Commerce and represented by the Saudi British Joint Business Council, took place on the sidelines of the UK-Saudi Sustainable Infrastructure Summit, reported the Saudi Press Agency.
This forum comes amid significant developments in the nation’s sports sector, driven by Vision 2030 initiatives that have positioned the Kingdom as an international destination for athletes, tournaments, and related investments.
During the event, Turki Al-Fawzan, CEO of the Saudi Electronic Sports Federation, stated that 67 percent of citizens enjoy electronic games and sports.
Mohammed El-Nemer, vice chairman of the Saudi British Joint Business Council, noted that between 2018 and 2023, the sports and entertainment sector in the Kingdom experienced an annual growth rate of 12 percent, highlighting rising interest in recreational and sports activities.
Participants at the forum highlighted opportunities in sports investment across Saudi Arabia and the UK, discussing ambitious sectoral growth plans, sports technology and esports as well as capacity building, infrastructure, and potential partnerships for investors from both countries.
Discussions at the event covered hosting major athletic tournaments, cross-border acquisitions, initiatives enhancing quality of life, and unique opportunities for partnerships and investments between the Kingdom and the UK.
The forum was attended by the Ministries of Investment and Sports, as well as 100 senior officials and investors from the Saudi and UK athletic sectors.
Closing Bell: Saudi main index rose to close at 11,729
RIYADH: Saudi Arabia’s Tadawul All Share Index rose on Thursday, gaining 73.27 points, or 0.63 percent, to close at 11,729.62.
The total trading turnover of the benchmark index was SR6.61 billion ($1.76 billion) as 116 of the stocks advanced, while 108 retreated.
Similarly, the MSCI Tadawul Index gained 11.69 points, or 0.8 percent, to close at 1,470.19.
Meanwhile, the Kingdom’s parallel market Nomu lost 53.33 points, or 0.2 percent, to close at 26,302. This came as 24 of the listed stocks advanced, while 42 retreated.
The best-performing stock of the day was Al Taiseer Group Talco Industrial Co., whose share price surged 9.97 percent to SR52.40.
Other top performers included Rasan Information Technology Co. and Saudi Ceramic Co., with share prices rising 8.7 percent and 6.46 percent, respectively.
The worst performer was Al-Baha Investment and Development Co., whose share price dropped by 7.69 percent to SR0.12.
Other notable declines were seen in Alkhaleej Training and Education Co. and Anaam International Holding Group, with shares falling 4.02 percent and 3.1 percent, respectively.
On the announcements front, Leaf Global Environmental Services Co. started trading on the Nomu-Parallel Market today at SR50 per share.
The company floated 1.5 million shares on Nomu, representing 30 percent of its capital. The capital consists of 25 million shares, divided into 5 million shares with a nominal value of SR5 per share, according to a Tadawul disclosure.
This marks the 13th listing on Nomu this year, including one direct listing and 12 offerings to qualified investors.
Furthermore, the Extraordinary General Assembly of Al-Saqr Insurance Co. approved an increase in the company’s capital from SR140 million to SR300 million through the offering of priority rights shares. The number of company shares after the increase will be 30 million.
Tadawul's release added that the fluctuation rate for Al-Saqr Cooperative Insurance Co. shares was calculated based on the price of SR18.26, and all existing orders were canceled.
Additionally, the priority rights of the company will be deposited in shareholders’ wallets on July 1.
GCC banks excel beyond global counterparts, poised for exceptional years ahead: report
RIYADH: A robust oil and gas sector, high interest margins, and fintech innovation will help drive banking sector growth across the Gulf Cooperation Council region in 2024 and beyond, according to a new report.
Analysis by global management consulting firm McKinsey & Co. found that despite global macroeconomic volatility, the region’s financial institutions outperformed their international counterparts in 2023 due to an exceptional operating environment, and the sector is set for a strong performance this year.
Global banking faces significant post-COVID-19 challenges, including rising prices and rapid monetary tightening.
The US Federal Reserve has increased interest rates quickly, which has raised bank profits but also heightened risks from unrealized losses, as evidenced by the collapse of Silicon Valley Bank and the takeover of Credit Suisse.
Middle East tensions and prolonged high US interest rates could further pressure global prices. These issues have led to a 10 percent decline in the price-to-book ratio, reducing global banking market capitalization by $900 billion.
The McKinsey & Co. report struck an optimistic note for the GCC banking sector, saying it “boasts an exceptionally high return on equity and some of the largest multiples worldwide.”
The report added: “The regional financial sector has yielded healthy returns to shareholders over the past decade, outperforming the global average.”
McKinsey & Co. highlighted that the total shareholder return index, which tracks dividend-adjusted share prices of over 80 GCC financial institutions, has consistently shown superior growth trends compared to global benchmarks from 2010 to 2024.
This underscores the sector’s ability to deliver robust shareholder returns amidst worldwide economic volatility.
GCC banks have also maintained higher return on equity levels and stronger market multiples globally. Despite recent narrowing, their ROE has consistently exceeded the global average by three to four percentage points from 2022 to 2023, reflecting their efficient capital management and profitability in a challenging global banking landscape.
Elevated interest rates have played a significant role, driving regional and international banking profits to record highs and supporting GCC banks in creating substantial shareholder value.
Furthermore, GCC banks boast higher net interest margins and revenue-to-assets ratios than the global average, according to the firm. With a net interest income of 2.3 percent, surpassing the worldwide norm of 1.4 percent, they indicate broader profitability margins regionally.
Despite facing higher impairment costs relative to global peers, GCC banks operate with lower operational costs, demonstrating efficient cost management strategies. Their average ROE of 10.9 percent reflects robust capitalization, outperforming the global average of 9.0 percent.
Overall, a favorable macroeconomic environment characterized by high hydrocarbon prices and robust economic growth has underpinned the GCC banking sector’s strong balance sheets and steady growth trajectory.
Resilience facing global risks
GCC banks have shown resilience amid recent global shocks, contrasting with the challenges facing the broader international banking sector.
The McKinsey & Co. report highlighted that while worldwide economic connectivity offers growth opportunities, it also increases instability risks, highlighted by heightened geopolitical tensions and regulatory scrutiny.
The firm stated that these trends are occurring against the backdrop of accelerating climate change – a global risk multiplier that also presents a multitrillion-dollar opportunity to finance the transition to low-carbon growth.
McKinsey’s macroeconomic scenarios project that global banking conditions will deteriorate in the coming years, leading to a peak and subsequent decline in return on equity for GCC banks.
Despite this, the region’s sector is better equipped to manage these challenges compared to its peers. Their banking indicators are expected to diverge positively from worldwide trends, highlighting their resilience and relative strength in navigating future economic uncertainties.
According to a 2023 study by Ernst & Young, increasing demand for banking services, growth in digital banking and regulatory reforms such as the introduction of Basel IV are expected to help boost growth in this sector.
Managing liquidity
Nevertheless, GCC banks face challenges despite a favorable environment, particularly from fluctuating interest rates. The firm noted that global tight monetary policies and faster growth in financing than deposits necessitate careful liquidity management.
The analysis showed that financing grew by 14 percent annually in the Kingdom from 2019 to 2022, outpacing 9 percent deposit growth. High interest rates drive mortgage lending as governments promote homeownership, impacting GCC banks’ retail loan portfolios.
The average loan-to-deposit ratio for Saudi banks increased by 18 percentage points from 2020 to 2022, suggesting potential liquidity issues ahead. High rates may also shift consumer and corporate behaviors, affecting non-interest-bearing liabilities and savings and investment patterns.
Total loans in Saudi Arabia are projected to reach SR5.04 trillion ($1.34 trillion) by 2030, growing annually at 10 percent from 2024 to 2030, the report showed.
Wholesale loans will comprise the largest share at 69 percent, followed by mortgages at 21 percent, and consumer finance at 11 percent.
Conversely, deposits are expected to reach SR3.54 trillion by 2030, growing at a rate of 5 percent per year. Wholesale deposits will account for 53 percent, with retail holdings making up the remaining 47 percent.
The total loans-to-deposits ratio is expected to increase by 142 percent from 104 percent in 2024, indicating that deposit growth in Saudi Arabia has not kept pace with financing, thereby heightening liquidity pressures.
Since 2020, GCC banks have significantly ramped up their activity in international debt capital markets. This strategic move aims to bolster their financing growth strategies, diversify funding sources, and more recently, mitigate the high costs of liquidity domestically.
According to a recent report from Fitch Ratings, emerging market dollar debt issuance, excluding China, surpassed $200 billion in the first five months of 2024, with the Kingdom issuers leading with 18.5 percent of the total issuance.
Despite challenging financial landscapes, these banks have adeptly managed liquidity challenges, supported by increased access to government sukuk and liquidity-management tools provided by central banks.
These measures are designed to ensure sustained liquidity levels, enabling banks to fulfill financial obligations and maintain operational stability amidst fluctuating market conditions.
Innovation and technology
McKinsey & Co. highlighted key transformational factors shaping GCC banks, including innovation, machine learning, and generative artificial intelligence, as well as high digital penetration and the influence of fin-tech in reshaping the industry.
Additionally, GCC regulators are actively developing an open banking framework to further drive sector evolution.
Abdulla Al-Moayed, CEO of Tarabut, praised Saudi Arabia’s adoption of open banking in an interview with Arab News in May.
He highlighted the collaborative efforts between banks and fintechs to innovate and expand market reach, signaling a significant evolution toward digital transformation in the Kingdom’s banking industry.
Generative AI and other advanced technologies are poised to revolutionize banking operations, boosting client engagement and operational efficiencies.
In the GCC, fintech advancements such as digital payments and sophisticated financial products are gaining popularity, driven by increasing demand for personalized digital services.
McKinsey & Co. noted that fintech firms are expanding their portfolios beyond basic offerings to serve both consumer and business sectors, buoyed by substantial funding and widespread digital adoption in the region.
Concurrently, traditional banks are launching new digital initiatives to remain competitive, highlighting the dynamic and evolving banking landscape across the GCC.
An example was given of how regulators in Bahrain and Saudi Arabia are fostering innovation through open banking frameworks aligned with global standards. This has spurred local startups and prompted established institutes to adopt new technologies.
The report stated that open banking boosts competition and IT costs and offers benefits like expanded customer reach and new services. It also demands that banks adapt to seize opportunities while managing profitability risks.
McKinsey & Co. recommendations
GCC banks are poised to navigate global economic uncertainties effectively but must remain proactive rather than complacent, the report warned.
Key priorities for banking CEOs in the region include managing hesitation around interest rates through robust asset-liability management and stress testing.
There should also be steps taken at enhancing operating efficiency by digitalizing processes and automating routine tasks that will optimize human resources.
Transforming the customer experience by offering real-time, personalized products to a digitally savvy population is crucial, as is maintaining focus on environmental, social, and governance initiatives that support global climate change efforts.
Additionally, creating shareholder value through strategic mergers and acquisitions and restructuring allows banks to capitalize on evolving market dynamics, freeing capital by divesting non-core assets and refocusing on core operations.
These priorities underscore GCC banks’ proactive stance amid evolving economic landscapes.
Egyptian fertilizer company turns to hydrogen amidist gas shortage
CAIRO: One of Egypt’s largest fertilizer companies said on June 27 it would partially switch to hydrogen supplies as the country struggles with a shortage of natural gas that has led to widespread blackouts.
Abu Qir Fertilizers — along with three other major companies in the fertilizer and chemicals sector, Mopco, Sidi Kerir Petrochemicals, and KIMA — had said this week it would halt production due to the shortage of natural gas, a key input.
The closures coincided with a worsening of regular blackouts that Egyptians have experienced since last year, due to a surge in summer power consumption and the shortage of gas.
Egyptian Prime Minister Mostafa Madbouly blamed the shortage on a production halt in a neighboring country, an apparent reference to Israel, and pressures on dollar resources.
He said earlier this week Egypt would spend more than $1 billion to import enough gas and mazut fuel oil to end the blackouts this summer.
On June 26, Egypt, the most populous Arab country, awarded a tender to buy 17 cargoes of liquefied natural gas to help meet demand, and is seeking three more cargoes for delivery in August-September, sources familiar with the matter said.
The tender was announced earlier this month, and it is not clear if it was included in the plan announced by Madbouly.
The closures this week are the second time chemical and fertilizer companies have shut plants this month. The first shutdowns came after the government temporarily reduced gas supplies to plants.
However, one of the companies, Sidi Kerir Petrochemicals, said in a stock exchange release on June 27 that its gas supply had resumed, and its plants would restart.
Japanese banking firm Mizuho applies to establish regional HQ in Riyadh
RIYADH: Global banking firm Mizuho Financial Group has begun the process of establishing its regional headquarters in Riyadh by submitting an application to the Kingdom’s Ministry of Investment.
The Tokyo-based company confirmed that it has submitted the application but declined further comment when approached by Arab News.
This comes as the Kingdom strengthens its appeal to international companies, driven by the state’s Regional Headquarters Program. Several global firms, including EY, Goldman Sachs, and PayerMax, have recently relocated their Middle East bases to Saudi Arabia as part of this initiative.
The Japanese group has been present in the country through its subsidiary, Mizuho Saudi Arabia Co., operating as an investment bank in Riyadh since 2009. Licensed and regulated by the Capital Market Authority, MSAR provides advisory and arranging services.
The Kingdom’s effort to attract regional headquarters to Riyadh supports economic diversification goals, offering new tax incentives such as a 30-year exemption from corporate income tax and withholding tax on headquarters activities, alongside discounts and support services.
According to the recently approved laws in Saudi Arabia, companies with state contracts must have a regional headquarters in the Kingdom with a minimum of 15 employees.
More than 120 international firms received licenses to relocate their regional headquarters to Saudi Arabia during the first quarter of 2024, representing a 477 percent year-on-year increase.
In its quarterly report, the Ministry of Investment revealed that the issuance of 127 permits in the first three months of the year underscores the Kingdom’s attractive and favorable business environment.
Boeing Co. and Amazon.com Inc. are among more than 400 contracting, manufacturing and technology firms that have obtained the RHQ licenses.
According to the report, 864 investment licenses were issued in the construction sector during the first three months of this year, followed by 620 permits in the manufacturing industry.
The ministry issued 396 licenses for vocational, educational, and technical activities, while 263 permits were granted in the information and communication technologies sector.
In February, a report by Saudi Arabia’s Small and Medium Enterprises General Authority highlighted that the Kingdom’s RHP has played a crucial role in accelerating the economic growth of Riyadh.
In November 2023, Minister of Investment Khalid Al-Falih announced that Saudi Arabia has outperformed its target for attracting regional headquarters, with over 180 companies now established in the Kingdom.
