Comments (sector banks and financial crisis)

In my opinion banks are one of the biggest reason of global financial crisis, that banks used to give loans to people that they cannot pay the loans back, so the solution for the global finance.
I blame the subprime crisis on the irrational exuberance that drove the economy’s two most recent bubbles–in stocks in the 1990s and in housing between 2000 and 2007. My only criticism is that the book could use more analysis of the psychology behind the current bubble. The expansion of capitalism in China and India somehow affirmed Americans’ notion that the land available for housing is scarce and thus valuable.

An emergency for development

World Bank analysis shows that the impact of the crisis is being felt by poor people across the world, many of whom were already hit hard by the food and fuel crises. The pace of poverty reduction has slowed, with about 65 million people estimated to remain under the $2 a day poverty line in 2009 as a result of the crisis.
“Conditions of recession are affecting the world’s poorest people, making them more vulnerable than ever to sudden shocks—but also reducing the opportunities available to them, and frustrating their hopes,” said Justin Yifu Lin, World Bank Chief Economist and Senior Vice President, Development Economics. “This could reverse years of progress, and is nothing less than an emergency for development.”
The upcoming Global Monitoring Report 2009, published annually by the World Bank and International Monetary Fund, and due to be released in late April, will assess the impact of the crisis on the 2015 Millennium Development Goals.

The outlook for developing regions

Europe and Central Asia has been worst affected by recent developments. GDP in the region is expected to fall by 2 percent in 2009, compared with a 4.2 percent increase in 2008.Latin America and the Caribbean will also likely see GDP contract in 2009, although at the country level outturns may be diverse. Overall, GDP is projected to decline 0.6 percent following gains of 4.3 percent in 2008.East Asia and the Pacific is likely to be most affected by the falloff in global investment and trade. Already this has cut sharply into industrial production and capital spending. GDP growth is expected to ease to 5.3 percent in 2009, as growth in China slumps to 6.5 percent, and several smaller economies in the region, including Thailand fall into recession.Prospects for South Asia have been marked down to 3.7 percent growth for 2009, down from 5.6 percent growth in 2008. Though terms of trade have moved in the region’s favor with lower oil prices, weaker export demand is being felt sharply.Growth in the Middle East and North Africa appears least affected among developing regions, now projected to be 3.3 percent in 2009. Reduced oil revenues and cuts in oil output will restrain GDP among oil exporters to 2.9 percent from 4.5 percent in 2008.In Sub-Saharan Africa, GDP growth is expected to halve from 4.9 percent in 2008 to 2.4 percent in 2009. The dramatic shift in commodity prices will have strong effects across countries.

Feeling the pulse of the global economy

Timmer explained that the global economy was going through “a perfect storm,” with the global recession, the credit crunch, and languishing confidence working together in a very negative dynamic.
The investment banking collapse last year and the ensuing credit crunch were followed by a sharp decline in industrial production across the world, especially in economies specializing in investment goods, such as Taiwan, China; and Japan.
The crisis was preceded by eight years of extraordinary economic growth in developing countries, supported by double-digit growth in investments. And investments are especially hard hit now by the tough financial conditions.
With the decline in industrial production has come an immediate fall in commodity prices—more than a 50 percent drop in oil prices and more than 40 percent in non-oil commodity prices.
The World Bank now expects a 6.1 percent contraction in 2009 in the volume of world trade in goods and services. The value of world trade will collapse much more because of the fall in commodity prices.
This is bad news for government revenues. It is the poorest countries that depend most on trade for their fiscal revenues. For example, in Lesotho, Swaziland and Cote d’Ivoire, between 40 and 50 percent of fiscal revenues come from trade. “The immediate impact of the financial crisis has been on the private sector, but before the year is out, we will likely see many countries run into fiscal problems,” Timmer warned. “This is because governments are already beginning to see a decline in revenues, while their spending has to increase and borrowing costs are up.”
World GDP growth is likely to increase to 2.3 percent in 2010, but significant risks could mar this outlook. For example, if balance of payments crises are not prevented, much sharper contractions would occur in 2009, possibly continuing into 2010.

- The first nine months of 2006 has not been very rosy for the UAE banking sector, like seen in the year 2005. This is primarily because of the reduced fee and commission income, which saw a decline during the first nine months due to the slowdown in capital market activity. However, the income from core banking activities has been healthy during the first nine months of 2006 which further substantiates our view that core income is likely to drive earnings growth going forward.
- In the first nine months of 2006, the net interest income of the banks under review reached AED8.23bn as compared to AED6.23bn during the same period corresponding year, registering a growth of 28.0%. On a q-o-q, the net interest income of the banks under review was AED2.73bn in the third quarter of 2006 as compared with AED2.34bn during the same period in corresponding year, registering a growth of 16.3%. Net income for the UAE banks under review reported a marginal growth of 1.4% during the first nine months of 2006.

Comment: The income from core banking activities has been healthy during the first nine months of 2006, and thats because of the reduced fee and commission income.

History of Citibank

History of Citibank
Founded in 1812 as the City Bank of New York by a group of New York merchants, the bank's first head was “Saumel Ostgood”, who had been United States Postmaster General. In 1863 the bank joined the U.S.'s new national banking system and became The National City Bank of New York. By 1868, it was considered one of the largest banks in the United States, and in 1897, it became the first major U.S. bank to establish a foreign department. In 1896, it was the first contributor to the Federal Reserve Bank of New York.

Bank mission and strategy
Citibank's strategy is to be the bank that supports the funds flows emanating from our customers' commerce activity occurring on the net.Leveraging our core competencies, our aim is to be the payment/settlement site of choice in the business to business (B2B) and business to customer (B2C) flows, as well as a provider of value-added solutions for net businesses. The bank strategy encompasses a three-pronged approach to working with our customers to develop e-Solutions.
e-Solutions provide clients and communities, in general, with new ways to operate and redefine market practices or open new market spaces in the e-business frontier. These e-Solutions reshape business process for speed and quality and are the new gears that drive the e-business growth and permanent infrastructure changes for the new e-space.


Extended marketplace efficiency
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4. Electronic payments
5. Real-time processing of transactions