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The Great Financial Crisis kick started the private credit boom, but SVB was its true 'watershed' moment, Sixth Street co-president says

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The Great Financial Crisis kick started the private credit boom, but SVB was its true 'watershed' moment, Sixth Street co-president says

The Global Financial Crisis threw millions of Americans out of their homes and jobs, upending the entire economy. But for the private credit industry, it was actually an awakening of sorts.

Over the past few decades, U.S. banks’ problems have signaled opportunity for the private credit market, and that’s particularly true of the Global Financial Crisis and the collapse of Silicon Valley Bank last March. When banks have issues, U.S. businesses’ desire for capital rarely wanes dramatically, and that leaves room for alternate lenders.

At the Fortune Future of Finance conference on Thursday, Joshua Easterly, co-CIO and co-president of the global investment firm Sixth Street, explained how he was working at Goldman Sachs after the Global Financial Crisis in 2009, running a team that did public and private market transactions in distressed debt and special situations, when he came to the realization that the lending industry had changed forever.

“It was the intended consequence, not the unintended consequence of regulations after the Crisis,” he said of the private credit boom. “Policymakers…wanted to figure out how to diffuse risk away from the taxpayer, but you couldn’t crush the economy by reducing credit, and so private credit history grew.”

Easterly argued that the private credit industry has a “better model” than the banking industry when it comes to lending risk, because it holds more capital for loans on balance sheets. And that made him come to a startling realization in 2009. “Huh? I think I need to go find a new job,” he recalled saying to a colleague. “So [the move to private credit] was a little bit about necessity.”

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Carey Lathrop, partner and chief operating officer of credit at Apollo Global Management, echoed Easterly’s comments, noting that when he started in the private credit industry “it was clear how hard it was to get things done that made economic sense” in public markets after the GFC.

The rise of private credit since 2008 has been historic, to say the least. Before the crisis, there was under $400 billion in total assets and committed capital in private credit. In 2023, that number jumped to $2.1 trillion, according to the International Monetary Fund. But it wasn’t just the Crisis that spurred the private credit boom. After the collapse of several regional banks in March 2023, headlined by the tech startup focused Silicon Valley Bank, businesses nationwide once again turned to private credit amid a liquidity crunch.

While SVB struggled after rapidly rising interest rates devalued its long-dated bonds, leading to a run on deposits from its list of influential and well-connected clientele, the manner in which private credit operates can lead to more stability in trying times.

Apollo’s Lathrop explained that banks like SVB “had this mismatch with a lot of long-term assets with assets with short term liabilities” that led to unrealized loan losses on their books as rates soared. But private credit doesn’t have this same issue. “We don’t run the [private credit] business that way,” he noted. “We were much more match funded.”

To his point, unlike banks, which fund a majority of their lending through customer deposits (and often uninsured deposits), private credit funds tend to use money from wealthy investors and institutions to make loans, leaving them less exposed to rising interest rates.

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Sixth Street’s Easterly said the SVB drama essentially showed “the robustness” of the private credit] business model, leading a raft of new clientele. “I think it was a watershed moment for the value of the asset class.”

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SRG Housing Finance Q4 Results Live : profit rise by 45.65% YOY

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SRG Housing Finance Q4 Results Live : profit rise by 45.65% YOY

SRG Housing Finance Q4 Results Live : SRG Housing Finance announced their Q4 results on 23 May, 2024, showcasing a significant growth in their financial performance.

The company reported a 38.64% increase in revenue and a 45.65% rise in profit year-over-year.

Quarter-on-quarter comparison also revealed positive growth, with revenue growing by 13.89% and profit increasing by 14.46%.

However, the Selling, general & administrative expenses saw a noticeable increase, rising by 8.82% sequentially and 43.86% year-on-year.

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Similarly, the operating income also showed a positive trend, with an 18.1% increase quarter-on-quarter and a 42.73% rise year-on-year.

The Earnings Per Share (EPS) for Q4 stood at 4.72, marking a 29.67% increase year-on-year.

In terms of market performance, SRG Housing Finance delivered a 2.84% return in the last week, 0.87% return in the last 6 months, and a 1.99% year-to-date return.

The company currently holds a market cap of 378.12 Cr, with a 52-week high/low of 336.75 and 230 respectively.

SRG Housing Finance Financials
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Period Q4 Q3 Q-o-Q Growth Q4 Y-o-Y Growth
Total Revenue 36.15 31.74 +13.89% 26.07 +38.64%
Selling/ General/ Admin Expenses Total 7.64 7.02 +8.82% 5.31 +43.86%
Depreciation/ Amortization 1.71 1.58 +7.86% 0.97 +76.31%
Total Operating Expense 28.79 25.51 +12.86% 20.92 +37.63%
Operating Income 7.35 6.23 +18.1% 5.15 +42.73%
Net Income Before Taxes 7.61 6.7 +13.64% 5.37 +41.65%
Net Income 6.09 5.32 +14.46% 4.18 +45.65%
Diluted Normalized EPS 4.72 4.09 +15.33% 3.64 +29.67%

FAQs

Question : What is the Q4 profit/Loss as per company?

Ans : ₹6.09Cr

Question : What is Q4 revenue?

Ans : ₹36.15Cr

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Published: 26 May 2024, 02:27 AM IST

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G7 finance ministers back plan to use Russian assets for Ukraine funding – the FT

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G7 finance ministers back plan to use Russian assets for Ukraine funding – the FT

Stock photo: Getty Images

The G7 finance ministers supported the idea of providing Ukraine with a loan secured by profits from frozen Russian assets to ensure funding for Kyiv after 2024.

Source: Financial Times, citing the draft communiqué of the ministers’ meeting, as reported by European Pravda 

The ministers’ discussions were based on a US proposal, which was circulated before the meeting in the Italian city of Stresa, to issue Ukraine a loan of about US$50 billion, to be repaid from the profits of the Russian central bank’s assets amounting to around €190 billion. 

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The ministers stated that they were “making progress” in working out options to “bring forward” the profits, according to the draft communiqué. They added that options for structuring the loan would be presented to the G7 leaders before the June summit.

They also promised to continue pressuring China to reduce industrial subsidies that they believe are driving Western competitors out of business, and stated that implementing the most significant global tax agreement in more than a century is a “top priority”.

The G7, a group of advanced economies that includes all major Western allies of Ukraine, aims to ensure funding for Kyiv in the long term, even after this year when crucial elections will take place on both sides of the Atlantic. 

According to people familiar with the negotiations, many details of the loan are yet to be agreed upon, including the amount, who will issue it, and how it will be guaranteed in case of Ukraine’s default or if the profits do not materialise. 

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One official mentioned that Europeans are particularly concerned about “fair-risk sharing”, fearing that Europe will bear the brunt of the financial and legal risks and potential retaliatory actions from Russia, as most of the assets are located on the continent.

This week, the EU officially approved a plan to use interest from frozen Russian assets, which, according to estimates, could bring up to three billion euros per year to Ukraine.

Background:

  • In February, the United States argued that G7 countries should fully seize frozen assets, but later abandoned this idea due to concerns from allies that it could set a dangerous legal precedent and prompt retaliatory measures from Russia.
  • Earlier, Minister of Foreign Affairs Dmytro Kuleba stated that Ukraine insists on the confiscation and transfer to Ukraine of all frozen assets of the Russian Federation held in the West.

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Big Players Maneuver In Global Finance And Industry

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Big Players Maneuver In Global Finance And Industry

What’s going on here?

From hostile takeovers to strategic acquisitions, major financial and industrial players are making bold moves to bolster their market positions. Spanish bank BBVA, Swiss private bank Julius Baer, and British IT services group Redcentric are all in high-stakes negotiations for potential mergers.

What does this mean?

BBVA’s €12.23 billion hostile takeover bid for Sabadell marks a major potential consolidation in the Spanish banking sector, despite opposition from Madrid. Julius Baer’s talks with EFG International highlighted competition in Swiss private banking, though discussions have ceased. In IT services, Redcentric’s negotiations with Milan-listed Wiit SpA could lead to a substantial acquisition. Additionally, private equity firm Carlyle is preparing to sell aerospace manufacturer Forgital, signaling increased activity in the aerospace sector. Also, Deutsche Bahn is advancing in the bidding process for its logistics subsidiary Schenker, with four contenders still vying for it.

Why should I care?

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For markets: Strategic consolidations and divestments.

These moves reflect broader trends of consolidation and strategic realignment across industries. BBVA’s bold bid for Sabadell and Criteria’s acquisition of a 9.4% stake in ACS for €983 million signify aggressive strategies to capitalize on market opportunities. Carlyle’s plan to sell Forgital and Saudi Aramco’s in Repsol’s renewable energy division highlight the growing focus on portfolio diversification and sustainability.

The bigger picture: Global shifts in financial and industrial landscapes.

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These developments indicate profound changes in the global financial and industrial sectors. KKR’s likely approval to acquire Telecom Italia’s fixed-line network without EU antitrust conditions signals a favorable regulatory climate for strategic deals. On the flip side, the Italian government’s decree for state broadcaster RAI to possibly merge its tower unit, RaiWay, with EI Towers shows the fluidity of managing national strategic assets. Meanwhile, Coventry Building Society’s £780 million purchase of Co-operative Bank underscores ongoing consolidation in the British banking sector.

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