Joey Bermudez from the Management Association of the Philippines delivers his keynote address on how the global financial crisis has the Philippines. (Jan 29, PACAP Community Development Forum: Microfinance Amidst the Global Financial Crisis"
1. THE GLOBAL ECONOMIC CRISIS www.maybridgeasia.com
2. Genesis Not too long ago ..... A decade of robust economic growth producing huge surpluses of capital ..... plus easy credit that produced liquidity exceeding the demands of the real economy ..... .....created tremendous wealth that insanely chased assets, producing asset bubbles in the process .....
3. ..... Housing, financial assets, commodities ..... the bubbles were all over the place ..... Then the housing bubble burst ..... and all hell broke loose!
4. LIQUIDITY HOW EXCESSIVE LIQUIDITY CREATES ASSET BUBBLES REAL ECONOMY’S NEEDS GROWTH IN REAL ECONOMY’S NEEDS ASSET PRICE INFLATION NORMAL LIQUIDITY GROWTH EXCESSIVE LIQUIDTY GROWTH
5. LIQUIDITY HOW DISAPPEARING LIQUIDITY SHRINKS THE ECONOMY REAL ECONOMY DEMAND DESTRUCTION; RECESSION ASSET PRICE DEFLATION CONTRACTING LIQUIDITY EXAGGERATED CONTRACTION
6. Bursting asset bubbles: Housing, financial assets, commodities Financial losses Shattered confidence Systemic wealth destruction Net outflow of FDI and hot money, lower Fil-Am demand for property, weaker global demand External events Domestic events Constricted liquidity, lower purchasing and investing power Falling asset prices, full-blown economic crisis Full economic crisis
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8. Just the same, financial institutions have to brace themselves . . . . . Weak business climate Volatile and jittery markets Inflation and rising interest rates Elevated risks Market risks: trading losses; decline in asset values Credit risks: defaults, deterioration in asset quality Operational risks: customer and employee fraud, lapses Margin squeeze: as liquidity disappears, funding costs rise faster than asset yields Overhead drag persists despite declining revenues Shrinking revenue base and declining revenue stream Capital flight; panic withdrawals
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10. Firm Losses Capital Raised Wachovia Corporation* 96.5 11.0 Citigroup Inc.* 68.1 74.0 Merrill Lynch & Co.* 55.9 29.9 Washington Mutual Inc.* 45.6 12.1 UBS AG 44.2 31.1 HSBC Holdings Plc* 32.8 5.0 Bank of America Corp. 27.4 55.7 National City Corp.* 26.2 8.9 JPMorgan Chase & Co. 20.5 44.7 Wells Fargo & Company* 17.7 41.8 Royal Bank of Scotland Group Plc* 16.0 51.3 Morgan Stanley 15.7 24.6 Lehman Brothers Holdings Inc.* 13.8 13.9 Credit Suisse Group AG 13.5 11.5 IKB Deutsche Industriebank AG 13.1 10.8 Deutsche Bank AG* 11.8 5.8 Fortis 8.4 20.5 ING Groep N.V. 8.0 17.1 Credit Agricole S.A. 7.8 11.4 INJURY LIST
11. Firm Losses Capital Raised Societe Generale* 7.6 10.5 Mizuho Financial Group Inc. 6.9 0.0 Barclays Plc 6.8 27.5 Canadian Imperial Bank of Commerce 6.3 2.5 Bayerische Landesbank 6.2 8.2 HBOS Plc* 5.9 24.2 BNP Paribas* 5.4 3.3 Indymac Bancorp Inc* 4.9 0.0 Goldman Sachs Group Inc.* 4.9 20.5 Dresdner Bank AG* 4.6 0.0 Landesbank Baden-Wurttemberg 4.2 0.0 E*TRADE Financial Corp. 4.1 2.2 Lloyds TSB Group Plc* 3.9 13.6 Bank of China Ltd 3.7 0.0 Nomura Holdings Inc. 3.7 1.3 Natixis 3.6 7.4 KBC Groep NV* 3.5 4.5 Bear Stearns Companies Inc.* 3.2 0.0 HSH Nordbank AG 3.1 1.6 Rabobank 3.1 0.0
12. WestLB AG* 2.8 6.4 Fifth Third Bancorp 2.7 2.6 Sovereign Bancorp Inc.* 2.4 1.9 DZ Bank AG 2.3 0.0 Landesbank Sachsen AG 2.2 0.0 U.S. Bancorp* 2.2 6.6 Commerzbank AG* 2.1 10.5 ABN AMRO Holding NV 2.0 0.0 Royal Bank of Canada 1.9 0.0 Mitsubishi UFJ Financial Group 1.7 11.8 Industrial and Commercial Bank of China 1.7 0.0 KeyCorp 1.6 4.2 Bank Hapoalim B.M. 1.5 2.3 Marshall & Ilsley Corp. 1.5 1.7 Dexia SA 1.5 8.2 UniCredit SpA 1.3 9.2 Alliance & Leicester Plc 1.1 0.0 Bank of Montreal 1.1 0.0 Sumitomo Mitsui Financial Group 1.0 4.9 Groupe Caisse d'Epargne 1.0 0.0 Firm Losses Capital Raised
13. Hypo Real Estate Holding AG 1.0 0.0 Gulf International Bank 1.0 1.0 Sumitomo Trust and Banking Co. 0.8 1.1 National Bank of Canada 0.6 0.8 DBS Group Holdings Limited* 0.2 1.0 Other European Banks 8.2 3.8 (not listed above) Other Asian Banks* 5.0 11.2 (not listed above) Other US Banks 3.6 17.5 (not listed above) Other Canadian Banks 0.3 0.0 (not listed above) TOTAL 695.0 714.9 Firm Losses Capital Raised
14. Total Subprime Losses of Banks Total Capital Raised by Banks Total Number of Banks with Losses US$695.0 Billion US$714.9 Billion Over 66
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18. Debt Capital Liquidity Spending and Investing Power The Anatomy of Liquidity Leveraging De-leveraging Panic! Panic! More! More! Loss! Loss!
19. Sept 2007 Jan 2008 Mar 2008 June 2008 Sept 2008 Nov 7 2008 Dow Jones Industrial Average
20. Market Capitalization (Free Float Only) Jan 2008 April 2008 July 2008 Sept 2008 Global U.S. Philippines Source: World Federation of Exchanges US$55.2T US$56.4T US$50.7T US$42.7T US$93.6B US$78.0B US$73.2B US$70.3B US$18.3T US$18.6T US$17.0T US$16.1T
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22. Sept 2007 Jan 2008 Mar 2008 June 2008 Sept 2008 Nov 7 2008 Philippine Stock Exchange Index
23. Sept 2007 Jan 2008 March 2008 June 2008 Sept 2008 PRICES OF ROP 32
24. A Major Local Bank Peso Funds Short-Term Fund Premium Bond Fund Equity Fund Balanced Fund Institutional Fund YOY YTD 3.39 2.77 4.57 2.95 -43.87 -41.06 -28.62 -25.84 3.91 2.08 YIELDS
25. A Major Local Bank Foreign Currency Funds YIELDS YOY YTD 1.57 1.17 -33.48 -31.15 0.14 1.22 -6.82 -8.61
