What household debt means and how to manage it ?

The difference between ‘healthy’ and ‘unhealthy’ loans

I have received queries about what household debt means and the best ways to manage it.

Household debt is basically all forms of loans with interest rates taken from entities that provide financing. The loans can be secured with assets such as real estate loans (housing and commercial properties), or without any collateral such as personal and credit card loans.

Residential and commercial property loans have capital appreciation potential over the long term. According to statistics from National Property Information Centre, the annual appreciation rate for house prices has averaged 9% in the past five years.

Even if we assume the average house prices only appreciate 5% per annum, it is still an ideal asset which we can live in, and at the same time it grows in value.

If you refer to the chart above, the effective interest rate for housing loans is only 4.65%, which is lower than its annual appreciation rate.

On the other hand, the effective interest rates for car loans range from 5% to 7.5% depending on car model and loan term (effective interest rates are calculated from the advertised headline rates of 2.5% to 3% depending on the tenure of the car loan).

On top of higher effective interest rates, the value of private vehicles depreciate about 10% to 20% per year based on car insurance calculations and accounting practice.

In fact, everyone knows that the day you drive the car out of the showroom, its value drops by 15% to 25%!

The effective interest rate for personal loans is 9% to 10%, while credit card effective interest rates can go as high as 18% to 24% (again, like car loans, the effective interest rates per year are much higher than the advertised rates).

If these loans are spent on items that do not appreciate over time and on perishable items, then the depreciation rates are high and there are no returns to speak of.

The real estate loans (housing and commercial properties) that will appreciate in the longer term, can be deemed as “good debt”.

Car, personal and credit card loans, which have higher interest rates repayment and do not generate value in the future, and are considered as “unhealthy debt” or “bad debt”.

The chart above illustrates the effective interest rates on different household debt components. It also reminds me about the household debt I shared in my last article. What does our nation’s household debt really mean to us? How much of it impacts us if we include its interest rate, appreciation and depreciation values?

According to Bank Negara, our household debt was at RM940.4bil or 87.9% of gross domestic product (GDP) as of end-2014.

Large burden

Residential housing loans accounted for 45.7% (RM429.7bil) of total debts, hire purchase at 16.6%, personal financing stood at 15.7%, non-residential loan was 7.7%, securities at 6.5%, followed by credit cards and other items at 3.9%.

Our household burden is larger if we include the servicing of incurred interest rate for loans. Much of it comes from the higher interest rates to service hire purchase, personal financing and credit card loans.

It reinforces my belief that if we take a debt to invest or secure appreciating items such as housing and other valuable assets, they will eventually provide a higher return in the longer term which more than compensates for the interest rate paid on the loans.

My belief is substantiated by Bank Negara’s Financial Stability and Payment Systems Report 2014.

The report states that properties remain an important investment for many households to finance children’s education, provide a form of financial security for the next generation and preparation for retirement.

Our government can help us achieve higher investment on housing and other valuable assets by looking at ways to reduce our dependency on other types of loans.

Reducing dependency

Example, to provide a comprehensive public transportation system by aggressively expanding mass rapid transit, buses, mini buses, and taxi service to cover more areas.

This will reduce the dependency on private vehicles which in turn help us to divert our financial resources to more fruitful areas or secure a roof over our heads.

As shared in my previous article, housing loans in advanced countries comprise an average of 74% of total household debt compared with ours at 45.7%.

This tells me that we, as a nation, are spending too much of our already high household debt (87.9% to GDP) on high interest/high depreciation “bad debt” such as a car, credit card and personal loan.

Now is a good time to relook into our debt portfolio and the interest rates incurred, and check whether we are having a healthy or unhealthy debt burden.

FIABCI Asia-Pacific Regional secretariat chairman Datuk Alan Tong has over 50 years of experience in property development. He is also the group chairman of Bukit Kiara Properties. For feedback, please email feedback@fiabci-asiapacific.com.

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South Korea cuts interest rate as MERS contagion as threat

SEOUL: South Korea reported a 10th MERS death as the outbreak of the potentially deadly virus forced the central bank to cut its key interest rate to ward off greater economic damage amid a slump in business.

In what has become the largest outbreak of Middle East Respiratory Syndrome (MERS) outside Saudi Arabia, a 65-year-old man died yesterday after being infected with the virus while receiving treatment for lung cancer at a hospital.

Seoul also reported 14 new cases, including the first infection of a pregnant woman. The new diagnoses brought to 122 the total number of confirmed cases in South Korea, the health ministry said.

Businesses including shopping malls, restaurants and cinemas have reported a sharp drop in sales as people shun public venues with large crowds.

Bank of Korea governor Lee Ju-yeol said slowing exports and threats to business from MERS were central to the decision to cut its benchmark rate by a quarter percentage point, to a record low of 1.5%.

It was the first cut since March, when the central bank made a surprise cut of 25 basis points.

“The full impact of the outbreak still remains uncertain but we thought it was desirable to act pre-emptively to curb its negative impact on the economy,” Lee said.

More than 54,000 foreign travellers have cancelled planned trips to South Korea so far this month, according to the Korea Tourism Board.

Hong Kong has issued a “red” alert warning against non-essential travel to South Korea.

However, Seoul says World Health Organisation guidelines do not warrant such action.

Taiwan raised its travel advisory level for South Korea but stopped short of warning its people against going at all. Other governments in Asia are urging caution but none has gone as far as Hong Kong in warning against non-essential travel.

Residents of Hong Kong are particularly sensitive after an outbreak of Severe Acute Respiratory Syndrome (SARS) killed 299 people in the city in 2003 and sparked global panic.

The MERS virus is considered a deadlier but less infectious cousin of SARS.

On Wednesday, the area around a health clinic inside a metro station in Hong Kong was cordoned off and officials donned protective gear after a woman returning from South Korea showed flu-like symptoms.

Surgical masks reportedly sold out in shops around the station, but Hong Kong officials confirmed yesterday that the woman had tested negative for MERS.

Growing public alarm has forced South Korean President Park Geun-hye to cancel a planned June 14-18 trip to the United States.

Her administration has faced a storm of criticism for perceived slow and insufficient response to the crisis.

Of the 14 new cases, eight were infected at Samsung Medical Centre in Seoul, a major hospital where 55 people have contracted the virus. That is the largest cluster in the outbreak.

A 39-year-old woman in her final trimester of pregnancy was among those confirmed yesterday to have acquired the virus at the hospital.

Another victim contracted the virus at a hospital in Hwaseong City, 40km south of Seoul, and five others are under investigation to discover how they were infected.

More than 3,800 people who came into close contact with those infected are under quarantine, either at their homes or at healthcare facilities.

The first infected patient was diagnosed on May 20 after a trip to Saudi Arabia.

The 68-year-old man visited four medical facilities, infecting other patients and medics, before he was finally diagnosed, sparking criticism that authorities had bungled the initial response. — AFP

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South Koreans fight over jobs

Why South Koreans with ‘best jobs’ take only one day off per year Young and Old Fight Over Jobs in Korea as Generation Gap Widens With...

South Koreans fight over jobs

Why South Koreans with ‘best jobs’ take only one day off per year

Young and Old Fight Over Jobs in Korea as Generation Gap Widens

With youth unemployment near a 15-year high and the government planning to raise the retirement age, intergenerational conflict over jobs is rising in South Korea.

The jobless rate for workers aged 15 to 29 touched 11 percent earlier this year and is about four times higher than for those aged 40 and above. At the other end of the spectrum, Korea has an underdeveloped pension system and the highest elderly poverty rate in the OECD, as companies push employees in their fifties into early retirement to contain costs.

An overall unemployment rate that’s close to the 10-year average belies the difficulty facing policy makers seeking to balance the needs of the young and the old as society ages and economic growth eases after the heady gains of previous decades.

Working longer would have helped Lee Jong Ho, 59, who retired from Korea Railroad Corp. two years ago and has been looking for another job ever since. Lee’s 2.2 million won ($1,970) monthly pension isn’t enough to support him and his wife, after pouring savings into raising their children.

“Healthy people like me should work at least until 70 given that the average life span of people now is easily over 80,” said Lee. “I know that extending the retirement age could mean fewer jobs for young people. I’m willing to get paid a little less if I can keep working.”

While currently there is no official retirement age in South Korea, a typical worker’s career ends around 53, government data show. After that, many try to get by on a combination of pension payments, savings, part-time work or small business ventures.

A new law taking effect next year mandates that large companies allow employees to work until at least 60.

‘Repeating Class’

Kang Jin Ho, an English major at Hankuk University of Foreign Studies in Seoul, is 26 and still trying to get into the workforce. He’s deferred graduating for years to maximize his employment chances, as many companies limit new entry hires to people still in school. Kang’s applied for more than 70 jobs already in 2015 and has been rejected every time.

“Getting a job was so much easier for my parents’ generation, when the economy was expanding fast,” he said. “The average age of job seekers in my study group is 30.”

Projections from the Organization for Economic Co-operation and Development paint a gloomy picture for Kang and the next generation of students who will follow. The number of people 65 and older in Korea will surge from 11 percent in 2010 to more than 37 percent by 2050, according to the OECD.

Park’s Plan

The unemployment rate for those aged 15 to 29 was 9.3 percent in May, Statistics Korea said Wednesday. That’s the highest figure for May in official data going back to June 1999, and compares with 2.7 percent for people 40-49 and 2.6 percent for the 50-59 group. Young people are also seeking stable jobs and many apply for the civil service exam, which pushes up the youth unemployment rate, said Sim Won Bo, director at Statistics Korea.

President Park Geun Hye’s government will next month announce its fourth set of measures in two years to help ease unemployment among the young.

Previous efforts have included improvements to career training at school and incentives for young people to join small- and medium-sized enterprises, not just the large corporate icons that dominate the public imagination.

This time around the government may begin addressing the problems faced by Lee and Kang at the same time.

Tenure System

According to a finance ministry statement in May, financial support could be offered to companies that keep on older workers, while trimming their wages and using the savings to hire more young employees. The ministry didn’t offer further details.

Labor unions have already voiced opposition to the idea of a peak-wage system, which also runs counter to cultural traditions of basing pay on tenure and age, rather than performance.

“In a rapidly aging society with weak growth momentum, you’re going to get conflict between young and old over how to divide economic benefits,” said Lee Geun Tae, an economist at the LG Economic Research Institute in Seoul. “Young people having proper jobs is important for our growth engine, but there doesn’t seem to be an easy solution.”

Source: Bloomberg by Kim ChipmanCynthia Kim

Retirement Redesigned

Baby Boomers, Work and the Endless Vacation

By Victoria Stilwell and Roger Runningen | Updated Jun 10, 2015 4:20 PM EDT

The baby boom generation already has left its mark on music, fitness and politics. Next up: retirement. While some people dream of the same “golden age” of relaxation, sun and travel their parents enjoyed, many more have looked at the numbers and decided they have to keep working. (It takes a lot of savings to finance a 30-year vacation.) For others, working is a choice. (Why give up a good income and fulfilling career?) Either way, the generation famous for rewriting the rules is now reshaping life after 65.

The Situation

Demographics are forcing changes in expectations for retirement. The number of senior citizens worldwide will swell to 714 million in 2020 from 601 million in 2015, straining government benefit plans. Meanwhile, the world’s birthrate is declining. Fewer workers mean fewer people paying into pension programs. So governments are encouraging or forcing people to work longer. Twenty percent of people over 65 are still working in Japan, whose median age of 46.1 gives it the world’s second-oldest population (surpassed only by Monaco at 51.1). There’s room for growth: Surveys show 80 percent of Japanese seniors want to work. Some are finding it hard to live comfortably on pensions alone. Others share the feelings of a 69-year-old who said: “Life is boring without work.”


Source: Bureau of Labor Statistics


The Background

German Chancellor Otto von Bismarck offered the elderly the world’s first national old-age pension system in 1889. In the U.S., the first private pension plan was begun by American Express in 1875. By 1929, one-tenth of the American work force was covered under company pension plans. Yet that same year, even before the Great Depression hit, 56 percent of Americans 65 and older couldn’t support themselves. The Social Security law that passed in 1935 included a pension plan. During World War II, wage controls in the U.S. led employers to offer pensions as a way to attract workers. Private pensions expanded through the 1970s until they covered almost half of American workers. By the 1950s, retirees had money to spend and they wanted to play. The number of golf courses in the U.S. doubled from about 5,000 in the 1950s to more than 10,000 in the 1980s. America’s first retirement community, Sun City, opened outside of Phoenix in 1960. Tours and programs designed for older travelers, such as Elderhostel, founded in 1975, helped them see the world. Things began to change in 1980 with the introduction of 401(k) plans, which allowed U.S. workers to avoid taxes on income put aside for retirement. Subsequent tax-law changes removed incentives for companies to maintain traditional pension plans. Savings plans that relied on the stock market lost value with every crash and tough economic times caused many to take early withdrawals from their retirement savings. Fewer U.S. homeowners reaching retirement age have paid off their mortgages. The result: American baby boomers are poorer than their parents who golfed, lived in sunny climates and traveled.

The Argument

Baby boomers are starting retirement without much in the bank. More than one-fifth of Americans 65 and older are working and more people expect to work past traditional retirement age. They may be needed — certain industries, like construction and manufacturing, are facing shortages of skilled workers. Healthy seniors often want to stay on the job even if they don’t need the money, though in areas like academia this may be preventing younger people from advancing. Governments are certainly encouraging older people to work. In 2011, the U.K. abolished its default retirement age of 65; most people can now work as long as they want. The graying of the workforce is likely to continue. When asked what age they expect to retire, 10 percent of American baby boomers say “never.”

The Reference Shelf

Gallup has a series of polls on baby boomers and retirement.

Financial Times Magazine article, “How Japan stood up to old age.”

Bloomberg Visual Data on the impact of an aging world population.

National Public Radio interviewed older workers for its series, “Working Late.”

PBS NewsHour interactive report, “New Adventures for Older Workers.

First Published Sept. 18, 2014
To contact the writer of this QuickTake:

Victoria Stilwell at vstilwell1@bloomberg.net

To contact the editor responsible for this QuickTake:
Anne Cronin at acronin14@bloomberg.net

Related:   

The best job without vacation :Why South Koreans with ‘best jobs’ take only one day off per year

Related post:

South Korea declares war on MERS

A family of tourists wearing face masks stand on a street in the popular Myeongdong shopping area in Seoul, on June 4, 2015 (AFP Photo/Ed ...

South Koreans fight over jobs

Why South Koreans with ‘best jobs’ take only one day off per year

Young and Old Fight Over Jobs in Korea as Generation Gap Widens

With youth unemployment near a 15-year high and the government planning to raise the retirement age, intergenerational conflict over jobs is rising in South Korea.

The jobless rate for workers aged 15 to 29 touched 11 percent earlier this year and is about four times higher than for those aged 40 and above. At the other end of the spectrum, Korea has an underdeveloped pension system and the highest elderly poverty rate in the OECD, as companies push employees in their fifties into early retirement to contain costs.

An overall unemployment rate that’s close to the 10-year average belies the difficulty facing policy makers seeking to balance the needs of the young and the old as society ages and economic growth eases after the heady gains of previous decades.

Working longer would have helped Lee Jong Ho, 59, who retired from Korea Railroad Corp. two years ago and has been looking for another job ever since. Lee’s 2.2 million won ($1,970) monthly pension isn’t enough to support him and his wife, after pouring savings into raising their children.

“Healthy people like me should work at least until 70 given that the average life span of people now is easily over 80,” said Lee. “I know that extending the retirement age could mean fewer jobs for young people. I’m willing to get paid a little less if I can keep working.”

While currently there is no official retirement age in South Korea, a typical worker’s career ends around 53, government data show. After that, many try to get by on a combination of pension payments, savings, part-time work or small business ventures.

A new law taking effect next year mandates that large companies allow employees to work until at least 60.

‘Repeating Class’

Kang Jin Ho, an English major at Hankuk University of Foreign Studies in Seoul, is 26 and still trying to get into the workforce. He’s deferred graduating for years to maximize his employment chances, as many companies limit new entry hires to people still in school. Kang’s applied for more than 70 jobs already in 2015 and has been rejected every time.

“Getting a job was so much easier for my parents’ generation, when the economy was expanding fast,” he said. “The average age of job seekers in my study group is 30.”

Projections from the Organization for Economic Co-operation and Development paint a gloomy picture for Kang and the next generation of students who will follow. The number of people 65 and older in Korea will surge from 11 percent in 2010 to more than 37 percent by 2050, according to the OECD.

Park’s Plan

The unemployment rate for those aged 15 to 29 was 9.3 percent in May, Statistics Korea said Wednesday. That’s the highest figure for May in official data going back to June 1999, and compares with 2.7 percent for people 40-49 and 2.6 percent for the 50-59 group. Young people are also seeking stable jobs and many apply for the civil service exam, which pushes up the youth unemployment rate, said Sim Won Bo, director at Statistics Korea.

President Park Geun Hye’s government will next month announce its fourth set of measures in two years to help ease unemployment among the young.

Previous efforts have included improvements to career training at school and incentives for young people to join small- and medium-sized enterprises, not just the large corporate icons that dominate the public imagination.

This time around the government may begin addressing the problems faced by Lee and Kang at the same time.

Tenure System

According to a finance ministry statement in May, financial support could be offered to companies that keep on older workers, while trimming their wages and using the savings to hire more young employees. The ministry didn’t offer further details.

Labor unions have already voiced opposition to the idea of a peak-wage system, which also runs counter to cultural traditions of basing pay on tenure and age, rather than performance.

“In a rapidly aging society with weak growth momentum, you’re going to get conflict between young and old over how to divide economic benefits,” said Lee Geun Tae, an economist at the LG Economic Research Institute in Seoul. “Young people having proper jobs is important for our growth engine, but there doesn’t seem to be an easy solution.”

Source: Bloomberg by Kim ChipmanCynthia Kim

Retirement Redesigned

Baby Boomers, Work and the Endless Vacation

By Victoria Stilwell and Roger Runningen | Updated Jun 10, 2015 4:20 PM EDT

The baby boom generation already has left its mark on music, fitness and politics. Next up: retirement. While some people dream of the same “golden age” of relaxation, sun and travel their parents enjoyed, many more have looked at the numbers and decided they have to keep working. (It takes a lot of savings to finance a 30-year vacation.) For others, working is a choice. (Why give up a good income and fulfilling career?) Either way, the generation famous for rewriting the rules is now reshaping life after 65.

The Situation

Demographics are forcing changes in expectations for retirement. The number of senior citizens worldwide will swell to 714 million in 2020 from 601 million in 2015, straining government benefit plans. Meanwhile, the world’s birthrate is declining. Fewer workers mean fewer people paying into pension programs. So governments are encouraging or forcing people to work longer. Twenty percent of people over 65 are still working in Japan, whose median age of 46.1 gives it the world’s second-oldest population (surpassed only by Monaco at 51.1). There’s room for growth: Surveys show 80 percent of Japanese seniors want to work. Some are finding it hard to live comfortably on pensions alone. Others share the feelings of a 69-year-old who said: “Life is boring without work.”


Source: Bureau of Labor Statistics


The Background

German Chancellor Otto von Bismarck offered the elderly the world’s first national old-age pension system in 1889. In the U.S., the first private pension plan was begun by American Express in 1875. By 1929, one-tenth of the American work force was covered under company pension plans. Yet that same year, even before the Great Depression hit, 56 percent of Americans 65 and older couldn’t support themselves. The Social Security law that passed in 1935 included a pension plan. During World War II, wage controls in the U.S. led employers to offer pensions as a way to attract workers. Private pensions expanded through the 1970s until they covered almost half of American workers. By the 1950s, retirees had money to spend and they wanted to play. The number of golf courses in the U.S. doubled from about 5,000 in the 1950s to more than 10,000 in the 1980s. America’s first retirement community, Sun City, opened outside of Phoenix in 1960. Tours and programs designed for older travelers, such as Elderhostel, founded in 1975, helped them see the world. Things began to change in 1980 with the introduction of 401(k) plans, which allowed U.S. workers to avoid taxes on income put aside for retirement. Subsequent tax-law changes removed incentives for companies to maintain traditional pension plans. Savings plans that relied on the stock market lost value with every crash and tough economic times caused many to take early withdrawals from their retirement savings. Fewer U.S. homeowners reaching retirement age have paid off their mortgages. The result: American baby boomers are poorer than their parents who golfed, lived in sunny climates and traveled.

The Argument

Baby boomers are starting retirement without much in the bank. More than one-fifth of Americans 65 and older are working and more people expect to work past traditional retirement age. They may be needed — certain industries, like construction and manufacturing, are facing shortages of skilled workers. Healthy seniors often want to stay on the job even if they don’t need the money, though in areas like academia this may be preventing younger people from advancing. Governments are certainly encouraging older people to work. In 2011, the U.K. abolished its default retirement age of 65; most people can now work as long as they want. The graying of the workforce is likely to continue. When asked what age they expect to retire, 10 percent of American baby boomers say “never.”

The Reference Shelf

Gallup has a series of polls on baby boomers and retirement.

Financial Times Magazine article, “How Japan stood up to old age.”

Bloomberg Visual Data on the impact of an aging world population.

National Public Radio interviewed older workers for its series, “Working Late.”

PBS NewsHour interactive report, “New Adventures for Older Workers.

First Published Sept. 18, 2014
To contact the writer of this QuickTake:

Victoria Stilwell at vstilwell1@bloomberg.net

To contact the editor responsible for this QuickTake:
Anne Cronin at acronin14@bloomberg.net

Related:   

The best job without vacation :Why South Koreans with ‘best jobs’ take only one day off per year

Related post:

South Korea declares war on MERS

A family of tourists wearing face masks stand on a street in the popular Myeongdong shopping area in Seoul, on June 4, 2015 (AFP Photo/Ed ...

HSBC Bank to cut 50,000 jobs in major overhaul: slash investment bank and shrink risk!

http://bcove.me/a7i3qveb

HSBC Holdings PLC will eliminate as many as 50,000 jobs through 2017 by shrinking its global reach as Chief Executive Officer Stuart Gulliver seeks to cut annual costs by about $5-billion (U.S.) to restore profit growth.

Europe’s largest bank plans to reduce full-time employees by 22,000 to 25,000, or about 10 per cent, it said in a presentation to investors on its website on Tuesday. A further 25,000 positions will be cut through the sale of its Turkey and Brazil operations. The bank left its target for return on equity, a measure of profitability, at more than 10 per cent.

Gulliver, 56, is looking to restore investor confidence in a bank battered by a series of scandals and surging compliance costs. Since taking over in 2011, he’s announced more than 87,000 jobs cuts, exited about 78 businesses and reduced the number of countries the bank operates by 15 to 73.

“HSBC is a big bank to move and they’re definitely moving in the right direction,” said Chris White, who helps oversee about 3.9 billion pounds ($6-billion), including HSBC shares, at Premier Fund Managers Ltd. in Guildford, England. “A lot of it feels like it was broadly as expected.”

The shares were little changed at 619.6 pence at 9:30 a.m. in London. They are up about 1.9 per cent this year, trailing a 6.9 per cent gain at Standard Chartered PLC, the other U.K. bank generating most of its earnings in Asia.  

U.K. Cuts

Just months after taking over, Gulliver announced some 30,000 jobs cuts to trim costs by as much as $2.5-billion. In the latest round, as many as 21,000 of the cuts will be lost in a push for digital banking, automation and branch closures. In the U.K., up to 8,000 jobs will be cut, Gulliver said.

Under his plan, the CEO plans to cut risk-weighted assets by about $290-billion, including a reduction at the securities division to less than one-third of the group’s RWAs, and target a return on equity of more than 10 per cent by 2017. The bank cut its ROE target to 10 per cent in February from as much as 15 per cent. In 2014, it had an ROE of 7.3 per cent.

At the investment bank, HSBC plans to cut RWAs by a net $130-billion, or 31 per cent, while “keeping costs flat.” The global banking and markets division had a 6 per cent profit gain in the first quarter, as revenue from foreign-exchange rose.

Asia Focus

The savings program will cost $4-billion to $4.5-billion through 2017, according to the statement.

“We recognize that the world has changed and we need to change with it,” Gulliver said in the statement. “I’m confident that our actions will allow us to capture expected future growth opportunities and deliver further value to shareholders.”

HSBC, founded 150 years ago in Hong Kong, will also sell operations in Turkey and Brazil, while stepping up investment in Asia, expanding asset management and insurance and focusing on places including China’s Pearl River Delta and areas including the internationalization of the yuan.

Jonathan Tyce, a senior banks analyst at Bloomberg Intelligence, said that while it’s a “good cost number,” the short list of disposals “may have surprised a little.”

“Margins are higher” in Asia,” Tyce said in an interview on Bloomberg Television from London on Tuesday. “Everybody’s all over Asia. This is all about improving capital efficiency. You can completely understand the motivation.”

HSBC Fines

With his strategy update, Gulliver is seeking to convince investors that he’s the right man to lead HSBC. At Deutsche Bank AG, Germany’s largest lender, co-CEO Anshu Jain announced his resignation on Sunday, just two months after presenting a strategic update that investors considered too weak.

“Gulliver is not an idiot,” said Chris Wheeler, an analyst at Atlantic Equities in London. “This is quite the opposite to Deutsche Bank as there is tonnes of granularity of where the cost cutting will come, how they’re achieving it and why they’re getting out of countries.”

HSBC has come under pressure to reduce costs and reverse a decline in profit after a year that saw the bank being fined for manipulating currency markets and embroiled in a tax-avoidance scandal in Switzerland.

The bank last week agreed to pay 40 million Swiss francs ($43-million) to close an investigation by Geneva prosecutors into allegations of money laundering at its Swiss private bank.

‘Extreme Solutions’

In February, Gulliver pledged that underperforming units would face “extreme solutions” after full-year earnings fell 17 per cent and the lender scrapped four-year-old profitability targets, citing a tougher regulatory environment.

HSBC is among the hardest hit by regulator scrutiny, with the Bank of England forcing the largest lenders to separate their consumer from riskier investment banking activities by 2019. It’s also been hurt by an increasing bank levy, costing lenders about 5.3 billion pounds over the next five years.

The bank said earlier this year that it’s reviewing whether to re-domicile from London because of rising tax and regulatory costs. It will complete its headquarters review by the end of 2015, according to the statement.

“It would be a mistake that HSBC flees the country,” Bill Blain, a strategist at Mint Partners, said in an interview with Jonathan Ferro on Bloomberg Television on Tuesday. “This is actually a pretty good place for banks to be.”

Source: Blomberg News


HSBC to cut 50,000 jobs, slash investment bank and shrink risk by $290 billion

HONG KONG/LONDON: HSBC will shed almost 50,000 jobs and take an axe to its investment bank, cutting the assets of Europe's biggest lender by a quarter in a bid to simplify and improve its sluggish performance.

HSBC said it will shrink global banking and markets division to less than one third of HSBC's $2.6 tn balance sheet from its current level of 40%. 

The bank said on Tuesday about half the staff cuts will come from the sale of businesses in Brazil and Turkey. The other half will come from cutting about 10 per cent of the remaining 233,000 staff by consolidating IT and back office operations and closing branches. About 7,000-8,000 cuts are expected to be in Britain, or one in six UK staff.

The cuts will leave HSBC with about 208,000 full-time equivalent staff by 2017, down from 295,000 at the end of 2010 and 258,000 at the end of 2014, although the bank said it will be hiring in growth businesses and its compliance division.

The cuts are part of a second attempt by Chief Executive Stuart Gulliver to boost profits since he took the helm at the start of 2011. The previous effort was foiled by high compliance costs, fines, low interest rates and sluggish growth.

"Slaughtering the staff is not necessarily the solution unless management makes the bank considerably less complex," said James Antos, analyst at Mizuho Securities Asia.

HSBC shares in London opened 0.9 per cent higher at 625 pence before slipping back to underperform both the FTSE 100 index and European banking stocks slightly.

HSBC said it will cut its assets on a risk adjusted basis (RWA) by $290 billion by 2017. That will include a reduction of a third, or $140 billion, in global banking and markets (GBM), its investment bank. That means GBM will account for less than a third of HSBC's balance sheet, down from 40 per cent now.

Investors had been calling for more radical cuts at the investment bank, which Gulliver ran for five years but where returns have suffered in tough market conditions.

"The cuts provide significant headroom for the group to fund asset growth in Asia and absorb RWA inflation, whilst protecting its ability to pay a progressive dividend," said Gurpreet Singh Sahi, analyst at Goldman Sachs.

COST SAVINGS

The bank lowered its target for return on equity to greater than 10 per cent by 2017, down from a previous target of 12-15 per cent by 2016. Gulliver said he will push through annual cost savings of up to $5 billion by 2017. It will cost up to $4.5 billion in the next three years to achieve the savings.

HSBC confirmed the planned sale of its businesses in Turkey and Brazil, adding it would keep a presence in the latter to serve corporate clients. It aims to overhaul underperforming businesses in Mexico and the United States to improve returns.

The bank said it was also targeting growth in Asia by expanding its insurance business and its presence in China's Pearl River Delta region.

Some analysts said the changes did not go as far as hoped, though others said the asset reduction plan was a substantial shift.

"The market is likely to respond positively on the move with investors having a much clearer idea of HSBC's direction going forward," said Steven Leung, a sales director at UOB Kay Hian in Hong Kong.

The bank also set out 11 criteria it will use to evaluate whether to move its headquarters from London to Asia, likely Hong Kong. They include factors such as economic growth, the tax system, government support for the growth of the banking system, long-term stability and an ability to attract good staff.

HSBC said it would complete the review of the possible move by the end of the year.

The bank also has to separate its British retail banking operation, which is to be based in Birmingham in central England. The "ring-fenced" bank will account for about two thirds of UK revenues, or $11 billion, and will have some 26,000 staff, or 57 per cent of the total in the United Kingdom.  - Reuters

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Science on high intensity interval training: HIIT, or SHIIT?

Let me pose you a question: would you rather go down to the video store (if it hasn’t yet gone bankrupt) to hire a DVD, or stream it from the comfort of your own home? You’ve probably answered: the comfort of your own home, unless of course you get all nostalgic about walking down the street to hire discs. I know I do!

Okay, okay, now let me pose you a further question: would you rather spend one hour exercising, or 30 minutes? Stop, don’t answer that just yet. What if I were to say that both workouts would give you equivalent results? Unless you’re a time wasting enthusiast, pain junky, or DOMS devotee you’re probably going to answer 30 minutes. Well a new (old) exercise regiment known as high intensity interval training (HIIT) is offering just that.

Yes, if you believe one of the internet’s many great fitness prophets, then you will be aware that HIIT is the shit! Slow endurance training is the DVD for hire and HIIT is Netflix, which is of course, the shit. So is HIIT truly the shit, or should you beware of false fitness prophets?

What is HIIT?

Before I answer your previous question. What is HIIT? Simply put, HIIT involves performing intervals of highly intense exercise followed by either complete rest, or low intensity exercise. The high intensity-low intensity combination seems to be the more popular of the two currently.

How about an example? Sure, here’s one. Let’s say running is your game. Your HIIT may involve a ratio of a one minute sprint, to 45 seconds of slow jogging, repeated for a total of 15 minutes. It certainly doesn’t have to follow this exact ratio, or duration and these variables change greatly from protocol to protocol, that was simply an example. I should note, however, that scientific data to date has found minimal difference between different interval ratios thus far (9).




Why HIIT might be the shit?

HIIT is proposed to lead to multiple complex physiological changes to the skeletal muscle system that promote fat burning efficiency and preference, and more efficient oxygen utilisation. In turn, this is proposed to: make you skinnier, fitter and it will likely give you the ability to fly! But probably not the last one.

Science and HIIT (SHIIT):

Of course theory means little unless it translates to real world, real life changes. So, does it? Spoiler, it generally does.

Aerobic health:

A review paper analysing studies on individuals suffering from various different lifestyle diseases found HIIT to be effective. Specifically, cardiovascular fitness, as measured by Vo2 max, was 9% higher when individuals performed HIIT as opposed to moderate intensity continuous exercise (1). Another large scale review paper on scientific studies to date found HIIT to improve: aerobic fitness level more so than normal, moderate intensity exercise in both sedentary and active individuals. But it was only as effective as continuous exercise training in athletic persons (2). If that wasn’t enough science for you, a third study found HIIT to improve aerobic fitness as well as moderate intensity continuous exercise in a relatively fit group of people (3). This basically tells us that the lower your fitness level is, the better you will respond to HIIT and if you only want to do one sort of training, HIIT will be more effective than continuous training for aerobic fitness. Conversely, if you’re really fit and only want to do one form of exercise, then HIIT is as good as continuous moderate intensity exercise for aerobic fitness.

Muscles, muscles, muscles:

What about those muscles? Can you skip the separate weight sessions and do an all in one HIIT session? Well, the scientific data is very limited on this. But the one study that does exist on this topic, found that when having an active rest period was compared to having complete rest, complete rest won. Yes, complete rest led to greater work output, which in turn would likely mean improved: muscle mass, strength, power, looking shredded bro (4)! This makes sense and says that resistance training HIIT will likely provide you with some nice adaptations, but not as good as traditional weight training where proper rest between sets is taken.

Weight loss:

What about weight loss then? The data ain’t crystal clear on this. One study found HIIT boxing was better than continuous brisk walking at improving body fat percentage (5). Another study found participants had a decreased waist circumference following HIIT, but not following moderate intensity continuous exercise (6). Yet, in complete contrast, continuous moderate intensity exercise was found to decrease trunk fat more so than HIIT in another study (7). All in all, the science isn’t certain on whether HIIT or continuous training is best for weight loss. But if you base your workout on the number of calories you’re burning, based on average heart rate or a similar method, then you should be no worse off than performing continuous exercise, as average heart rate tends to be higher for HIIT and stays elevated for longer following exercise.

Adherence:

If HIIT is quicker to do, then you’d think people would do it more and stick to it. And they do! High intensity interval training led to a greater level of adherence (89% vs 71%) than moderate intensity continuous training (8). Grouse!

Is it healthful? 

Ladies and gentlemen, HIIT is the shit! Or at least it is pretty darn good and very relevant to our time-centric society:

• HIIT is likely as good as endurance exercise for aerobic fitness and if you’re of a low fitness level it’s probably better.
  
  
•  Resistance training HIIT won’t get you as ripped as traditional resistance training with structured rest periods. But it’s probably not a great deal worse.
  
  
• HIIT will lead to at least equivalent weight loss to continuous moderate intensity exercise in a shorter period of time, likely due to an elevated average heart rate.
  
  
• HIIT generally leads to higher adherence, so you’re more likely to stick with it.

Our verdict :Highly healthfull. If you’re time poor and unfit, HIIT’s the most effective way to turn things around. Although if time is less of a factor and you really want to optimise your health you should combine HIIT, anaerobic exercise and aerobic exercise as part of a proper periodised program. Especially, if you have sport related goals.

I hope this has been healthful!

Isithealthful

I hold a Doctor of Physiotherapy, Bachelor of Exercise Science and am a qualified personal trainer. I have extensive clinical and research experience and a strong passion for all things health. This has driven me to write the blog: Is it healthful, in order to analyse sound scientific research to determine if a product, service or intervention is healthful, or simply a waste of money or time.

 
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Trees and plants can feel stress, need time to recharge like humans

KEPONG: Trees feel stress and need rest the same way humans do, and the Forest Research Institute of Malaysia (FRIM) is playing doctor to keep them healthy.

FRIM director-general Datuk Dr Abdul Latif Mohmod said trees in the cities were the worst affected.

“It causes them to fall sick, making them susceptible to attacks from fungi and pests,” he said at the institute’s open day and World Environment Day yesterday.

He said a tree that looked healthy on the outside could be hollow inside, making it hard to diagnose its problem with the naked eye.

Dr Latif said FRIM used sonar technology as an “X-ray” machine to diagnose such trees.

Research officer Ahmad Aza­ruddin Mohd Noor demonstrated the use of the device called the Picus Sonic Tomography.

“The device generates a 3D image of a tree’s insides, effectively identifying decay and cavities in the trunk,” said Ahmad Azaruddin, a certified arborist (professional in cultivating, managing and the study of trees) who has helped local councils manage trees.

“A tree that has become 30% hollow can fall in the event of a thunderstorm. If that happens, it can be very dangerous,” he said.

To prevent this, his team would usually prune it to preserve its structural integrity.

He said the team would do its best to preserve a tree due to its benefits to the urban ecosystem.

“We will be forced to cut it down only if the damage is too severe,” he said, adding that less than 20% of trees faced such a problem.

“In the cities, it only happens to trees that are more than 100 years old or those with roots that have been damaged.

“In the forests, the usual culprits are termites,” he said.

Dr Latif said as trees feel stress, FRIM closes its canopy walkway on Mondays and Fridays to let them rest.

“Our canopy walkway can accommodate 200 visitors a day. We don’t want to give the trees too much stress,” he said.

He also said Malaysians should be proud of FRIM’s man-made tropical forest as it was the world’s largest and oldest.

The forest covers seven arboreta (repositories of living plants) and a botanic garden.

He said it was originally an abandoned mining land and that the Forestry Department, which owned less than a hectare of it, planted its first tree there in 1923.

“Today, it spans 544.3ha and houses 73 out of 92 critically endangered plants in Malaysia,” he said, adding that more than 1.3 million people visited FRIM last year.

Dr Latif said FRIM prided itself as a community-friendly institute that facilitated learning and embraced outstanding universal values.

“Because of this, we are working towards being gazetted as a Unesco World Heritage site by 2020.”

By Adrian Chan The Star/Asia News Network

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Forget chocs, better to plant a tree instead

• Restoring Mother Earth

One to call their own: Residents and families posing with a tree they just planted for the programme. The particular tree will remain as part of each family’s responsibility and heritage in USJ Heights, inherited by future generations.