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2024-05-10 | Bloomberg | Sub-Sahara Africa Stocks: First Bank, New Mauritius Hotels | Mauritius’s SEMDEX Index rallied to the highest since February 2008, adding 0.9 percent to 2,086.43 by the 1:30 p.m. close in Port Louis. The Ghana Stock Exchange Composite Index snapped 10 days of gains, slipping 0.8 percent to 1,151.83 by the 3 p.m. close of trading in Accra. Kenya’s All-Share Index retreated for a second day, losing 0.8 percent to 75.98 by the end of trading at 3 p.m. in Nairobi. The Nigerian Stock Exchange All-Share Index advanced 0.7 percent to 25,432.93 at the 2:30 p.m. close in Lagos, according to a statement on the bourse’s website. Namibia’s FTSE/ Namibia Overall Index (FTN098) surged 2 percent to 862.71 by the 4 p.m. close in Windhoek. The following shares rose or fell in sub-Saharan Africa , excluding South Africa. Stock symbols are in parentheses. CFC Insurance Holding Ltd. (CFCI KN), Kenya ’s first listing in 28 months, retreated 30 cents, or 1.6 percent, to 18.10 shillings, on speculation it climbed too far too fast since it started trading two weeks ago. “For the short time it has been in the market, the gains have been driven purely by short-term traders and it is bound to fall,” Ruphus Mwanyasi, head trader at Nairobi-based Canaan Capital Ltd., said in a phone interview today. First Bank of Nigeria Plc (FIRSTBAN) , the country’s third-biggest lender by market value, rose the most in six weeks, gaining 66 kobo, or 5 percent, to 13.92 naira. Renaissance Capital placed a “buy” recommendation on First Bank and five other Nigerian lenders, saying April elections in Africa’s most populous nation were “positive, and should shift market focus away from political risk,” analysts David Nangle, Adesoji Solanke and Armen Gasparyan wrote in an e- mailed note to clients yesterday. Skye Bank Plc (SKYEBANK) , a Nigerian lender, gained 32 kobo, or 3.9 percent, to 8.6 naira, after it was also rated “buy” at Renaissance. New Mauritius Hotels Ltd. (NMH) , the Indian Ocean island nation’s biggest leisure group by market value, climbed the most in three months, rising 4 rupees, or 3.9 percent, to 107 rupees. Net income increased 25 percent to 334.6 million rupees ($12 million) in the second quarter from a year earlier, it said in a regulatory filing today. To contact the reporters on this story: Vincent Nwanma in Lagos at vnwanma@bloomberg.net ; Kamlesh Bhuckory in Port Louis via Johannesburg at 1914 or kbhuckory@bloomberg.net To contact the editor responsible for this story: Stephen Kirkland at skirkland@bloomberg.net |
2024-10-25 | Bloomberg | Iowa Voters Are Independent, Not Undecided | On the college campus where I write and teach in Iowa, the trees are aflame with red and yellow leaves and the students -- more than 90 percent of them if 2008 numbers hold strong -- are ready to vote for Barack Obama. With early voting, many students cast their ballots before they headed home for fall break, to far-flung states where their votes may not matter quite as much. Still, at least according to the media’s incessant reporting , a large segment of Iowa voters are still independent and undecided. And they’re getting a lot of attention. I’m a registered independent, and I’ve spent my whole life in the Midwest -- Michigan , Wisconsin and now Iowa -- so I’ve gotten a lot of calls from pollsters over the years. And every time they ask me whom I plan to vote for in November, I always tell them I’m undecided. It’s always a lie. I always know whom I’m going to vote for months before the election, though I’ve cast votes for at least three different parties over the years. For many Midwesterners, saying I’m undecided is akin to saying it’s none of your darn business. In Iowa , it’s often hard to predict how people will vote, largely because it’s a fairly private place (there’s plenty of elbow room) and it’s an awfully polite place, too. We try to get along despite our differences. Bumper stickers and yard signs go away swiftly once an election is over. Defying Convention While I can sort of guess whom most of my students will vote for based on their T-shirts and the Howard Zinn books sticking out of their backpacks, I’m less certain about the political leanings of my fellow bowlers on Wednesday nights or my fellow worshippers on Sunday mornings. Last week, at the same stoplight, I saw a Romney sticker on a Prius and an Obama sticker on a massive Dodge pickup. Iowa defies convention. Still, I believe these mythical swing voters will once again go for Barack Obama in 2012. Here’s why: -- We don’t like to change horses in midstream. Here in the Midwest, if we hire someone to do a job, we try to stay out of the way and let him or her finish it. It’s stoicism common among the farmers and laborers of the region. Good work takes time. You can’t solve a problem overnight. You plug away a little every day. This is, I think, a big reason George W. Bush won Ohio in 2004 and why Wisconsin Governor Scott Walker staved off a recall attempt earlier this year. It’s simply a matter of respect. Iowans remember, acutely, the economic collapse of 2008 and understand a community doesn’t recover from disaster overnight. Federal assistance and federal subsidies have helped Iowa recover from many unforeseen disasters in the past; while we don’t trust the government to do everything, we understand that effective federal programs, such as Obama’s economic stimulus, student-loan and health-care plans, can steadily help a nation work toward recovery. If we see some progress, we are patient people. -- Iowa’s a “live and let live” kind of place. I recently learned that a well-educated gay man from the East Coast, now living in rural Iowa, whom I met at a cocktail party, is probably voting for Mitt Romney. Meanwhile, an insurance company employee I met at church, a married father of three who dresses in khakis and polos, turns out to be one of the fiercest liberals I’ve ever met. I know a small-business owner who is still undecided, but he’s wavering between Obama and the Green Party. A former student of mine in Ames, an Iraq war veteran, will probably vote for Obama, but may very well go for the libertarian Gary Johnson or write in Ron Paul. Few Converts He doesn’t trust Romney on foreign policy or civil liberties. Simply put, for those coveted independent voters, Romney-Ryan’s hard turn to the right on social and military issues is disconcerting. Most Iowans don’t like to put their noses in other people’s business, whether it’s a neighboring home or a distant nation. Divisive social issues and jingoistic nationalism, which Republicans are pushing hard in Midwestern swing states, may mobilize the party’s base but they do little to create converts to conservatism. -- Wall Street is very far away from Iowa. In the Midwest, we don’t trust fancy. And while those on the far right have long tried to paint Obama as the elitist in this race, in Iowa, Romney is going to have a hard time hiding the silver spoon that’s been in his mouth since birth. It’s not that Iowans resent wealth; it’s more that they resent the kind of wealth that Romney has accrued in his life, most of it “unearned” income -- wealth that seems to grow through the manipulated magic of Wall Street rather than the pluck and perseverance we prefer. Wall Street’s recklessness in the past decade has had a profoundly destructive effect on Main Street and the fields that surround it. It’s hard for Iowans to forget that Romney made his money in a system that exploited, in multiple ways, the modest resources of the average American family. In Iowa, we tend to follow our strong opinions with a polite disclaimer: Well, I may be wrong, you know. And I may. Yet one thing is certain. No matter which way Iowa goes this year, it won’t be long before the pollsters come back to us, looking toward the 2016 caucuses, asking us whom we will support the next time the presidency is at stake. And we’ll get everybody excited, by letting out a low whistle, shaking our heads and muttering, “Well, gee, I don’t know yet. I’m undecided.” Have a nice day. (Dean Bakopoulos teaches at Grinnell College. His most recent novel is “My American Unhappiness,” now out in paperback. The opinions expressed are his own.) Read more opinion online from Bloomberg View. Subscribe to receive a daily e-mail highlighting new View editorials, columns and op-ed articles. Today’s highlights: the editors on the myriad ways gridlock undermines Congress ; Jonathan Alter on why moderate Romney wouldn’t make it past Inauguration Day ; Stephen L. Carter on our unprincipled politics ; Jonathan Weil on why mandated audits should end. To contact the writer of this article: Dean Bakopoulos at bakopoul@grinnell.edu. To contact the editor responsible for this article: Katy Roberts at kroberts29@bloomberg.net . |
2024-05-06 | Bloomberg | Taxes, Scale of Spending Cuts Remain Hurdles to U.S. Debt Limit Increase | A fight over taxes and the scale of spending cuts remain the biggest obstacles to a deficit-cutting plan that White House officials and congressional leaders say is necessary for an agreement to raise the U.S. debt ceiling. House Republican leaders said yesterday they would place on hold a plan to privatize Medicare health coverage for the elderly because of political obstacles, and concentrate on finding common ground with President Barack Obama on spending cuts. House Majority Leader Eric Cantor, a Virginia Republican, told reporters in the Capitol that “the reality is this president has excoriated” the Medicare proposal. House Speaker John Boehner , an Ohio Republican, said the party would be unable to prevail on the idea in the current Congress, though he also said everything remains on the table except tax increases. After lawmakers met yesterday with Vice President Joe Biden to discuss their differences over budget-cutting, Cantor said “there are areas in which we can find some commonality” with the Obama administration. He declined to give specifics about the overlaps. Many lawmakers are using a deadline to raise the U.S. debt limit in the next few months as an opportunity to force major changes in the federal budget. The Treasury Department said this week lawmakers will need to raise the $14.3 trillion debt cap by about Aug. 2. Biden opened the talks by calling the negotiations with lawmakers on reducing long-term government deficits “hard business.” ‘We Made Progress’ “We made progress,” Biden told reporters after the two- hour session. Before it started, he said, “I’ve been in Congress for 36 years and I’m always optimistic.” The next meeting is scheduled for May 10, the vice president said. Representative Tom Cole of Oklahoma , a Republican member of the Budget Committee who formerly led his party’s House campaign arm, said political realities point to a smaller-scale deal than Republicans have sought. Republicans realize “there are some things we’d want that Democrats simply are not going to consent to,” Cole said. “The entitlement changes are longer-term changes, and they don’t need to be built into this year’s budget to arrive at a deal.” “We can still come to an agreement on the 2012 budget that ratchets down spending, and hopefully that will set us up for something that is much more sweeping post-presidential election,” Cole said. Gleeful Reaction Democrats reacted gleefully to Republicans’ seeming retreat on their Medicare plan, charging that it was a reaction to a voter backlash against what Democrats characterized as a politically lethal proposal. Democrats say Republicans are trying to balance the budget on the backs of the poor and elderly. “The Republicans are slowly realizing their plan to privatize Medicare is a political disaster, but until they renounce their vote for it, they are still going to own it,” Senator Chuck Schumer of New York , the Senate’s third-ranking Democrat, said in a statement. Obama last month outlined a proposal to cut $4 trillion from deficits over 12 years. The House in April passed a Republican plan to cut spending by more than $6 trillion over a decade, privatize Medicare and turn the Medicaid health-care plan for the poor into a block grant program. Lawmakers in both parties used the meeting with Biden at Blair House across the street from the White House as a chance to spell out their starting positions in the budget debate, said one participant, Democratic Representative Chris Van Hollen of Maryland. “There’s an intent to keep at this,” he said. Mandatory Cuts Cantor told reporters the Republican position is the House- passed budget, which calls for $715 billion in mandatory cuts over 10 years outside of Medicare and Medicaid. Those include cuts in farm subsidy payments and financial aid to graduate students. After the meeting, lawmakers sent legislative staff to look for areas of overlap, including specific spending cuts, in Republican and Democratic proposals that could form the basis of an agreement, according to congressional aides who spoke on condition of anonymity because they weren’t authorized to describe the discussions. Officials outlined a tentative schedule of twice-weekly meetings that would last through May, one congressional aide said. Biden said that, while the debt limit and the budget aren’t “technically connected,” they are “politically connected.” Cost Controls Obama’s deficit-reduction plan would impose cost controls on Medicare. House Republicans would replace the entitlement program with one in which the government would provide subsidies so people could buy coverage on the private insurance market. Obama and the House Republicans also take separate paths on taxes. Obama would eliminate Bush-era tax cuts for wealthy families upon their expiration in 2012 and add $1 trillion in taxes on high-income families over 12 years. House Republicans would continue all the Bush tax cuts and avoid tax increases. Cantor and Senator Jon Kyl of Arizona , the Senate’s second- ranking Republican, were the two members of their party participating in the talks with Biden. Four Democrats attended: Senate Finance Committee Chairman Max Baucus of Montana , Senate Appropriations Committee Chairman Daniel Inouye of Hawaii , House Assistant Democratic leader Jim Clyburn of South Carolina and Van Hollen , the House Budget Committee’s top-ranking Democrat. Biden was joined at the meeting by Treasury Secretary Timothy Geithner , White House budget director Jack Lew and Gene Sperling , director of the National Economic Council. Bond markets showed little concern over the U.S. deficit in trading yesterday, as a plunge in commodities and stocks and a rise in weekly jobless claims eased concern inflation is accelerating. Yields on benchmark 10-year Treasury notes fell to a six-week low. The 10-year note yield fell seven basis points to 3.15 percent, after touching the lowest since March 17. To contact the reporters on this story: Mike Dorning in Washington at mdorning@bloomberg.net ; Julie Hirschfeld Davis in Washington at or Jdavis159@bloomberg.net To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net |
2024-09-29 | Bloomberg | Discover Faces FDIC Enforcement Claim Over Marketing Practices | Discover Financial Services (DFS) , the top performer this year in the Standard & Poor’s 500 Financials Index, said U.S. regulators plan to bring an enforcement case over how the credit-card issuer marketed fee-based products. The Federal Deposit Insurance Corp., which regulates firms that accept customer deposits, decided to press the claim after investigating the bank’s marketing practices, Riverwoods, Illinois-based Discover said yesterday in a quarterly filing. “Since well before the FDIC’s review began, Discover Bank has made changes to both its fee-based products and program, and Discover Bank believes its current practices substantially address the FDIC’s concerns,” the lender said in the filing. Minnesota Attorney General Lori Swanson sued the company in December 2010, claiming that Discover telemarketers failed to tell consumers when they were agreeing to purchase optional, fee-based services, including payment protection. Discover, led by Chief Executive Officer David Nelms, 50, agreed in June to a preliminary settlement of eight class-action cases challenging its marketing tactics, according to an earlier filing. The company’s telemarketers, selling identity-theft and credit-score monitoring services, failed to tell consumers when they were agreeing to buy those products, which generated more than $300 million for Discover in 2009, Swanson had said. “While disappointed by their decision, Discover has cooperated fully with the FDIC and we look forward to putting the matter behind us,” Leslie Sutton, a company spokeswoman, said in an e-mailed statement. Andrew Gray , a spokesman for the FDIC, declined to comment. West Virginia , Missouri The West Virginia Attorney General’s office sued Discover last month, challenging the firm’s enrollment of card-holders in fee-based products, according to yesterday’s filing. “The company will seek to vigorously defend all claims asserted against it,” Discover said. The Missouri Attorney General’s office also is investigating Discover’s marketing of its payment-protection service and the lender is cooperating with the probe, according to the filing. Discover fell 98 cents to $23.88 yesterday in New York. The shares have climbed 29 percent this year, compared with a 25 percent decline for the 84-company S&P 500 Financials Index. (S5FINL) To contact the reporter on this story: Donal Griffin in New York at dgriffin10@bloomberg.net. To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net . |
2024-02-26 | Bloomberg | Porto Seguro 2010 Profit Rises 96% to 623.4 Million Reais | Porto Seguro SA , Brazil ’s biggest insurance company by market value, said profit rose 96 percent to 623.4 million reais ($373.6 million) last year, according to a regulatory filing. To contact the reporter on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net. To contact the editor responsible for this story: Bill Faries at wfaries@bloomberg.net |
2024-07-18 | Bloomberg | The Contender Mitt Romney Could’ve Been | Last week, a friend put the U.S. presidential race in depressingly clear terms: This election is a choice between a Democratic president who voters don’t think is able to solve our economic problems and a Republican candidate who voters think is committed to the same doctrines and institutions that helped produce them. So who do you want, America? The guy who can’t seem to get us out of this mess, or the party that helped get us into it? But there’s a candidate out there who could have made this election something very different -- a candidate perfectly suited to this unusual moment in American politics. That candidate? Mitt Romney. I don’t mean, of course, Romney the purveyor of Republican boilerplate and one-percenter obliviousness who actually won the Republican primaries. That Romney is, if anything, uniquely ill- suited to the demands of the moment, which combines a need for fresh thinking with a profound mistrust of the existing power structure. I’m referring to the Romney who could have been. Romney entered this race with three striking credentials for a presidential candidate: He was one of the most successful private equity executives of all time. He was the first governor to pass and implement a near-universal health-care program. And he was a moderate Republican who had, at various points in his career, spoken out against his party’s more extreme orthodoxies. For various reasons, the real Romney abandoned each of those qualifications. Privatizing Profits From the beginning of his campaign, Romney spun his tenure at Bain Capital LLC. He told voters that Bain was all about job creation. That’s manifestly untrue. Bain’s prospectus never mentions the words “jobs” or “employment.” Bain is -- and was -- organized to maximize wealth for shareholders. Sometimes it maximized their wealth in ways that hurt the rest of us, as when Bain executives loaded companies with tax-deductible debt, used it to pay themselves and investors huge dividends, and then fled the scene as the company fell into bankruptcy. As Anthony Luzzatto Gardner wrote, that was, in effect, privatizing profits while socializing losses. But that’s not all Bain did. A better, alternate Romney would tell a very different story. He would explain that one reason the U.S. economy is stronger than those of other developed nations is that Americans are unsentimental; we keep our labor markets flexible, force our business leaders to fear takeovers and buyouts, and let struggling companies die. He would say that Bain was an engine of corporate restructuring and, at times, destruction, and that when Bain closed down a plant because it wasn’t sufficiently competitive and moved that capital to more productive purposes, it performed a worthwhile service for the entire economy. He would say the lesson he took from Bain is that countries aren’t all that different from companies: If we decide it’s just too hard and painful to make the changes need to remain competitive, we too will wake up one day to find the global economy has passed us by. A Romney who said all that could present himself as the unsentimental turnaround artist our ailing economy needs. However, he would also need to tell a more honest story about the human costs. Rather than denying that Bain’s activities sometimes hurt workers, he would admit it. Rather than offering paeans to free enterprise and risk taking, he would acknowledge that the modern economy isn’t fair and is sometimes downright cruel. Workers lose their jobs, their health insurance and their self respect because management is insufficiently farsighted, or because advances in shipping technology make it cheaper to move a factory to China. The solution, he would say, isn’t to make our companies less competitive. Rather, the answer is to make our government more compassionate and more effective in helping those left behind. Universal Care Our alternate Romney could point to his work in Massachusetts as evidence that his words are more than just a script. When Romney left Bain to lead the Bay State, he passed and implemented the first statewide universal health-care system. He made sure that no one who lost a job would also lose health insurance. The alternate Romney would say that his health-care plan wasn’t a perfect end but a powerful first step. He would describe the problems in the health-care market that he realized only the federal government can fix, including the system’s emphasis on employer-based coverage. And he would propose reforms to free workers and employers alike from that system. That is to say, rather than trying to repeal the national version of Romneycare, he would make it Romneycare Plus. Because the alternate Romney is still a Republican, he would also back Representative Paul Ryan ’s latest proposal for Medicare reforms and propose integrating Medicare exchanges with the Affordable Care Act’s insurance exchanges, enabling people to retain the same insurance throughout their lives, a change that would improve insurance markets and health outcomes by encouraging insurers to care about the long-term health of their customers. Moreover, this Romney wouldn’t stop with health care. Our analytical alternate would say that although there’s much we don’t know about preparing our children to compete in tomorrow’s economy, data suggest that early childhood education offers more bang-for-the-buck than virtually any other investment, and so we should focus on it. This Romney would propose a raft of specific spending cuts |
2024-07-29 | Bloomberg | U.S. Commodities Day Ahead: Chile Copper Mine Strike Prolonged | The following are the top stories on metals, agriculture and shipping. TOP STORY: BHP Chile Workers Vow to Prolong Strike at Biggest Copper Mine Workers at BHP Billiton Ltd.’s Escondida unit in Chile pledged to extend a weeklong strike that has halted shipments from the world’s biggest copper mine and helped push up prices of the metal. COMMODITY EXCLUSIVES: Eveready May Raise Battery Prices, Start New Products Sales (1) Eveready Industries Ltd., India ’s biggest maker of batteries, plans to raise prices and sell new products to reverse four straight quarters of profit decline. Biggest Pig Farmer to Sell First Bond in 4 Years: Russia Credit Miratorg, Russia’s largest pork producer, is planning its first bond sale since 2007 this month as the biggest grain harvest in four years lures investors to higher-yielding agricultural debt. India Refiners Said to Open Bank Accounts to Pay Iran Via Turkey Indian refiners, seeking to end an impasse over payments for Iranian crude oil, opened accounts with state-owned Union Bank of India Ltd. to route money through a lender in Turkey, two people with direct knowledge of the matter said. African Wind, Hydro, Cook Stoves May Benefit From New CO2 Rule Wind turbines , hydro-electric dams and efficient cooking stoves in Africa and other countries may attract up to $1 billion in investment, according to ClimateCare after the United Nations agreed on new carbon market rules that may grant such projects more emissions credits. McDonald’s to Open a Restaurant a Day in China in Four Years (1) McDonald’s Corp., the world’s largest restaurant chain, should open an outlet a day in China as it challenges Yum! Brands for dominance in Asia’s largest economy as rising salaries boost spending on fast food. Sugar Exports From India at Four-Year High May Cool Prices (1) Sugar exports from India, the second-biggest producer, may surge to the highest level in four years next season as output exceeds domestic demand, potentially cooling a rally in global prices. Nickel Surplus to Narrow on China ’s Demand, Sumitomo Says (1) A global nickel surplus may narrow on increasing stainless- steel demand from China and as new mining projects have stalled, limiting a decline in prices, said Sumitomo Metal Mining Co., Japan ’s top producer. China Gold Demand May Surpass India This Year, Goldcorp Says (1) Demand for physical gold in China may exceed consumption in India by the end of this year, said Chuck Jeannes, chief executive officer of Goldcorp Inc., the world’s No. 2 producer of the metal by market value. INDUSTRIAL METALS: Copper May Fall on Concern About Potential U.S. Debt Default Copper may fall in London , trimming a second monthly gain, on concern about a potential U.S. default after lawmakers failed to reach agreement on raising the debt ceiling. Copper Inventories in Shanghai Rise Third Week; Aluminum Drops Copper stockpiles monitored by the Shanghai Futures Exchange increased for a third week, while aluminum inventories declined to a 23-month low. MINING: Ukraine Coal Miners Trapped by Deadliest Blast Since 2007 (3) Ukrainian authorities are working to free nine workers trapped after an explosion at a coal mine owned by the country’s richest man, Rinat Akhmetov, which killed 17 in the deadliest such accident since 2007. Exxaro to Close Unprofitable Zincor Refinery, Fire Workers (1) Exxaro Resources Ltd., the second-biggest South African coal producer, plans to close the Zincor refinery in the country and may fire workers at the plant after failing to turn a profit or find a buyer. Anglo American’s Profit Rises 41%; CEO Sees Cost ‘Headwinds’ (2) Anglo American Plc, part-owner of the world’s biggest platinum and diamond producers, said first-half profit rose 41 percent, missing estimates, as it confronts “very strong headwinds” on costs. Mitsubishi Says Will Meet Profit Target, Sojitz May Exceed Mitsubishi Corp., Japan’s largest trading company, said it will meet its annual profit target even after lower coal sales contributed to a 18 percent cut in first quarter profit. Vedanta Quarterly Profit Climbs to Record as Prices Advance (1) Vedanta Resources Plc, the largest copper producer in India, said fiscal first-quarter profit rose 33 percent to a record as commodity prices increased. Anglo American First-Half Profit Rises 41% on Metal Gains (1) Anglo American Plc, part-owner of the world’s biggest platinum and diamond producers, said first-half profit rose 41 percent as metal and gem prices gained. PRECIOUS METALS: Gold May Fall in London as Rally to Record Spurs Investor Sales Gold may decline in London as a rally to a record this week on debt concerns in the U.S. and Europe prompts some investors to sell the metal. AGRICULTURE: Palm Oil Drops on Concern U.S. Debt Stalemate May Lower Demand Palm oil had its first weekly loss in four on speculation that the stalemate in the U.S. over raising the debt limit to avoid a default may hurt global demand for commodities. Corn Drops on Speculation U.S. Rainfall Will Curb Crop Stress Corn dropped in Chicago, paring the first monthly gain in three, on speculation rainfall in U.S. growing areas will curb stress caused by heat and dryness. Soybeans Gain on Optimism China Demand May Expand on Feed Use Soybeans advanced for the first time in three days on expectation that demand in China, the world’s biggest importer and consumer, may increase as the country’s hog herds expand, boosting consumption of animal feed. Sugar Falls as Surplus May Become Available; Coffee Advances Sugar fell for a third day in London to the lowest level in more than a week on speculation a projected surplus for the coming season will soon be available. Coffee advanced. Japan Buys 9,050 Tons of Food Wheat From Australia in Tender (1) Japan bought 9,050 metric tons of food wheat from Australia in a tender today, the Ministry of Agriculture, Forestry and Fisheries said in a statement. Rubber Drops for Second Day as U.S. Debt Impasse Curbs Demand Rubber declined for a second day, paring a monthly advance, as U.S. lawmakers failed to make progress on a deal to raise the nation’s debt ceiling, curbing investor appetite for the commodity used to make tires. SHIPPING: Supertankers Storing Oil Rise by One to Six, ICAP Shipping Says The number of “international” supertankers storing crude oil rose by one to six, ICAP Shipping International Ltd. said in a report today. Another of the vessels that has been booked to store gasoil off Singapore has yet to start doing so, it said. Tropical Storm Don May Strengthen Before Texas Landfall (1) Tropical Storm Don may experience “some strengthening” before making landfall on the Texas coast later today, the National Hurricane Center said. Pirates Took 1,090 Sailors Hostage Last Year, Ship Flaggers Say Pirates took 1,090 sailors hostage last year, the world’s three biggest flag states that register vessel ownership said. Crude Tanker Sails From Offshore Libya to Sardinia, Data Show The Captain X. Kyriakou, an oil tanker able to haul about 1 million barrels of crude, is now off Sardinia, having previously signaled its position off Libya, according to ship-tracking data compiled by Bloomberg. ECONOMIES: HSBC Recommends Buying Chinese Stocks as Inflation May Ease (1) Chinese stocks will outperform the rest of Asia this year as inflation slows in the world’s second- biggest economy and the political stalemate over U.S. debt ends, according to HSBC Holdings Plc. China Should Buy U.S. Stocks Over Treasuries, Economist Xie Says China should buy U.S. stocks instead of Treasuries as they may be safer investments amid concerns about a U.S. debt default or credit-rating downgrades, according to Andy Xie , an independent economist. Auction Demand Weakest in a Year on Cash Crunch: China Credit Demand at China’s government debt sales was the weakest in at least a year this month as higher reserve-requirement ratios left financial companies with fewer funds to invest in the securities. Treasury May Adopt ‘Risky’ Payment Plan as U.S. Deadline Nears The U.S. is approaching the moment it may have to decide which bills to pay, a prospect Treasury Secretary Timothy F. Geithner has called “unacceptably risky and unfair” to Americans. U.S. Contingency Plan Said to Give Priority to Bondholders (2) The U.S. Treasury will give priority to making interest payments to holders of government bonds when due if lawmakers fail to reach an agreement to raise the debt ceiling, according to an administration official. German Retail Sales Surged in June as Unemployment Declined (1) German retail sales surged the most on record in June as falling unemployment boosted household purchasing power. OTHER MARKETS: Stocks Fall, Franc Gains on House Vote Delay; Default Risk Rises Stocks fell, the Swiss franc and yen strengthened and the cost of U.S. default insurance rose to the highest since March 2009 as American lawmakers called off a vote to increase the debt limit. Yen, Franc Gain on U.S. Debt Limit, Euro Drops on Spain Rating The yen and Swiss franc rose versus most of their currency peers as Moody’s Investors Service said it may cut Spain’s credit ranking and U.S. lawmakers delayed voting on a plan to raise the debt limit to avert a default. Asian Currencies Strengthen This Week on Rising Interest Rates Asian currencies completed a second weekly gain, led by the Philippine peso and India’s rupee, on speculation the region’s growth outlook and rising interest rates will attract foreign funds. European Stocks Retreat as U.S. Lawmakers Cancel Debt-Limit Vote European stocks slid, extending the Stoxx Europe 600 Index’s monthly drop, as U.S. lawmakers called off a vote on a Republican plan for raising the nation’s debt ceiling. Asian shares and U.S. index futures declined. Company Debt in Europe Will Slide to 1996 Low: Chart of the Day European corporate indebtedness will slide to the lowest level in 16 years in 2012, a signal that the two-year-old rally in the region’s stocks will extend its gains, according to Societe Generale SA. Oil Falls, Heads for Weekly Drop, on U.S. Debt Ceiling Dispute Oil fell, headed for the first weekly decline in five, on concern a failure to reach a deal on raising the U.S. debt limit may cause the nation to default, threatening the economy of the world’s biggest crude consumer. House Bids to Salvage Boehner Bill as Aug. 2 Deadline Nears (1) House Republican leaders, four days before a threatened U.S. default and facing stiff resistance within their ranks to raising the U.S. debt ceiling, plan to make a second try at passing legislation that is headed for a Senate roadblock. Berlusconi Survives Confidence Vote as Italian Yields Surge (2) Italian Prime Minister Silvio Berlusconi survived a confidence vote on a bill critics say will help shield him from prosecution, ending a week of turmoil after bond yields rose on speculation Finance Minister Giulio Tremonti may quit. UN Tribunal Reveals Identity of Suspects in Hariri Killing (1) The United Nations tribunal investigating the 2005 killing of former Lebanese Prime Minister Rafiq Hariri eased the confidentiality of its indictment by naming the four men charged in the case. SPORTS: Inter Milan Preparing $65 Million Tevez Bid, Sun Says: Roundup The following is a roundup of soccer stories from U.K. newspapers, with clickable links to the Web. DiBenedetto Group’s Takeover of Roma Club Said to Be Delayed A group of U.S. investors led by Boston Red Sox partner Thomas DiBenedetto and UniCredit SpA will extend the deadline to purchase Italian soccer club AS Roma, according to two people familiar with the matter. Tiger Woods Resumes Pursuit of Nicklaus, Returns at Bridgestone Tiger Woods will return to tournament play at next week’s World Golf Championships event in Ohio, more than two months after withdrawing from the Players championship with knee and ankle injuries. To contact the editor responsible for this story: Stuart Wallace in London at swallace6@bloomberg.net |
2024-06-24 | Bloomberg | Finma Plans Stricter Capital Rules for Insurers, Sonntag Says | Switzerland ’s Financial Market Supervisory Authority plans to introduce stricter capital rules for property and casualty insurers, Der Sonntag reported, citing Rene Schnieper, who heads insurance supervision. It’s not yet clear how much more capital insurers will need, Schnieper said, according to the newspaper. To contact the reporter on this story: Elena Logutenkova in Zurich at elogutenkova@bloomberg.net To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net |
2024-07-25 | Bloomberg | Insurance Bill for Renewables Seen Tripling to $2.8 Billion | Insurance costs for the renewable energy industry may more than triple to $2.8 billion by 2020 as projects become more complex and risky, a report commissioned by Swiss Re Ltd. found. The report by Bloomberg New Energy Finance examined markets for wind and solar power including Australia , China , the U.S and Germany and estimated the industry spends about $850 million a year on insurance now, according a statement from the London-based researcher released today. The increases will be driven by a move by the wind energy industry to generate more power from offshore farms and as more risk-averse investors such as pension funds enter the industry, the report for the world’s second-biggest re-insurer found. Nations from the U.S. to China are seeking to build cleaner power plants to curb air pollution and maintain steady energy supplies with as much as be $2 trillion of renewable power capacity added between now and 2030, BNEF said. Insurers are tapping the growing industry, with Munich Re , the world’s biggest re-insurer, agreeing the first offshore wind turbine insurance in December with REpower Systems SE. “The demand for risk management solutions will grow, partly because the renewable energy sector will simply get bigger, but also because of increasing uncertainty affecting power markets in general,” said Guy Turner , BNEF’s chief economist. As the technologies mature, they’ll need to evolve from one where risks are “taken on the chin” to one with fewer surprises, he said. ’Silver bullet’ Offshore wind turbines in particular require risk management because their revenue may be hurt by unfavorable weather leading to damage and delays, according to BNEF. European nations are leading a push to install machines in the North Sea where winds gust at more than 90 miles (145 kilometers) an hour and waves may top 15 feet (5 meters). As nations seek to wean onshore wind and solar parks off subsidies, they will become exposed to new, market-related risks such as grid constraints and price volatility as they compete in open electricity markets, the researcher said. While developers will manage some risks internally, they’re likely to boost insurance-product use, it said. “Insurance is not a silver bullet,” Juerg Trueb, head of environmental and commodity markets at Swiss Re (SREN) Corporate Solutions, said. “But by mitigating the risk in the construction phase and improving the consistency and surety of revenues during operation, insurance can help improve the return on investment for renewable energy projects,” he said. To contact the reporter on this story: Sally Bakewell in London at sbakewell1@bloomberg.net To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net |
2024-09-28 | Bloomberg | Obama Lawyers Appeal to U.S. High Court on Health-Care Law | President Barack Obama ’s administration asked the U.S. Supreme Court to review last year’s landmark health-care law, a move that may lead to a ruling months before the 2012 presidential election. Calling the issue “a matter of grave national importance,” administration lawyers today appealed a lower court ruling that declared part of the law unconstitutional. Earlier in the day, 26 states filed their own appeal, saying the lower court should have gone further and voided the whole statute, which was championed by Obama. The lower court ruling “is fundamentally flawed and denies Congress the broad deference it is due in enacting laws to address the nation’s most pressing economic problems and set tax policy,” U.S. Solicitor General Donald Verrilli argued in the administration’s appeal. The Supreme Court usually agrees to hear appeals when both sides in a dispute seek a hearing, particularly when the federal government is one of the litigants. The justices often take cases when federal appeals courts are divided on an issue, as they are over the health-care law. “The Supreme Court now effectively has to take the case,” said Gregory Katsas, a lawyer who filed a third appeal today, on behalf of the National Federation of Independent Business , a small-business trade group in Nashville, Tennessee , seeking to invalidate the law. Expanding Coverage A decision is likely to come in late June, at the end of the nine-month term that starts next week, and just as the presidential campaign will become focused on the two party nominees who will face each other in the November election. All eight Republicans seeking the party’s presidential nomination favor repealing the health-care law. The two candidates leading in the polls, Texas Governor Rick Perry and former Massachusetts Governor Mitt Romney, each vowed at a Sept. 12 Republican debate to block the law’s implementation without waiting for Congress to repeal it. The health law would expand coverage to an estimated 32 million Americans who lack insurance, largely through an expansion of the federal-state Medicaid program for the poor and by setting up “exchanges,” in which consumers will be able to buy insurance. The Atlanta-based appeals court ruled in August that Congress lacked the constitutional power to pass a provision that requires people to either get insurance or pay a penalty. The government’s appeal contends that Congress enacted that mandate under its authority to regulate interstate commerce and to impose taxes. Mandate is ‘Integral’ The mandate “is an integral part of a comprehensive regulatory scheme that the commerce power plainly authorizes Congress to enact,” Verrilli argued. The states’ appeal focuses on different aspects of the lower court ruling. The appeals court said it would strike down only the insurance mandate, leaving intact other provisions, including a requirement that insurers accept applicants with pre-existing conditions. There is “compelling evidence that Congress intended the mandate to function as the act’s essential lynchpin and would never have passed the act without it,” said the states’ lead lawyer, former U.S. Solicitor General Paul Clement. The states are also asking the high court to scrutinize the law’s Medicaid expansion, which the appeals court upheld. The states contend that the provision improperly threatens states with the loss of all federal Medicaid funding if they don’t expand coverage. Another Challenge The law “passes the point at which pressure turns into compulsion and achieves forbidden direct regulation of the states,” Clement argued. A different federal appeals court upheld the law in a separate case, and a Michigan public interest law firm is already appealing that ruling to the Supreme Court. The states asked the high court to move quickly to review the Affordable Care Act, as the law is known. “Time is of the essence,” Clement argued. “States need to know whether they must adapt their policies to deal with the brave new world ushered in by the ACA.” The Justice Department in a statement predicted the court would uphold the law. “Throughout history, there have been similar challenges to other landmark legislation such as the Social Security Act , the Civil Rights Act and the Voting Rights Act, and all of those challenges failed,” the Justice Department said. It said challenges to the health-care law “will also ultimately fail.” The federal government’s appeal is U.S. Department of Health and Human Services v. Florida , 11-398. The states’ case is Florida v. U.S. Department of Health and Human Services. To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net |
2024-12-07 | Bloomberg | Extension of U.S. Tax Cuts Will Prompt Congress to Discard Own Budget Law | Congressional Democrats and Republicans are preparing to set aside their budget constraints as they negotiate the extension of income tax cuts scheduled to expire this month. Their plans to declare a budget emergency as they approve the extension of tax cuts will override a “pay-as-you-go” law that was structured to limit Congress’s ability to finance higher spending or tax relief by expanding the budget deficit. Extending all income-tax rates for two years, along with renewal of business tax breaks, relief from the alternative minimum tax and other moves such as expanded unemployment insurance could add about $750 billion to the deficit over the next decade, about $300 billion of which is beyond the deficit- expansion which the “pay-as-you-go” law would allow. For all the campaign-trail rhetoric about deficit reduction and recent attention focused on a bipartisan fiscal commission, Republicans and Democrats alike say the so-called “paygo” law won’t be a procedural or political obstacle to extending all of the tax cuts without offsets in spending. “I never think paygo is out the window, in my own personal view,” said Representative Baron Hill of Indiana, who lost his bid for re-election last month. “But any rate, that’s what’s going to happen.” Hill co-chairs the Blue Dog Coalition, a group of House Democrats that pushed for the law. Required Offsets The paygo law, signed by President Barack Obama on Feb. 12, generally requires that tax cuts or increases in mandatory spending be offset by spending reductions or revenue-raising measures. The law allows Congress to exempt about $1.5 trillion if needed to extend many of the Bush-era tax cuts. Offsets aren’t needed to make the income tax cuts permanent on the first $200,000 of gross income for individuals or the first $250,000 for married couples. Offsets also aren’t needed to prevent the expansion of the alternative minimum tax through 2011 or to extend the 2009 parameters of the estate tax (a $3.5 million per-person exemption and a 45 percent top rate) through 2011. If, over the course of a year, Congress creates additional deficits under the law’s parameters, its enforcement mechanism triggers automatic spending cuts in mandatory programs such as most Medicare payments, farm price supports and social service block grants. The law’s demand for offsets led Democrats to propose measures that were opposed by businesses, including higher per- barrel taxes on oil production and limits on several kinds of foreign tax-credit transactions. Emergency Declarations Still, emergency declarations can be used to exempt particular bills from the law’s enforcement rules. Congress used such declarations this year to pass unemployment-insurance extensions without offsets. Democratic attempts to extend expired tax breaks failed because they were paired with revenue-raising offsets, such as higher taxes on the “carried interest” earned by private equity managers and real estate investors. “That paygo law is just used to increase taxes,” said Senator Orrin Hatch of Utah, who is in line to become the top Republican on the Finance Committee next year. “It doesn’t make a hill of beans what the difference is as far as cutting back on spending and the overregulation that these Democrats have brought to this country.” Spending Side The law also has affected the spending side of the budget. The health-care overhaul, for example, increased spending on insurance for low-income people, and Democrats made it compliant with the paygo law, in part, by reducing future Medicare costs. Historically, budget constraints have worked when they embodied an agreement about how to address fiscal policy, said James Horney , director of federal fiscal policy at the Center on Budget and Policy Priorities. Without that agreement, he said, the pay-as-you-go law is likely to be ignored or waived in the year-end tax bill. “It’s more of a symptom of the lack of consensus about what to do on budgets and deficits,” Horney said. The tax bill that the House passed Dec. 2 complied with the pay-as-you-go law, because it didn’t extend tax cuts on income above the specified thresholds. Senate Republicans have pledged to block that bill because they think tax cuts should be extended for taxpayers at every income level. The main Senate Democratic alternative proposed by Finance Chairman Max Baucus on Dec. 2 features dozens of provisions that violate the pay-as-you-go law. They include a permanent extension of the 2009 estate tax parameters, extension of the “Making Work Pay” tax credit approved by President Barack Obama from the stimulus law and the extension of dozens of provisions favored by businesses such as a research tax credit. Republicans voted unanimously against the pay-as-you-go law earlier this year, and they dismiss it as a Democratic gimmick. Changes Sought Republicans, who will control the House in January, can’t eliminate or change the law without agreement from the Senate and Obama. They are weighing changes to the separate pay-as-you- go rules that the House has adopted, said Representative Greg Walden of Oregon, who is leading the Republican transition team. Republicans complain that the law doesn’t apply to discretionary spending, the main funding vehicle for federal agencies. They also say it ignores the positive economic effects of tax cuts. “The thing about paygo is it was specifically designed by the Democrats to encourage spending and discourage tax reductions,” said John Campbell , a California Republican who sits on the House Budget Committee. “We hate it.” To contact the reporters on this story: Richard Rubin in Washington at rrubin12@bloomberg.net. Peter Cohn in Washington at pcohn@bloomberg.net. Editors: Mark Silva , Robin Meszoly To contact the editor responsible for this story: Mark Silva in Washington at msilva34@bloomberg.net |
2024-01-14 | Bloomberg | KBC to Follow Barclays’s Lead With Contingent Capital Bond Sale | KBC Groep NV (KBC) , Belgium’s biggest bank and insurer by market value, plans to sell high-risk capital bonds similar to Barclays Plc’s recent deal that bankers said garnered more than $17 billion of orders. The 10-year dollar-denominated notes will be written off if KBC has losses that reduce its so-called core Tier 1 capital ratio to 7 percent of assets or lower, according to an investor presentation obtained by Bloomberg News. The Brussels-based lender has capital of 12.7 percent of assets, according to the presentation. Issuers of debt designed to take losses include Rabobank Groep NV, UBS AG, as well as Barclays, which in November sold $3 billion of bonds that will be written off if capital ratios fall to less than 7 percent. Bonds designed to absorb losses prior to a lender’s collapse are a child of the 2008 financial-sector crisis, when debt investors were repaid while taxpayer cash was used to prop up banks to safeguard the wider economy. “The idea is to provide both senior creditors and shareholders with an extra layer of protection and enhance the stability of the bank,” said Paul Smillie, a Singapore-based global banking analyst at Threadneedle Asset Management, which oversees about $45 billion of fixed-income securities. “This is a carbon copy of the Barclays deal.” KBC, which received Belgian bank-rescue funds three times to cushion against declines in the value of collateralized debt obligations and MBIA Inc. (MBI) insurance coverage of credit risk, is raising money to repay its bailouts. Management also has committed to retaining a Tier 1 ratio of at least 10 percent. ‘Divesting Assets’ KBC spokeswoman Viviane Huybrecht didn’t respond to a call seeking comment. “That will make it one of the best-capitalized banks in Europe ,” said Smillie. “KBC has been divesting assets and deleveraging for quite some time now.” By selling the Tier 2 bonds in dollars, KBC can appeal to wealthy Asian investors in Hong Kong and Singapore seeking higher-yielding securities. Standard & Poor’s said today it assigned a BB+ rating, the highest speculative grade, to the proposed securities. The bonds’ equity content is “minimal” and they are designed to allow the lender to continue to operate as a going concern as it seeks to raise money after they are triggered, S&P said. Barclays (BARC) 7.625 percent contingent capital notes received a BBB- rating from S&P, one step higher than the KBC securities, and were priced to yield 604 basis points more than the benchmark Treasury bond. They now yield 537 basis points more than the 1.625 percent Treasury due 2022. To contact the reporter on this story: John Glover in London at johnglover@bloomberg.net To contact the editor responsible for this story: Paul Armstrong at parmstrong10@bloomberg.net |
2024-04-07 | Bloomberg | How Obamacare Will Distort the Health-Care Market | President Barack Obama and his fellow Democrats sold many Americans on the Affordable Care Act largely by emphasizing two arguments: The law would help to reduce overall health-care costs, and it would provide health insurance to those who, for financial or health reasons, cannot get it now. Unfortunately, both of these arguments are flawed. The law creates market distortions that will significantly raise premiums and costs for many Americans -- including some middle- income families. And there are less costly, less distortionary and less intrusive ways to address the problem of the uninsured. Two recent independent and nonpartisan studies help to explain how the law fails in its mission. The first is from the Society of Actuaries, a group representing professionals who measure and manage financial risk. The main conclusion is that individuals and families who purchase their health insurance in the non-group (basically the non-employer-based) market will have to pay higher premiums. This is because the law will increase by 32 percent the costs that insurers must cover for health-care services, the largest driver of health-insurance premiums. The second study , commissioned by Covered California, the California entity responsible for setting up the state’s health- insurance exchange, speaks directly to premium rates. Isolating the impact that market changes caused by the new federal law will have, the study concludes that premiums for Californians will rise by an average of 14 percent. Increases will be most pronounced for those families who currently have health insurance and are making more than $94,000 or so -- for them, premiums may rise by an average of 30 percent. Market Distortions What’s the primary reason for these cost increases? In short, it’s the law’s market distortions. Both studies conclude that because the law requires insurers to provide coverage to all comers -- regardless of their pre-existing health status -- the overall pool of those with health insurance will be sicker and more costly to insure. Public policy sometimes creates market distortions -- as with the minimum wage, for example, or some agricultural subsidies -- and in those cases Americans may believe that the economic costs are outweighed by the societal benefit. But we should make these judgments with our eyes wide open. In the case of health-care reform, there are less expensive and intrusive ways to help cover the uninsured. We can accomplish many of the Affordable Care Act’s stated goals while still addressing the shortcomings of our health-care system. Arguably the most significant problem that the law tries to solve with its massive regulatory edifice is that of the patient with a pre-existing medical condition who is either denied coverage altogether or charged a prohibitively high premium. These are people who generally face hurdles in the transition from employer-based coverage to individually purchased insurance, or who are changing plans in the individual market. It’s a problem that affects as many as 4 million Americans, and it’s one that policy makers ought to solve. The law addresses these concerns primarily through two regulations: as noted earlier, a requirement that insurers provide coverage to anyone who applies, and a prohibition on any variance in premium due to health status. Unfortunately, these rules create the very market distortions that raise consumer costs. Another Way There is another way to solve this problem. State-based, high-risk health-insurance pools can be an effective way of getting those with pre-existing conditions (and therefore high health-care costs) access to affordable health insurance. High-risk pools generally offer a choice of insurance plans, and enrollment in them is limited to those unable to get or afford other coverage. Premiums are capped, and the additional cost of coverage is paid through a variety of sources, such as assessments on insurers or tax revenue. Because high-risk pools are isolated from the broader health-insurance marketplace, they don’t increase premiums for those outside the pool. The challenge with high-risk pools is that they must be properly funded and designed. As the fiscal condition of states has worsened over the past few years, funding for high-risk pools has become even more limited. Three years ago, two conservative scholars estimated that a “comprehensive set of high-risk pool programs” would cost $15 billion to $20 billion per year. That is a small fraction of the new spending the Affordable Care Act creates. The federal government should ensure that state-based, high-risk pools are properly funded, perhaps in the form of block grants to states, which should be regularly reviewed to ensure adequacy. And states should have rules to prevent both insurers and individuals from improperly taking advantage of the high-risk pools. Solutions such as these are far preferable to the Affordable Care Act’s one-size-fits-all approach. Rather than distort the health-insurance marketplace in a way that will increase costs for many Americans, we should focus on reforms that use market forces to reduce costs. Americans should know that there are better ways to bring about health-care reform. (Lanhee Chen is a Bloomberg View columnist and a research fellow at the Hoover Institution at Stanford University. He was the policy director of Mitt Romney ’s 2012 presidential campaign. The opinions expressed are his own.) To contact the writer of this article: Lanhee Chen at lchen301 @bloomberg.net or @lanheechen on Twitter. To contact the editor responsible for this article: Michael Newman at mnewman43@bloomberg.net |
2024-05-28 | Bloomberg | China Yongda Scraps Hong Kong IPO Amid Weak Demand | China Yongda Automobiles Services Holdings Ltd. (3669) canceled plans to raise as much as $430 million in an initial public offering in Hong Kong , two people with knowledge of the matter said. China ’s biggest distributor of BMW cars, which had extended its order-taking process from last week, decided to shelve the offering after failing to get enough demand from investors, said the people, who declined to be identified because the information is private. The Shanghai-based company has to set a final price for the shares no later than today, according to a sale prospectus. Yongda Chairman Cheung Tak On couldn’t be reached for comment at his office. Yongda pursued its IPO at a time when Chinese auto dealerships were struggling to raise funds in the capital markets. China ZhengTong Auto Services Holdings Ltd. (1728) and Baoxin Auto Group Ltd., which operate BMW stores in China, scrapped plans to sell dollar-denominated bonds this month, with Baoxin citing “less attractive” market conditions. “Yongda’s IPO came at a bad time,” said Yao Wei, an analyst with Everbright Securities Co. in Shanghai. “Auto dealers have been burning money on network expansion and have caused market concern over their cash flows.” Hong Kong’s benchmark Hang Seng Index (HSI) is down 11 percent this month on signs that China’s economic slowdown is deepening and Europe ’s debt crisis will worsen. Dow Jones Newswires reported the cancellation of the IPO earlier today. Auto Dealerships Yongda, which operates 66 stores selling mid- to high-end vehicles, is the fourth Chinese auto dealer to try and raise funds in Hong Kong in the past two years. Zhongsheng Group Holdings Ltd. (881) , a Beijing-based distributor of Mercedes-Benz cars, first sold shares in March 2010, followed by ZhengTong Auto and Baoxin Auto. All three stocks have fallen this year, with only Zhongsheng trading above its IPO price. Zhengtong Auto has fallen 40 percent and Baoxin Auto is down 26 percent. Zhongsheng has declined about 10 percent. Hong Kong’s IPO market is set for its slowest first half since 2009. Companies have raised $1.4 billion through initial offerings so far this year, compared with $7.3 billion in the same period in 2011, according to data compiled by Bloomberg. Yongda had planned to use about 50 percent of the net proceeds to finance the opening of new outlets, about 35 percent on acquisitions and the rest to upgrade and expand existing showrooms and for working capital, according to its prospectus. A 10th of the stock offered were shares sold by existing shareholders, it said. Business Risks The company began as a joint venture with a bicycle accessory manufacturer in 1991, before expanding into distributing passenger vehicles a year later. It then started businesses in auto rental and vehicle insurance, and went into sales of pre-owned vehicles. Risks to its business include a reliance on a few major brands for revenue, and competition in China’s dealership industry, Yongda said in the prospectus this month. Growth in the industry is slowing. Chinese vehicle demand in the first four months of the year increased the least since 1998, weighing on automakers from General Motors Co. (GM) to Volkswagen AG (VOW) , which are counting on the nation to offset slumping sales in Europe. The slowing demand is hurting dealerships, whose pileup of unsold cars is threatening to deepen price cuts, according to Su Hui, vice president of the auto market division at the state- backed China Automobile Dealers Association. “Unsold cars are crowding dealer lots in cities from Guangzhou in the south to Xi’an to the west,” Su said in a telephone interview this month. “It’s like a contagious disease that will spread.” Yongda’s sale was arranged by UBS AG and HSBC Holdings Plc. To contact Bloomberg News staff for this story: Fox Hu in Hong Kong at fhu7@bloomberg.net ; Liza Lin in Shanghai at llin15@bloomberg.net ; Tian Ying in Beijing at ytian@bloomberg.net To contact the editor responsible for this story: Mohammed Hadi at mhadi1@bloomberg.net |
2024-07-15 | Bloomberg | Nordea Eclipsing JPMorgan Shows Value of Transparency-Capital Convergence | Jamie Dimon says rules for systemically important global banks that would increase JPMorgan Chase & Co. (JPM) ’s capital requirements by about one-third will hurt profits, investment returns and the U.S. lender’s future growth. Shareholders may see things differently if Stockholm-based Nordea Bank AB (NDA) , Sweden’s largest, is any guide. The four biggest banks in the Nordic region’s dominant economy hold more capital on average than those in the U.S., with common equity equaling 12 percent of their assets as calculated under new regulations, according to data compiled by Bloomberg. That compares with 6.5 percent for the four biggest U.S. banks as estimated by analysts at Nomura Securities International Inc. The Swedish banks also have higher price-to- book values and better investment returns than most U.S. banks. “Dimon and other U.S. banks would be wise to follow the example of the Swedish banks” before regulators impose higher capital rules, Gunther Marder, chief executive officer of the Swedish Shareholders’ Association , which represents about 70,000 investors, said in a phone interview. “Many investors in Sweden appreciate the transparency and higher capital levels of the banks and know that having a lower risk profile will likely lead to a better return over the long term.” Swedish Premium Investors are willing to pay a premium for the more conservatively run Swedish lenders. Nordea, with common equity, or core Tier 1 capital, of 9.7 percent of its risk-weighted assets as calculated under rules agreed to by the Basel Committee on Banking Supervision, has a price-to-book ratio of 1.18. Dimon’s bank, the second-largest U.S. lender, which says its core Tier 1 capital under the new Basel rules is 7.6 percent, is trading at 0.9 times book value, meaning investors believe the lender isn’t worth as much as its stated assets. Nordea’s five-year average return on equity through 2010 is 16 percent compared with 9.3 percent at JPMorgan. The New York- based bank, which has more than twice the assets of Nordea, is considered by analysts one of the strongest and best capitalized U.S. lenders. Howard Opinsky , a spokesman for JPMorgan, declined to comment. Nordea, Svenska Handelsbanken AB (SHBA) , Swedbank AB (SWEDA) and SEB AB, Sweden’s four biggest banks, whose assets are about four times the size of the country’s economy, are trading at an average of 1.25 times book value. Bank of America, based in Charlotte, North Carolina , the largest U.S. bank with $2.3 trillion in total assets and 5.5 percent core Tier 1 capital, according to Nomura estimates, has a price-to-book ratio of 0.48. The average ratio among the top four U.S. banks, which also include Citigroup Inc. (C) and San Francisco-based Wells Fargo & Co. (WFC) , is 0.81, data compiled by Bloomberg show. ‘Well-Capitalized’ “The main reason Swedish banks have a valuation premium is because they are well-capitalized, transparent and the country’s economy is strong with interest rates going up,” said Andreas Hakansson, an analyst at Exane BNP Paribas in Stockholm. Loans in Sweden are increasing, the unemployment rate is 7.9 percent and the economy expanded at 6.5 percent over the 12 months ended March 31 compared with 2.3 percent in the U.S. Dimon, 55, has said that JPMorgan won’t be able to make “an adequate return” on certain products under rules proposed by the Basel committee that would require about 30 systemically important financial institutions to hold core Tier 1 capital of as much as 9.5 percent of total risk-weighted assets, 2.5 percent more than other banks. The JPMorgan CEO told analysts yesterday, after the bank reported its highest half-year profit ever of almost $11 billion, that the company will shed some assets that require higher capital reserves under the new rules. Dimon’s ‘Great Fear’ Speaking at a bank conference in Atlanta last month, the JPMorgan CEO asked Federal Reserve Chairman Ben S. Bernanke whether capital requirements and bank rules have gone too far reining in the banking system and are slowing economic growth. The U.S. unemployment rate rose to 9.2 percent in June, and the S&P/Case-Shiller index of property values in 20 cities showed that home prices slumped in March to their lowest since 2003. “I have a great fear someone’s going to try to write a book in 20 years, and the book is going to talk about all the things that we did in the middle of the crisis to actually slow down recovery,” Dimon said. Bernanke, 57, responded that Dimon’s points are valid and that the Fed lacks the tools to study the net impact of regulatory and market changes over the past three years. ‘Reasonable Level’ Those concerns aren’t shared by Bjorn Wahlroos, chairman of Nordea’s board, who holds a comparable position at Finnish insurer Sampo Oyj (SAMAS) , Nordea’s largest shareholder. A core capital ratio of 10 percent is a “reasonable level,” he said. “After the exercise with the financial crisis, there’s one big thing to be learned: The system needs more capital and more transparency,” Wahlroos, 58, said in an interview in his office in Helsinki. “We all need to move in that direction.” Regulators in Sweden are pushing for its banks to hold more core capital than global rivals. The country’s financial watchdog wants the four main banks to have a core Tier 1 capital ratio of between at least 10 percent and 12 percent. Stefan Ingves, the central bank governor, has said Sweden should consider tougher rules than those set by the Basel committee and push the changes through faster than the 2019 deadline. Swedish banks have invested in what many say are less risky assets. U.S. banks applied an average risk-weighting of 69 percent to their assets compared with 41 percent for Europe, Citigroup analysts led by Kinner Lakhani said in a June 20 report. The average risk-weighting among Swedish banks was less than 20 percent, according to a Nomura report last month. The only developed country with higher average risk-weightings than the U.S. is Russia, where the figure is more than 95 percent, Nomura said. Different Standards The high number for the U.S. could mean that bank balance sheets are riskier or that lenders are doing a better job assessing risk, said Brian Foran, a Nomura analyst in New York. Residential mortgages held by banks have a risk-weighting of 50 percent in the U.S., according to the Federal Deposit Insurance Corp. That means lenders will have to hold at least 3.5 cents of capital against every $1 in whole loans. At Stockholm-based Swedbank, Sweden’s largest mortgage lender, the average risk-weighting on home loans was 8 percent in the first quarter, while Handelsbanken had an average risk-weighting of 5.2 percent, according to company filings. “One of the questions you often get from investors in Europe is: Are the Nordic banks really the best-capitalized banks in the world, or do they just have risk-weightings on their assets that are too low?” Foran said. U.S. banks are currently held to Basel I capital standards because the country opted out of Basel II rules adopted by other countries in 2004. That means U.S. lenders use a standardized system for calculating capital needs in which asset types are assigned specific weightings, ranging from zero for lending to the U.S. government to 100 for derivative products. ‘Data Cleansing’ European banks have more flexibility to determine risk- weightings. HSBC Holdings Plc (HSBA) , Europe’s biggest bank, was able to lower its capital requirements by reassessing the treatment of outstanding derivatives contracts. Under international accounting rules, banks have to hold extra capital against such contracts that aren’t fully hedged, and they can’t hedge their contracts without good data. The London-based bank was able to make “significant risk- weight asset savings” through “data cleansing,” Iain Mackay, HSBC’s finance director, said at an investor meeting last month. “It’s not transparent to anybody outside whether the model is as good as it could be and, therefore, the capital weighting is right,” Chairman Douglas Flint said at the May 11 meeting. ‘Standard and Fair’ That’s a statement Dimon would agree with. “What’s not transparent is the calculation of risk- weighted assets” under international accounting rules, Dimon said at a March 30 event in Washington. “Equivalent banks overseas -- adjusting for differences in accounting -- it comes to like half of our risk-weighted assets. The regulators have said they’re going to try to make sure it’s standard and fair, and I’ll take their word on that, but it’s just one more thing we have to keep an eye on.” Swedish banks have made an effort to be transparent about how they judge and calculate risk-weighted assets, said Hakansson of Exane BNP Paribas. “This is exactly the type of detailed information the market needs to have a view on how capital ratios are calculated, and you really don’t get this level of detail with most European banks,” Hakansson said. Increased Transparency Sweden has pushed for increased transparency for years. Ingves, named chairman of the Basel committee last month, oversaw the Swedish central bank’s move to issue forecasts of what level it expects the benchmark interest rate to be over a three-year period. “An individual depositor or investor just cannot judge what’s going on inside a bank on his or her own,” Ingves said in an interview in Stockholm. “By having transparent systems in place you have many, many people looking at what’s going on and that makes the system safer for everybody.” The drive for transparency and stricter capital rules is a legacy of past Swedish banking crises. In the early 1990s, the collapse of an overheated property market triggered bank losses that led to a government rescue. Nordbanken and Gota Bank were nationalized and merged in 1993 to create Nordea in a state- engineered restructuring. Lehman ‘Eye-Opener’ A property-market crash in the Baltic region following the bankruptcy of Lehman Brothers Holdings Inc. in September 2008 and a global credit squeeze led to further losses. Swedbank, the biggest lender in the Baltics, was hit hardest and posted losses in all quarters of 2009. It relied on government guarantees for funding until July 2009 and raised 27.5 billion kronor ($4.17 billion) in two rights offerings to replenish capital. “The fall of Lehman was an eye-opener for everybody,” Swedbank CEO Michael Wolf said in an interview. “We’re much more conscious of how important being properly capitalized is, and I’m sure our shareholders appreciate this.” That may explain why Swedish lenders have largely escaped the sovereign-debt crisis that has plagued so many European rivals. Nordea said it holds no Portuguese, Italian, Irish, Greek or Spanish sovereign debt. “We are very down-to-earth, and we like to know where the money is,” said Wahlroos, the Nordea chairman. “Nobody is going to sell on projected cash flow and its volatility or whatever the parameters are used to describe a structured- finance product.” Insuring Debt Confidence in Swedish banks means it’s cheaper to insure debt than for U.S. financial companies. The cost of protecting Handelsbanken debt is the second- lowest in the world among 196 banks tracked by Bloomberg at 68.1 basis points, compared with 89.4 for JPMorgan. The average for U.S. banks is 131.3. A basis point is one-hundredth of a percent, and each additional point means an extra $1,000 a year to protect $10 million of debt for five years. The comparable figure for Nordea debt is 96.2, higher than for JPMorgan. While Nordea has a higher price-to-book ratio than JPMorgan, its shares have slumped 12 percent this year, exceeding JPMorgan’s 4.9 percent decline. The government has been selling shares in Nordea as part of a plan to divest its entire stake in the bank and generate cash to pay down state debt. Sweden owns about 13.4 percent of Nordea, a holding valued at about 36 billion kronor. It sold 6.3 percent in February. Handelsbanken’s shares have fallen 13 percent this year and SEB’s 17 percent, while Swedbank is up 7.3 percent. The 24- member KBW Bank Index is down 11 percent. “Because the macro environment is better in Sweden, I would say that the essential fitness of the individual banks is also better,” Luis Maglanoc, the global head of credit research at UniCredit SpA in Munich said. “The challenges of the financial crisis are practically over for Sweden.” To contact the reporters on this story: Adam Ewing in Stockholm at aewing5@bloomberg.net ; Dawn Kopecki in New York at dkopecki@bloomberg.net. To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net ; |
2024-10-11 | Bloomberg | ING Agrees to Sell Malaysia Unit to AIA Group | AIA Group Ltd. (1299) , the third-largest Asia-based insurer, agreed to buy ING Groep NV (INGA) ’s insurance business in Malaysia for about 1.3 billion euros ($1.7 billion) in its largest acquisition as a listed company. The purchase will boost the percentage of profit AIA gets from Malaysia to 13 percent from 8 percent, it said in a statement. Separately, AIA said its value of new business rose 22 percent in the third quarter to a record $300 million. “The deal may add around 5 percent to AIA’s earnings per share and shift its business to a higher-growth region,” Arjan van Veen, a Hong Kong-based analyst at Credit Suisse Group AG, said in an e-mail response to Bloomberg. AIA’s value of new business growth in the third quarter well exceeded the consensus analyst estimate of 12 percent, according to van Veen. AIA Chief Executive Officer Mark Tucker has sought to revive new business growth after the Hong Kong-based insurer was hurt during the financial crisis because of woes at its bailed- out former parent American International Group Inc. (AIG) Tucker today said the strength of AIA’s balance sheet means it can grow its existing business as well as buy new assets. “This is a rare opportunity to acquire a high-quality company,” Tucker said in a conference call with wire services reporters today. “It’s an excellent strategic fit for AIA.” The acquisition will combine ING’s operations, the third- largest in Malaysia, and AIA’s existing business, the fourth biggest, to create the No. 1 life insurer in the country, according to the statement. Still Looking AIA has the capability of paying for the acquisition with any combination of internal cash and debt with the specific mix to be decided closer to the completion date, Tucker said. AIA, which has no debt before the acquisition, will remain financially strong afterwards, he added. The Malaysian acquisition was both rare in size and quality, Tucker said, adding AIA will continue to look at acquisitions that are both strategically and financially compelling. The purchase includes ING’s life-insurance and employee- benefits businesses in Malaysia, as well as its 60 percent stake in ING Public Takaful Ehsan Berhad. The deal values the operations at 16.9 times 2011 earnings and 2.2 times book value in the first half of 2012, ING said. The deal values the Malaysian business at 1.8 times of its 2011 embedded value, Tucker said, declining to give forward- looking data because of Hong Kong stock exchange restrictions. Embedded value is an actuarial estimate of the economic value of life insurance business. ING Gain AIA, which went public two years ago in Hong Kong’s biggest initial public offering, ended the day unchanged at HK$29.60 in Hong Kong trading today, keeping this year’s gains at 22 percent. ING lost 0.2 percent to 6.38 euros in Amsterdam yesterday. The transaction, which may be completed in the first quarter, is expected to lead to a gain of about 780 million euros, Amsterdam-based ING said. AIA is in talks with the Malaysian regulator, Tucker said on the call in answer to a question regarding whether the deal would meet obstacles in a country which restricts 100 percent foreign ownership of life insurance companies. There are no current regulatory hurdles preventing the acquisition, Ng Keng Hooi, AIA regional CEO in charge of Taiwan , Malaysia, Singapore , China and Brunei, said during a press conference in Kuala Lumpur today. Last month, AIA agreed to pay $109 million to buy 92 percent of Aviva NDB Insurance Plc (CTCE) , Sri Lanka ’s second-largest life insurer, from London-based Aviva Plc (AV/) and National Development Bank. AIA’s existing Malaysian operations accounted for about 6 percent of new business value in the six months to May 31, according to a statement on July 27. That will rise to 10 percent if the takeover succeeds, it said today. Sale Requirement AIA’s market share will double to 25 percent in the country, which the insurer described as one of Southeast Asia ’s most attractive and fast growing life assurance markets. Credit Suisse analysts raised AIA’s 12-month price target to HK$33 from HK$32 and kept the outperform rating for the stock, citing the acquisition and third-quarter new business trends. Deutsche Bank AG, Morgan Stanley, Evercore Partners Inc. and CIMB Group Holdings Bhd. advised AIA on the transaction. Debevoise & Plimpton LLP is the legal adviser to the firm, AIA said in a stock exchange statement today. AIA received a $1.73 billion 12-month bridge loan from eight banks to help fund the purchase, according to a person familiar with the matter. The banks, which will fund the facility in equal amounts, are Australia & New Zealand Banking Group Ltd., BNP Paribas SA, DBS Group Holdings Ltd., Deutsche Bank, HSBC Holdings Plc, JPMorgan Chase & Co., Morgan Stanley and Standard Chartered Plc, the person said, asking not to be identified because the details are private. ‘Major Step’ ING is required to sell its insurance and investment- management businesses before the end of 2013 after getting 10 billion euros of state aid during the financial crisis. While executing the imposed divestment program, it’s also selling banking assets to help speed up repayment of a remaining 3 billion euros with premiums. “Today’s announcement is the first major step in the divestment of our Asian insurance and investment management businesses and shows that ING continues to make steady progress in the restructuring of our company,” Chief Executive Officer Jan Hommen said in a statement. In the last six weeks, ING announced an agreement to sell its Canadian online bank for $3.16 billion, its U.K. Internet business and a 33 percent stake in China Merchants Fund, an investment management joint venture. The firm also raised about $3 billion last month by selling 54 million shares of McLean, Virginia-based Capital One Financial Corp. (COF) Earnings Boost ING’s Asian insurance and asset-management business had a combined book value of 6.6 billion euros, the bank said on Sept. 27. The company’s operations in the region include emerging markets such as Malaysia, where rising incomes are fueling demand, and Japan , which is grappling with deflation and an aging population. AIA’s gauge of projected future profitability of new policies increased to $300 million from $245 million a year earlier, overcoming depreciating Asian currencies, the insurer which sells policies in local currencies yet reports earnings in dollars said in a separate statement to Hong Kong’s stock exchange today. Underlying annualized new premium, the sum of first-year premiums and 10 percent of single premiums, grew 17 percent to $696 million, from $594 million a year ago. New business margin, measured by value of new business as a percentage of annualized new premium, widened by 11 percentage points to 42.6 percent, the fourth straight quarter above 40 percent. “Given the significant improvement in overall margin over the last 12 months, there’s a concern that margins could be peaking for AIA,” Morgan Stanley analysts led by Ben Lin wrote in an Oct. 4 note. “In our recent meetings with investors, some raised the view that they would like to see the growth composition shift more toward volume growth and less on margin expansion.” To contact the reporters on this story: Cathy Chan in Hong Kong at kchan14@bloomberg.net ; Maud van Gaal in Amsterdam at mvangaal@bloomberg.net To contact the editors responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net ; Frank Connelly at fconnelly@bloomberg.net |
2024-11-19 | Bloomberg | AIG Opts Against Contesting Systemic-Risk Designation | American International Group Inc. (AIG) , the first non-bank to disclose it’s under consideration to be labeled a potential risk to the financial system, said it won’t contest such a designation, which could lead to tighter capital rules. “In fact, we welcome supervision by the Federal Reserve,” Chief Executive Officer Robert Benmosche said in a Nov. 1 letter to the office of the Financial Stability Oversight Council. Federal regulators are evaluating which non-banks should be subject to additional oversight as systemically important financial institutions to prevent a repeat of the bailouts that were undertaken in 2008 to stabilize the economy. Benmosche has scaled back risk and sought to assure investors, clients and regulators that AIG is better able to weather a downturn. “AIG today is remarkably smaller in size, far less complex, and operates with a markedly improved risk profile compared to 2008,” Benmosche said in the letter. “We have had extraordinary success in de-risking our business.” AIG received a rescue in 2008 that swelled to $182.3 billion to prevent the firm from collapsing amid the financial crisis. The New York-based insurer is still 16 percent owned by the U.S., which has recouped the cost of the bailout. Jim Ankner, a spokesman for the insurer, declined to comment. Prudential Financial Inc. (PRU) , the second-largest U.S. life insurer, and General Electric Co.’s finance arm are also under review to be designated systemically important. The oversight council can still consider other companies. MetLife, Prudential MetLife Inc. (MET) , the largest U.S. life insurer, is already regulated by the Fed because it owns a deposit-taking institution. It’s seeking to exit banking to end the oversight, and could be named a non-bank SIFI after exiting the industry. Neither MetLife nor Prudential received funds from the Treasury’s Troubled Asset Relief Program. Benmosche said in the letter that oversight should be tailored to insurance companies and take account of state regulation of insurers that’s already in place. It’s not clear what capital requirements the Fed may impose, David Herzog, AIG’s chief financial officer, said on a Nov. 2 conference call. Prudential is having “really constructive dialogue with our regulators around the significant differences between insurance and banks,” CFO Richard Carbone said on a Nov. 8 conference call with analysts. “Unfortunately, we can’t predict the outcome on the regulatory front, particularly around the nonbank SIFI impact.” The oversight council was created in the aftermath of the crisis under the Dodd-Frank law and evaluates leverage and derivative liabilities of firms with more than $50 billion in assets. Bank holding companies with more than $50 billion in assets -- including Bank of America Corp., JPMorgan Chase & Co., Morgan Stanley, Goldman Sachs Group Inc., Wells Fargo & Co. and Citigroup Inc. -- are automatically subject to heightened Fed supervision under Dodd-Frank. To contact the reporters on this story: Zachary Tracer in New York at ztracer1@bloomebrg.net ; Cheyenne Hopkins in Washington at chopkins19@bloomberg.net To contact the editors responsible for this story: Dan Kraut at dkraut2@bloomberg.net ; Maura Reynolds at mreynolds34@bloomberg.net |
2024-02-28 | Bloomberg | Obama’s Nominee Battle a One-Man Fight By Freshman Senator Lee | Never in his brief U.S. Senate career has Mike Lee , a Tea-Party backed freshman from Utah, attracted such attention. In the past month, he was the subject of the president’s weekly radio address, testified before a House panel and appeared on television news programs five times. Lee, a Republican, is the only senator fighting confirmation of all of President Barack Obama’s executive and judicial nominees, after the president angered party members by appointing officials while Congress was on a holiday break. Through his Jan. 4 action, Obama bypassed Senate confirmation of his choices and installed the first U.S. consumer financial watchdog, a position Republicans want to abolish. He also appointed three members to the National Labor Relations Board. “I can’t and won’t simply pretend as if nothing has changed,” Lee, a 40-year-old lawyer elected in November 2010, said in an interview. “Something has fundamentally changed in the balance of power between the president and the Senate. And he has shown a certain disrespect for our confirmation prerogative.” As Republicans seek to take control of the Senate in the November election, Lee might end up posing more of a challenge to his party than to the Democratic president. Obama is accusing Republicans of obstructionism, playing off record-low congressional approval ratings. The question is whether other Republicans will join Lee or hold back and let him promote himself as a champion to the party’s right wing. Low Approval “Given the low approval ratings for Congress, there’s some risk,” said Julian Zelizer , a history professor at Princeton University in New Jersey. “More obstruction can actually backfire” for Republicans, he said. A Feb. 2-5 nationwide Gallup poll of 1,029 adults showed public approval of Congress fell to 10 percent, a record low. Lee said he’ll do everything he can to oppose Obama’s nominees, though any senator’s ability to stop confirmation is limited. He can deny Democrats the unanimous consent agreements needed to speed up floor votes on nominations and can place “holds” on them. As a member of the Judiciary Committee, he also can slow the advancement of nominees through the panel. The Constitution allows the president to make appointments without Senate confirmation when the chamber is in recess. Republicans maintain that Obama’s appointment of Richard Cordray as director of the Consumer Financial Protection Bureau and three members to the labor relations board were unlawful because the Senate held brief sessions every three days during the holiday break. FDIC, FTC Officials The Senate has confirmed four district court judges and one appellate judge since reconvening in late January. Other pending confirmations include the U.S. comptroller of the currency, the chairman and vice chairman of the Federal Deposit Insurance Corp. and two Federal Trade Commission members. So far, Republican leaders are supporting Lee’s right to react as he wishes though they aren’t joining him in seeking to block all nominees. Senator John Cornyn of Texas , chairman of the National Republican Senatorial Committee , said the party is trying to find a “measured and appropriate” response to the appointments and shouldn’t play into the president’s narrative. Obama reacted quickly after Lee took the Senate floor Jan. 26 to say he would resist confirmations unless the president would rescind his recess appointments. “‘We were sent here to serve the American people,” the president said two days later in his weekly national radio address. “They deserve better than gridlock and games. One senator gumming up the works for the whole country is certainly not what our founding fathers envisioned.” Clerk to Alito Lee is a former law clerk to Supreme Court Justice Samuel Alito and counsel to former Utah Governor Jon Huntsman. Lee won his Senate seat after Tea Party support helped him defeat three- term Republican Robert Bennett at a state party convention. His father, Rex Lee, was U.S. solicitor general under President Ronald Reagan and the founding dean of Brigham Young University’s law school. Lee’s older brother, Thomas Lee , was appointed to the Utah Supreme Court in 2010. Rex Lee argued 59 cases before the U.S. Supreme Court (1000L) , and Mike Lee said attending argument sessions beginning at age 10 inspired his interest in government. While Lee grew up mostly in Provo, he lived for several years in McLean, Virginia , three doors down from Democratic Senator Robert Byrd of West Virginia. Lee’s Mormon family’s monthly “home teacher” was Senate Majority Leader Harry Reid, a Nevada Democrat and fellow Mormon who was a House member at the time. Lee was close friends with Reid’s son, Josh, and spent plenty of time at the Reid household, he said. ‘First Democrats’ “They were probably the first Democrats I ever knew really well,” he said. Lee said he learned from the Reids that “if I was going to tout the virtues of Ronald Reagan and my admiration of him, I had to be prepared to defend myself.” Lee is working to boost his clout in conservative circles in a way similar to Republican Senator Jim DeMint of South Carolina , whose political action committee helped bankroll Tea Party candidates in 2010. Lee’s Constitutional Conservatives Fund raised $31,260 at the end of last year, compared with the $4.36 million DeMint’s PAC brought in. In October, Lee asked the Federal Election Commission to let his PAC create a separate super-PAC to take unlimited donations from corporations, unions and individuals. The FEC unanimously rejected his request on grounds that federal law bars unlimited giving to federal candidates. ‘Progressive’ Constitution Critics say that’s not his only overreach. Doug Kendall , president of the Constitutional Accountability Center, a Washington group that calls the Constitution a “progressive” document, said Lee highlights portions that support his philosophy while seeking to alter or reinterpret elsewhere in the document. Kendall pointed to Lee’s push last year to bar automatic U.S. citizenship to babies born in this country when their parents are illegal immigrants. “His muscular, if completely erroneous, assertion of constitutional support for the Tea Party’s agenda has made him a hero in conservative political circles,” Kendall said. “His very career has depended upon politicizing the Constitution.” Sal Russo, political director of the Tea Party Express, disagreed. “He’s willing to stand up against the tide, and do the right thing and say the right thing, even if in the short run it might not be politically popular,” Russo said. ‘Cannot Go Unchecked’ Since calling for a confirmation battle, Lee has appeared twice on CNN and Fox News , and once on Fox Business, to discuss his stance. He testified Feb. 1 before the House Oversight and Government Reform Committee, saying Obama’s assertion of power “cannot go unchecked.” Lee’s Senate Republican colleagues are more circumspect about nominations. “What I’d like to do is consider each appointment on its merits,” said Senator Richard Shelby, the top Republican on the Banking Committee, which will consider two Federal Reserve Board nominees. Some Republican senators up for re-election in November have distanced themselves. “That’s not something I would do,” said Senator Scott Brown , a Massachusetts Republican, of Lee’s quest to block confirmations. Senator Richard Lugar, an Indiana Republican who faces a primary challenge from a Tea Party-backed rival, declined to discuss Lee’s actions. Instead, he praised a decision by Senate Republican leaders to file a friend-of-the-court brief supporting a lawsuit that challenges the recess appointments to the labor board. Reid said Feb. 17 he will urge Obama to make more than 50 executive-branch recess appointments unless the Senate takes “significant action” to advance nominations before an April recess. In an interview, Reid warned of election-year repercussions if other Republicans follow the freshman senator. “I think it’s the worst time for the Republicans to be talking about stopping things,” the majority leader said. To contact the reporter on this story: Laura Litvan in Washington at llitvan@bloomberg.net To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net |
2024-06-25 | Bloomberg | Conrad Black Must Return to Prison After New 3 1/2-Year Sentence Imposed | Conrad Black , the former Hollinger International Inc. chairman and chief executive officer, was resentenced for mail fraud and obstructing justice and must spend another year in prison. A new sentence of 3 1/2 years, for the surviving convictions from his 2007 trial, was imposed yesterday by U.S. District Judge Amy J. St. Eve in Chicago. Black will get credit for 29 months already served, a Justice Department spokesman, Randall Samborn , said after the hearing. “I have always tried to take success like a gentleman and disappointment like a man,” Black told St. Eve before she imposed the sentence. “I accept that a reasonable person could conclude that I am guilty,” he said, adding he also believed the same reasonable person could conclude he had been “adequately punished.” This was the second time Black, 66, faced punishment at the federal courthouse since being convicted for his role in the theft of $6.1 million from the Chicago-based newspaper publishing company now known as the Sun-Times Media Group Inc. (SUTMQ) His wife, Barbara Amiel, appeared to faint when the sentence was passed and was helped from the courtroom. The couple left together later. No date was set for Black to report to prison. He may face deportation following his prison term. 2007 Sentence St. Eve sentenced Black to 78 months in prison in December 2007. He served from March 2008 to July 2010 before being freed on bail while pursuing appeals. An appellate court last year threw out two of three mail fraud convictions after the Supreme Court told it to consider whether they conformed to a recent high court decision. The Supreme Court last month declined to consider Black’s challenge to the appellate ruling that let stand the final two convictions. Prosecutors had asked the judge to reinstate the original 78-month term, arguing that his obstruction conviction, which stemmed from his unlawful removal of documents sought by the U.S. government from his Toronto office, remained undisturbed throughout the appellate process. St. Eve in 2007 imposed the full 6 1/2-year term for that count, with five-year sentences for each fraud conviction set to run concurrently with the obstruction punishment. “I still scratch my head as to why you engaged in this conduct,” St. Eve said yesterday before pronouncing sentence. “Nobody is above the law, including you,” she told Black. Time Already Served Black’s lawyers on May 13 filed a 50-page presentencing brief in which they extolled his behavior in prison and said his punishment should be reduced to the time already served. A published author of biographies of U.S. presidents Richard M. Nixon and Franklin D. Roosevelt , Black served as a tutor and mentor to his fellow inmates while at the low-security Coleman Federal Correctional Institution. Defense attorney Carolyn Gurland yesterday called his efforts there “nothing less than extraordinary.” Prosecutor Julie Porter countered that Black is “a corporate CEO who stole from the company and obstructed justice,” and that Black still stands convicted of two crimes. “Defendant’s conduct at Coleman, whatever it was, does not undo the crimes that were committed,” she said. Hollinger International was once the world’s third-biggest publisher of English-language newspapers. Its publications included the U.K.’s Daily Telegraph , Canada ’s National Post and the Jerusalem Post. Forced to Resign The Montreal-born Black served as the company’s chairman and CEO from 1995 to 2003. In November 2003, amid allegations of corruption, he was forced to resign as CEO and was fired as chairman two months later. “His small group of students soon swelled into nearly every one of the Vocational Training Division’s General Equivalency Degree (GED) candidates,” according to his attorneys’ court filing. “Mr. Black estimates that he tutored more than 100 student inmates over the course of approximately 28 months.” Letters written on his behalf demonstrate “the impact Mr. Black had on the students he encountered was nothing less than astounding,” his lawyers said. “I don’t think it’s possible to conclude that justice would be done by sending him back to jail, even for a short time,” defense attorney Miguel Estrada said yesterday. Contributions Challenged Prosecutors maintained that Black hasn’t accepted responsibility for his crimes. The government also submitted affidavits challenging the defense team’s account of Black’s contributions in prison. “Black was one of three tutors assigned to my class,” said Carrie DeLaGarza, a Coleman prison-education specialist. “He did perform tutoring as he was assigned to do. I would not say, however, that Black went above and beyond what was expected of him in his job or impacted the program any differently than other tutors.” Yesterday she said that in light of the multitude of letters she’d received from Black’s fellow prisoners, she wouldn’t rely upon DeLaGarza’s account. Black and four other men were accused of stealing from Hollinger as they engineered the company’s sale of $3 billion in assets between 1998 and 2001. Counts Vacated The appeals court decision vacated two counts stemming from the alleged theft of $5.5 million by Black and three co- defendants, leaving intact jurors’ finding that Black and the other collaborated to take $600,000. Black’s share of that money was $285,000 his lawyers said yesterday. Prosecutors elected to not retry the defendants on those counts for which their convictions were thrown out. F. David Radler, the company’s former chief operating officer, pleaded guilty to fraud, agreed to cooperate with U.S. prosecutors and testified for them at the four-monthlong trial. Radler, who was sentenced to 29 months in prison, was later transferred to Canadian custody, served 10 months and gained parole in December 2008. St. Eve had said earlier that federal sentencing guidelines supported a term of 4 1/3 years to 5 1/3 years for Black. “I do believe in the confession and repentance of misconduct,” Black said as he addressed St. Eve yesterday, adding that he wasn’t without remorse. “I regret a great many things in this sequence of events.” Still, the silver-haired former CEO, whose lawyers said suffers from high blood pressure , high cholesterol and a heart arrhythmia, maintained his innocence. ‘Substantial Disintegration’ He criticized prosecutors for what he described an unwillingness to admit the “substantial disintegration” of their case against him. Black said he’d have to have been “barking mad” to have removed 13 cartons of documents from his office in full view of security cameras he’d installed, as prosecutors allege, in lieu of spiriting out incriminating documents in his briefcase. “I am a seeker of justice,” he told St. Eve. “I do ask for the avoidance of injustice which now lies entirely with your gift.” The case is U.S. v. Black, 05-cr-00727, U.S. District Court, Northern District of Illinois ( Chicago ). To contact the reporter on this story: Andrew Harris in Chicago at aharris16@bloomberg.net To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net |
2024-05-15 | Bloomberg | Carlyle’s Rubenstein Seeks to Raise Funds for Deal Pickup | Carlyle Group LP (CG) , the world’s second- largest private equity firm, plans to raise 11 funds this year to seize on a reviving deal-making market, the firm’s co-chief executive officer said. Carlyle raised $2 billion during the first quarter, David Rubenstein said today in a conference call to discuss first- quarter earnings. Carlyle, based in Washington , had $39.9 billion in dry powder, or committed funds that haven’t been invested, as of March 31. “This is a fantastic time to make investments,” William Conway , the firm’s other co-CEO, said on the call. “It is precisely in times like this, when economic data and markets are sending confusing signals, that the best investments can be made.” Larger competitor Blackstone Group LP (BX) is in the market with its latest real estate fund and KKR & Co. (KKR) , led by Henry Kravis and George Roberts , is gathering its next North American private-equity fund. Carlyle is targeting $10 billion for its own flagship North American fund and is pursuing its fourth Asian buyout fund, adding to the 89 funds it already manages. Rubenstein and Conway, who created Carlyle in 1987 with Daniel D’Aniello , are betting those funds will presage a rebound in deal-making. Announced private-equity transactions in the first quarter dropped 41 percent from a year earlier to $53.9 billion, according to data compiled by Bloomberg. Carlyle’s earnings rely on its ability to buy and sell companies, a process that generates income from both managing money and so-called performance fees tied to the profits of successful sales. Profit Falls 26% In its first quarterly earnings report, Carlyle said profit in the first three months fell 26 percent as performance fees declined from a year earlier. Economic net income, a measure of profit excluding some costs, declined to $392 million from $533 million a year ago, according to the statement. Performance fees fell 27 percent to about $632 million from a year earlier, when Carlyle sold $1.8 billion of shares of China Pacific Insurance Group Co. Fee-earning assets rose 5 percent since Dec. 31 to $117 billion as total assets under management climbed 8 percent to about $159 billion. Blackstone, the largest private-equity firm, oversees about $190 billion. The value of Carlyle’s fund portfolio gained 9 percent in the quarter, compared with 4.9 percent at Blackstone. New York- based Blackstone last month said profit fell 24 percent to $432 million as the slower gain in the value of its holdings hurt performance fees. Post-IPO Declines Carlyle joined the ranks of publicly traded private-equity firms this month, raising $671 million in its initial share sale, pricing below the marketed range to win investors wary of the track record of publicly traded buyout firms. The stock has declined 4 percent from the $22 offering price, rising 0.4 percent to $21.12 at the close of trading today in New York. All publicly traded U.S. buyout firms have fallen below their IPO prices, with Blackstone down 61 percent from its 2007 debut, Fortress Investment Group LLC (FIG) losing 82 percent and Apollo Global Management LLC (APO) declining 39 percent. “We firmly believe Carlyle’s status as a public company will strengthen our capabilities,” Rubenstein said today. “No doubt as a public company there will be times when we face challenges, just as there will be times when we see considerable opportunities.” Distributions to Clients Carlyle said it returned $2.3 billion to fund investors in the quarter and is set to return $1.5 billion more. Distributable earnings were $179 million, down 37 percent from a record $284 million a year earlier, while earnings for the 12 months ended March 31 were $759 million, up 36 percent from the previous 12 months. Taking into account changes related to the IPO, after-tax distributable earnings were 57 cents a share. Private-equity firms pool investor money to buy companies, using mostly debt, with the intention of selling them or taking them public later for a profit. They typically charge an annual management fee of 1.5 percent to 2 percent of committed funds and keep 15 to 20 percent of profit from investments. To contact the reporters on this story: Devin Banerjee in New York at dbanerjee2@bloomberg.net ; Jason Kelly in New York at jkelly14@bloomberg.net To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net |
2024-05-23 | Bloomberg | Toronto-Dominion Profit Rises on U.S. Lending Business | Toronto-Dominion Bank (TD) , the first Canadian lender to report second-quarter results, said profit rose 1.8 percent on record earnings from U.S. consumer lending. Net income for the period ended April 30 climbed to C$1.72 billion ($1.67 billion), or C$1.78 a share, from C$1.69 billion, or C$1.78, a year earlier, the Toronto-based bank said today in a statement. Revenue rose 4.3 percent to C$6 billion. U.S. consumer banking profit jumped 12 percent as lending growth there topped domestic gains, Toronto-Dominion said. The firm now has more bank branches in the U.S. than in Canada. Earnings from investment banking also rose, boosted by trading. “We’ve had consistently strong volume growth in the United States and for some time now the U.S. has outpaced Canada ,” Chief Financial Officer Colleen Johnston said in a telephone interview. “We’re seeing fundamentals strengthen in the United States versus our expectations.” Adjusted earnings, which exclude some items, were C$1.90 a share, missing the C$1.91 average estimate of 13 analysts surveyed by Bloomberg. “A solid quarter, but little to get excited about in terms of a step-up in valuation or drastically improved outlook,” John Aiken, a Barclays Plc analyst, said today in a note. Toronto-Dominion, Canada’s second-largest lender by assets, fell 0.5 percent to close at C$83.65 in Toronto. The shares have declined 0.1 percent this year, trailing the 2.5 percent gain of the eight-company Standard & Poor’s/TSX Banks Index. Low Expectations “Expectations in my view are relatively low for the Canadian banks,” said Ian Nakamoto , director of research at MacDougall MacDougall & MacTier Inc. in Toronto, which manages about C$4 billion including bank stocks. “The housing market continues to weigh on investors’ expectations.” Toronto-Dominion said it plans to buy back as many as 12 million shares, or 1.3 percent of its outstanding stock, starting in June. It’s the first buyback for the bank in almost seven years. “We’re now in the position where we can start thinking about capital deployment,” Johnston said. The lender set aside C$417 million for bad loans, up from C$388 million a year earlier. U.S. Earnings U.S. consumer banking earnings jumped to C$398 million and domestic banking profit rose 4.8 percent to C$847 million, Toronto-Dominion said. Wholesale banking increased 12 percent to C$220 million. Profit from wealth management and insurance was C$364 million, compared with C$365 million a year earlier. Toronto-Dominion still expects Canadian personal and commercial banking earnings to grow 7 percent to 10 percent this year, even with slowing loan growth and low interest rates, Johnston said. “We continue to face headwinds from slower loan growth in Canada and lower interest rates globally,” Chief Executive Officer Ed Clark said today in a conference call. Government efforts to cool housing are helping reduce risks of a major drop in prices, he said. “Given the structure of Canadian lending, Canadians do not need to worry that we will see the type of meltdown that has occurred in other countries,” Clark said. “We may see a softening of prices, but this would be a good thing, not a prelude to a major correction.” Cost Cutting Toronto-Dominion is “reviewing all opportunities” to cut costs across the bank, Clark said. The bank said it seeks to keep expense growth below 3 percent this year. “Finding current-year cost savings is not enough,” Clark said. “We continue to focus on more permanent cost reductions.” The eight biggest Canadian banks are expected to report a 7 percent increase in adjusted per-share earnings for the quarter from a year earlier, Sumit Malhotra, an analyst with Macquarie Capital Markets in Toronto, said in a May 21 note. National Bank of Canada (NA) reports results tomorrow, followed by Bank of Nova Scotia (BNS) on May 28 and Bank of Montreal (BMO) on May 29. Royal Bank of Canada, the country’s largest lender, and Canadian Imperial Bank of Commerce, the fifth-biggest, report on May 30. To contact the reporter on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net ; David Scanlan at dscanlan@bloomberg.net |
2024-04-17 | Bloomberg | IMF Raises Global Forecast for First Time Since Early 2011 | The International Monetary Fund raised its global growth forecast for the first time in more than a year, with the U.S. boosting the outlook while recent improvements remain “very fragile.” The world economy will expand 3.5 percent this year, compared with a January projection of 3.3 percent, the Washington-based IMF said today in its World Economic Outlook. It sees growth of 4.1 percent in 2013, up from 4.0 percent. It raised its forecasts for the U.S. to gains of 2.1 percent this year and 2.4 percent in 2013. The report reflects the IMF’s view that the euro area, while still facing an economic downturn and the “hard to quantify” potential risk of a country’s default, has stabilized since last year. The euro area economy is projected to decline by 0.3 percent in 2012, an improvement from the 0.5 percent in the IMF’s previous forecast. China is projected to grow 8.2 percent and Japan 2 percent this year. “For the last six months the world economy has been on what is best described as a roller-coaster,” IMF chief economist Olivier Blanchard said at a briefing in Washington today. After European governments took measures to reassure markets, “an uneasy calm remains. One has the feeling that at any moment things could well get very bad again.” The IMF last raised its quarterly projection for world growth in January 2011, when it increased the forecast to 4.4 percent for that year from 4.2 percent. The IMF’s projections for the U.S. are below the median forecasts of 2.3 percent growth this year and 2.5 percent in 2013, according to economists surveyed by Bloomberg News. U.S. Growth “Improved activity in the United States during the second half of 2011 and better policies in the euro area in response to its deepening economic crisis have reduced the threat of a sharp global slowdown,” the IMF said in a summary of the report. “Weak recovery will likely resume in the major advanced economies, and activity is expected to remain relatively solid in most emerging and developing economies. However, the recent improvements are very fragile.” “The most immediate concern is still that further escalation of the euro-area crisis will trigger a much more generalized flight from risk,” the IMF said. “Geopolitical uncertainty could trigger a sharp increase in oil prices.” A 50 percent increase in the cost of oil would reduce global output by 1.25 percent, according to the report. Oil Price Oil rose yesterday as the reversal date for the Seaway crude pipeline was moved up, causing the spread between New York-traded futures and Brent in London to narrow. Crude for May delivery gained 10 cents to settle at $102.93 a barrel on the New York Mercantile Exchange. Prices are up 4.1 percent this year. As Group of 20 finance ministers and central bank governors prepare to meet this week in Washington, the IMF warned that policy makers in Europe “must prevent disorderly and destructive deleveraging of the banking system and to promote an adequate flow of credit to the private sector.” Advanced economies, which include the U.S., the euro area, Japan, the U.K. and Canada , will grow 1.4 percent this year and 2 percent in 2013, the IMF said. Those are up from 1.2 percent and 1.9 percent in the January forecasts. So-called emerging and developing economies will expand by 5.7 percent in 2012 and 6 percent next year, up from earlier projections of 5.5 percent and 5.9 percent. IMF Forecast The IMF forecast a 1.8 percent economic contraction in Spain , worse than the 1.6 decline the lender projected in January, according to the report. Spanish Prime Minister Mariano Rajoy said yesterday that the country must slash its budget deficit to maintain access to financing, as bond yields rose to the highest level since his government came to power four months ago. Italy , where Prime Minister Mario Monti is trying to revamp labor markets to make the economy more competitive, is forecast to contract 1.9 percent this year, better than the 2.1 percent slump the IMF had projected in January, the IMF said today. “Some optimism has returned,” Blanchard said in a statement accompanying the report. “It should remain tempered. Even absent another European crisis, most advanced economies still face major brakes on growth. And the risk of another crisis is still very much present and could well affect both advanced and emerging economies.” European Banks European nations should decrease the links between governments and banks, “from the creation of euro level deposit insurance and bank resolution to the introduction of limited forms of Eurobonds, such as the creation of a common euro bill market,” Blanchard said. On China , the IMF said growth in the world’s second-largest economy had “moderated” since mid-2011, “and there is so far little sign of a sharp correction in the potentially overheated real estate sector and most related activities, despite widespread concerns about a hard landing.” After 8.2 percent growth for China this year, the IMF forecasts an 8.8 percent expansion in 2013. “The potential consequences of a disorderly default and exit by a euro area member are unpredictable and thus not possible to map into a specific scenario,” the IMF said. “If such an event occurs, it is possible that other euro area economies perceived to have similar risk characteristics would come under severe pressure as well, with a full-blown panic in financial markets and depositor flight from several banking systems.” On consumer prices, the IMF projects a 1.9 percent increase this year in advanced economies and 1.7 percent in 2013. Those are higher than the 1.6 percent and 1.3 percent the lender forecast in January. In emerging and developing countries, inflation will be 6.2 percent this year and 5.6 percent in 2013. To contact the reporter on this story: Ian Katz in Washington at ikatz2@bloomberg.net To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net |
2024-03-28 | Bloomberg | U.K. Supreme Court Says Insurers Should Pay Asbestos Victims | Thousands of workers who fell ill from exposure to asbestos can receive compensation after the U.K. Supreme Court ruled insurers should cover their claims. The judges decided that employers’ liability insurance was triggered the moment workers came into contact with hazardous material, rather than years later at the onset of mesothelioma, a cancer caused by asbestos inhalation. “It would be remarkable if the insurers were not liable under the policies,” said Justice Jonathan Mance, one of five Supreme Court judges who dismissed the insurers’ appeal. Companies including Akzo Nobel NV (AKZO) and Amec Plc (AMEC) and a group of local governments and individual claimants have been trying since at least 2006 to force four insurers, some of which are insolvent, to pay compensation on claims arising from the point at which workers inhaled the asbestos fibers. “The result will be a relief to thousands of disease victims and their families,” whose insurance claims have been on hold because of the litigation, said Leon Taylor , a lawyer at DLA Piper LLP (1191L) who represented two insurers, BAI (Run Off) Ltd. and Independent Insurance Company Ltd. Both companies are insolvent and being wound down by PricewaterhouseCoopers LLP. “For the insolvent insurance companies involved, their administrators and liquidators now have the judicial guidance they needed to satisfy their obligations,” Taylor said in an e- mailed statement. Mesothelioma is a lung disease which kills about 3,000 people every year in the U.K. due to the common use of asbestos materials as recently as the 1970s. To contact the reporter on this story: Kit Chellel in London at cchellel@bloomberg.net To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net |
2024-12-27 | Bloomberg | Guangfa Bank, Merchants Bank, Elion Resources: China Bond Alert | China Guangfa Bank Co., China Merchants Bank Co. and Elion Resources Group Co. are among issuers that may sell bonds in the nation’s debt markets. Domestic Bonds CHINA GUANGFA BANK CO.: The bank plans to sell 2 billion yuan ($321 million) of 10-year and 2.5 billion yuan of 15-year bonds today, according to a statement posted to Chinabond.com.cn, the Chinese government bond clearing house website. (Updated Dec. 27) CHINA MERCHANTS BANK CO.: The bank plans to sell up to 6 billion yuan of 10-year subordinated bonds and up to 5.7 billion yuan of 15-year bonds today, according to a statement posted to Chinamoney.com.cn, a website of the China Foreign Exchange Trade System. (Updated Dec. 27) BANK OF TIANJIN CO.: The bank plans to sell as much as 1.35 billion yuan of 10-year and 1.35 billion yuan of 15-year subordinated bonds today, according to a statement posted to Chinamoney.com.cn. (Updated Dec. 27) ELION RESOURCES GROUP CO.: The company plans to sell 1.2 billion yuan of one-year bonds today, according to data compiled by Bloomberg. (Updated Dec. 27) SHANGHAI PUDONG DEVELOPMENT BANK CO.: The bank plans to sell up to 12 billion yuan of 15-year subordinated bonds today, according to a statement posted to Chinamoney.com.cn. (Updated Dec. 27) BEIJING RURAL COMMERCIAL BANK CO.: The bank plans to sell as much as 5.1 billion yuan of 10-year subordinated bonds today, according to a statement posted to Chinabond.com.cn. (Updated Dec. 27) BANK OF BEIJING CO.: The bank has won approval from People’s Bank of China to sell up to 30 billion yuan of debt on the nation’s interbank market, according to a statement to Shanghai’s stock exchange. (Added Dec. 25) SANYA PHOENIX INTERNATIONAL AIRPORT CO.: The company plans to sell 500 million yuan of one-year bonds on the interbank market , according to data compiled by Bloomberg. The notes will settle on Dec. 28, the data show. (Added Dec. 25) PING AN INSURANCE (GROUP) CO.: The company’s board renewed a mandate for the sale of 26 billion yuan of convertible bonds, according to a statement posted to Shanghai Stock Exchange. (Added Dec. 19) CHINA EASTERN AIRLINES CORP.: The company obtained regulatory approval for up to 8.8 billion yuan of bond issuance, according to a statement to the Shanghai Stock Exchange. (Added Dec. 17) FUFENG GROUP LTD.: The company obtained a regulatory approval to issue up to 1.2 billion yuan of medium-term notes for its subsidiary Neimenggu Fufeng Biotechnologies Co., according to a statement posted on Hong Kong Stock Exchange. (Added Dec. 17) HEBEI IRON & STEEL CO.: The company won a regulatory approval to issue up to 5 billion yuan of bonds, according to a statement posted to the Shenzhen Stock Exchange. (Added Dec. 17) DATONG COAL INDUSTRY CO.: The company plans to sell 3 billion yuan in medium-term notes with a maturity of no more than five years, according to a statement to the Shanghai Stock Exchange. (Added Dec. 11) HUAIBEI CITY CONSTRUCTION INVESTMENT & DEVELOPMENT CO.: The company has approval to sell as much as 1.8 billion yuan of six- year bonds, according to a statement from the National Development and Reform Commission in Anhui province. (Added Dec. 11) DATANG INTERNATIONAL POWER GENERATION CO.: The company won approval to sell 6 billion yuan of bonds, according to a statement posted to the Shanghai Stock Exchange. (Added Dec. 10) CHONGQING CITY: The western city of China plans to sell bonds to finance small- and medium-sized companies in the region, the official Xinhua News Agency reported, without citing anyone. Chongqing plans to sell 350 million yuan of bonds to raise funds for five companies, the report said. (Added Dec. 6) SHANGHAI ELECTRIC GROUP CO.: The company won approval for its 4 billion yuan bond issuance, according to a statement posted to Shanghai Stock Exchange. (Added Dec. 6) SHANDONG CHENMING PAPER HOLDINGS LTD.: The manufacturer won approval from China Securities Regulatory Commission for its 3.8 billion yuan bond sale, according to a statement posted to Shenzhen Stock Exchange. (Added Dec. 6) Dim Sum Bonds BRITISH COLUMBIA: The Canadian province hired HSBC Holdings Plc to arrange bond investor meetings, according to a person familiar with the matter. (Updated Dec. 13) To contact the reporter on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net |
2024-09-10 | Bloomberg | Argentina’s IRSA Paves Way to Invest in Israel’s IDB Via Dolphin | IRSA Inversiones y Representaciones SA (IRS) , Argentina ’s largest publicly traded real estate company, prepared to bid for a controlling stake in Israel’s IDB Holding Corp. (IDBH) through an investment in Bermuda-based Dolphin Fund Ltd. IRSA paid $75 million for shares in Dolphin, which is analyzing the possibility of investing as much as $200 million in IDB Holding, according to regulatory filings. Argentine businessman Eduardo Elsztain is chairman of both IRSA and Dolphin. Dolphin will use the cash to acquire a stake in IDB, a holding company run by Isaeli businessman Nochi Dankner, which has interests in real estate, energy, insurance, banking and telecommunications. IDB has about 2 billion shekels ($558 million) of debt outstanding. Elsztain said he would make the investment through Dolphin in a June 7 letter filed with the Tel Aviv stock exchange. “Along with two investors, Dolphin is analyzing an investment of as much as $200 million in IDB Holding Corporation Ltd,” IRSA said in a filing to Argentina’s securities regulator today. “In the event of proceeding with the investment, Dolphin will have political rights to appoint IDBH directors.” Sergio Dattilo, an IRSA spokesman, said in a telephone interview from Buenos Aires that Dolphin is working to acquire a stake in IDB, and IRSA will manage Dolphin. IRSA’s American Depositary Receipts rallied 6.5 percent in New York , the most since Jan. 22, to $8.01 a share. To contact the reporter on this story: Pablo Gonzalez in Buenos Aires at pgonzalez49@bloomberg.net To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net |
2024-07-18 | Bloomberg | Europe’s Debt-Crisis Policies Are ‘Absolutely Crazy,’ Sen Says | European Union policies to try to protect the euro region from a possible sovereign debt default are “absolutely crazy,” according to Amartya Sen, the first Indian to win the Nobel Prize for economics. Enabling Greece to sell its products at prices determined by the euro will only be achieved by huge spending cuts that will make the lives of Greeks “pretty unbearable,” Sen, 77, said in an interview in Edinburgh yesterday. “This whole idea of inflicting huge amounts of local sacrifice in order to generate a surplus to pay back foreign creditors to keep the euro intact is an absolutely crazy economic policy,” Sen said. “The later it ends, those countries technically defaulting like Greece, Portugal or Spain will end up with a much bigger debt than they need have if they had been liberated from their euro chains a bit earlier.” Greek Prime Minister George Papandreou last month won parliamentary approval for a new 78 billion-euro ($109.5 billion) five-year package of budget cuts and state asset sales to secure further international aid. European leaders will meet in Brussels later this week to finalize a second bailout for Greece as its debt crisis threatens contagion across the region. European officials suffer from “economic confusion” because they don’t accept that exchange rate adjustments should be part of any solution to such crises, said Sen, professor of economics and philosophy at Harvard University. China, India Sen was in the Scottish capital attending a conference organised by Edinburgh University to mark the tercentenary of the birth of Scottish philosopher David Hume. Economies of countries like China , India and Brazil won’t be much affected by the debt crisis because of their focus on economic growth, said Sen, who won the Nobel Prize in 1998 for his work on welfare economics. “I find it odd that the mistakes that the Chinese, the Indians and the Brazilians are not making are being made by these allegedly much more advanced countries like Japan , Europe and America,” Sen said “The fact of the matter is their economic thinking is far less sound than what you are getting from China, India and Brazil right now.” To contact the reporter on this story: Peter Woodifield in Edinburgh at pwoodifield@bloomberg.net. To contact the editor responsible for this story: Colin Keatinge at ckeatinge@bloomberg.net . |
2024-09-01 | Bloomberg | AT&T Suit Follows Antitrust Tactics With Oracle, H&R Block | AT&T Inc. (T) ’s proposed $39 billion takeover of T-Mobile USA Inc. is one of the rare instances where the U.S. Justice Department in recent years has actively sought to block a merger through a lawsuit or an informal threat to sue, based on antitrust grounds. What follows are some examples of department efforts to block acquisitions and their outcomes: H&R Block/2SS Holdings Inc.: In May, the Justice Department sued H&R Block Inc. (HRB) to stop its proposed purchase of the owner of TaxAct products, saying the companies’ merger would stifle competition and raise prices in the growing market for consumer tax-preparation software. The case is being litigated in U.S. District Court in Washington. Nasdaq OMX/NYSE Euronext: Nasdaq OMX Group Inc. and IntercontinentalExchange Inc. withdrew their joint $11.3 billion bid for NYSE Euronext on May 16 after the Justice Department threatened a lawsuit. An acquisition “would have substantially eliminated competition for corporate stock-listing services, opening and closing stock auction services, off-exchange stock trade reporting services and real-time proprietary equity data products,” the department said. Blue Cross Blue Shield of Michigan /Physicians Health Plan of Mid-Michigan: Blue Cross Blue Shield of Michigan’s Blue Care Networks of Michigan abandoned its attempt to purchase Physicians Health Plan of Mid-Michigan in 2010 after the Justice Department told the companies that it would file an antitrust lawsuit to block the acquisition. The department said in a press release that the acquisition “would have given Blue Cross- Michigan control of almost 90 percent of the commercial health insurance market in the Lansing, Michigan, area, which would have led to higher prices, fewer choices and a reduction in the quality of commercial health insurance plans purchased by Lansing area residents and their employers.” Oracle/PeopleSoft: In 2004, the department sued to keep Oracle Corp. (ORCL) from completing its $8.4 billion purchase of PeopleSoft Inc. The acquisition went through after a U.S. judge rejected the department’s arguments that the deal would give Oracle power to raise software prices and harm competition. SunGard Data Systems Inc./Comdisco Inc.: SunGard Data Systems Inc. acquired Comdisco Inc.’s computer disaster-recovery business in 2001 after a U.S. appeals court rebuffed a request by the Justice Department to halt the $825 million transaction. The trial judge who initially ruled against the department was U.S. District Judge Ellen Segal Huvelle, who is presiding over the AT&T case. Huvelle ruled the government failed to show the combined company’s relevant market would be limited to services now offered by Comdisco, SunGard and International Business Machines Corp. WorldCom/Sprint: The Justice Department in June 2000 sued to block WorldCom Inc.’s proposed buyout of Sprint Corp., saying the combination would create too much concentration in markets for long-distance, international and Internet backbone services. The value of that deal when it was announced in October 1999 was $110 billion. In July 2000 when the companies called off the deal, it was valued at $152 billion. The case is U.S. v. AT&T Inc., 11-01560, U.S. District Court, District of Columbia ( Washington ). To contact the reporter on this story: Tom Schoenberg in Washington at tschoenberg@bloomberg.net To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net |
2024-09-30 | Bloomberg | Archie MacAllaster of Barron’s Investor Roundtable Is Dead of Cancer at 82 | Archie MacAllaster, chairman of New York City investment firm MacAllaster Pitfield Mackay, who shared his market observations as a longtime member of Barron’s investor roundtable , has died. He was 82. He died Sept. 24 at St. Vincent’s Medical Center in Bridgeport, Connecticut. The cause was complications from colon cancer , according to his son, David, the firm’s president. A resident of Fairfield, Connecticut, since 1962, MacAllaster was actively managing the firm as recently as three weeks ago, his son said today in an interview. For many years, his firm was a market maker in banking and insurance stocks. Peter Lynch , in his book “Beating the Street,” called MacAllaster “a savvy investor in the over-the- counter market.” MacAllaster began his career in the Montreal office of Canadian investment company Pitfield, Mackay & Ross Ltd. After two years, he was dispatched to run in its New York office. In 1984, he purchased the firm’s U.S. unit, which he reorganized under the name MacAllaster Pitfield Mackay. David MacAllaster said his father began sharing his insights through Barron’s roundtables in the 1970s “because, number one, he thought he had good ideas to share. But he also got a lot of calls from people who wanted him to manage their money” after reading his views. “He just enjoyed doing stock picking.” Lunch With Buffett One of his best picks came in the late 1950s or early 1960s for the Pilgrim Fund, which he was managing, and was prompted by a lunch with Warren Buffett, his son recalled. “He was so impressed with Warren Buffett ’s intelligence, the first thing he did when he came back to the office was purchase 12,000 shares of Berkshire Hathaway for his fund,” a stake that today would be worth more than $1.2 billion. Within about one year, MacAllaster concluded that running a mutual fund and a brokerage created conflicts, and he turned over control of the Pilgrim Fund, his son said -- “and the first thing the new manager did was sell the 12,000 shares of Berkshire Hathaway.” MacAllaster viewed himself as particularly knowledgeable about the insurance industry , and at the start of 2011 he advised investors to be buying. ‘Place to Be’ “As a group, the life-insurance business is a great place to be,” he told Barron’s in January. “You could buy almost all of them. The old, senior, the well-vested companies, they should be bought. They’re cheap.” Three months ago, as part of the Barron’s midyear 2011 market assessment, MacAllaster said he saw “lots and lots of bargains, long-term,” in financial stocks. “The problem is, define long-term,” he added. “The Obama administration is anti-business,” he said. “The president is good on his feet. He speaks well. He has a sense of humor. But he is anti-business because he never grew up with business. Also, the two parties don’t get along, which makes things difficult for business. In this environment it is hard to know what stocks will do.” Archie Freeman MacAllaster II was born on Oct. 16, 1928, in Watertown, New York. He attended Dartmouth College in New Hampshire and St. Lawrence University in Canton, New York, before graduating from the U.S. Naval Academy. He served four years in the Navy. MacAllaster was a trustee emeritus at St. Lawrence. The university president’s residence was renamed MacAllaster House in 1999, in recognition of his financial support for its renovation. In addition to son David, survivors include his wife, Barbara Torrey MacAllaster; a daughter, Sara; and a granddaughter, Alexandra. Another son, Archie III, known as Sandy, died in 1979. To contact the reporter on this story: Laurence Arnold in Washington at larnold4@bloomberg.net To contact the editor responsible for this story: Charles W. Stevens at cstevens@bloomberg.net |
2024-04-16 | Bloomberg | How Shape-Shifting Banks Foil Dodd-Frank Act | Deutsche Bank AG (DBK) recently separated its U.S. investment bank from its bank holding company , removing it from supervision by the Federal Reserve. So far, U.S. regulators have reacted passively to such moves by foreign banks to avoid the heightened capital requirements mandated by the Dodd-Frank Act. That’s because Dodd-Frank failed to heed a fundamental law of architecture: Form must follow function. For financial regulation to be effective, it should focus on economic function, rather than legal form. If it doesn’t, institutions will quickly find new forms that free them of regulatory constraints. What walks like a duck and quacks like a duck must be regulated as a duck, even if it is legally a goose. All too often financial regulation misses this obvious point. The result is regulatory arbitrage, as intermediaries alter their legal form to minimize their costs. That would be fine if the costs of the risks carried by a large, complex investment bank -- a prime example of a “systemically important financial intermediary,” or SIFI, that Dodd-Frank sought to regulate -- were all its own. But that isn’t the case. When such institutions take risks, they can threaten the financial system and require public bailouts. Emergency Liquidity In a crisis, a SIFI could be forced into a fire sale that triggers a broad credit crunch. To avoid this outcome, the Fed typically would be called upon to provide emergency liquidity -- an insurance subsidy that fosters more risk-taking in good times. Indeed, when Lehman Brothers Holdings Inc. failed, the two largest U.S. investment banks, Goldman Sachs Group Inc. (GS) and Morgan Stanley (MS) , converted their legal status to bank holding companies, gaining access to the Fed’s discount window. The central bank obliged them and many other institutions to an astonishing degree because the costs of a further collapse of the financial system made that the optimal response at the time. Other spillovers from such regulatory arbitrage are no less significant. If a SIFI’s insolvency threatened a run on its counterparties, resolving it under Dodd-Frank rules could force less risk-prone intermediaries to bear the costs. Over time, that process would promote a risk-taking race to the bottom. The form versus function dilemma extends far beyond investment banks and, in some cases, even beyond SIFIs. It drives shadow banking as a whole. Why are money-market mutual funds still permitted to offer depositlike instruments -- creating the risks of a run -- without being subject to bank rules? Why were bank holding companies allowed to minimize capital by creating off-balance-sheet mechanisms (such as “special investment vehicles”) that were prone to panic? Why was the world’s largest insurer, American International Group Inc. (AIG) , allowed to shop for a weak regulator (the now-shuttered Office of Thrift Supervision) that was ill-equipped to understand its business? Once we allow form, rather than function, to guide regulation, the classic problem of “time consistency” becomes acute. Time consistency refers to the overwhelming incentives, in bad times, for policy makers to renege on the commitments they made when things were going well. Imagine that a group of intermediaries has engaged in regulatory arbitrage to reduce their capital buffer or to take liquidity risks (say, by excessive reliance on short-term funding) that jeopardize the stability of the financial system. Suppose that regulators respond by warning that -- in a future crisis -- they won’t provide emergency liquidity or other bailout funds to such intermediaries. Unfortunately, the regulators’ threat is largely empty, because carrying it out could lead to economic catastrophe and both parties know this to be true. Time Consistency As a result, the promises of policy makers often lack the credibility needed to discipline systemic risk-taking. This time-consistency problem is particularly challenging for advocates of so-called narrow banking, a regulatory approach that focuses almost exclusively on form, rather than function. Under a narrow banking rule, government crisis backstops -- such as Federal Deposit Insurance Corp. guarantees or Fed discount lending -- would be available only to narrowly defined depositories that provide the economy’s basic payments mechanism. These banks would then be tightly regulated like public utilities. Outside this protected sphere, anything goes. Narrow banking sounds attractive because it seems to focus the losses in bad times on those non-narrow banks that took the risks in good times. If that were the case, the resulting incentives would help make the financial system safer. But would it really work that way? Not if people doubt the official commitment to let intermediaries outside the narrow banking world fail en masse. Even if legislation forbade bailouts (as Dodd-Frank does), would a modern government stand by in a full-blown financial crisis if doing so threatened another depression? Probably not. Indeed, one reason to establish thoughtful rules governing an official lender of last resort -- such as the Fed -- is that some part of government inevitably will play this role in a crisis. As a consequence, it’s better to do so through an institution of established integrity that limits the potential for corruption and fraud. If regulation by function rather than form is critical, why do we often fail to pursue it? Part of the answer is that it’s quite difficult to do. Another, no less troubling, part is that regulated financial entities are politically powerful. In some cases, they can persuade Congress and their regulators to exempt them from discipline. If the costs of that protection ultimately are borne by a large, diffuse group of taxpayers only in a crisis, taxpayer resistance can be overcome in good times. Market Discipline The most straightforward solution to this problem is to regulate financial instruments and markets (say, through collateral and margin requirements), rather than just regulating institutions. Another is to promote transparency and infrastructure that empower greater market discipline. Dodd- Frank makes some progress along these lines by shifting derivatives trading to clearinghouses. And the Fed has pushed for years to reduce the systemic risks emanating from the critical market for collateralized short-term funds (repurchase agreements). But not all systemic risks are easily amenable to this approach. History shows that increased regulation of instruments and markets also will create incentives for innovations that avoid it. Such innovations may be quite profitable, even as they undermine efforts to limit systemic risks. Have the great financial crisis, the extraordinary policy responses, the deepest postwar recession and the dismal recovery altered these historical tendencies? Not if Deutsche Bank and other foreign banks’ version of regulatory arbitrage proves representative. (Thomas Cooley and Kim Schoenholtz are professors of economics at New York University’s Stern School of Business and contributors to Business Class. The opinions expressed are their own.) Read more opinion online from Bloomberg View. Today’s highlights: The View editors on increasing the minimum wage and vetoing the UN Security Council veto ; Jeffrey Goldberg on Afghanistan after the U.S. withdrawal ; Ramesh Ponnuru on Romney and the women’s vote ; Betsey Stevenson and Justin Wolfers on why tax deductions are really subsidies ; Josef Joffe on why Europe needs to be more German ; Steven Greenhut on the sports- stadium scam. To contact the writers of this article: Tom Cooley at tcooley@stern.nyu.edu ; Kim Schoenholtz at kschoenh@stern.nyu.edu To contact the editor responsible for this article: Max Berley at mberley@bloomberg.net |
2024-11-20 | Bloomberg | Chrysler Dodges Tech Troubles by Letting Ford Blunder | Chrysler Group LLC is emerging a leader in touch screens by letting Ford Motor Co. and General Motors Co. jump ahead and stumble. Blunders with the systems, which handle tasks from entertaining with Pandora Internet radio to reading text messages and mapping out directions, have dragged on Ford’s (F) showings in surveys by Consumer Reports and J.D. Power & Associates. The No. 2 U.S. automaker said last month that it expects to fall short with quality metrics for a second straight year. GM’s system for its Cadillac brand has drawn negative comparisons with Ford’s in early reviews by Consumer Reports. While its rivals plunged ahead with advanced controls and abandoned trusty knobs and buttons, Chrysler has moved more slowly with its simpler Uconnect system. In-car technology is gaining extra weight as industrywide quality of powertrains, design and interiors gets closer to parity. “We’ve definitely seen a shift in terms of what breaks,” Jake Fisher, the director of Consumer Reports ’ Auto Test Center, said in an interview at Bloomberg’s Detroit bureau. He picked up his iPhone from a conference room table: “Now, it’s this as opposed to transmissions and engines.” Consumer Reports, regarded as credible because it forgoes advertising and buys the cars it tests, published an Aug. 22 post on its website: “Why the MyFord Touch control system stinks .” Plagued by issues with its electronics, Ford’s namesake brand fell seven spots to second-to-last place in the magazine’s auto-reliability survey announced last month. Its luxury nameplate Lincoln plunged 12 spots, the biggest drop. ‘Growing Pains’ “We want to be a leader in technology, and so we’re having a few growing pains,” Bill Ford , the chairman of Dearborn, Michigan-based Ford, told reporters Nov. 19 in Detroit. “Our customers are telling us it’s absolutely the right way to go.” Without improving its system, Ford may be unable to keep David Cheslow as a customer. The 65-year-old life insurance agent said that the screen in his 2013 Ford Edge “froze” and went black on three separate occasions yesterday. He’s had similar problems since buying the sport-utility vehicle in July. “I wouldn’t go for another Ford unless I knew that it was working the way that it’s supposed to,” said Cheslow, who lives in Elizabeth, New Jersey , and owned two other Ford vehicles before purchasing the Edge. GM (GM) sought to top Ford early this year with its Cadillac User Experience, or CUE, system with tablet computer-style touch screens. Early indications from Consumer Reports’ testing is that CUE is “not any better” than Ford’s system, Fisher said in an Oct. 29 interview. More Designers Chrysler, which introduced its Uconnect system in 2003, has been relatively quiet in marketing its technology compared with GM and Ford. The automaker has introduced updated versions of its touch screens into new models as they debut rather than blanketing its whole lineup with its latest up-to-date system. “We’re doing more thoughtful integration,” Marios Zenios, Chrysler’s head of connectivity, said in an interview from the Uconnect command center in Chrysler’s Auburn Hills, Michigan , headquarters. When Zenios joined Chrysler in 2008, the automaker employed three people who specialized in the field of human machine interface, in which designers and engineers work on the layout and software of devices to make them easy to use. Chrysler now has “quite a force” of such personnel, he said, declining to provide a specific figure. Automakers’ Challenge Chrysler has reason to be mum about details concerning its Uconnect staff, said Andrew Watt, chief executive officer of iTalent LLC. Watt’s recruiting firm has been tapped by automakers and suppliers for eight to 10 searches this year to fill positions related to mobile technology in vehicles. “Any intelligence about what’s going on when it comes to this talent, you keep to yourself,” said Watt, who is based in Troy, Michigan. “These are niche skills and this is the kind of content that attracts young buyers to cars. The only way to get these people is to take them from someone else.” Automakers face a challenge because virtually all consumers say they want technology and tie-ins between their mobile phones and cars, Zenios said. Customers, though, vary in how much they use in-car systems. Also, users are less forgiving of technological mishaps from behind the wheel. “As long as you manage technology, it will be your friend,” said Zenios, who worked on in-car telecommunications systems for GM, Daimler AG (DAI) , and Bayerische Motoren Werke AG (BMW) during his 22 years with Motorola Inc. “The minute you do something for technology’s sake, it may not work out very well for you in automotive.” ‘Learning Curve’ Chrysler, majority-owned by Italian carmaker Fiat SpA (F) , “didn’t reinvent the wheel” in developing features such as the navigation system within Uconnect, said Consumer Reports’ Fisher, a former engineer for Detroit-based GM. “The Chrysler system is probably the best one that I’ve used,” Dave Sullivan , a product analyst for Tustin, California- based AutoPacific Inc., said in a telephone interview. “It’s the fastest, it’s got great resolution. The screen has nice, big buttons on it. It doesn’t crash. The navigation is simple.” Like Bill Ford, AutoPacific’s Sullivan attributes Ford’s first-mover strategy for the automaker’s ills in consumer surveys. The namesake Ford brand slid to 27th from 23rd a year ago and fifth in 2010 in Westlake Village , California-based J.D. Power’s initial-quality study that was released in June. “There’s a learning curve for all these automakers,” Sullivan said. “They’ve never really been software people before. They’ve always been engineering nuts and bolts. This is what happens when you want to be first.” ‘Misplaced Progress’ The Cadillac CUE system debuted in the XTS and ATS sedans that GM introduced this year and is spreading throughout the brand’s lineup. The world’s largest automaker equipped its touch controls with haptic feedback -- meaning that the car’s buttons vibrate when touched -- in an effort to outdo Ford’s systems. “The haptic feedback is nice, but we found that you still have to take your eyes off the road to make sure you’re tapping the right spot,” Jim Travers, a Consumer Reports associate editor, wrote in a June 22 review of the XTS. “Having to relearn how to use a button just for the sake of looking ‘high tech’ -- as there are no functional advantages to these flush controls -- is misplaced progress.” The CUE system’s buttons are “fussy” and flipping through screens is a “chore,” Tom Mutchler, a Consumer Reports engineer, said in an Oct. 19 review of the ATS. “That’s really something of a shame, because the annoying controls detract from what otherwise is a really rewarding car to drive.” MyLink, IntelliLink GM is taking a different approach from Cadillac for Chevrolet , its high-volume brand, with a system branded as MyLink, and for Buick and GMC with IntelliLink. With MyLink, GM uses a concept it calls “smart phone, dumb radio,” in which the in-car system embeds features from the phone and amplifies them over a display, said Scott Fosgard, a GM spokesman. “If you set CUE aside, GM’s got a system in the Sonic and the Spark that’s pretty competitive,” said AutoPacific’s Sullivan, referring to MyLink. In addition to competitive pressures, U.S. automakers are being scrutinized by regulators led by Transportation Secretary Ray LaHood, who has said his department is on a “rampage” against behind-the-wheel distractions. U.S. Guidelines The government issued guidelines this year to quell in-dash distractions, recommending that no task for drivers take longer than two seconds and that cars be stopped and in park before users can enter navigation commands or use social networking sites such as Facebook (FB) and Twitter. The guidelines stop short of recommending limits on devices. Chrysler put its latest Uconnect system in new pickups introduced late this year with a feature intended to curb distraction from texting while driving. A phone paired with the Uconnect system can notify a vehicle’s occupants of a received text and “read” the message over the audio system. A reply to the message can be made audibly, using voice-to-text software developed by Nuance Communications Inc. (NUAN) “I don’t want the people touching the phone no matter what,” Zenios said. “Keep it in your pocket or keep it in your purse, and then let the system alert you in the right way.” To contact the reporter on this story: Craig Trudell in Southfield, Michigan at ctrudell1@bloomberg.net To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net |
2024-09-10 | Bloomberg | Citigroup Joins HSBC in Mulling Shanghai Free Trade Zone | Citigroup Inc. (C) , HSBC Holdings Plc (HSBA) and Standard Chartered Plc (STAN) signaled interest in a proposed free trade zone for Shanghai as China ’s leaders seek to revamp the world’s second-largest economy to bolster growth. Citigroup, the third-biggest U.S. lender, will seek a “leading role” in developing the zone, James Griffiths, a Hong Kong-based spokesman, said by e-mail today. Standard Chartered is “committed to contributing to the further development” of the program, it said in a statement. HSBC is also interested in establishing a presence there, spokesman Gareth Hewett said. Attracting international lenders will help China achieve its goal of making Shanghai, a port city with more people than Greece and Portugal combined, a global finance hub by 2020. The zone, which in addition to foreign trade will feature looser rules on matters such as interest rates and business licenses, is part of Premier Li Keqiang’s drive to sustain growth by shifting the economy toward services and consumption. “The Shanghai free trade zone has to be a place that allows banks to operate on an equal footing with banks in Hong Kong, London , or New York,” Jim Antos, a Hong Kong-based analyst at Mizuho Securities Asia Ltd., wrote in an e-mail. “Internationalization of the renminbi and a relaxation of restrictions on foreign banks, brokers, and insurance companies so that these companies have a business reason to want to set up shop in the free trade zone” will be important, he said. China announced last month its cabinet had approved the plan to set up the nation’s first such zone on 29 square kilometers (11 square miles) in Shanghai, calling it a crucial move in adapting to global economic and trade development, while further opening up the world’s second-largest economy. Market Rates Policy makers may allow free conversion of the yuan under the capital account and market-oriented interest rates on a trial basis in the zone, according to a draft plan seen by Bloomberg News. Qualified foreign banks may be allowed to set up branches or joint ventures with local lenders in the area, while some Chinese banks may offer offshore services, according to the draft. Shanghai Pudong Development Bank Co. (600000) , which is controlled by the local government, jumped 8.3 percent today. The stock has surged 35 percent since Aug. 22, when China’s Ministry of Commerce reiterated the approval of the free-trade area. Pudong Bank officials didn’t immediately return calls seeking comment. HSBC gained 0.3 percent in Hong Kong, while Standard Chartered climbed 1.9 percent. The benchmark Hang Seng Index (HSI) gained 1 percent. ‘New Opportunities’ HSBC has been approached by the China Banking Regulatory Commission about offering banking services in the zone, according to a person with knowledge of the matter. A press official at the Shanghai branch of the CBRC declined to comment. The regulator solicited foreign banks including London-based HSBC and Standard Chartered for feedback on how they want to open operations in the area, the South China Morning Post reported today. Bank of East Asia Ltd. (23) , based in Hong Kong, also plans to set up an institution in the area, it said today. “The establishment of the Shanghai free trade zone will bring a range of new opportunities and we have confidence in the mainland China market,” Carmen Lee, a spokeswoman in Hong Kong, said in an e-mailed response to queries. “We will continue to maintain a long-term commitment to local development, which will include a plan to set up an appropriate institution in the free trade zone based on regulatory conditions.” Faster Growth The project could have broader implications for the structure of China’s economy, according to Wendy Tang, a Shanghai-based analyst at Northeast Securities Co. “You can’t separate financial development from the free trade zone,” she said by phone today. “Apart from making it a trial zone for interest rate liberalization and private investment in the financial industry, probably the entire Yangtze Delta region led by Shanghai will see faster growth in sectors such as trade and shipping.” Shanghai’s economy has expanded by about a third since 2009 to more than 2 trillion yuan last year, larger than any other Chinese city and ranked No. 10 in the world, according to the local government. Still, its GDP growth has lagged behind the national rate since 2009, when the country grew at a rate of 7.7 percent to 10.4 percent. The project will “upgrade Shanghai’s core competitiveness and boost its status as a global financial, trade, shipping and logistics center,” Barclays Plc’s Hong Kong-based economist Chang Jian wrote in a note on Sept. 6. The zone will be built on the basis of the city’s four existing bonded trade zones, according to the government. To contact Bloomberg News staff for this story: Jun Luo in Shanghai at jluo6@bloomberg.net ; Stephanie Tong in Hong Kong at stong17@bloomberg.net To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net |
2024-11-30 | Bloomberg | Ally’s GMAC Is Sued by Insurer Over $1.2 Billion in Mortgage Securities | Units of Ally Financial Inc. , the auto and home lender that received a government bailout, were sued by Financial Guaranty Insurance Co. for allegedly misrepresenting the quality of mortgage loans underlying securities that Financial Guaranty insured. In suits filed yesterday in New York State Supreme Court in Manhattan , Ally Financial’s GMAC Mortgage and Residential Funding units are accused of breach of contract in connection with policies issued by New York-based Financial Guaranty related to about $3.8 billion worth of residential mortgage- backed securities. GMAC Mortgage “fraudulently induced FGIC’s agreement to provide this insurance through willful and material misrepresentations and omissions concerning the nature of its business practices and the credit quality of tens of thousands of mortgage loans that provided the collateral” for securities, Financial Guaranty said in court papers. FGIC Corp., the holding company for Financial Guaranty Insurance Co., sought bankruptcy protection from creditors in August 2010 after suffering losses from the drop in the U.S. housing market. “There are substantial legal and factual defenses related to the FGIC claims and we intend to defend our position aggressively,” Gina Proia , a spokeswoman for Detroit-based Ally, said in an e-mail. “We have reviewed loan level ‘put- back’ claims from FGIC in the normal course as contractually required and have met our contractual obligations at all times, including repurchasing loans where a claim was valid.” The cases are Financial Guaranty Insurance Co. v. GMAC Mortgage LLC, 653302/2011; Financial Guaranty Insurance Co. v. Residential Funding Co., 653303/2011; and Financial Guaranty Insurance Co. v. Residential Funding Co., 653304/2011, New York State Supreme Court, New York County (Manhattan). To contact the reporters on this story: Chris Dolmetsch in New York at cdolmetsch@bloomberg.net ; David McLaughlin in New York at dmclaughlin9@bloomberg.net. To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net ; John Pickering at jpickering@bloomberg.net . |
2024-01-09 | Bloomberg | U.K. Stocks Rise; Vodafone Gains on Network-Sharing Plan | U.K. stocks rose to their highest level since May 2008 as Vodafone Group Plc (VOD) climbed and Alcoa (AA) Inc. kicked off the U.S. earnings season by posting sales that beat estimates. Vodafone rose 1.9 percent following a report that European telecommunications operators have discussed a regional mobile- phone network. Shire (SHP) Plc gained 2.3 percent as the company said it will meet its earlier guidance for full-year earnings growth. Aviva Plc (AV/) dropped 2.2 percent after selling its stake in Delta Lloyd NV for 433.8 million euros ($566 million). The FTSE 100 added 45.02 points, or 0.7 percent, to 6,098.65 at the close in London, its highest level since May 22, 2008. The equity benchmark has jumped 3.4 percent so far this year as the U.S. Congress agreed on a compromise budget, avoiding automatic deficit-reduction measures. The broader FTSE All-Share Index rose 0.7 percent today, while Ireland’s ISEQ Index slipped 0.2 percent. The number of shares changing hands in FTSE 100 companies today was 76 percent greater than the average of the last 30 days, according to data compiled by Bloomberg. Alcoa, the largest U.S. aluminum producer, reported fourth- quarter sales of $5.9 billion, beating the $5.6 billion average of 11 estimates in a Bloomberg News survey. Vodafone advanced 1.9 percent to 165.5 pence. The Financial Times reported that Deutsche Telekom AG, France Telecom SA, Telecom Italia SpA and Telefonica SA discussed a pan-European network with Competition Commissioner Joaquin Almunia during a private meeting. The newspaper cited several people familiar with the discussions. Network Talks “This can help them face the problem of competition and fight the price war,” said Arnaud Scarpaci , a fund manager at Montaigne Capital in Paris, which oversees $225 million. “It’s good news because the industry’s performance has been lagging.” Shire increased 2.3 percent to 2,008 pence. Chief Executive Officer Angus Russell said that the Irish drugmaker increased earnings by at least 10 percent in 2012, confirming an Oct. 25 forecast. Russell addressed investors at JPMorgan Chase & Co.’s health-care conference in San Francisco. “Shire is now increasingly confident of meeting current consensus earnings expectations for 2013,” the company added in a statement. Meggitt Plc (MGGT) rallied 3.8 percent to 425 pence, rising to its highest price since at least September 1988. Bank of America Corp. raised the largest provider of wheels and brakes for combat aircraft to buy from neutral. The brokerage said that the outlook for Meggitt’s market has improved. Aviva Slips Aviva declined 2.2 percent to 373.7 pence after the U.K.’s second-biggest insurance company by market value said late yesterday that it sold its 19.4 percent stake in Delta Lloyd (DL) for 12.65 euros per share. J Sainsbury Plc (SBRY) retreated 2.9 percent to 329.2 pence after the U.K.’s third-largest supermarket chain reported its slowest sales growth in eight years. Sales at stores open at least a year rose 0.9 percent, excluding revenue from fuel, in the 14 weeks ended Jan. 5, London-based Sainsbury said in a statement. That was the weakest of 32 consecutive quarters of gains, even though it matched the median estimate of 11 analysts compiled by Bloomberg. Centamin Plc (CEY) soared 13 percent to 49.98 pence after producing more gold than it had forecast. Full-year output of the precious metal rose 30 percent to 262,958 ounces, beating its guidance of 250,000 ounces, the company said. Lloyds, Punch Lloyds Banking Group Plc (LLOY) rallied 4.9 percent to 53.37 pence for the biggest gain on the FTSE 100. (UKX) UBS AG raised its recommendation on the shares of the U.K.’s largest mortgage lender to buy from neutral, citing its focus on earnings. The U.K.’s domestic banks have improving growth and profitability prospects, UBS analysts wrote in the note. Royal Bank of Scotland Group Plc (RBS) jumped 3.8 percent to 349.9 pence, while Barclays Plc (BARC) added 2.6 percent to 294.75 pence. John Wood Group Plc (WG/) advanced 3.3 percent to 774 pence. Goldman Sachs Group Inc. added the oil-services company to its conviction-buy list. Punch Taverns Plc (PUB) slipped 2.2 percent to 11.25 pence. Enterprise Inns Plc (ETI) lost 2.1 percent to 100.9 pence. U.K. Business Secretary Vince Cable may fine pub companies, the Telegraph reported. Cable announced a plan for an independent adjudicator that will penalize big pub owners if they exploit their tenants, the newspaper reported. To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net |
2024-12-15 | Bloomberg | Hang Seng Bank Seeks Partner for Wealth Management in China, CEO Sit Says | Hang Seng Bank Ltd. is seeking a partner in China to offer wealth management services as it tries to expand in the world’s fastest-growing major economy without competing directly with local lenders. Hang Seng Bank, the Hong Kong lender controlled by HSBC Holdings Plc , aims to get into strategic partnerships with companies in the insurance, asset management and securities industries, Dorothy Sit , chief executive officer for China, said yesterday in an interview in Hong Kong. Citigroup Inc. , HSBC and Standard Chartered Plc are among foreign lenders expanding in China to tap growing wealth among the country’s 1.3 billion people. Their local operations are dwarfed by local rivals like Industrial & Commercial Bank of China Ltd. , which has more than 16,000 outlets in the country. “Local banks and foreign banks have different business models,” Sit said. “We don’t position ourselves as a daily transaction bank.” Hang Seng Bank’s China unit will pursue a “limited” expansion of its branch network in the country next year, said Sit. It has 38 branches in China. Expansion in wealth management, insurance and asset management could take place through a joint venture or by buying a stake in another company, Sit said. Rapid growth in personal wealth in China has attracted the world’s top managers of assets for the rich, including UBS AG. The number of high net worth individuals in the nation increased 31 percent to 477,000 in 2009, according to a survey by Capgemini SA and Merrill Lynch Wealth Management. Staff Additions Hang Seng Bank , whose target clients in China are the “upper-segment” group according to Sit, won’t compete with local rivals such as Beijing-based ICBC on branch numbers. “The number of outlets is not the key success factor,” said Sit. “I am not saying we are not growing in China; we are not growing by means of number of outlets.” The lender, which employs 1,600 people in China, plans to recruit 200 more in 2011 after adding 150 this year. Hang Seng will focus on hiring more “frontline” employees, after adding staff at back-office operations this year, she said. Hang Seng Bank’s China unit posted growth of more than 50 percent in deposits and more than 20 percent expansion in loans in the first 11 months of 2010 from a year earlier, Sit said. “We are hoping to achieve double-digit growth in both top lines and bottom lines this year and next year,” she said. The China unit is required to reduce its loan-to-deposit ratio to 75 percent by the end of next year to comply with local regulations, according to Sit. It currently has a ratio of less than 90 percent, she said without being more specific. Hang Seng Bank, which was listed in Hong Kong in 1972, is also considering going public in China, though it’s “not the top priority” for the lender, Sit said. To contact the reporter on this story: Stephanie Tong in Hong Kong at Stong17@bloomberg.net To contact the editor responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net |
2024-08-03 | Bloomberg | World’s Richest Gain $19 Billion as Stocks Surge on Jobs | The 40 richest people on the planet added $19.4 billion to their collective net worth yesterday after an increase in U.S. jobs and positive earnings reports erased losses sustained earlier in the week. The day’s biggest gainer was Spanish retail tycoon Amancio Ortega , who added $2.8 billion to his fortune as shares of Inditex SA (ITX) , the world’s largest clothing retailer, jumped 5.4 percent. The 76-year-old, Europe’s richest man, is worth $45.1 billion, according to the Bloomberg Billionaires Index. “Investor sentiment has turned a little bit more positive,” said Kristen Scarpa, a New York-based investment strategist at Barclays Wealth Management, in a telephone interview yesterday. “Job growth is the key to igniting additional consumption, which will drive the U.S economy forward.” Global stocks slumped earlier in the week after European Central Bank President Mario Draghi failed to articulate the details of a bond-buying plan to ease the euro area crisis. The Federal Reserve Bank’s pledge to provide additional support for the economy further disappointed investors who were anticipating a more definitive sign of additional monetary easing. The losses were reversed yesterday after the U.S. Labor Department reported a 163,000 payroll increase in July, boosted by a pickup in employment at automakers, even as the jobless rate rose to 8.3 percent. The Standard & Poor’s 500 Index gained 0.4 percent during the week to close at 1390.99 in New York. The Stoxx Europe 600 Index gained 2.22 percent, closing at 265.58. Delisting LLX In the full week, Eike Batista , Brazil’s richest man, gained $65 million after he offered on July 31 to buy back all of the outstanding shares of his ports developer, LLX Logistica SA. (LLXL3) Batista will pay as much as 618.7 million reais ($305 million) to take the Rio de Janeiro-based LLX private. The company’s stock plunged to a three-year low last month. The proposal is a reversal for Batista, 55, who has taken public six energy, commodities and logistics startups since 2006. Batista’s $21.3 billion fortune makes him the world’s 22nd-richest person. Bernard Arnault ’s fortune increased $474 million during the week. Shares of LVMH Moet Hennessy Louis Vuitton SA (MC) , the world’s largest luxury goods maker, rose 3.1 percent in Paris trading after reporting a 20 percent increase in first-half earnings on July 26. France’s richest man, 63, ranks 16th on the index with a net worth of $24.1 billion. Carlos Slim , 72, remains the world’s richest person. Slim’s fortune lost $569 million. He now has a net worth of $74.9 billion. Seychelles Island Bill Gates , 56, is $12.2 billion behind Slim. Shares of Microsoft, the world’s biggest software maker, were unchanged for the week. The world’s biggest software maker announced on July 31 that it will phase out Hotmail and introduce a new, free Web-based e-mail portal as it seeks to draw users from Mountain View, California-based Google Inc. (GOOG) ’s Gmail. No. 3 on the index is Warren Buffett , 81, with a net worth of $45.9 billion. Shares of Berkshire Hathaway Inc. (BRK/B) rose to a 16-month high during the week. The Omaha, Nebraska-based company said yesterday that profit slipped 9 percent in the second quarter as derivative bets declined in value. Liliane Bettencourt , Europe’s richest woman, sold her private island in the Seychelles to marine conservation organization Save Our Seas Foundation for $60 million, it was announced July 31. The L’Oreal SA heiress, 89, ranks 15th on the index with a net worth of $24.2 billion. The richest man in Asia is Li Ka-Shing , who ranks 14th on the index with a net worth of $24.5 billion. Shares of the billionaire’s Cheung Kong Holdings Ltd. rose 3.38 percent during the week in Hong Kong. Family Trust Hutchison Whampoa Ltd. (13) , Li Ka-shing’s biggest company, posted first-half profit that beat analysts’ estimates after boosting earnings from U.K. utilities, phone services in Europe and retail stores in China. The 84-year-old last month transferred his son Richard’s stake in the family trust that controls Hutchison Whampoa and flagship developer Cheung Kong to his oldest son, Victor. “His character is similar with mine and he is prudent when dealing with things,” the elder Li said at a press conference in Hong Kong Aug. 1. “I shall do my best to support him. I have the cash in the bank and he can take it anytime. It’s for him but I’m not encouraging him to take it all now.” The Bloomberg Billionaires Index takes measure of the world’s wealthiest people based on market and economic changes and Bloomberg News reporting. Each net worth figure is updated every business day at 5:30 p.m. in New York and listed in U.S. dollars. To contact the reporter on this story: David De Jong in New York at ddejong3@bloomberg.net To contact the editor responsible for this story: Matthew G. Miller at mmiller144@bloomberg.net |
2024-04-03 | Bloomberg | AIG Targets China Drivers in $50 Billion Insurance Market | (Corrects PICC premium revenue in sixth paragraph of story published March 30.) Soon-to-be-relaxed rules in China have firms including American International Group Inc. (AIG) and Allianz SE (ALV) eager to grab a bigger share of the $50 billion that the country’s drivers spend each year on auto insurance. Both insurers are making plans to offer more products as China lifts a ban on foreign companies selling mandatory policies for drivers. On a recent two-week trip, Kevin Goulding, the Shanghai-based head of Chartis China, AIG’s property- casualty business in the country, scouted four municipalities and provinces with a combined population of 500 million, as he weighs where to open the company’s next branch and lays plans to sell car coverage for the first time. “We’re definitely looking forward to moving into the auto market in China,” he said in a phone interview. “It’s an extremely large market and will also allow us to offer other products to consumers.” The policy shift, announced in February during Chinese Vice President Xi Jinping ’s visit to the U.S., may be a boon for foreign insurance companies, which have struggled to gain a foothold in the world’s largest auto market, where an average of about 40,000 cars are sold a day. Non-Chinese property-casualty carriers’ share of premiums has been stuck at 1 percent since 2004, a December report from PricewaterhouseCoopers LLP shows. The compulsory coverage, which protects drivers against third-party liability, is a loss leader for Chinese insurers. The companies often bundle the policies with more-lucrative voluntary insurance that covers damage to cars. Taken together, the protection has been a profitable business in China since 2009, representing about 70 percent of all property-casualty insurance sold in the country. Compulsory Coverage Based on that ratio, auto would account for more than $50 billion in premiums in what the China Insurance Regulatory Commission said was a 478 billion yuan ($75.8 billion) property- casualty market last year. PICC Property & Casualty Co., China’s largest non-life insurer, with about one-third of the market, generated more than 100 billion yuan in premium revenue from the auto segment in 2011. The rule that limited foreign insurers only to sales of the optional coverage has stymied their growth in the country, said Sally Yim, an analyst at Moody’s Investors Service in Hong Kong. “If a customer wanted to buy motor insurance, why would they want to choose a foreign company that can’t provide the compulsory coverage,” she said by phone. Being able to offer a comprehensive package will “help them build their brand recognition and gradually build scale.” Underwriting Profit Chinese regulators have protected the domestic industry, still in its early stages of development, from foreign competitors, said Yim. About 60 percent of PICC’s 8.02 billion yuan total underwriting profit came from auto coverage in 2011. The largest local companies made at least 5 cents for every premium dollar on underwriting auto insurance in the first half of 2011, according to a Moody’s report in February. Insurers in the U.S. lost 1 cent per premium dollar on consumer auto policies in 2010, the last year of available data, according to a report by the National Association of Insurance Commissioners. Insurers also make money by investing float, or the premiums held before paying claims. Allianz, which got about 5 million euros ($6.7 million) in auto premiums from China in 2011 after five years of selling voluntary coverage, plans to offer the compulsory policies and invest to increase its market share once it’s permitted, said Peter Nestmann, chief executive officer of the Munich-based insurer’s property-casualty unit in the country. The company’s strategy is to sell coverage at car dealerships and target buyers of luxury brands, such as Mercedes-Benz and BMW. ‘Not Easy’ “If you’re not allowed to sell the most basic liability coverage, it’s not easy to compete,” Nestmann, who’s based in Guangzhou, said by phone. For now, non-Chinese insurers are awaiting rules from regulators detailing when, where and how they’ll be able to sell the mandatory coverage. Liberty Mutual Holding Co. projects that it will take six to 18 months before it will be able to offer the products, according to Jackson Tang, CEO of the Boston-based insurer’s China subsidiary. The company began selling voluntary auto coverage in the country in 2005 in Chongqing on the expectation that the rules would be relaxed for foreign insurers selling compulsory car policies, said Tang. Liberty Mutual has more than 90,000 auto policyholders in the country and plans to enter areas where there are few foreign rivals, he said. Tokio Marine The insurer may have competition as it expands. Japanese firms including Tokio Marine Holdings Inc. (8766) , Sompo Japan Insurance Inc., Mitsui Sumitomo Insurance Co., and South Korea ’s Samsung Fire & Marine Insurance Co. all expressed interest in selling the policies as soon as regulators permit. Mitsui, like Liberty Mutual and Allianz, already offers voluntary auto insurance in China. Sompo said it will begin providing that coverage in Shanghai as early as June. For AIG’s global property-casualty insurer Chartis, the move into China’s auto market compliments a shift toward selling more coverage to individuals. Consumer insurance accounted for 38 percent of the unit’s policy sales in 2011, compared with 30 percent two years earlier, according to a regulatory filing. Chartis China is the largest foreign property-casualty insurer in the Asian country, on sales of commercial coverage and accident-and-health policies. AIG traces its roots to an insurance agency founded by Cornelius Vander Starr in Shanghai, after the American entrepreneur arrived in the city in 1919. More recently, the New York-based insurer has been invested in China’s auto insurance market through a 9.9 percent stake in PICC. The two firms have had a strategic relationship since the Chinese insurer’s initial public offering in 2003. AIG’s Hancock Peter Hancock , who heads Chartis globally, is relying on growth in developing economies to boost returns, as AIG seeks to attract private investors to replace government funds from its 2008 U.S. rescue. Asset sales to pay back the bailout led AIG to retreat from selling life insurance in China in 2010, when the company sold a majority stake in AIA Group Ltd. (1299) , the Hong Kong- based insurer with operations across Asia. Hancock personally thanked Xi for the decision to lift the auto-insurance ban at a luncheon at the Marriott Wardman Park hotel in Washington on Feb. 15, during the Chinese vice president’s visit. After years of lobbying by the insurance industry , Chinese regulators are relaxing regulations to benefit from foreign companies’ expertise and improve service. Still, building an auto business in the country faces hurdles. The government sets rates for the mandatory coverage. And foreign insurers face restrictions on where and how fast they can open new branches. It takes about 18 months to win approval to sell coverage in a new province or municipality, said Liberty Mutual’s Tang, who’s based in Chongqing. And the licenses are granted one at a time. Chinese firms don’t face the same requirements. ‘Can You Imagine’ “Can you imagine, if I wanted to open 10 provincial branches, it would take me 15 years,” said Tang in a phone interview. “Local companies can apply for 10 branches, 15 branches in the first year and just open them.” One way for foreign insurers to distinguish themselves from local companies, said Moody’s Yim, is on service. Domestic carriers have struggled to process and settle claims as the number of vehicles surged to 228 million, China’s insurance regulator said in a work plan posted on its website this month. Companies were ordered to submit plans for how to improve service by the end of March. Even with better service, foreign insurers may find it tough to steal customers in cities like Beijing. Local companies such as Ping An Insurance (Group) Co., China’s second-biggest insurer, have claims staff at car dealerships to handle almost everything after an accident. Service Quality “We drove back to the dealership where we bought the car, they took pictures of the broken part, had us fill a form, they paid the bill, and we drove home after the repair,” said Dong Xuan, 34, a manager at a Beijing-based construction company. “It’s simpler than we thought,” she said of her experience last year after her Ping An-insured Toyota Corolla smashed its front light hitting a taxi. “The first thing I look at is convenience, then service quality,” said Yang Guang, 35, an English teacher at a Beijing- based college who won the right to buy a car in the otherwise- restricted city as part of a government monthly car-license lottery in February. “I’ll see what foreign insurers have to offer, but I doubt they can elbow their way into the dealerships that have already partnered with local insurers.” Figuring out which customers are the best risks may also pose a challenge. The number of drivers in the country climbed to 239 million at the end of February, according to the Ministry of Public Security. Chartis’s Goulding said it would take a few years before the company has enough data to make accurate forecasts about the business. Profiling Customers “Worldwide, auto has small margins, so you have to be very smart on how you profile your customers,” he said. Official statistics show that China’s roads have gotten safer in recent years, even as the country has added more cars and drivers. Road fatalities fell to about 2.8 for every 10,000 vehicles from 3.2 in 2010, according to the State Administration of Work Safety. Still, that’s more than twice the rate in the U.S. in 2010, according to the most recent data from the National Highway Traffic Safety Administration. Further, a study of death records published in the January 2011 Bulletin of the World Health Organization showed that the rate of fatalities from road traffic may not have declined and could be double what’s reported by the police. ‘Crazy’ China is adjusting to the increase in motorists, said Peter Hessler, a New Yorker staff writer and author of “Country Driving: A Journey Through China from Farm to Factory,” which chronicles how the car is transforming the country. Driver education in China is “the blind leading the blind,” he said in a phone interview from Cairo, where he now lives. “In the developing world people drive in ways that people in the States think is crazy,” said Hessler. “The difference in China is that they all learned in the last five years, basically. I don’t think you’ve ever had a country that’s had this scale of the automobile suddenly becoming a part of life.” To contact the reporter on this story: Noah Buhayar in New York at nbuhayar@bloomberg.net. To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-04-26 | Bloomberg | U.K. Stocks Advance on Earnings; Unilever, Shell Climb | U.K. stocks advanced for a third day, after swinging between gains and losses, as Unilever Plc and Royal Dutch Shell Group Plc posted financial results that beat forecasts, outweighing worse-than-expected economic reports in the U.S. and Europe. Unilever, the world’s second-biggest consumer goods company, and Shell, Europe’s largest oil producer, climbed more than 2.5 percent each. AstraZeneca (AZN) Plc fell the most since 2010 after the drugmaker cut its profit forecast. Admiral Group Plc (ADM) dropped after reporting a slowdown in sales. The FTSE 100 (UKX) Index rose 29.83 points, or 0.5 percent, to 5,748.72 in London after fluctuating between gains and losses at least 12 times. The measure has dropped 3.6 percent from its 2012 high in March as concern resurfaced that some countries in Europe will struggle to reduce deficits and service their debt. The FTSE All-Share Index added 0.5 percent today, while Ireland’s ISEQ Index slipped 0.4 percent. “Indecision reigned today where a volatile session indicated just how investors are still unsure as to whether the good corporate earnings season is enough to discount the overriding storm clouds that still shroud the macro picture,” said Angus Campbell , head of market analysis at Capital Spreads in London. Euro-Area Confidence A report today showed economic confidence in the euro area declined more than economists forecast in April, as the region’s slump showed signs of deepening. An index of executive and consumer sentiment fell to 92.8 from a revised 94.5 in March, the European Commission said. Economists had forecast a drop to 94.2, according to the median estimates in a Bloomberg survey. Italy’s borrowing costs jumped at the sale of 8.5 billion euros ($11.3 billion) of six-month bills amid renewed concern about the spread of the region’s debt crisis. The Treasury sold the debt at a rate of 1.772 percent, up from 1.119 percent at the previous auction on March 28. “We have been consistently bearish on European equities,” Stuart Richardson, who helps oversee $70 million at RMG Wealth Management in London , said in a phone interview. “For the next two to three years, we like several companies in the region whose growth drivers come from overseas, but we are just worried about the overall event risk in Europe.” U.S. Jobless Claims In the U.S., more people than forecast filed applications for unemployment benefits last week, a sign that the labor market is taking time to improve. Jobless claims fell by 1,000 to 388,000 in the week ended April 21 from a revised 389,000 the prior period that was the highest since early January, Labor Department figures showed today in Washington. The median forecast of 48 economists surveyed by Bloomberg News called for a drop to 375,000. Unilever (ULVR) advanced 2.7 percent to 2,135 pence after reporting an 8.4 percent increase in underlying sales last quarter that beat the average analyst estimate for a 6.4 percent gain, according to a survey conducted by the company. Units sold increased 3.5 percent, more than double the forecast. The company also said it’s “on track” to deliver a modest improvement in full-year core operating margin, weighted toward the second half of the year. “However one cuts it, it’s a strong first quarter,” analysts at Deutsche Bank AG wrote in a report today. The company “will probably be one of a few to show recovery in volumes in spite of good pricing,” they added. Shell Asset Sales Shell increased 3.2 percent to 2,195.5 pence after first- quarter earnings beat estimates and the company raised a target for asset sales this year. Excluding one-time items and inventory changes, Shell posted a profit of $7.28 billion, compared with the $6.7 billion average analyst estimate. Whitbread Plc (WTB) jumped 6.2 percent to 1,921 pence after the owner of Premier Inn budget lodges reported an 11 percent increase in full-year pretax profit. The company posted earnings per share of 134.1 pence, beating analyst estimates. Taylor Wimpey Plc (TW/) gained 3.5 percent to 50.35 pence after the homebuilder reported a 23 percent increase in the value of its order book since the year end and said trading is at the “upper end of expectations.” AstraZeneca fell 6.1 percent to 2,666.5 pence, the biggest drop since December 2010. The drugmaker cut its 2012 core earnings-per share target to $5.85 from $6.15, compared with a previous range of $6 to $6.30. The company said first-quarter revenue sank because of “challenging market conditions” and the loss of patent protection on several medicines. The company also announced that Chief Executive Officer David Brennan will retire from his post, ending a six-year tenure after repeated failures in drug development left investors skeptical of the company’s earnings prospects. Admiral lost 2.9 percent to 1,195 pence, paring the gain this year to 40 percent. The company said it made a “good start” to the year as first-quarter sales rose 9 percent to 586 million pounds ($948 million). The pace of growth declined from 20 percent in the fourth quarter of 2011 and 56 percent in the first quarter a year earlier, according to analysts at RBC Capital Markets. To contact the reporters on this story: Sarah Jones in London at sjones35@bloomberg.net ; Alexis Xydias in London at axydias@bloomberg.net To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net |
2024-10-05 | Bloomberg | AIA Names Ex-AIG Executive Edmund Tse as Director Before IPO | Edmund Tse , who helped build American International Group Inc. ’s life insurance operations for more than four decades, has been named a director of the main Asia unit being prepared for an initial public offering. Tse, 72, was appointed a non-executive director of AIA Group Ltd. on Sept. 27, the Hong Kong-based unit said yesterday in a statement. He also serves as honorary chairman, AIA said. AIA is adding executives as the business prepares for a public listing in Hong Kong this month to help repay its parent’s $182.3 billion U.S. government bailout. Mark Tucker , who built the Asia operations of Prudential Plc over 15 years and became chief executive officer of the London-based insurer in 2005, was named CEO of AIA in July. Tse was the “principal architect of AIG’s global life insurance platform,” the New York-based insurer said in a 2009 statement announcing his reduced role with the firm. “Edmund Tse’s leadership, wisdom and vision will be greatly missed.” Tse joined AIA in 1961 and was CEO of the business from 1983 to 2009, according to the filing. He retired in 2009 as a director of AIG. AIA’s board consists of Tucker and seven non-executive directors, including Tse, the firm said in the statement. Jeffrey Hurd , AIG’s senior vice president of human resources and communications, and Jay Wintrob , executive vice president of AIG’s U.S. life and retirement services, represent the parent firm on the board, AIA said. Directors include Chow Chung Kong , 60, CEO of MTR Corp. and deputy chairman of the Hong Kong General Chamber of Commerce; Rafael Hui , 62, former chief secretary for administration of Hong Kong; Qin Xiao, 63, former chairman of China Merchants Bank Co. , and Jack So , 65, who became vice chairman of Credit Suisse Group AG’s China region in 2008. ‘Strategic Thinking’ “The strength of the entire AIA board reflects the importance we place on strong corporate governance and sound strategic thinking,” Tucker, 52, said in the statement. AIG is seeking about HK$115.3 billion ($14.9 billion) in the IPO through the sale of as many as 5.9 billion shares of AIA, said two people with knowledge of the matter. The offering represents a stake of about 49 percent of the company, valuing AIA at as much as $30.6 billion, said the people, who declined to be identified because the discussions are private. AIG has the option to sell more shares in AIA, taking the potential size of the IPO to about $20.5 billion, according to a term sheet for the transaction sent to fund managers. That would make it the largest ever in Hong Kong, overtaking the $16 billion raised by Beijing-based Industrial & Commercial Bank of China Ltd. in 2006, data compiled by Bloomberg show. To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-06-15 | Bloomberg | Lira Falls for a 4th Day on Possible Deposit Insurance Increase | Turkey ’s lira slid for a fourth day on reports regulators may increase deposit insurance premiums on banks as the government seeks to rein in inflation while keeping the benchmark interest rate at a record low. The lira depreciated to the lowest level in two weeks, weakening 0.8 percent to 1.5974 per dollar at 5:50 p.m. in Istanbul. Yields on two-year benchmark bonds rose seven basis points, or 0.07 percentage point, to 8.95 percent, data compiled by Bloomberg show. That’s the highest level in a week, according to the TEB Local Benchmark Bond Index. Turkey has attempted to contain its ballooning current- account deficit by raising bank reserve requirements while holding its benchmark interest rate at an all-time low of 6.25 percent. The country is now considering an increase on bank deposit insurance premiums, Savings Deposit and Insurance Fund Chairman Sakir Ercan Gul confirmed to Bloomberg HT television today, without saying by how much. “The fight with the widening current-account deficit will continue by using the banks as the main intermediary going forward,” HSBC Yatirim Turkey, the Turkish investment arm of HSBC Holdings Plc, said in an e-mailed research note today. “These potential actions stand as the Damocles’ sword on the Turkish banks, until the regulators announce them and investors assess the potential outcome.” The fund may increase deposit insurance to cover as much as 100,000 euros ($143,000), the European Union average, from 50,000 liras ($31,300), Haberturk newspaper reported today. That would double the burden on the banking system to $1 billion, Oyak Securities said in an e-mailed research note. The benchmark ISE National 100 Index (XU100) dropped 1,246.62, or 2 percent, to 60,938.92. Turkey’s banking index slumped 2.6 percent, closing at the lowest level in more than three months. Turkiye Garanti Bankasi AS (GARAN) , the country’s biggest listed bank, slid 3.1 percent in a third day of declines and Turkiye Is Bankasi (ISATR) AS dropped 2 percent. To contact the reporter on this story: Benjamin Harvey in Ankara at bharvey11@bloomberg.net To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net |
2024-08-24 | Bloomberg | Israeli Stocks: Harel Insurance Investments, Paz Oil, Scailex | Israel ’s TA-25 Index gained for a third time this week, advancing 0.8 percent to 1,115.25 at the 4:30 p.m. close in Tel Aviv. Investors traded about 1.16 billion shekels ($321.5 million) of shares and convertible securities today, according to Tel Aviv Stock Exchange data. The following stocks rose or fell today. Symbols are in parentheses. Harel Insurance Investments & Financial Services Ltd. (HARL) jumped to the highest level since Aug. 8, advancing 2.9 percent to 155 shekels. The country’s third-biggest insurance company by market value said net income surged more than sixfold to 95 million shekels. Paz Oil Co. (PZOL IT) declined 3 percent to 468.50 shekels, the biggest drop since Aug. 7. The maker of petroleum-based products said second-quarter net income fell 31 percent to 100 million shekels. Scailex Ltd. (SCIX IT) slid to the lowest since March 2009, falling 3.1 percent to 27.13 shekels. Standard & Poor’s Maalot put the IlA- rating of the provider of telecommunications services on “CreditWatch” with negative implications. To contact the reporter on this story: Sharon Wrobel in Tel Aviv at swrobel4@bloomberg.net To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net |
2024-08-18 | Bloomberg | Consumer Confidence in Economy Lowest Since Recession in Bloomberg Index | Consumer confidence in the U.S. economic outlook slumped in August to the lowest level since the recession, raising the risk that spending will dry up. The Bloomberg Consumer Comfort Index’s monthly expectations gauge dropped to minus 34, the weakest since March 2009, from minus 22 in July. The weekly measure of current conditions was minus 48.3 for the period ended Aug. 14 compared with minus 49.1, which was the worst reading since mid-May. The most unstable market in the history of American stocks, wage gains that are failing to keep up with inflation and unemployment hovering around 9 percent may be causing Americans to lose faith that the economy and their financial situations will soon improve. Applications for unemployment benefits climbed last week to the highest level in a month. “The recent market volatility has exacted a toll on consumer confidence that will likely not ease any time soon,” said Joseph Brusuelas , a senior economist at Bloomberg LP in New York. “Consumer sentiment has reached a critical tipping point that suggests households may pull back on spending.” First-time claims for jobless insurance rose by 9,000 to 408,000 in the week ended Aug. 13, Labor Department figures showed today. Economists surveyed by Bloomberg News projected a rise to 400,000, according to the median forecast. The cost of living in the U.S. rose in July by the most in four months, led by gains in food and fuel, the Labor Department also said. The consumer-price index increased 0.5 percent from June, while worker pay failed to keep pace. Adjusted for inflation, hourly wages dropped 0.1 percent in July and were down 1.3 percent from the same month a year ago. Stocks Drop Stocks declined today on concern about the global economy and that European banks lack sufficient capital. The Standard & Poor’s 500 Index dropped 3.2 percent to 1,156.12 at 9:39 a.m. in New York. The gauge has fallen 7.6 percent so far this month through yesterday. It rose or fell at least 4.4 percent in each of the first four days of last week, an unprecedented string of swings of such magnitude in consecutive days, according to data compiled by Birinyi Associates Inc., Bloomberg and Howard Silverblatt , senior index analyst at S&P. The drop in the Bloomberg economic expectations gauge was most severe among households earning $50,000 a year or more, married people and full-time workers, today’s report showed. “The change from last month stands out among some better- off groups, another troubling sign,” Gary Langer , president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg, said in a statement. Two of Three Lower The weekly comfort data showed declines in two of the index’s three components. The measure of Americans’ views of the current state of the economy dropped to minus 85.4 last week from minus 85.2 the prior period. The gauge of personal finances fell to minus 8.4, the lowest level since the first week of July. The buying climate index rose to minus 51.2, the first increase in five weeks, from minus 55. The Bloomberg comfort index, which began December 1985, has averaged minus 45.1 this year compared with minus 45.7 for all of 2010 and minus 47.9 in 2009, the year the recession ended, the report showed. Other reports have shown more volatility in confidence. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment for August plunged to the weakest reading since May 1980, when the economy was contracting at a 7.9 percent annual pace. Shoppers at Wal-Mart Stores Inc., the world’s largest retailer, continue to be “strained” by economic conditions, Charles Holley, chief financial officer at the Bentonville, Arkansas-based company, said in a conference call with reporters this week. Consumers’ biggest concern is unemployment, rather than fuel or food costs, he said. Jobless Rate The jobless rate dropped to 9.1 percent in July as thousands of discouraged workers left the labor force , figures from the Labor Department showed earlier this month. The Bloomberg Consumer Comfort Index is based on responses to telephone interviews with a random sample of 1,000 consumers aged 18 and over. Each week, 250 respondents are asked for their views on the economy, personal finances and buying climate; the percentage of negative responses is subtracted from the share of positive views and divided by three. The most recent reading is based on the average of responses over the previous four weeks. The monthly expectations gauge reflects the responses of 500 households polled over the past two weeks. The comfort index can range from 100, indicating every participant in the survey had a positive response to all three components, to minus 100, signaling all views were negative. The margin of error for the headline reading is 3 percentage points. Field work for the index is done by SSRS/Social Science Research Solutions in Media, Pennsylvania. To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net |
2024-11-14 | Bloomberg | U.K. Gas Prices, Carbon Permits, Level Global: Compliance | The U.K. government said it’s prepared to legislate to clamp down on wholesale natural-gas trading should price-fixing allegations prove true. The Financial Services Authority, or FSA, is investigating claims last month by the price-reporting company ICIS Heren that “unusual trading activity” may have affected gas prices, according to a statement yesterday. Energy Secretary Ed Davey said he’s asked regulators whether they need more authority. The probe raises questions about how market prices are determined and whether the biggest utilities, which are involved in setting prices, may also profit by manipulating them. Prime Minister David Cameron ’s government has been pressing electricity and gas suppliers to rein in costs after Centrica Plc (CNA) and SSE Plc (SSE) raised customer prices. The investigation broadens the efforts of British financial regulators to curtail market abuses. Martin Wheatley, a managing director at the FSA commissioned to investigate the Libor abuse, had raised concerns it may spread to energy markets. “Centrica has very robust governance and compliance policies, which regulate its market participation and behavior,” Britain’s biggest energy supplier said yesterday in a statement. “Centrica’s traders are prohibited from providing price information to price-reporting agencies.” SSE, Britain’s second-largest energy supplier, said it’s “entirely confident that our energy portfolio management team operate in a fair and legitimate way.” SSE raised consumer gas prices by 9 percent from August. Centrica said last month it would increase them about 6 percent starting Nov. 16. For more, click here. Compliance Policy Geithner Steps Up Pressure on SEC to Make Money Funds Safer U.S. Treasury Secretary Timothy Geithner , stepping up pressure on the Securities and Exchange Commission to make money funds safer, outlined three options to overhaul the $2.6 trillion industry. Geithner, who spoke yesterday in Washington at a meeting of the Financial Stability Oversight Council, a group formed by the Dodd-Frank Act and charged with addressing systemic financial risks, said the SEC should consider a plan for a capital buffer of 3 percent of assets that may be lowered if other steps are taken to reduce risk. Two other solutions Geithner offered are opposed by the funds industry and were rejected in August by a majority of SEC commissioners. Representatives for the fund industry, who last month put forth their own plan to reach a compromise, rejected the proposals, saying they didn’t advance the debate. While Geithner has said the SEC is best positioned to address money funds, he has also said that the regulators’ panel, often referred to as FSOC, might intervene and subject funds to oversight by the Federal Reserve if the SEC fails to act. Two of the options proposed by Geithner yesterday included the major elements of a plan backed by SEC Chairman Mary Schapiro that she abandoned for lack of votes in August. That proposal would have given money funds a choice to either drop their traditional $1 share price for a floating value, or create capital buffers to absorb losses and temporary holdbacks on all withdrawals to discourage investor runs. For more, click here, and click here. EU Companies Face 40% Quota Rule Favoring Women on Boards Companies may be required to favor women over equally qualified men for supervisory board seats, as they strive to meet a 40 percent female directors quota the European Union set out in draft rules published today. The European Commission adopted a proposal aiming to reach the 40 percent level by 2020, Mina Andreeva, a spokeswoman for EU Justice Commissioner Viviane Reding , said in an e-mailed statement. Regulators amended earlier proposals so that companies would only face sanctions if they fail to favor women, even if they don’t manage to meet the quota. About 13.7 percent of corporate board seats in the EU are held by women, the commission said in a report in March. The measures would apply to some 5,000 listed companies in the EU by 2020 and state-owned companies by 2018, the commission said. Some exclusions would apply. The draft rules need the backing of most of the EU’s 27 member states and the parliament, which can amend draft laws before they become final. For more, click here. Compliance Action EU Carbon Prices Slump After Commission Unveils Permit-Glut Fix European Union emission permits dropped, erasing most of the Nov. 12 gains, after the region’s regulator proposed to delay sales of 900 million allowances to curb an oversupply in the world’s biggest carbon market. Permits for December slid as much as 8.9 percent, their biggest drop since July 18, after gaining 9 percent Nov. 12 on the ICE Futures Europe exchange in London. The European Commission is seeking to postpone sales during the three years through 2015 to the last two years of the next trading phase, which ends in 2020, according to a draft document published Nov. 12 on an EU website. Carbon permits for December sank to a record in April, losing 83 percent since peaking in 2008, as the region’s financial crisis cut demand from polluters. The commission plans to publish a report today setting out permanent changes to the program to meet its 2050 pollution-reduction target. The regulator may be forced to soften its plan because of opposition from some countries, according to Deutsche Bank AG. The number of permits to be delayed under the strategy known as backloading is at the higher side of a range floated by the commission in July, when it presented an outline of the short-term plan to improve the world’s biggest cap-and-trade market. The options drafted at the time were postponing 400 million, 900 million and 1.2 billion allowances. The draft measure needs qualified-majority support from national governments to become law. Its formal adoption will take place only after the parliament votes on a separate law relating to the timing of auctions, Climate Commissioner Connie Hedegaard said Nov. 13 in Brussels. The parliament is tentatively scheduled to vote on the legislative amendment in April. Goldman’s Risk-Weighted Assets Seen Jumping 67% Under New Rules Goldman Sachs Group Inc. (GS) , the fifth-biggest U.S. bank, would have $728 billion in risk-weighted assets under new capital rules, a 67 percent jump from the amount it had under earlier regulations. Goldman Sachs plans to cut the figure to $700 billion by the end of next year, Chief Executive Officer Lloyd C. Blankfein, 58, said yesterday at an investor conference in New York hosted by Bank of America Corp.’s Merrill Lynch unit. About $18 billion of the reduction will come from cutting credit risk, and $11 billion will come from market risk, said Blankfein in his seventh straight appearance at the annual event. The comments mark Goldman Sachs’s first public estimate of risk-weighted assets under new Basel III rules, a figure that serves as the denominator for determining regulatory capital ratios. The firm said last month its capital ratio was about 8.5 percent, the exact amount it will be required to maintain based on surcharges for the world’s largest banks released this month by the Financial Stability Board. Blankfein said the New York-based bank is likely to maintain a 1 percentage point buffer above that requirement. The need to boost the proportion of equity capital has pressured return on equity, a measure of profitability. Banks have been seeking to cut holdings of assets with high risk weightings to reduce capital needs for trading businesses and improve returns. For more, click here. Separately, Blankfein said Wall Street competitors with large retail businesses face increasing pressure from new global capital rules and “the size and complexity” of the rules will “come at a cost.” The biggest banks will have to balance the “synergies” of having retail and institutional businesses with the burden of higher capital surcharges that are being imposed on systemically important firms, Blankfein said. Courts Olympus Sued by State Street, Other Investors for $241 Million Olympus Corp. (7733) , the camera and endoscope maker that admitted an accounting fraud, said it was sued by a group of 48 investors for 19.1 billion yen ($240 million) in damages. The lawsuit by investors including State Street Bank and Trust Co. and Government of Singapore Investment Corporation Pte Ltd. was disclosed after markets in Tokyo closed Nov. 12. It was filed on June 28 to Tokyo District Court, Olympus spokesman Yasutoshi Fujiwara said. Olympus shares Nov. 12 rose the most in three months after it raised its earnings forecast. Former Chairman Tsuyoshi Kikukawa and two other former executives in September pleaded guilty to covering up losses at the company for 13 years starting in the 1990s. The lawsuit is in addition to 14 similar cases Olympus has in Japan where investors are suing over the accounting fraud, said another Olympus spokesman, Sam Kobayashi. The company is studying the content of the notification received and hasn’t decided how it will respond, Kobayashi said. The impact on Olympus’s earnings is unclear, according to its statement. For more, click here. Bartender, Dog Walker to Judge Level Global Co-Founder at Trial A bartender and a dog walker are among the federal court jurors hearing opening arguments in the insider-trading trial of Level Global Investors LP co-founder Anthony Chiasson and Todd Newman , a former portfolio manager for Diamondback Capital Management LLC. The jury of seven women and five men also includes a computer animator on feature films, a retired postal worker and a medical assistant. The jurors won’t include a hedge fund manager and the mother-in-law of another who expressed harsh views of the industry and were excused by U.S. District Judge Richard Sullivan in Manhattan. Chiasson and Newman worked at funds that were raided by the Federal Bureau of Investigation in November 2010, as part of a nationwide crackdown of illicit trading by portfolio managers, analysts and insiders at technology companies. Opening statements began yesterday. Prosecutors in the office of Manhattan U.S. Attorney Preet Bharara allege that Chiasson and Newman were part of a group of portfolio managers, analysts and technology company employees who traded stock tips in a conspiracy that operated from 2007 to 2009. The case is U.S. v. Newman, 12-00121, U.S. District Court, Southern District of New York (Manhattan). For more, click here. Interviews/Panels Bair Says U.S. Should Scrap Preferential Tax Treatment Former Federal Deposit Insurance Corp. Chairman Sheila Bair discussed the U.S. tax system and the outlook for a successor to Treasury Secretary Timothy F. Geithner. Bair, now a senior adviser at Pew Charitable Trusts, spoke from Brussels with Manus Cranny on Bloomberg Television’s “The Pulse.” For the video, click here. Brown Says Bowles a ‘Favorite’ for Treasury Secretary Thomas Brown , chief executive officer at Second Curve Capital LLC and a Bloomberg contributing editor, talked about the outlook for financial regulation and Treasury Secretary Timothy Geithner’s successor. Brown spoke with Betty Liu on Bloomberg Television’s “In the Loop.” Michael Holland , chairman of Holland & Co., also spoke. For the video, click here. CFTC International Rules Harming U.S. Firms, Swaps Brokers Say The main U.S. swaps regulator risks harming American firms with how it’s telling international counterparts to interpret rules to oversee the $648 trillion swaps market, according to executives at brokers from ICAP Plc to Tradition North America Inc. The Commodity Futures Trading Commission is weighing final guidance on the cross-border reach of trading, capital, collateral and other swaps rules under the Dodd-Frank Act. The commission held a meeting in Washington last week with the U.S. Securities and Exchange Commission, which shares oversight of some swaps markets, where European regulators said the U.S. approach wouldn’t work. “It’s actually very evident that a lot of what the CFTC has done is harming the U.S.,” Mark Beeston, chief executive officer of portfolio risk services for ICAP, said on a panel discussion at the SefCon III conference in New York. Group of 20 nations set an end-of-year goal to complete swaps regulations designed to reduce risk and increase transparency in a market faulted for helping to fuel the 2008 credit crisis. Lack of clarity and cross-border wrangling over the rules threaten to delay the deadline. For more, click here. Comings and Goings Diamond Libor Taint Drives Colby Students Seeking His Ouster Robert Diamond , the former Barclays Plc (BARC) chief, gave $6 million to finance a Colby College building that has become a focal point for student dissent over his role at the 199-year- old school in Waterville, Maine. Diamond, class of ’73, was forced out at Barclays after the London-based bank admitted to manipulating a key lending rate affecting $300 trillion in finance products worldwide. Since Colby trustees backed him as chairman in August, a group of students and local activists has rallied outside the Diamond Building to call for his removal. The market crisis that led to the longest recession since World War II highlighted a cozy relationship between academia and Wall Street. As campus protests focused on financiers, academic leaders urged graduates to resist the lure of banking and investment jobs. Yet executives who’ve been tarnished by scandal are rarely forced to cut ties with schools and nonprofit organizations they’ve supported, said Stanley Katz, a professor of public and international affairs at Princeton University. Usually a trustee caught up in such situations simply isn’t re-elected, rather than being forced off the board, Katz said. For more, click here. Tucker’s Odds on Becoming BOE Governor Narrow at Paddy Power Bank of England Deputy Governor Paul Tucker ’s odds of becoming the next governor narrowed at Paddy Power Plc. (PAP) The price on Tucker replacing Mervyn King in June shortened to 1-3 from 4-9, meaning a successful 3-pound bet would win a 1- pound profit, the Dublin-based bookmaker said on its website. The second favorite for the role is Terence Burns, former Permanent Secretary at the Treasury, at 13-2. Tucker’s position as the favorite for getting the top central bank job wobbled earlier this year as he and his colleagues were embroiled in the Libor scandal, and he briefly lost his lead position to Gus O’Donnell, former head of the civil service. The application deadline for the Bank of England job was Oct. 8. To contact the reporter on this story: Carla Main in New York at cmain2@bloomberg.net To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net |
2024-03-09 | Bloomberg | Walgreen to Sell Pharmacy Benefit Manager for $525 Million | Walgreen Co. (WAG) , the largest U.S. drugstore chain, agreed to sell its pharmacy-benefit management business for $525 million to Catalyst Health Solutions Inc. (CHSI) to focus on its network of stores. Transition costs for the deal, scheduled to occur by June, will be about $40 million, the Deerfield, Illinois-based chain said today in a statement. Walgreen’s PBM unit, begun in 1995, negotiates drug prices for corporate and government insurance plans and manages employee pharmacy claims. Walgreen, led by Chief Executive Officer Greg Wasson, plans to expand health services like flu shots at more than 7,700 stores. The chain began looking to sell its PBM unit last year, people with knowledge of the matter said then. At the time, the people said the sale might fetch $500 million to $1 billion, depending on the assets sold. “Walgreen had become a bit player in the PBM industry,” Kemp Dolliver, a managing director for Avondale Partners LLC, said in a telephone interview from Boston. “Success is heavily dependent on scale.” The PBM business Walgreen did in a year was about what rival CVS Caremark Corp. (CVS) does in a month, Kemp said. Walgreen will shed its entire PBM unit in the sale to Catalyst, Tiffani Washington , a Walgreen spokeswoman, said today. Share Performance Walgreen rose 28 cents to $42.67 at 9:58 a.m. in New York Stock Exchange trading. Rockville, Maryland-based Catalyst advanced $6.42, or 14 percent, to $50.95 on the Nasdaq Stock Market. The move will help Catalyst, helmed by CEO David Blair, increase membership in its pharmacy-benefits management unit to more than 18 million, according to the statement. The company’s Catalyst RX pharmacy benefits manager currently serves more than 7 million people in the U.S. and Puerto Rico. Bank of America Merrill Lynch provided financial advice to Walgreen, while Sidley Austin LLP and Weil Gotshal & Manges LLP gave legal counsel. Citigroup Inc., Goldman Sachs Group Inc. (GS) and Jefferies & Co. advised Catalyst, and Latham & Watkins LLP and Mintz Levin Cohn Ferris Glovsky and Popeo provided legal advice. To contact the reporter on this story: Duane D. Stanford in Atlanta at dstanford2@bloomberg.net To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net |
2024-08-23 | Bloomberg | India’s Rupee Set for Worst Week Since 1993 on Fed Stimulus Risk | India ’s rupee plunged 4.4 percent to a record this week in its worst performance since 1993 on signs the U.S. is getting closer to reducing stimulus that fueled demand for emerging-market assets. Federal Reserve policy makers were “broadly comfortable” with Chairman Ben S. Bernanke’s plan to start reducing bond purchases later this year if the economy improves, with a few saying tapering might be needed soon, according to the minutes of their July meeting released Aug. 21. Global funds cut holdings of Indian debt by $9.9 billion since Bernanke first flagged possible paring on May 22, leaving the rupee vulnerable to the nation’s record current-account deficit. “The rupee’s levels reflect lack of flows in the market,” said Mirza Baig, head of foreign-exchange and interest-rate strategy in Singapore at BNP Paribas SA. “Indian authorities should just allow the currency to find its own value.” The rupee fell to 64.4650 per dollar this week as of 10:29 a.m. in Mumbai and touched an unprecedented 65.56 yesterday, according to prices from local banks compiled by Bloomberg. It was the biggest weekly loss since March 1993. The currency rose 0.2 percent today. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose 408 basis, or 4.08 percentage points, from Aug. 16 to 16.80 percent. India’s current-account deficit widened to a record 4.8 percent of gross domestic product in the year ended March 31. Excessive Pessimism Finance Minister Palaniappan Chidambaram and Reserve Bank of India Governor Duvvuri Subbarao held coordinated briefings in New Delhi yesterday to try to soothe investors’ nerves. Data due Aug. 30 may show India’s economy expanded 4.7 percent in the quarter ended June 30, slower than 4.8 percent in the previous period, according to the median estimate of 14 economists surveyed by Bloomberg. Excessive pessimism is unwarranted, economic expansion will pick up as the year progresses and the rupee’s drop has overshot appropriate levels, Chidambaram said. In its annual report released in Mumbai yesterday, the central bank said the nation’s economic and monetary policies must focus on preserving financial stability. The RBI said Aug. 20 it will start buying government debt to pump funds into markets and consider reducing weekly sales of cash-management bills to rein in a surge in bond yields. The central bank engineered a cash crunch in Asia’s third-largest economy last month to shore up the rupee. Yield Surge India’s 10-year local-currency sovereign debt yield touched 9.48 percent on Aug. 20, the highest since 2001, data compiled by Bloomberg show. The yield has since retreated to 8.29 percent. The cost to protect State Bank of India’s bonds from default climbed 70 basis points this week to 370 basis points, prices from CMA show. The insurance rate reached 372 on Aug. 20, the highest since June last year. The lender is seen as a proxy for the Indian government by some investors. “The less the authorities do about saving the rupee, the better it is,” BNP’s Baig said. “What they are doing is having no effect, they’re losing their credibility, and raising the risk of a credit-rating downgrade.” Fitch Ratings said yesterday that recent pressures on India’s markets aren’t a trigger for rating action at this point. Moody’s investors Service reiterated its stable outlook on the nation’s rating on Aug. 19, while analyst Atsi Sheth said in an e-mail that inflows are unlikely to accelerate unless the growth outlook improves. Three-month onshore rupee forwards rose 0.6 percent to 65.97 per dollar today, data compiled by Bloomberg show. Offshore non-deliverable contracts climbed 0.7 percent to 66.28. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars. To contact the reporter on this story: Jeanette Rodrigues in Mumbai at jrodrigues26@bloomberg.net To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net |
2024-12-10 | Bloomberg | U.S. Stocks Advance After Consumer Confidence Report, GE's Dividend Boost | U.S. stocks rose, sending the Standard & Poor’s 500 Index to the highest level since the week of Lehman Brothers Holdings Inc.’s bankruptcy in 2008, after General Electric Co. boosted its dividend and reports on consumer confidence and the trade deficit beat forecasts. GE advanced 3.4 percent, the most in the Dow Jones Industrial Average, after raising its dividend for a second time in sixth months. Occidental Petroleum Corp. rose 2.2 percent after lifting its payout and announcing its biggest acquisition since 2006. Tenet Healthcare Corp. soared 55 percent as Community Health Systems Inc. made an unsolicited offer of $7.3 billion. Beckman Coulter Inc. surged 26 percent as people familiar with the matter said it’s exploring a sale. The S&P 500 rose 0.6 percent to 1,240.40 at 4 p.m. in New York, extending its weekly advance to 1.3 percent. The Dow average added 40.26 points, or 0.4 percent, to 11,410.32. “We have moderately better economic growth,” said Mike Ryan , the New York-based head of wealth management research for the Americas at UBS Financial Services Inc., which oversees about $641 billion. “As the economy is in better footing, companies start engaging in strategic acquisitions, capital spending and shareholder-friendly practices.” The S&P 500 built on yesterday’s 0.4 percent advance, which was driven by Pacific Investment Management Co., the world’s largest bond fund manager, raising its forecast for economic growth. The U.S. stock benchmark gauge is up 11 percent this year on investor expectation that government measures will bolster economic growth. China Concern Stocks advanced today even after China ordered lenders to park more money with the central bank for the third time in five weeks to counter the threat from inflation after November’s lending and trade surplus topped analysts’ estimates. Reserve requirements will increase 50 basis points starting Dec. 20, the People’s Bank of China said on its website today. Stocks extended gains as the trade deficit in the U.S. shrank more than forecast in October as a weaker dollar and growing economies overseas propelled exports to a two-year high. The gap narrowed 13 percent to $38.7 billion, less than the lowest estimate of 78 economists surveyed by Bloomberg News and the smallest since January, Commerce Department figures showed in Washington. Exports were the strongest since August 2008. “People who had been looking at the glass half empty might be surprised,” said Frank Ingarra , a Stamford, Connecticut- based money manager at Hennessy Advisors Inc., which oversees about $900 million. “The economy is picking up and exports are a great indication of that as well.” Consumer Confidence Confidence among U.S. consumers increased more than forecast in December to the highest level in six months at the same time Americans began stepping up holiday spending. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment rose to 74.2 from 71.6 at the end of November. Economists projected a December reading of 72.5, according to the median estimate in a Bloomberg News survey. GE led a gauge of industrial companies up 1 percent, the biggest gain among the S&P 500’s 10 groups. The world’s biggest maker of jet engines, power-generation equipment and locomotives increased its quarterly dividend to 14 cents a share, exceeding the 12-cent estimate from Bloomberg analysts. The stock rose 3.4 percent to $17.72. Occidental added 2.2 percent to $93.04. The energy company agreed to buy oil and gas properties in South Texas and North Dakota for $3.2 billion. The company also said it’s boosting its quarterly dividend to 46 cents a share from 38 cents. Tenet, Beckman Tenet soared 55 percent, the most since at least 1980, to $6.65 for the biggest gain in the S&P 500. Community Health’s bid of $6 a share, including $5 a share in cash and $1 per share in its common stock, was rejected as “not remotely fair value” by Dallas-based Tenet. The equity offer of $3.3 billion would represent about a 40 percent premium over Tenet’s $4.29 closing price yesterday. Community Health jumped 13 percent to $35.89. Beckman Coulter rallied 26 percent to $72.08. The maker of laboratory equipment for scientific research is exploring a sale after it was approached by buyout firms interested in taking the company private, people with knowledge of the matter said. First Solar Inc. led solar shares higher after Senate negotiators approved extending grants to U.S. wind and solar power companies for one year. Shares of the world’s largest maker of thin-film solar modules advanced 3.7 percent to $138.20. SunPower Corp. climbed 6.9 percent to $13.78. National Semiconductor Corp. slumped 7.8 percent to $13.81 for the biggest retreat in the S&P 500. The maker of analog integrated circuits forecast third-quarter sales lower than analysts predicted. Revenue this quarter will be $344 million to $359 million, compared with $382.3 million, the average estimate of analysts surveyed by Bloomberg. New York Times Co. slipped 1.3 percent to $9.61 while Office Depot Inc. declined 1.6 percent to $4.87 after they were removed from the S&P 500. Among stocks added to the benchmark index, Cablevision Systems Corp. rose 4.1 percent to $34.72 and Netflix Inc. increased 1.9 percent to $194.63. To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net ; Lu Wang in New York at lwang8@bloomberg.net. To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net . |
2024-02-07 | Bloomberg | Farmers Plan Biggest U.S. Crop Boost Since 1984, Led by Corn: Commodities | U.S. farmers will plant the most acres in a generation this year, led by the biggest corn crop since World War II, taking advantage of the highest agricultural prices in at least four decades. They will sow corn, soybeans and wheat on 226.9 million acres, the most since 1984, a Bloomberg survey of 36 farmers, bankers and analysts showed. The 2.5 percent gain means an expansion the size of New Jersey , as growers target fields left fallow last year and land freed up from conservation programs. Crop prices, some of which reached the highest averages ever in 2011, bolstered the economies of Midwest growing states, sent net farm income up 28 percent to $100.9 billion and pushed the value of farmland to a record $2,350 an acre, the U.S. Department of Agriculture estimates. Global food costs are down 11 percent from a peak a year ago as grain output rises from China to Canada , United Nations data show. “There is unlikely to be any ground that won’t be planted this year,” said Todd Wachtel, a 40 year-old who farms about 5,700 acres in Altamont, Illinois , and plans to expand his corn fields by 21 percent when seeding begins in early April. “Farmers know that they have to plant more when prices are high because they may not last.” Production Forecast A bigger harvest in the U.S., the world’s largest exporter of all three crops, will help compensate for shortages in the current crop year. Drought damage in Brazil and Argentina will probably spur the USDA to cut its global and U.S. grain-supply forecasts for the current season on Feb. 9, a separate Bloomberg survey of as many as 25 analysts showed. The USDA’s first forecast for the year 2012-2013 crop year will be Feb. 23. Farmers will sow corn, used to feed livestock and make ethanol, on 94.329 million acres this year, up 2.6 percent from last year and the most since 1944, according to the Bloomberg survey. Soybean fields may expand 0.4 percent to 75.309 million acres, the fifth-most ever. Both crops are harvested after the current season ends on Aug. 31. Wheat in the season that begins June 1 will reach a three-year high of 57.233 million acres, up 5.2 percent, the survey showed. Corn may rise 7.4 percent to $6.90 a bushel in six months because of the damage in South America , before dropping to $5.25 in a year as U.S. farmers increase supply, Goldman Sachs Group Inc. said in a Feb. 2 report. Corn for delivery in December, after the harvest, fell 1 percent to $5.7525 today, 10 percent below the March contract on the Chicago Board of Trade. Foresight Commodities Wheat may tumble 17 percent to $5.50 by July and soybeans may drop 17 percent to $10.20 a bushel, analysts at commodity broker Allendale Inc. in McHenry, Illinois, said Jan. 21. “The area is available to have huge crops this year,” said Paul Meyers, a vice president at Foresight Commodities Services Inc. in Long Valley, New Jersey, and the former head of grain-market analysis at the USDA from 1974 to 1983. “We are headed for a surplus-supply situation.” Corn, soybean and wheat futures are down at least 15 percent since the end of August, helping to send the Standard & Poor’s GSCI Agriculture Index to a 17 percent decline. The MSCI All-Country World Index of equities gained 5 percent during the period, touching a six-month high today, while Treasuries returned 2.2 percent, a Bank of America Corp. index shows. World food prices fell to a 14-month low in December, led by declines in grains, sugar and oilseeds, the UN’s Food and Agriculture Organization said Jan. 12. Monetary Fund The USDA affirmed its forecast for moderating food costs last month. Prices will increase 2.5 percent to 3.5 percent in 2012, below last year’s 3.7 percent gain, the agency said Jan. 25. The same day, the International Monetary Fund forecast a 14 percent drop in non-oil commodities this year, citing more supply. Farmers in the Midwest, the main growing region, are less than two months away from planting seeds, and dry soils in some areas could limit output. The most widely-held option on December corn futures gives the holder the right to buy the grain at $7. “It’s been an abnormally warm winter,” said Alan Tiemann, who is preparing to expand corn planting on his 2,000-acre farm in Seward, Nebraska , by 15 percent. “That may not relate to what’s going to happen this summer, but it keeps you on the edge of your seat a little bit, wondering when the next moisture event is going to happen.” Corn averaged $6.79 in Chicago last year, the highest ever and twice the level of the previous decade, exchange data show. Soybeans averaged a record $13.21, 72 percent above the 10 previous years, while wheat’s average of $7.235 was the second- highest ever and 57 percent more than the past decade. Trading Commission Money managers have been betting on lower wheat prices since September, U.S. Commodity Futures Trading Commission data show. They cut their bullish wagers on soybean and corn in two of the past three weeks. Floods, drought and freezes last year prevented planting of the three crops on about 8.577 million acres, 28 percent more than in 2010, USDA data show. An additional 1.84 million acres that were planted failed to produce, more than double the amount a year earlier. Crop insurers paid out a record $9.1 billion last year to cover the damage, and the bill may top $10 billion when all claims are settled, Overland Park , Kansas-based National Crop Insurance Services said Jan. 24. A return to normal weather in 2012 would mean more production from last year’s lost acres. The government also has reduced the amount of land it pays farmers to leave fallow by 4.7 percent, adding 1.47 million acres that weren’t available in 2011, USDA data show. Rising incomes allowed farmers to buy more land and the extra seed, crop chemicals and equipment needed. Profitable Industries “Grain farming has been one of few profitable industries for the past three years, and there will be a tendency for farmers around the world to maximize acreage,” said Don Roose , the president of U.S. Commodities Inc. in West Des Moines , Iowa , who has been advising farmers and grain elevators since 1979. “We have the potential to grow record world crops this year that can swamp demand.” Deere & Co. , the world’s largest farm-equipment maker, will report record net income of $3.14 billion this year, up from $2.8 billion a year earlier, the mean of eight analyst estimates compiled by Bloomberg shows. Shares of the Moline, Illinois- based company rose 14 percent this year. Monsanto Co. , the biggest seed company, will earn $1.9 billion, up from $1.61 billion, the mean of seven estimates shows. The St. Louis-based company rose 14 percent in New York trading this year. Farming Accounts Land prices in Iowa, the biggest corn- and soybean-growing state, averaged $5,600 an acre last year, three times the amount a decade ago, USDA data show. While farming accounts for 0.9 percent of the U.S. economy , it has been among the fastest-growing contributors. The amount of value added by agriculture in the four years through 2010 rose 42 percent to $132.6 billion , compared with 8.6 percent growth for the entire economy, government data show. U.S. exports surged as global economic growth boosted demand for crops, meat and dairy products, while weather damage disrupted supplies of everything from Russian wheat to Chinese pork. Shipments reached a record $137.4 billion in the year that ended Sept. 30, with China the largest farm-goods buyer, USDA data show. While the government expects a drop to $132 billion in the current fiscal year, that still would be the second- largest ever and 21 percent higher than when President Barack Obama set a goal in 2010 to double all U.S. exports by 2015. U.S. Unemployment Unemployment in Midwest states was 7.9 percent in December, tied with the Northeast as the healthiest job region. North Dakota , Nebraska and South Dakota were the only states with unemployment under 5 percent. The national rate fell to 8.3 percent in January from 8.5 percent in December. Corn will lead the planting surge because it is the most profitable row crop. U.S. mandates for alternative fuels have led to an increased use of the grain to make ethanol, and rising worldwide incomes are boosting meat consumption, increasing requirements for livestock feed. Global production of beef, veal, pork, chicken and turkey will reach almost a quarter of a billion metric tons this year, 62 percent more than two decades ago, the USDA estimates. An acre of corn will earn as much $150 more than soybeans at current prices and normal weather, said Mike Wagler, 30, who farms about 7,000 acres with his father in Montgomery, Indiana. “Farmers have the capital to plant a big corn crop this year,” said Wagler, who plans to sow 85 percent of his family’s land with the grain compared with 70 percent last year. “We can make more money raising corn than soybeans.” North Dakota In North Dakota, the largest producer of spring wheat, farmers probably will plant record corn and soybean acres this year as they use most of the 5.6 million acres that couldn’t be planted in 2011, said Frayne Olson, an agriculture economist at North Dakota State University in Fargo. Spring-wheat acreage will remain steady, he said. David Kopseng, a fourth-generation grower on 4,700 acres in Harvey, North Dakota, said he will boost corn planting by 17 percent to 1,400 acres from a year earlier. in 2006, he didn’t sow any of the grain. Improved seeds have boosted yield by about 40 percent in the past decade, making corn at least $50 more profitable than wheat or soybeans, he said. “We’re going to plant the most corn acres ever,” said the 47-year-old Kopseng. “I’ve been buying some more land and renting more because of corn’s profitability. It’s a great time to be a farmer in North Dakota.” To contact the reporters on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net ; Whitney McFerron in Chicago at wmcferron1@bloomberg.net To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net |
2024-03-27 | Bloomberg | Allianz Buys Turkish Insurer Yapi for $879 Million | Allianz SE (ALV) , Europe’s biggest insurer, bought Turkey’s Yapi Kredi Sigorta AS (YKSGR) for 684 million euros ($879 million), seeking to expand in faster-growing emerging markets as the debt crisis abated. Allianz agreed to buy the company from Turkish bank Yapi & Kredi Bankasi AS (YKBNK) , it said in an e-mailed statement today. Munich-based Allianz said the deal will make it the country’s largest insurer and will provide access to Yapi & Kredi’s 928 banking branches for its products over the next 15 years. The world’s insurance firms are competing for premiums in developing economies as the expansion in traditional markets slows. Turkey is forecast by the Organization for Economic Cooperation and Development to grow 4.1 percent this year as the euro area contracts 0.1 percent. Paris-based Axa SA (CS) agreed last year to purchase HSBC Holdings Plc (HSBA) ’s general insurance businesses in Mexico , Hong Kong and Singapore. “We’ve now seen Allianz and Axa dip their toes into small bolt-on deals in emerging markets in recent months, suggesting that the larger conglomerates are becoming more comfortable that the worst of the crisis is over,” Shailesh Raikundlia, an analyst at Espirito Santo Investment Bank in London, said in an e-mailed report to clients. “Allianz’s model is very underweight emerging markets.” The agreement means Allianz will displace Axa as Turkey’s biggest insurance company in an industry where premiums grew 16 percent to 17.1 billion liras ($9.4 billion) in 2012, according to figures published by the Insurance Association of Turkey. ‘Unique Opportunity’ European insurers including Allianz are benefiting from a recovery in financial markets and higher prices for some of their products. Net income at Allianz was 5.49 billion euros in 2012, almost double the 2.8 billion euros it reported for 2011. “Turkey is one of the fastest growing insurance markets worldwide,” Allianz board member Oliver Baete said. The transaction “is a unique opportunity to move into a market- leading position in one of Europe ’s key growth markets,” he said. Allianz fell 3.1 percent to 105 euros at 1:21 p.m. in Frankfurt. The main Stoxx 600 Insurance index dropped 1.9 percent. Yapi Kredi Sigorta slumped 18 percent to 17.60 liras in Istanbul, the biggest decline in more than a decade. The deal had valued the 93.9 percent stake that Allianz is buying at 23 percent below yesterday’s share price-based valuation of $1.14 billion. Allianz said it will conduct a mandatory offer for remaining stock after the transaction is complete. Market Share Allianz, which ranked third among insurers in Turkey last year with a 7.3 percent market share, will increase its coverage to about 15 percent through the acquisition, according to data from the Insurance Association of Turkey. Axa controlled 12 percent of the market and local firm Anadolu Anonim Turk Sigorta Sirketi (ANSGR) 11 percent, the data showed. The agreement also means Allianz acquires 80 percent of life insurance and pensions provider Yapi Kredi Emeklilik AS, with Yapi & Kredi Bankasi keeping 20 percent, Allianz said. Turkey’s population is expected to become larger than Germany’s by the end of 2014, according to the U.S. Census Bureau. The 99 percent-Muslim nation may have almost 82 million people, overtaking Germany’s 81 million, the bureau said. The government is also increasing cash incentives for citizens to take out private pensions, introducing legislation this year that raised its contribution. Health Cover Yapi Kredi Sigorta increased its premiums 26 percent to 1.23 billion liras last year. Health insurance accounted for 507 million liras, making it the market leader with a 23 percent share. Allianz offers health, property insurance, life insurance and pensions in Turkey with primary business lines being auto and health, according to its annual report. The German firm’s share of health insurance premiums will expand to more than 38 percent after the acquisition, according to the insurance association’s figures. Acibadem Saglik & Hayat ranked second last year with 10 percent, the data showed. The agreement to buy Yapi Kredi Sigorta requires the approval of Turkey’s antitrust regulator. To contact the reporter on this story: Annette Weisbach in Frankfurt at aweisbach1@bloomberg.net To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net |
2024-09-30 | Bloomberg | Greek Bonds Advance for First Time Since Debt Crisis Began: Euro Credit | Greek bonds were the top performers in Europe last quarter, gaining for the first time since the sovereign debt crisis began, as investors bet that record high yields more than compensate for the possibility of a default. Investors made money on Greek bonds for the first time since the third quarter of 2009, garnering a total return of 3.9 percent in the three months ended Sept. 29, indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies show. The yield premium for 10-year Greek bonds was 818 basis points more than Germany, the most of any euro nation. “The selling has stopped, and with yields at these levels, that’s all you need to make a good return,” said Padhraic Garvey , head of developed markets debt strategy at ING Groep NV in Amsterdam. “The outlook for Greece hasn’t materially changed, but Greek bonds offer great returns if investors are prepared to hold on for a reasonable period of time.” Greek markets have been battered since the end of last year when the newly-elected Pasok government said the budget deficit was twice as big as the previous administration indicated. The disclosure forced Greece to tap a 110 billion-euro ($150 billion) loan facility in April from the European Union and International Monetary Fund after being shut out of the debt market. Finance Minister George Papaconstantinou has until Oct. 4 to draft a budget that convinces investors he can resume borrowing in the bond market. He said as recently as Sept. 9 that he’s reconsidering a plan to increase sales taxes next year because it may hinder growth. Shrinking Deficit The budget deficit shrank 32 percent in the first eight months of 2010 as the government cut expenses such as wages and pensions to counter the effects of tax evasion, an inefficient tax collection process and a shrinking economy. The deficit-reduction program “hinges critically on improving tax compliance,” the IMF said on Sept. 14. Greek revenue from taxes is among the lowest in the EU at 32.6 percent of gross domestic product, compared with an average 39.3 percent in the EU-27, according to a 2009 Eurostat report. “If Greece succeeds in reaching deficit targets in 2011, it could mean a smooth return to the primary markets for funding,” said Ioannis Sokos , an interest-rate strategist at BNP Paribas SA in London. “Clearly, tax revenue collection will be the key.” Credit-default swaps on Greece were the best-performing sovereign debt insurance contracts in the world this month among developed economies, according to data provider CMA. Swaps for the nation also fell by the most among peers in the third quarter. During the same periods, derivatives for Ireland and Portugal increased by the most in the world, CMA prices show. Swaps on Greece remain the second-most expensive in the world after Venezuela at 772 basis points. Buy Recommendations HSBC Holdings Plc, Europe’s largest bank by market value, Goldman Sachs Group Inc., ING and Societe Generale SA are advising clients to purchase securities sold by Greece. Goldman Sachs and HSBC recommend Greek 30-year bonds with prices just above 50 percent of face value. Societe Generale advises buying three-year Greek notes, betting a rally in two- year debt will extend to longer-dated securities. Norway’s $450 billion sovereign-wealth fund, the world’s second biggest, has purchased Greek securities. Investors should buy two-year Greek notes and hold them for nine months as the higher yield should allow them to outperform equivalent German government notes, even if the spread widens by as much as 320 basis points, ING’s Garvey said on Sept. 27. ‘High Risk’ Purchasing Greek bonds remains difficult because of the difference in price between buying and selling them, known as the bid-ask spread. Citigroup Inc. was offering to buy 10-year Greek bonds at a yield of 10.89 percent yesterday and sell them at 9.99 percent, meaning the yield would have to fall 90 basis points for the purchaser to break-even on the trade before coupon payments, according to data compiled by Bloomberg. “It’s a high-risk trade,” Garvey said. “The bid-ask spread means you can’t get in today and out tomorrow unless there’s been a decent move, and the volatility means you could be forced to mark to market in the short term and take a loss.” Papaconstantinou said last week during a speech in Berlin that Greek risk is “massively overpriced” as investors remain skeptical about plans to reduce the deficit to 8.1 percent of GDP this year and 2.6 percent in 2014 from 13.6 percent in 2009. The government is struggling to meet some of its targets. Net ordinary budget revenue rose 3.4 percent this year through August, compared with the targeted annual increase of 13.7 percent, the Finance Ministry said on Sept. 20. Borrowing Costs Prime Minister George Papandreou said Sept. 21 that Greece would like to pay less than the 5 percent that the IMF-EU loans cost. The country sold six-month Treasury bills in September to yield 4.82 percent, more than 10 times what Germany pays for similar securities. The country hasn’t sold 12-month bills since April, when the yield was then 4.85 percent. “There’s no need to do a longer period when you’re not happy with the interest rates available,” Papaconstantinou said on Sept. 8. Greece has to meet quarterly targets to receive loan installments. Short-dated bonds have rallied since mid-August after the EU and IMF said in the first review that Greece had made a strong start in the deficit-cutting program, allowing the release of a second installment of aid. Two-year yields declined to 8.7 percent from 11.6 percent in the past month. “Assuming Greece is on track and preparing to return to primary markets, there will be a critical point at the end of 2011 where Greece could ask for an extension of the repayment schedule of the EU/IMF loans,” BNP Paribas’s Sokos said. “That would make it easier for investors to feel confident about Greece and start purchasing bonds again.” EU-IMF The EU-IMF agreement obliges Papaconstantinou to produce 6.6 billion euros of extra revenue and spending cuts of 2.6 billion euros next year to reduce the deficit. This year, he pledged 4.6 billion euros of cuts, while revenue measures added 1.3 billion euros. “The focus on 2011 will be to deliver on the revenue side, which for any country is difficult, much less Greece,” said Anke Richter , a strategist at Conduit Capital Markets in London. “Without any progress there, it’s hard to imagine investors will have the confidence to give Greece money.” To contact the reporter on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net ; Matthew Brown in London at mbrown42@bloomberg.net To contact the editor responsible for this story: Angela Cullen at acullen8@bloomberg.net |
2024-03-10 | Bloomberg | Treasuries Surge as U.S. 30-Year Bond Sale Draws Highest Demand Since 2000 | Treasuries rallied, pushing yields on 30-year bonds down the most this year, as a jump in weekly unemployment claims spurred concern the recovery is faltering and bolstered demand to the highest level since 2000 at the $13 billion auction of the securities. Benchmark 10-year note yields dropped to the lowest since January as stocks tumbled, Moody’s Investors Service cut Spain ’s credit rating, China’s export growth slowed, and reports indicated Saudi police fired on protesters. The Federal Reserve said it will buy $102 billion in debt over the next month under quantitative easing. “We got another strong result,” said Richard Bryant , head of Treasury trading in New York at MF Global Holdings Ltd., one of 20 primary dealers obligated to participate in U.S. auctions. “Across the board, there’s been very good demand for new supply this week. People are nervous.” The 30-year bond yield dropped 11 basis points, or 0.11 percentage point, to 4.50 percent at 5:21 p.m. in New York, according to BGCantor Market Data, the biggest intraday drop since Dec. 29. The price of the 4.75 percent security maturing in February 2041 increased 1 25/32, or $17.81 per $1,000 face amount, to 104 3/32. The benchmark 10-year note yield touched 3.36 percent, the lowest level since Jan. 31. The 2-year note yield decreased six basis points to 0.63 percent. The extra yield investors demand to hold 30-year bonds instead of 2-year notes was 3.87 percentage points, down from a record 4.02 percentage points reached Feb. 1 on a closing basis. Auction Yield At today’s auction, the securities yielded 4.569 percent, compared with an average forecast of 4.610 percent in a Bloomberg News survey of seven primary dealers. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 3.02, the highest since the auction on Aug. 10, 2000. Indirect bidders, a class of investors that includes foreign central banks, bought 40.7 percent of the bonds, compared with 43.1 percent in February. The average for the past 10 sales is 38.9 percent. While the market has viewed rising oil prices as hindering the economy, a decrease in crude today led investors to exit bets against government securities even as other investors continued to buy the debt for safety, according to David Ader , head of U.S. government bond strategy at CRT Capital Group LLC in Stamford , Connecticut. “There are two trades going on, and they both have proven to be beneficial to Treasuries,” he said. Stocks Fall A drop in stocks pushed the Dow Jones Industrial Average down 1.9 percent, the most on a closing basis since Aug. 11. The Standard & Poor’s 500 Index also slid 1.9 percent. Crude oil pared losses as the Associated Press reported that police in Saudi Arabia , the Mideast’s biggest producer, opened fire during a protest rally. Futures dropped 2 percent after earlier falling 3.6 percent. Prices are up 25 percent from a year ago. Bonds rose after the Labor Department reported that initial applications for unemployment insurance increased more than forecast to 397,000 in the week ended March 5 from 371,000 in the previous week. The median forecast of 49 economists in a Bloomberg News survey was for an advance to 376,000 from a previously reported 368,000. The U.S. trade deficit widened 15 percent in January to $46.3 billion, Commerce Department figures showed. The negative trade balance was bigger than the most pessimistic forecast in a Bloomberg News survey. Fed Debt Buying The central bank said in November it would buy $600 billion of government securities through June to pump money into the economy. Over the next month under that program, the Fed plans to buy $80 billion in debt as well as $22 billion in purchases related to principal payments from agency debt and agency mortgage-backed securities, the New York Fed announced today on its website. Fed Chairman Ben S. Bernanke didn’t rule out in congressional testimony last week expanding the central bank’s asset purchases, saying he doesn’t want to see the U.S. fall back into a recession. Spain’s government bond ratings were cut one level to Aa2 from Aa1, and the outlook is negative, Moody’s said. The cost of shoring up Spain’s banking industry will be 40 billion to 50 billion euros ($69 billion), more than the government expects, according to Moody’s. Moody’s on Spain The “eventual cost of bank restructuring will exceed the government’s current assumptions” of 20 billion euros, while the risks to government finances remain “skewed to the downside,” the company said in a statement today. China ’s exports increased 2.4 percent in February from a year earlier, the slowest pace since November 2009, the customs bureau reported today. The U.S. government, facing a record annual fiscal shortfall and a congressional impasse over financing, had the largest monthly deficit ever in February. The gap totaled $222.5 billion last month compared with a $220.9 billion shortfall in February 2010, according to the Treasury Department’s monthly budget statement released today in Washington. Last February’s deficit was the previous monthly record, government data show. To contact the reporters on this story: Daniel Kruger in New York at dkruger1@bloomberg.net ; Susanne Walker in New York at swalker33@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net |
2024-03-26 | Bloomberg | Silver Says Deal Near on Cuomo’s $132.5 Billion New York Budget | New York (STONY1) Assembly Speaker Sheldon Silver said he expects a deal on Governor Andrew Cuomo ’s $132.5 billion budget proposal as soon as today. Silver, a Manhattan Democrat, and Senate Majority Leader Dean Skelos, a Long Island Republican, are still working with Cuomo’s office on details, including how they’ll allocate a 4 percent increase, or about $800 million, in education funding to local school districts. Cuomo proposed doling out $250 million through competitive grants, while Silver and Skelos have said they want more money given out based on need. Cuomo has said he’s flexible. “I expect us to have a completed budget by tonight,” Silver said in an interview in Albany, the capital. “We are getting there,” on the education funding, he said. Voting on the budget would start March 28 and finish the next day if a deal can be reached today, Silver said. New York ’s 2013 fiscal year begins April 1, and Cuomo, Silver and Skelos have said they want to have the budget approved on-time, if not early. If the spending plan is approved on-time, it would be the first time since 2005 and 2006 that consecutive final budgets were passed by March 31, Morris Peters, a budget division spokesman, said in an e-mail. Before then, the last time consecutive budgets were passed on-time was in each year from 1982 to 1984, Peters said. Health-Care Exchanges The lawmakers and Cuomo, a 54-year-old Democrat, are also stuck in negotiations on plans for creating a health-care exchange, Silver said. Cuomo and Silver want New York to set up its own one-stop shop for health insurance before the federal government steps in and establishes one for the state. The exchange is part of President Barack Obama’s health-care overhaul, and Republicans who control the Senate have been reluctant to support it. Some of the budget’s most contentious issues were resolved March 15, when the Legislature approved a Cuomo-backed pension overhaul and a teacher-evaluation system, items that were part of the spending plan Cuomo sent to lawmakers in January. An agreement reached last night will provide $13.1 billion to fund the last three years of the Metropolitan Transportation Authority ’s five-year capital budget, allowing projects such as the Second Avenue subway to proceed as planned, according to a person with direct knowledge of the deal, who spoke on the condition of anonymity because the deal hasn’t been formally announced. The state had originally funded only $9.1 billion for the first two years. The agreement raises the MTA’s debt cap by $7 billion. Gambling Commission “With this funding, the MTA will continue to enhance our riders’ experience by investing in the future of our transportation network,” MTA Chairman Joseph Lhota said in a statement e-mailed today. Another deal included in one of three budget bills printed last night would create a seven-member gaming commission to operate the lottery, and oversee Indian casinos, horse racing and the video lottery terminals in the so-called racinos at race tracks. The commission, which will include five members appointed by the governor, one from the Senate majority leader and one from the Assembly speaker, will replace and combine the existing Racing and Wagering Board and Lottery Division. This month, the Legislature voted in favor of a constitutional amendment that would allow for as many as seven Las Vegas-style casinos in the third-most-populous state. The amendment will be sent to voters if lawmakers approve it a second time next year. The bill creating the commission doesn’t discuss how it might relate to those non-Indian casinos. Infrastructure Task Force A separate measure included in the printed bills would create a 15-member infrastructure task force that would determine the state’s building needs across several agencies and develop a plan for meeting them. The task force, part of Cuomo’s original proposal, would also recommend financing options, including using state-backed debt, federal funding and “other finance vehicles.” Cuomo is seeking legislation separate from the budget process that would allow private investment in public infrastructure projects. “We’ve never looked holistically about what our infrastructure priorities are,” Karen Rae, deputy secretary of transportation, said in an interview in New York before the deal on the task force was reached. “This is a much more proactive intervention on how we prioritize across many agencies.” To contact the reporter on this story: Freeman Klopott in Albany , New York, at fklopott@bloomberg.net To contact the editor responsible for this story: Mark Tannenbaum in New York at mtannen@bloomberg.net |
2024-03-02 | Bloomberg | Pillsbury Hires 6 Howrey Partners for Construction Practice | Pillsbury Winthrop Shaw Pittman LLP, a San Francisco-based law firm, hired a construction litigation team of six partners and seven associates from Howrey LLP, the latest of several departures from the firm this year. The attorneys, who are joining Pillsbury’s New York , San Francisco, Los Angeles and Washington offices, include John Heisse, former co-head of Washington-based Howrey’s construction litigation group. Heisse will lead Pillsbury’s construction team from San Francisco. “These attorneys are a dynamic fit for us given Pillsbury’s industry focus in energy, real estate, and project development,” Pillsbury Chairman Jim Rishwain said today in a statement. The group, totaling 15 in all, also includes two lawyers who aren’t partners in Los Angeles. In addition to Heisse, the partners are David Dekker, Jeffrey Gans, Melissa Lesmes and Michael McNamara in Washington and Robert Thum in Los Angeles. More than 70 partners have left Howrey in the past year and a half, the American Lawyer, a trade publication, reported last month. Yesterday, Roger Klein, former chairman of Howrey’s corporate and transactional practice, announced he had joined Sheppard Mullin Richter & Hampton LLP as a partner in the firm’s corporate practice group. Howrey Departures Departures from Howrey in recent weeks include IP litigation partner Duane Mathiowetz to Pillsbury, insurance litigators Jill Berkeley and Seth Lamden to Chicago-based Neal Gerber & Eisenberg LLP, and antitrust partners C. Scott Hataway to Paul Hastings Janofsky & Walker LLP and Shaun Goodman to Kirkland & Ellis International LLP. Counsel Sarah Jordan also left for Kirkland & Ellis. Howrey ranked 58th by gross revenue on the American Lawyer’s 2010 list of large U.S. firms, with $480 million in 2009. Pillsbury ranked 53rd. Gross revenue last year was little changed at $533 million, Sandi Sonnenfeld, a spokeswoman for the firm, said today in a phone interview. Chris Till, a Howrey spokeswoman, didn’t immediately return a phone call seeking comment on the departures. To contact the reporter on this story: Sophia Pearson in Wilmington, Delaware, at spearson3@bloomberg.net To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net |
2024-09-03 | Bloomberg | Germany’s Talanx Plans to Raise 700 Million Euros in IPO | Talanx AG, Germany ’s third-biggest insurer, plans an initial public offering of shares for about 700 million euros ($882 million) in what would be Europe ’s biggest IPO since February. The insurer is scheduled to price the IPO by the end of September and will seek a listing in Frankfurt and Hanover, the location of its headquarters, according to terms for the sale obtained by Bloomberg. All stock being sold will be primary shares, according to the document. “The market environment has improved and Talanx is very well prepared,” Chief Executive Officer Herbert Haas said in a statement on its website today. “If the conditions remain stable we plan to seek a stock exchange listing this autumn.” Proceeds of the sale will be used to fund international expansion and strengthen the company’s capital base, the company said. Talanx is owned by German mutual insurer HDI Haftpflichtverband der Deutschen Industrie VaG. It has been considering a share sale for more than a decade to finance international growth for its retail business and to expand industrial insurance. The company postponed a plan to sell shares earlier this year amid market volatility resulting from the European sovereign debt crisis. As part of the IPO, Meiji Yasuda Life Insurance Co. will convert a 300 million-euro ($378 million) convertible bond it held since Nov. 2010 into Talanx shares at the offered price, the insurer said. Growth To speed up growth, Talanx acquired Poland ’s Towarzystwo Ubezpieczen i Reasekuracji Warta SA earlier this year from KBC Group NV for 770 million euros, beating rivals in eastern Europe’s largest insurance market. When the purchase is completed in the second half of 2012, Meiji Yasuda will take over 30 percent of Warta, Poland’s second-largest insurer. The insurer, which owns a 50.2 percent stake in Hannover Re, the world’s fourth-biggest reinsurer, said on Aug. 14 that second-quarter net income rose 4 percent to 143 million euros. HDI, which is based in Hanover and owned by its insurance customers, has said it will keep a majority stake should Talanx sell shares to the public. Talanx’s IPO is being managed by Deutsche Bank AG (DBK) , Citigroup Inc. (C) and JPMorgan Chase & Co. (JPM) as well as Rothschild, which acts as an adviser. So far, the 110 biggest publicly listed companies in Germany included three insurance companies -- Allianz, Europe’s biggest insurer, Munich Re , the world’s biggest reinsurer, and Hannover Re. Talanx’s IPO would be the first big share sale by an insurer in Germany since Hannover Re ’s initial public offering in 1994. To contact the editor responsible for this story: Angela Cullen at acullen8@bloomberg.net |
2024-03-23 | Bloomberg | Fannie-Freddie ‘Largesse,’ Telmex, BNP-SocGen: Compliance | The days of big spending on conferences and charity are over at Fannie Mae (FNMA) and Freddie Mac (FMCC) and the companies’ regulator should make sure it stays that way, the auditor of the Federal Housing Finance Agency said in two reports released yesterday. The FHFA Inspector General opened an investigation into travel spending at the government-owned mortgage companies last year after U.S. lawmakers complained that Fannie Mae and Freddie Mac spent over $600,000 to send more than 90 employees to a Mortgage Bankers Association conference in October. About half those expenditures -- which went toward sponsoring the convention and hosting dinners and other meals -- was “of questionable value,” according to a report. “There is no indication that any business conducted by the Enterprises with their clientele at the convention could not have been conducted as well without this largesse,” the audit said. After the conference, the FHFA instituted new restrictions on travel spending at the companies and barred conference sponsorships without prior approval. The companies, which own or guarantee most U.S. mortgages, have faced spending restrictions since they were seized by the government in 2008 after investments in risky loans pushed them to the brink of insolvency. Together, they have drawn almost $190 billion in taxpayer aid so far. For more, click here. Compliance Policy U.S. Senate Backs Easing Capital Rules for New Public Companies The U.S. Senate, with wide bipartisan support, backed a reduction in U.S. Securities and Exchange Commission rules for start-up and newly public firms, setting up a final House vote on the measure. The Senate voted 73-26 to pass the bill, which has been subject to a week-long fight between investor advocates and business groups, as well as infighting within and between Democrats, over whether the measure will lead to fraud or give closely held firms the freedom to more easily raise capital and, by extension, create jobs. The House, which passed a similar measure earlier this month, will have to vote on the Senate version before President Barack Obama , who supports several provisions in the bill, can sign it into law. For more, click here. Slim’s Telmex Targeted in Mexican Rules on Leasing Lines Mexico’s telecommunications regulatory agency approved rules implementing price and quality controls for dedicated lines leased by billionaire Carlos Slim ’s Telefonos de Mexico SAB to competitors. The rules will go into effect in “the coming days” when they are released in the official gazette, the agency known as Cofetel said yesterday in an e-mailed statement. Carriers designated as dominant by Mexico’s antitrust agency will face regulations to prevent them from “engaging in conduct that hurts the development of equal competition, or hurt consumers through the fixing of arbitrarily high prices in services offered,” Cofetel said. Telmex, as the Mexico City-based unit of America Movil SAB (AMXL) is known, dominates the market for originating, carrying and completing phone calls as well as leasing lines to rivals, the antitrust agency found in 2009. The agency declared America Movil’s wireless unit Telcel dominant in the mobile-phone market the following year. Telmex is the only company to be designated as dominant by the antitrust agency in the market for dedicated lines. The rules tighten the government’s oversight of the phone carrier controlled by Slim. More rules are coming in other areas in which the antitrust agency has declared Slim’s companies dominant, Cofetel President Mony de Swaan said in a January interview. America Movil and Telmex are appealing the antitrust agency’s rulings on their dominance. The companies have 70 percent of wireless customers and almost 80 percent of fixed lines. Telmex had no immediate comment, said an official who asked not to be named because of company policy. The rules obligate any carrier designated as dominant to provide competitors using leased lines with quality “that in no case can be inferior to that which the carrier provides itself or to its subsidiaries or affiliates.” Service requests must be attended to “with punctuality,” Cofetel said. The agency didn’t specify what prices dominant carriers can charge for the lease of dedicated lines. FSA Increases Annual Budget to $914 Million in Final Year The U.K. Financial Services Authority increased its annual budget by 15.6 percent to 578.4 million pounds ($914 million) in its last year of operation, citing the challenges of structural changes and implementing European rules. The financial watchdog, funded by the firms it regulates, is preparing to be abolished by 2013 and replaced by two new regulators to police banks and markets. About 1,100 people will move to the Prudential Regulatory Authority at the Bank of England while the rest of the FSA’s 4,000 employees will go to the Financial Conduct Authority. The regulator increased its budget by 10 percent last year to 501 million pounds as it started two separate business units to mirror the creation of the Prudential Regulatory Authority and Financial Conduct Authority in 2013. Credit-Ratings Firms Need to Improve Transparency, Esma Says Credit-rating firms such as Fitch Ratings Ltd., Moody’s Investors Service Inc. (MCO) and Standard & Poor’s must improve their computer systems, documentation of rating decisions and transparency of their methodology, the European Union’s markets authority said. The European Securities and Markets Authority said in an e- mailed statement yesterday that it focused on sovereign debt and bank credit ratings and hasn’t yet determined “whether any of the observations in the report constitute a breach” of the rules governing the firms. France Needs Reform Minister, AMF’s Jouyet Tells Acteurs Publics France needs a junior minister in charge of financial reform, Jean-Pierre Jouyet, president of France’s financial markets regulator, said in an interview published yesterday on the website of Acteurs Publics. Jouyet, head of the Autorite des Marches Financiers, said the proposal by Pascal Canfin, a member of the European Parliament, is “a very good idea that answers a real need for coordination” and could allow France a stronger voice in negotiations with other countries, according to Acteurs Publics, a monthly magazine. Such a post would be under the Finance Minister, whose agenda is too full to allow adequate focus on the issue, Jouyet told Acteurs Publics. SASAC Plans Overseas Investment Rules, 21st Century Says China ’s State-Owned Assets Supervision and Administration Commission is considering making overseas investment rules for central government-owned companies to prevent the erosion of assets, 21st Century Business Herald reported yesterday, citing an unidentified SASAC official. Overseas equities and ownership of offshore companies held by individuals on behalf of the government must be registered with SASAC by the end of this month, according to the newspaper. SASAC will also “clean up” the transfer and capital injections of overseas state assets and changes of state stakes in Hong Kong-listed “red chip” companies, according to the report. Compliance Action AIJ Chiefs May Face Japan Criminal Probe for Hiding Losses Two directors of AIJ Investment Advisors Co. , the Japanese investment firm suspected of hiding more than $1 billion of losses on pension money, may face a criminal probe for their role in the case, regulators said. AIJ President Kazuhiko Asakawa, 59, and director Shigeko Takahashi, 52, allegedly conspired to conceal trading losses and fabricate reports on the assets managed to attract pension funds, the Securities and Exchange Surveillance Commission said in Tokyo today. The firm oversaw 145.8 billion yen ($1.8 billion) of clients’ money and lost 109.2 billion yen from derivatives trades directed by Asakawa over nine years, the SESC said. The case has spurred authorities to conduct checks on 265 Japanese fund managers amid growing concerns that retirement assets are at risk in a country where more than a fifth of the population is over 65. Regulators today searched AIJ’s Tokyo headquarters and revoked its registration. They ordered brokerage ITM Securities Co. to halt business for six months for allegedly selling the funds with the knowledge that reports of their value were false. AIJ’s clients included 84 pension funds representing 880,000 workers ranging from taxi drivers to medical practitioners. For more, click here. Deutsche Bank Reorganizes U.S. Unit Amid Capital Regulations Deutsche Bank AG (DBK) , Germany’s biggest lender, implemented a plan to alter the status of its main U.S. subsidiary in response to capital rules being imposed under a U.S. regulatory overhaul. The division, known as Taunus Corp., is no longer a U.S. bank holding company effective Feb. 1 after the German firm reorganized the ownership of its U.S. banking subsidiaries, Deutsche Bank said in a report published on its website on March 20. Deutsche Bank Trust Corp. is now the “top-tier” U.S. bank holding company subsidiary, the firm said. Deutsche Bank shareholders in May 2011 approved plans to reorganize the U.S. unit to meet new regulations without requiring additional capital. Chief Financial Officer Stefan Krause said last month the project is “ongoing.” Overseas lenders including Barclays Plc are altering their U.S. holding subsidiaries because the Dodd-Frank Act of 2010 would otherwise force the divisions to comply with the same capital rules as domestic banks. “We have always had and will continue to have appropriate capital levels in all our U.S. regulated entities,” spokesman Christian Streckert said by e-mail yesterday. “This action, which does not diminish any of our regulatory oversight, allows us to streamline our organizational structure, strengthening an already strong institution.” EU May Limit Planned Insurance Exemptions for Tankers to Iran The European Union may scale back a plan to allow some insurance contracts for Iranian oil by permitting cover against the risk of tanker collisions and spills only until July 1, according to three EU officials. The three-month exemption for such insurance under a forthcoming EU embargo on Iranian oil would toughen a proposal from February to exclude these contracts from the sanctions altogether. Because insurers of almost all the world’s tankers follow EU law, its provisions on insurance tied to Iranian oil would have an impact beyond the bloc’s borders. Frontline Ltd. (FRO) , Overseas Shipholding Group Inc. (OSG) and owners of at least 100 supertankers said last month they would no longer call at Iranian ports because of the insurance ban. The latest plan, set to be discussed yesterday in Brussels by diplomats from the 27-nation EU, has the backing of most member nations, the European officials said on the condition of anonymity because the talks are confidential. For more, click here. BNP, SocGen Reviewing Appeal of AMF Fine for Market Violations BNP Paribas SA (BNP) and Societe Generale SA, France’s largest banks, are considering appealing 500,000-euro ($658,000) fines issued by the Autorite des Marches Financiers for violating market-testing procedures before a bond sale. The banks were fined by the AMF, France’s financial markets regulator, for breaking rules on how to conduct market polls to ensure against insider trading ahead of January 2009 bond issuances, according to the March 21 decision. BNP Paribas said in a statement e-mailed by Paris-based spokeswoman Julia Boyce that the incident resulted from a “one- off administrative process” which has no consequence for clients.’’ Societe Generale (GLE) is considering “options” following the AMF decision, the Paris-based bank said in an e-mailed statement. FSA Plans Review of Client Cash Process, Telegraph Says The U.K. Financial Services Authority will undertake a review of how companies handle client money, according to a report by the Telegraph. The review comes in the wake of the collapse of MF Global Holdings Ltd. (MF) , Lehman Brothers Holdings Inc. and WorldSpreads Group Plc (WSPR) , the newspaper said. The FSA will look at factors such as “inadequate records, ineffective segregation of client assets and low level of awareness of requirements in this area” as part of its current business plan, the newspaper reported. The government agency is “also examining options to prohibit former bosses of failed banks from taking other well paid jobs in the City,” the Telegraph said, referring to London ’s financial sector. Courts AT&T Accused of Improperly Billing U.S. Program for Deaf A unit of AT&T Inc. (T) is accused of improperly billing the U.S. for millions of dollars in reimbursements of text-based communications under a federal program for the hearing-impaired. The U.S. Justice Department March 21 intervened in a whistle-blower lawsuit in federal court in Pittsburgh that alleged the phone company violated the False Claims Act. AT&T failed to ensure that users of the Federal Communications Commission program were eligible, the U.S. alleges. According to the complaint, AT&T allowed thousands of calls to be made on the system by users in Nigeria and other countries seeking to defraud U.S. merchants. Marty Richter, a spokesman for Dallas-based AT&T, said in a statement that the company followed the FCC’s rules. He said that while it is possible for an individual to misuse IP Relay services, FCC rules “require the company to complete all calls by customers who identify themselves as disabled.” The case is Lyttle v. AT&T Communications of Pennsylvania, 10-01376, U.S. District Court, Western District of Pennsylvania (Pittsburgh). Interviews/Speeches Roth Expects a CFTC Rule on Use of Investor Funds Daniel Roth , chief executive officer of the National Futures Association , talked about the U.S. Commodity Futures Trading Commission’s regulation of the futures market and the so-called Corzine Rule proposal which would place tighter restrictions on firms’ use of investor funds. Roth spoke on Bloomberg Television’s “InBusiness With Margaret Brennan.” For the video, click here. Smith Says Money-Market Fund Business Model ‘Broken’ Henley Smith, chief investment officer at Commonwealth Asset Management LLC , talked about money-market mutual funds and reform. In the 2008 financial crisis, money market funds “were the left hook that no one really saw,” Henley said. He spoke with Pimm Fox on Bloomberg Television’s “Surveillance Midday.” For the video, click here. Comings and Goings Ex-Congressman Bartlett Retiring From Wall Street Trade Group Steve Bartlett, head of one of the biggest trade associations for financial companies in Washington , is retiring at the end of the year, saying that “after 12 and a half years at the helm, it’s time for a new captain.” Bartlett, chief executive officer of the Financial Services Roundtable , announced his plans in an e-mail sent to the group’s members yesterday. The former Republican congressman from Texas joined the association in 1999. The roundtable, which lobbies on behalf of 97 large banks, insurers and other financial companies, has hired executive search firm Korn/Ferry International (KFY) to find a new CEO, Bartlett said. According to two people familiar with the search, the association is looking to hire a former lawmaker or high-level regulatory official to replace Bartlett. Potential candidates the group wants to interview include former Representative Michael Oxley, an Ohio Republican, and Jill Sommers, a Republican commissioner at the Commodity Futures Trading Commission, the people said on condition that they not be named because the process is confidential. Sommers declined to comment. Oxley didn’t immediately respond to a telephone message seeking a response. To contact the reporter on this story: Carla Main in New Jersey at cmain2@bloomberg.net. To contact the editor responsible for this report: Michael Hytha at mhytha@bloomberg.net . |
2024-10-14 | Bloomberg | Republicans and Democrats Disagree on How to Save Defense Budget | U.S. Representative Howard P. “Buck” McKeon, the California Republican who leads the U.S. House Armed Services Committee, and Adam Smith of Washington , the panel’s top Democrat, are urging Congress’s supercommittee to avoid further cuts to the Pentagon’s budget. Their Senate counterparts are doing the same. Where they disagree is on how that might be done. The two House colleagues yesterday released their letters to the supercommittee, which is tasked with cutting the federal deficit by up to $1.5 trillion over the next decade. McKeon called on the panel to find reductions in non-defense entitlements, such as Medicare and Social Security. Smith pressed the special panel to increase federal revenue instead. McKeon said that his message to the 12-member supercommittee is to find the cuts “out of the mandatory side,” while Smith in a letter to the special panel said that “including revenues in an overall balanced approach to deficit reduction is the best course of action for the committee.” In the Senate, Carl Levin of Michigan , chairman of the armed services panel, and John McCain of Arizona , the panel’s top Republican, repeatedly said this month and last that they wouldn’t recommend further cuts beyond the roughly $450 billion in reductions already projected over the next 10 years. Senate Plans Hawaii Democrat Daniel Inouye, who leads the Senate Appropriations panel, said last week that cutting the defense budget more than already planned would be “detrimental” to national security. “We have not been asked to make any additional recommendations on discretionary spending,” Levin said in an interview. “We may make recommendations on some of the entitlements.” Levin and McCain in their official letters making recommendations to the supercommittee urged no further cuts to the defense budget. Both lawmakers detailed their support for revisions to military health care and retirement benefits. McCain today said he supported a proposal made by President Barack Obama to establish an annual enrollment fee for the military’s Tricare for Life health insurance program. “While this fee increase would hit those age 65 and over, a group on mostly fixed incomes who are vulnerable to unanticipated changes in expenses, I believe this fee increase is a reasonable step,” McCain wrote. Pharmacy Fees McCain also backed an Obama proposal to increase fees for pharmacy services. McCain cautioned that it might lead to “significant increases in out-of-pocket costs” for beneficiaries and pressed for consultation with the Defense Department on the matter. Another issue of consultation with the Pentagon would be a Congressional Budget Office proposal to restrict working-age military retirees and their dependents from enrolling in Tricare Prime, the military health-care option with the lowest out-of-pocket expenses, said McCain. McCain also said that he would support the president’s proposal to establish a commission to review military retirement benefits. The panel would operate similarly to the 2005 Defense Base Closure and Realignment Commission, which presented Congress with a plan it had to either accept or reject without changes. McCain cautioned that current retirees and those already serving should be “grandfathered” so that their retirement benefits are not reduced. Independent Commission Bloomberg News reported on Oct. 6 that the supercommittee may consider whether cuts in all federal pensions, pay and health-care benefits, including those for the military, should be drafted by an independent, BRAC-like commission. Levin, in his letter to the supercommittee, today recommended that the independent commission looking into military health care and retirement should also consider military compensation, including basic pay, allowances, special and incentive pay. Levin rejected the president’s proposal to apply the same co-payment to preferred and non-preferred brand name drugs under the Tricare pharmacy benefit. “The president’s proposal would compromise the Department’s negotiating leverage with pharmaceutical manufacturers,” Levin wrote to the supercommittee. “These discounts are important to reducing the cost to DOD.” McKeon yesterday cautioned against overhauling military health care and military retirement benefits, which was suggested by a Pentagon advisory board. Caution Urged “We urge the joint select committee to exercise caution when considering many of the existing deficit reduction proposals relating to service-member benefits,” McKeon wrote on behalf of Republican members of his panel. “Avoid to the greatest possible extent adopting multiple simultaneous changes to military retirement and health care,” he said. The “combined effects will have a devastating impact on the fiscal and quality of life of military retirees.” Military benefits must be viewed with the dangers and the extended absences from family in mind, McKeon said. The benefits must also be formulated “in the context of expected life stream earnings.” The Defense Department faces cuts of about $450 billion from its 10-year spending plans, even before the supercommittee makes its recommendations. If Congress fails to act on the recommendations by Dec. 23, the August budget bill signed by President Barack Obama calls for automatic cuts, including an additional $500 billion from defense spending over a decade, not including interest. Forced Choice McKeon told an audience at the American Enterprise Institute on Sept. 12 that his “suspicion” was “the White House and congressional Democrats insisted on that defense number for one purpose: to force Republicans to choose between raising taxes or gutting defense.” During a question and answer period after his speech, McKeon said that, if he were faced with the choice between raising taxes or protecting the defense budget, he would “go to strengthen defense.” McKeon said that he had never voted for an increase in taxes and that he would “never plan on voting” for such an increase. Defense Secretary Leon Panetta and defense industry trade groups, such as the Aerospace Industries Association, have raised alarms. In a hearing before McKeon’s panel yesterday, Panetta said that additional cuts and particularly the automatic trigger would “truly devastate our national defense.” “It will badly damage our capabilities for the future,” Panetta said. If the automatic cuts take effect, the Pentagon would have its budget cut to about $437 billion -- about the same amount as in fiscal year 2003, McKeon said. The Pentagon would operate under such a budget through 2021, according to McKeon. To contact the reporter on this story: Roxana Tiron in Washington at rtiron@bloomberg.net To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net |
2024-06-17 | Bloomberg | Farmers Insurance Hires Yahoo’s Spagnoletto for Digital Strategy | Farmers Insurance, the U.S. provider of property-casualty coverage that has a management relationship with Zurich Insurance Group AG (ZURN) , hired Patrizio Spagnoletto as head of digital strategy. Spagnoletto was most recently vice president of global marketing services for Yahoo! Inc. (YHOO) , Los Angeles-based Farmers said today in a statement distributed by PR Newswire. To contact the reporter on this story: Megan Hickey in New York at Mhickey18@bloomberg.net To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-10-23 | Bloomberg | Assurant Declines as Regulators Pressure Insurer on Rates | Assurant Inc. (AIZ) slid the most since January after saying earnings would be reduced by the decision to cut rates in California under pressure from a regulator. Assurant will lower prices 30.5 percent at the American Security unit, which sells home coverage that borrowers must buy when they miss payments on their initial policies, California Insurance Commissioner Dave Jones said yesterday. The firm declined 5.5 percent to $38.64 at 4:01 p.m. in New York. Regulators in California, Florida and New York have been pressing providers of so-called force-placed policies to cut premiums amid inquiries into whether they charge too much. The coverage is typically selected by lenders and paid for by borrowers. The New York-based insurer, which dominates the market for the coverage along with QBE Insurance Group Ltd., said yesterday the California changes will cut annualized net income by about $18 million. “We think a real risk to 2013-2014 earnings will come if other states demand premium rate cuts,” Sean Dargan, an analyst at Macquarie Group Ltd., wrote in a note dated yesterday. “New York may be next.” To contact the reporter on this story: Susanna Pak in New York at spak10@bloomberg.net To contact the editor responsible for this story: Dan Kraut at dkraut@bloomberg.net |
2024-11-12 | Bloomberg | German Banker Gains Support for Narrower Banking Union | Georg Fahrenschon, who led Germany’s savings banks in helping quash a proposal for Europe-wide deposit guarantees, is now seeking to limit the remaining aspects of a European banking union: a joint resolution fund and central supervision of all the region’s lenders. “I’m hard put to find anyone who speaks in favor of common European deposit insurance these days,” Fahrenschon said in an interview in Frankfurt on Nov. 9. He stepped down as Bavarian Finance Minister last November and became president of the German savings banks association, or DSGV. “It’s a commonly held misconception that banking supervision, banking resolution and deposit insurance all has to be structured centrally via Europe .” Germany’s 423 savings banks and 11 landesbanks provide 43 percent of the loans to the small- and mid-sized companies, known as Mittelstand, that power the country’s export-driven economy. The lenders oppose a joint liability plan because they say it would put German depositors at risk over bank rescues in countries like Spain, where a real-estate collapse forced the government to seek a European Union bailout for its banking system. “Our mandate is against that,” said Fahrenschon, 44. “The savings banks have a mandate to operate regionally by taking deposits and lending regionally.” Savings banks make up one of the three pillars of Germany ’s financial system, which also includes more than 1,100 cooperative lenders and commercial banks such as Deutsche Bank AG (DBK) and Commerzbank AG. (CBK) Government Support As European policy makers attempt to hammer out the shape of a banking union, one question is whether lenders should be overseen by national regulators or the European Central Bank. Fahrenschon is finding increasing support at home for keeping savings and cooperative lenders outside a Europe-wide union. Germany, joined by the Netherlands, Luxembourg and Finland, sought last week to limit the ECB’s planned supervisory role to the largest banks, according to a Nov. 6 document obtained by Bloomberg News. The approach contrasts with EU Financial Services Commissioner Michel Barnier ’s plans to put the ECB in charge of all euro-area banks. All 27 EU leaders last month affirmed their pledge to establish ECB oversight of euro-area banks and set a Dec. 31 goal for political agreement on the supervisor’s design. “The German government supports our position and more importantly, we’re increasingly experiencing more support from within the European Parliament,” said Fahrenschon, a member of the Christian Social Union , a coalition partner of Chancellor Angela Merkel ’s Christian Democrats. ‘Watered Down’ ECB President Mario Draghi has called for improved supervision to help break the bank-sovereign link that has prolonged the financial crisis, opening the door for direct bank bailouts from the European Stability Mechanism if the countries accept conditions. Draghi said last week that “financial union does not have to imply the pooling of deposit-guarantee schemes.” German foot-dragging threatens to delay or scupper the banking union, said Simon Adamson , an analyst with CreditSights in London. “The opposition by Germany and other nations puts the whole banking union project at risk as the big roadmap agreed in June -- banking supervisor, resolution fund and deposit insurance -- is clearly watered down,” Adamson said in an interview. “It is a typical EU project, with high ambitions in the beginning and many problems with the implementation.” Changing Times Fahrenschon’s position differs from those of lenders in Italy , Spain and France , which favor a broader banking union, as well as those of Deutsche Bank and Commerzbank, Germany’s largest banks. A banking union is in everyone’s interest and Germany should be willing to make “concessions,” Deutsche Bank co - Chief Executive Officer Juergen Fitschen said in a speech in Hamburg on Nov. 8. Funds set aside to pay for rescuing or winding down Europe’s systemically relevant banks in the event of a failure should come from those banks themselves, Fahrenschon said. Otherwise, there is the risk of “moral hazard,” whereby the largest lenders take risks in the knowledge their smaller competitors will have to pay, he said. “The world has changed,” Fahrenschon said. The financial crisis is heralding the end of the dominance of the largest banks over smaller ones, he said. “The times of ‘hurrah globalization, size is all that matters,’ in which small entities were deemed to be standing in the way of European champions, are gone.” Smaller Banks The advantages of a “boring” model of collecting deposits and lending money to companies in the same region are becoming apparent, Fahrenschon said, describing savings banks as “very profitable and a stabilizing factor in the economy.” The assets of banks in the EU make up 349 percent of gross domestic product, while in the U.S. they account for 78 percent of GDP, according to the European Banking Federation. “If the liability regimes in Europe are too small for the banks, there are two options,” said Fahrenschon. “Either one increases the liability regimes or one makes banks smaller.” Making banks smaller is the trend, he said. Germany’s savings and cooperative banks had a combined balance sheet of 2.16 trillion euros ($2.75 trillion) at the end of 2011, almost matching that of Deutsche Bank, Europe’s biggest lender by assets. To contact the reporter on this story: Annette Weisbach in Frankfurt at aweisbach1@bloomberg.net To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net |
2024-04-02 | Bloomberg | JSW Steel Gets 10.3 Billion Yen in Loans From Japanese Banks | JSW Steel Ltd. (JSTL) , India’s third- largest producer of the metal, borrowed 10.3 billion yen ($124 million) from Japanese banks, according to data compiled by Bloomberg. The lenders were Japan Bank for International Cooperation , Mizuho Corporate Bank Ltd. and Nippon Export and Investment Insurance, the data show. Mithun Roy, JSW Steel spokesman, said when contacted by e- mail and phone today that he could not immediately respond to questions concerning the loan. To contact the reporters on this story: Anurag Joshi in Mumbai at ajoshi53@bloomberg.net ; Abhishek Shanker in Mumbai at ashanker1@bloomberg.net To contact the editors responsible for this story: Shelley Smith at ssmith118@bloomberg.net ; Andrew Hobbs at ahobbs4@bloomberg.net |
2024-11-20 | Bloomberg | Adris Eyes Insurers in Croatia, Slovenia, Poslovni Says | Adris Grupa d.d. , Croatia ’s largest cigarette producer, is interested in buying insurers in Croatia and Slovenia, Poslovni Dnevnik reported, citing Predrag Grubic, the company’s communications director. Adris is eying Croatia Osiguranje d.d. , the state-owned insurer and the largest insurance company in Slovenia, Zavarovalnica Triglav d.d., the newspaper cited Grubic as saying. To contact the reporter responsible for the story: Jasmina Kuzmanovic in Zagreb at jkuzmanovic@bloomberg.net To contact the editor responsible for the story: James M. Gomez at jagomez@bloomberg.net |
2024-11-25 | Bloomberg | N.Y. Leads With $66.5 Billion Unfunded Retiree Cost, S&P Says | New York’s $66.5 billion unfunded obligation for costs such as retiree health care is the largest among U.S. states as the governments’ combined liability fell about 3 percent from a 2011 survey, Standard & Poor’s said. The liability of the third-most-populous state surpassed that of California , which has a $65 billion unfinanced burden, according to an S&P report released today. New Jersey was third with $64 billion in other post-employment benefits. Oklahoma had the lowest. States’ collective burden was about $529 billion. The company said it used the most recent figures available, from 2012 or earlier. “States have been proactive in addressing this liability,” the report said. “This is a liability that needs to be managed over time to prevent it from becoming a source of credit pressure.” The governments have looked to cut costs associated with retirees after the longest recession since the 1930s sapped their revenue. While pension obligations can’t be altered once earned in most states, costs associated with benefits such as retiree health care and life insurance can, S&P said. Unlike most states, New York considers public-university benefits a state obligation, raising its burden, S&P said. The state’s per-capita obligation is $3,397, sixth largest, S&P said. New York Governor Andrew Cuomo, a 55-year-old Democrat, raised the retirement age to 63 from 62 in 2012 and increased public workers’ contribution rates toward pensions. He also used labor negotiations in 2011 to boost retirees’ contribution rates to health care. Morris Peters, a spokesman for Cuomo’s budget division, didn’t immediately respond to a request for comment on the liability. To contact the reporter on this story: Freeman Klopott in Albany at fklopott@bloomberg.net To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net |
2024-07-03 | Bloomberg | State Farm, Nationwide Report Claims From Weekend Storms | Insurers led by State Farm Mutual Automobile Insurance Co. reported a combined total of more than 48,000 claims from weekend storms that brought down trees and left millions without power across 10 U.S. states. State Farm, the biggest U.S. home and car insurer, had more than 29,300 auto and property claims in the Midwest and Mid- Atlantic states, Amy Preddy, a spokeswoman for the Bloomington, Illinois-based company, said today in a telephone interview. Policyholder-owned State Farm expects more claims, she said. “It’s mostly wind damage, so we’re seeing a lot of trees that are down, trees that fell on a structure or fell on a car, some shingles off of roofs, then things related to the power being out,” Anna Bryant, another State Farm spokeswoman, said yesterday in an interview. The storm system brought winds of as much as 91 miles an hour (146 kilometers), rain and lightning, disrupting electricity for as many as 4.3 million customers from North Carolina to New Jersey. More than 1.44 million customers remained without power earlier today. Utilities said effects were equivalent to a hurricane. Nationwide Mutual Insurance Co. reported more than 9,000 claims in a statement issued today. United Services Automobile Association received 8,900, Rebecca Hirsch, a company spokeswoman, said in an e-mail. Farmers Insurance, which has a management relationship with Switzerland ’s Zurich Insurance Group AG, had more than 800 property claims as of yesterday, Jerry Davies, a spokesman for the Los Angeles-based insurer, said in an e-mail. Carriers haven’t yet estimated insured losses. Allstate Corp., Liberty Mutual Insurance Co., Hartford Financial Services Group Inc. (HIG) , Chubb Corp. and Erie Indemnity Co. declined to provide claims numbers. To contact the reporter on this story: Steven Norton in New York at snorton7@bloomberg.net To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-08-12 | Bloomberg | Illinois Budget Doesn’t Address Pension Payment Backlog, Moody’s Says | The Illinois fiscal 2012 budget doesn’t address the state’s “sizeable backlog of unpaid bills and an unsustainable ascent” in spending for pension benefits, Moody’s Investors Service said in a report. The increase in state corporate and individual income tax- rates that took effect in January will contain growth in total liabilities of almost $120 billion, and the budget ends a practice of issuing bonds to pay current-year expenses, Moody’s said in a “special comment” yesterday. Still, the tax increases are a short-term solution because the rates decrease in 2015, leaving the state with a “significant funding burden” to meet its unfunded pension liability of about $80 billion and the likelihood that late payments to vendors will persist, Moody’s said. “The state may be able to use increased tax revenue to chip away at its large balance of past-due budgetary payment obligations, but it has not adopted a comprehensive plan to do so,” the company said. Democratic Governor Pat Quinn ’s office declined comment on the report, Kelly Kraft , the governor’s budget spokeswoman, said in an e-mail. Comptroller Judy Baar Topinka has estimated that the amount outstanding was $7.4 billion as of June 30, including $3.8 billion of general unpaid bills, $1.3 billion of vouchers, $1.2 billion of unpaid health insurance costs and $650 million of corporate tax refunds, Moody’s said. Illinois, which borrowed to make its two most recent annual pension payments, is the lowest-rated state in the estimation of Moody’s, at A1. Standard & Poor’s has it at A+. Moody’s said that other risks to the state’s fiscal 2012 budget are reduced aid payments caused by cuts in federal funding from the debt-ceiling agreement and a faltering economic recovery. “Because of its financial weakness, Illinois is less well positioned than other states to handle a renewed downturn in the national economy,” Moody’s said. To contact the reporter on this story: Mark Niquette in Columbus, Ohio , at mniquette@bloomberg. To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net |
2024-04-03 | Bloomberg | Swaps Exemption, Libor ‘Delay,’ Brazil Swaps: Compliance | Barclays Plc (BARC) , JPMorgan Chase & Co. (JPM) and other banks will be exempt from Dodd-Frank Act swap market rules when trading between their own affiliates under a measure completed by the U.S. Commodity Futures Trading Commission. Commissioners approved a rule excluding inter-affiliate trades from requirements that swaps be guaranteed at clearinghouses that protect buyers and sellers against defaults, the CFTC said April 1. The rule is part of the CFTC’s mandate to cut risk and expand transparency in the $639 trillion global swaps market. Lobby groups for banks including New York-based JPMorgan and Goldman Sachs Group Inc. (GS) and London-based Barclays urged the agency to exclude such trades from Dodd-Frank rules enacted in response to the 2008 credit crisis. Prudential Financial Inc. and a group of so-called end-users -- commercial and manufacturing firms that use swaps to hedge risk -- also sought exemption. The exemption is allowed for swaps between majority-owned affiliates of companies that file consolidated financial statements, CFTC Chairman Gary Gensler said in a statement. Swaps between affiliates and other unrelated counterparties must be cleared. The CFTC granted a greater exemption than originally proposed in 2012 by not requiring variation margin for interaffiliate swaps. Variation margin is typically exchanged daily to offset the risk from incremental price movements in a trade. Compliance Policy SEC Approves Using Facebook, Twitter for Company Disclosures U.S. companies will now be able to post their earnings on Twitter or update their status on Facebook as long as investors have been told in advance where to look. The U.S. Securities and Exchange Commission issued guidance April 2 permitting companies to use social media sites including Facebook Inc. (FB) and Twitter Inc. to communicate company announcements. The guidance came as part of a report detailing its investigation into Netflix Inc. (NFLX) Chief Executive Officer Reed Hastings , who in July posted monthly viewership results on his Facebook page rather than in an SEC filing or news release. The SEC refrained from bringing an enforcement action against Hastings or Netflix, which runs a subscription service for watching television programs and movies, because rules around using social media for company disclosures had been unclear, the agency said. The SEC confirmed that a regulation prohibiting companies from disclosing material information to select investors applies to social media and other emerging means of communication the same way it applies to company websites. Company communications made through social media channels could constitute a violation of the fair disclosure rule known as Regulation FD if investors hadn’t been told in advance where the information would be posted, the SEC said. Jim Prosser, a spokesman for San Francisco-based Twitter, declined to comment. “We welcome, and certainly agree with, the SEC’s finding that Facebook is an established means for companies and individuals to share and disseminate information broadly,” Menlo Park , California-based Facebook said in a statement. For more, click here. U.K. Lawmakers Challenge Regulator on Banks’ Proprietary Trading The U.K.’s new banking regulator must explain to a panel of British lawmakers how it intends to monitor and restrict lenders’ proprietary trading. Prudential Regulation Authority Chief Executive Officer Andrew Bailey should outline how he intends to monitor banks’ trading on their own account, what regulatory actions could be taken and whether the supervisor needs changes to the existing rules to “carry out these actions,” the Parliamentary Commission on Banking Standards said in a letter dated March 28. The panel on March 15 stopped short of immediately recommending a ban similar to that required under the U.S. Volcker rule, citing the difficulties of separating proprietary trading and customer market making. Regulators should “bear down” on banks’ proprietary trading and review the case for an outright ban within three years, the commission said. The PRA, a unit of the Bank of England , took over banking supervision from the Financial Services Authority this week as part of an overhaul of the U.K.’s regulatory system. The Financial Conduct Authority, another new regulator, will be responsible for market abuse and consumer issues. The parliamentary commission was set up by Chancellor of the Exchequer George Osborne last year to review the government’s plans to overhaul how Britain’s banks are regulated after taxpayers were forced to bail out Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc. (LLOY) BBA to Delay Publishing Libor Submissions of Individual Banks The British Bankers’ Association , the lobby group that oversees Libor, said it will delay publishing banks’ individual submissions by three months in an effort to restore confidence in the benchmark rate. Individual entries of the lenders that contribute to the London interbank offered rate each day in different currencies and maturities will no longer be made available on the same day from July 1, the London-based BBA said in a statement yesterday. Libor will also no longer be published on U.K. bank holidays. The measures were ordered by Martin Wheatley, the U.K. regulator charged with overhauling the global benchmark rate, after banks around the globe admitted to low-balling their submissions during the financial crisis to appear healthier than they were. Barclays Plc was fined 290 million pounds ($439 million) in June for rigging Libor, prompting senior executives including Chief Executive Officer Robert Diamond to resign. Libor, a benchmark for more than $300 trillion of financial products worldwide, is calculated by a poll carried out daily on behalf of the BBA that asks firms to estimate how much it would cost to borrow from each other for different periods and in different currencies. The top and bottom quartiles of quotes are excluded, and those left are averaged and published for individual currencies before noon in London. The U.K. government is preparing to select a new operator for Libor. Brazil Swap Rates Rise on View Tax Cuts Won’t Work Brazil’s shorter-term swap rates rose on speculation the government’s latest tax breaks will fail to contain inflation, prompting policy makers to increase benchmark borrowing costs. The Finance Ministry said March 30 that it would extend to December a reduction of the so-called IPI tax on vehicles that was due to expire April 1. The central bank said last week that inflation has spread, boosting the probability that price increases will breach the upper limit of the target range for the first time in a decade. Brazil’s government has extended payroll tax cuts to new industries, reduced electricity costs and eliminated federal taxes on food staples to cushion Brazil’s economic recovery while taming consumer price increases. Swap rates on longer-term contracts fell April 1 after a report showed U.S. manufacturing grew less than forecast in March, dimming external factors that support Brazil’s growth. The central bank has swung between selling currency swaps to prevent the real from falling too quickly and offering reverse currency swaps to protect exporters by preventing excessive gains. Won Bets Ease as South Korean Calls for Transaction Tax Escalate Threats by South Korea to institute a tax on foreign- exchange transactions may finally be starting to curb the won’s appreciation after it rose to the highest level versus the yen since 2008 and cooled economic growth. The won fell in March against the yen after climbing 23 percent for seven straight months through February, the longest rally since 2005, as Japanese Prime Minister Shinzo Abe called for more monetary easing to end deflation. Strategists are starting to temper their calls for the won to appreciate, data compiled by Bloomberg show. South Korea’s economic prospects took a turn for the worse as the won appreciated, causing exports to rise less than analysts forecast last month. Eun Sung Soo, director general at Korea’s Finance Ministry, said on March 20 that the nation will consider measures to stem inflows if needed while “various” financial taxes will be studied. The proposed Spahn Tax, named after German professor Paul Bernd Spahn, would likely weaken the exchange rate by at least 50 won per dollar, Oh Suk Tae, head of research at Standard Chartered First Bank in Seoul, said in a March 26 interview. No country has adopted the method. For more, click here. Compliance Action SEC Investigates ‘Rebecca’, Adding to Offstage Legal Drama “Rebecca,” the Broadway musical still in its production stages, has attracted the attention of the U.S. Securities and Exchange Commission. Based on a murder mystery by Daphne du Maurier, the musical has been buffeted by two postponements. At the center is Ben Sprecher, a New York producer hoping to score with this Austrian production of Sacher-Torte tunes and mammoth sets. The show was previously produced in Europe. “The SEC subpoenaed all of our files,” said Ronald Russo, a lawyer for Sprecher. “I have no concerns about this.” The commission is trying to determine whether Sprecher misled a prospective investor, Larry Runsdorf, said Jeffrey Lichtman, a lawyer who has spoken with the regulator. Lichtman represents the show’s former press representative, Marc Thibodeau, who is being sued by Sprecher for defamation and breach of contract. Runsdorf decided not to invest $2.25 million in the show after receiving an anonymous e-mail saying “the walls are about to cave in” on the production. Thibodeau later admitted to having written the e-mail. The SEC is investigating whether Sprecher “made misrepresentations to Larry Runsdorf, either by commission or omission,” Lichtman said. The producer, said Russo, is an innocent victim of fraud. Sprecher said he needs to raise about $7 million more if the show is to open this year. Kevin Callahan , an SEC spokesman, declined to comment. Runsdorf didn’t return calls. For more, click here. SEC Sticks With Approval of JPMorgan’s Physical Copper Product The proposed copper exchange-traded product planned by JPMorgan Chase & Co. in the U.S. will be allowed to proceed after objections were raised, the Securities and Exchange Commission said. Redemption of shares won’t necessarily lead to longer lines for metal out of warehouses monitored by the London Metal Exchange, the SEC said in a March 28 notice on its website. Finance Companies Account for Two-Thirds of U.K. Fraud Fines The U.K. financial services industry was fined more than 550 million pounds ($831 million) by regulators for fraudulent activity since 2007. Total fraud fines in all industries during the period exceeded 1 billion pounds, with banks, lenders and other financial firms accounting for 68 percent of the penalties, Ernst & Young LLP said in a report. Consumer companies that produce food, beverages, tobacco and household goods had the second-largest total of fines during the period, the accounting firm said. Britain’s biggest banks have been caught up in several regulatory probes. Banks including Lloyds Banking Group Plc, Royal Bank of Scotland Group Plc and Barclays Plc have set aside more than 13 billion pounds to compensate customers who were improperly sold payment-protection insurance. Barclays, UBS AG (UBSN) and RBS have been fined more than $2.5 billion by U.S. and U.K. regulators for manipulating Libor rates. The study examined 721 cases of fraud reported since 2007 by the Financial Services Authority, Serious Fraud Office and the Office of Fair Trading. The average prison sentence for the director of a company that committed fraud was three years and three months. U.K. Prospective Brokers Have to Take Ethics Test, FT Reports Prospective brokers in the U.K. are now required to take an ethics test, to be administered by the Chartered Institute for Securities & Investment , the Financial Times reported. The test is required before candidates take exams for professional qualifications, FT reported, citing institute head Simon Culhane. The move is intended to offset damage to London’s reputation created by the Libor scandal, the paper said. Courts Wisconsin Researcher Accused of Economic Spying for China A Medical College of Wisconsin researcher was charged with economic espionage by stealing a patented cancer-research compound to give to a university in China. Hua Jun Zhao, 42, may have stolen the compound from a Medical College office in Milwaukee and taken steps to deliver it to Zhejiang University, according to a Federal Bureau of Investigation agent’s affidavit in support of a criminal complaint dated March 29. A copy of the complaint against Zhao was obtained yesterday from the office of Milwaukee U.S. Attorney James L. Santelle. Zhao joins a Motorola Inc. engineer and a researcher at Dow AgroSciences who, in separate cases, have been accused by the U.S. of economic espionage or stealing on behalf of Chinese entities. Zhao is in the Milwaukee County Jail and no bail has been set, said Fran McLaughlin, a spokeswoman for the Milwaukee County Sheriff’s Department. A preliminary hearing is set for April 11. Dean Puschnig, a spokesman for Santelle, declined to comment on the status of Zhao’s case. Theft of trade secrets to benefit a foreign government is punishable by as long as 15 years’ imprisonment. The case is U.S. v. Zhao, 13-mj-00220, U.S. District Court, Eastern District of Wisconsin (Milwaukee). Paulson Hedge Fund Investor Case Dismissed for Lack of Standing An investor’s lawsuit against John Paulson ’s $23 billion hedge fund over its reported loss of about $460 million in Sino- Forest Corp. was dismissed by a federal judge. U.S. District Judge Marcia Cooke in Miami threw out the case saying the investor, Hugh Culverhouse, who had sought group status for the suit, didn’t have the legal right to sue, according to an order filed March 29. Paulson & Co., based in New York, told clients in a June 2011 letter that it lost the money since the end of May on its Sino-Forest investment. The hedge fund held 31 million shares of Sino-Forest in May of that year, or 13 percent of outstanding stock, and sold its entire stake by June 17, according to the letter. Sino-Forest’s shares dropped more than 80 percent when Carson Block ’s Muddy Waters LLC said the Hong Kong-based company overstated its timber holdings. Sino-Forest denied the allegations. Culverhouse’s lawyers, Harvey Gurland and Felice Schonfeld of Duane Morris LLP, didn’t immediately respond to an e-mail seeking comment on the ruling. Dawn Dover, a spokeswoman for Paulson at Kest & Co., said by e-mail that the company maintained “from the outset” that the suit was “completely without merit.” The case is Culverhouse v. Paulson & Co., 12-cv-20695, U.S. District Court, Southern District of Florida (Miami). To contact the reporter on this story: Carla Main in New York at cmain2@bloomberg.net To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net |
2024-03-17 | Bloomberg | BofA Board Adds Billionaire Ambani, Boosting Access to India | Bank of America Corp. (BAC) picked Mukesh Ambani , India’s billionaire chairman of Reliance Industries Ltd. (RIL) , to join its board as the lender seeks to expand revenue from outside the U.S. Ambani, whose Mumbai-based company owns the world’s largest refining complex, will stand for election at an annual meeting this year, Charlotte , North Carolina-based Bank of America said yesterday in a statement. The 53-year-old is the world’s ninth- richest person and the wealthiest in India, with a net worth estimated at $27 billion, according to Forbes magazine. The appointment may bolster Bank of America’s efforts to expand its corporate banking, trading and wealth management operations in the world’s second-fastest growing major economy. Chief Executive Officer Brian T. Moynihan , 51, told investors last week that non-U.S. operations are increasingly vital to revenue growth. “Getting somebody like that gives the bank access to regulators, which gives them an inside track to do things like finance the multibillion-dollar infrastructure projects that India has committed to,” said Phillip Phan, a professor at the Johns Hopkins Carey Business School in Baltimore. “In places like India, regulation, business and government are very tightly interlinked.” More Reach HSBC Holdings Plc, the U.K. bank that gets most of its profit from Asia , in March 2008 named Infosys Technologies Ltd. co-founder N. R. Narayana Murthy to its board, while New York- based Goldman Sachs Group Inc. appointed Lakshmi Mittal , the billionaire chairman of steelmaker ArcelorMittal, as a director in June of that year. Ambani said in the statement that it’s a “privilege and a great honor” to be the first non-U.S. citizen to join the bank’s board. Investors will benefit from Ambani’s “global perspective” and experience managing a diverse set of businesses, bank Chairman Charles Holliday said in the statement. Reliance’s businesses include chemicals, oil refineries, gas production, pharmaceuticals, clothing and solar energy. The company had $43 billion in annual revenue for the year ended March 2010. In October, Bank of America helped Reliance arrange a $1.5 billion sale of senior notes in the U.S., after advising the company on its $1.7 billion purchase of shale-gas assets from Atlas Energy Inc in April. Ambani’s Influence Bank of America also advised Reliance on a 31.9 billion rupee sale of treasury stock in September 2009. Adding Ambani gives Bank of America more recognition in India, the world’s second-most populous country. His influence extends into international political circles, with memberships on the Indian Prime Minister’s Council on Trade and Industry and the Indo-U.S. CEOs Forum, according to the statement. He’s also co-chair of the Japan-India Business Leader’s Forum and serves on the Foundation Board of the World Economic Forum. “This move adds a lot of credibility, it sends the message that Bank of America is committed to the area,” said Jason Tyler , who helps oversee $5.7 billion at Chicago-based Ariel Investments LLC. “They have done what they can in the United States , it’s time for them to look elsewhere for growth.” Bank of America is No. 8 among investment banks in managing equity sales in India this year, maintaining its 2010 ranking, according to data compiled by Bloomberg. In merger and acquisition advisory as well, the company is in eighth spot, the data show. $1.3 Trillion Economy Bank of America, which gets more than 80 percent of its revenue from the U.S., has done business in India for 46 years, Thomas Montag , head of the firm’s trading and investment-bank units, said last week at a conference. Montag’s operations, largely acquired in the 2009 deal to purchase Merrill Lynch & Co., were involved in the biggest Indian corporate bond offering, he said. India ’s $1.3 trillion economy may expand as much as 9.25 percent in the year starting April 1, the fastest pace since 2008, compared with an estimated 8.6 percent gain in the current year, the finance ministry said last month. The economy expanded 8.2 percent last quarter, the fastest after China. Moynihan has said banks can’t safely grow much faster than gross domestic product without taking undue risks. In practice, the bank will increase its U.S. revenue 1 percent faster than the country’s gross domestic product, which would be about 3.5 percent under a normal scenario, Moynihan said. Economic Growth India can become a $5 trillion economy within two decades, Ambani told bankers and reporters in New Delhi on March 4. “How many countries can have that kind of growth?” he said. Reliance said Jan. 21 it had cash and cash-equivalents of 318.3 billion rupees as of Dec. 31. The company may get another $7.2 billion in the year starting April 1 after it completes the sale of 30 percent stakes in 23 oil and gas fields in India to BP Plc. India’s economy may expand more than China ’s in the next 10 years if it lifts curbs on foreign investment in retail and boosts spending on roads and bridges, Nouriel Roubini , the New York University professor who predicted the global financial crisis, said in December. To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net . |
2024-02-15 | Bloomberg | BNP Paribas Profit Falls Less Than Estimated as Bank Sees Better Quarter | BNP Paribas SA (BNP) , France ’s largest bank, reported fourth-quarter profit that beat analysts’ estimates and said its corporate- and investment-banking unit had a “good start” to the year. The shares gained after net income dropped less than expected to 765 million euros ($1 billion) from 1.55 billion euros a year earlier. The average estimate of 10 analysts surveyed by Bloomberg was for earnings of 587 million euros. The bank withstood a “quite difficult” period for financial markets, Chief Executive Officer Jean-Laurent Bonnafe, 50, said in an interview with Bloomberg Television today. “Progressively the situation throughout the euro zone should stabilize.” Bonnafe, who took over in December after overseeing the purchase of Fortis assets, inherited a bank hurt last year from losses on Greek sovereign bonds. French lenders have been embroiled in Europe ’s crisis because of their $620 billion in holdings of private and public debt in Greece , Portugal , Ireland, Italy and Spain , according to figures from the Bank for International Settlements. BNP Paribas rose as much as 2.38 euros, or 7.1 percent, to 35.89 euros, the most in almost a month, and was at 35.73 euros at 12:44 p.m. in Paris trading. The shares have gained 18 percent this year, giving the lender a market value of 43.1 billion euros. European financial stocks are rebounding after the European Central Bank provided 489 billion euros to lenders through a three-year refinancing operation in December and plans to offer a further series of loans at the end of February. Greek Writedowns BNP Paribas is “well-provisioned” for its Greek holdings, said Gonzague Legoff, a London-based investment manager at H2o AM LLP. “The key question remains the level of funding that might come from ECB facilities at the end of the month.” H2o manages about 2 billion euros and owns shares of the bank. The lender booked 567 million euros in writedowns on Greek sovereign debt in the fourth quarter as it increased the provisioning level on the securities to 75 percent from 60 percent. In 2011, provisions on Greek sovereign bonds reached 3.24 billion euros. Loan Losses BNP Paribas posted losses in the quarter of 148 million euros from disposing of corporate loans as it raced to reduce dollar-funded assets. The bank, which expects about 650 million euros in such losses again this year, is also about halfway in taking 400 million euros of one-time costs at the corporate- and investment-banking unit, it said. The company hasn’t decided whether it will tap the ECB’s funding offer at the end of the month, Bonnafe said today. BNP Paribas doesn’t need the funds, he said. “If it’s clever to move, we will move,” he said in the interview. “If it’s not clever, we won’t.” BNP Paribas’s share-price gain in 2012 pares the decline for the past 12 months to 38 percent. Societe Generale SA (GLE) and Credit Agricole SA, France’s second- and third-largest banks, respectively, have lost more than half of their market value in the period. BNP Paribas plans to pay a dividend of 1.20 euros a share for 2011, a 43 percent drop compared with a year earlier. Societe Generale and Credit Agricole scrapped their 2011 payout. Shrinking Assets The three banks are retreating, shrinking assets by about 300 billion euros and cutting at least 5,600 jobs to comply with international capital rules as they book Greek losses. The lenders, together with Groupe BPCE, France’s fourth- largest bank, had taken 5.4 billion euros in writedowns on Greek sovereign holdings as of the end of September. Societe Generale and Credit Agricole (ACA) both operate unprofitable Athens-based consumer-banking networks. Euro-area finance ministers yesterday canceled a meeting in Brussels slated for today and will hold a teleconference instead to prod Greece to do more to clinch an aid package by identifying additional budget cuts of 325 million euros. The measures are among conditions that must be met for Greece to secure a 130 billion-euro rescue needed to avert financial collapse. Dollar Financing Part of the rescue includes a bond swap intended to slice Greece’s debt load. The exchange for new 30-year bonds with an average coupon of as low as 3.6 percent would cut 100 billion euros off more than 200 billion euros of privately held debt. Finance Minister Evangelos Venizelos said the country needs to make a formal offer to private bondholders for a debt swap by Feb. 17. BNP Paribas, which achieved most of its self-imposed goal of reducing dollar financing by $60 billion by the end of this year, raised the target to $65 billion, it said today. The lender is also booking losses after reducing European sovereign-debt holdings to help make its capital level less dependent on fluctuations in government-debt prices. The company posted 510 million euros of losses in the fourth quarter stemming from government bond sales. BNP Paribas is “at ease” with its levels of holdings in French, Italian and Belgian sovereign debt, Bonnafe told reporters at a press conference in Paris, adding that he sees no relation between participating in the ECB’s three-year funding offers and buying sovereign debt. The lender reduced its banking-book sovereign exposure by 29 percent in the second half to 75.3 billion euros as it cut Italian government holdings by 8.2 billion euros, according to a presentation handed to journalists. Job Cuts BNP Paribas’s pretax profit at the corporate- and investment-banking division slumped to 6 million euros from 1.09 billion euros a year earlier. Fourth-quarter sales at the unit fell 40 percent to 1.65 billion euros as fixed-income revenue slid 68 percent, hurt by losses from selling sovereign bonds. Equity-and-advisory sales dropped 31 percent to 405 million euros, while financing revenue slid 16 percent to 894 million euros, the bank said. Bonnafe affirmed in the interview today that the division was off to a good start in 2012, without elaborating. The company said Nov. 16 it plans to cut about 1,400 jobs at the division, or 6.5 percent of the unit’s staff worldwide. BNP Paribas booked 184 million euros in one-time costs in the fourth quarter after starting the job-reduction plan. The lender doesn’t have plans for further job reductions at the corporate- and investment-banking business on top of those already announced, Bonnafe said. The bank cut the division’s bonus pool for 2011 by half, the CEO said. Capital ‘Stretched’ “Growing the corporate and investment bank will require much more capital than they used before” as new Basel III rules are introduced, Alain Tchibozo, a London-based analyst at Mediobanca SpA, said in an interview with Bloomberg Television. “Let’s face it, the real challenge for BNP Paribas is to emerge from this crisis stronger, and to do that, to gain market share, you need capital. Unfortunately their capital base is stretched.” BNP Paribas reached the European Banking Authority’s capital requirements six months ahead of the mid-2012 schedule, it said today. The London-based EBA in December had found a 1.5 billion-euro capital shortfall at France’s largest bank. The company repeated that it will satisfy Basel III’s 9 percent common equity Tier 1 ratio by year end as the lender retains earnings and adapts its business. The French lender has no plans for a capital increase after it complied with the EBA’s targets “quite swiftly,” Bonnafe said. BancWest ‘Footprint’ BNP Paribas gets most of its revenue from France, Belgium , Luxembourg and Italy and the company also owns BancWest, a network of branches in the U.S. Through its purchase of Fortis in 2009, the lender added clients in faster-growing economies such as Turkey and Poland. Pretax profit at the French retail-banking network gained 13 percent to 378 million euros, while pretax earnings at San Francisco-based BancWest increased 1.9 percent to 159 million euros, the company said. California is the “footprint” of BNP Paribas in the U.S. and the company has no intention of exiting that retail-banking market, Bonnafe told reporters after the press conference. BNP Paribas’s Italian retail network, Banca Nazionale del Lavoro SpA, had 102 million euros in pretax profit, up 11 percent from a year earlier, the company said. The Europe- Mediterranean division, which includes consumer-banking networks in countries such as Turkey, Ukraine and Egypt , had a 20 million-euro pretax profit, compared with 7 million euros a year earlier. Pretax earnings at the investment-solutions unit, which includes asset management, private banking and insurance, fell 61 percent to 212 million euros on lower asset-management revenue. To contact the reporter on this story: Fabio Benedetti-Valentini in Paris at fabiobv@bloomberg.net To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net ; Edward Evans at eevans3@bloomberg.net |
2024-07-29 | Bloomberg | Seinfeld Bests Kardashians as U.S. Recalculates GDP: Economy | To better gauge the U.S. economy , government statisticians are turning to a British film buff who once watched the movie “Aliens” 14 times in as many days. Col Needham’s IMDb.com, an Internet movie database now owned by Amazon.com Inc. (AMZN) that tracks all things Hollywood --from box office receipts to celebrity hijinks -- will be a notch in a new yardstick for measuring gross domestic product. In its most significant reclassification since 1999, GDP will now include spending on research and development and some forms of entertainment, transfer fees related to home sales and a new treatment of pensions. While the July 31 update will boost the world’s largest economy by around $400 billion, equivalent to adding another Virginia or New Jersey , it probably won’t alter the recent trend in growth. “If you measure something in pounds or in kilos, you haven’t changed the weight,” said Neal Soss, chief economist at Credit Suisse AG in New York. “It’s the same economy, we’re just applying a different accounting convention to measure it.” Spending on films and long-running television shows such as the situation comedy “Seinfeld” will be classified as investment, rather than an expense. That would have added about $70 billion to GDP as of 2007, according to estimates from the Commerce Department’s Bureau of Economic Analysis. Biggest Impact The biggest impact will be from including research and development costs, which would have boosted the economy by about $314 billion in 2007, according to BEA estimates. In the 1999 rejiggering, the government first counted spending on computer software as an investment. In addition, the change raised the tally of real estate spending in 2007 by about $60 billion with the incorporation of purchase costs such as title insurance and engineering plans. The new treatment of pensions, which will be counted as they are accrued rather than as they are paid out, added about $30 billion to government consumption and boosted the saving rate as the benefit increased personal income. “This is the knowledge economy ,” said Carol Corrado, senior adviser at the Conference Board, a New York-based research group that tracks consumer confidence. “It’s catching up to modern business reality and recognizing that firms make investments in a wide variety of things. Sometimes they’re things you can’t see or touch but nonetheless they’re really important.” GDP is the sum of all goods and services produced as tracked by consumer spending , government outlays and business investment on such things as plants, equipment and inventories. It also includes the value of exports minus imports. Revisions’ Scope In addition to the reclassification, the Commerce Department’s report will include the first reading of second-quarter GDP and updates to growth figures based on more complete data that is available only with a lag. The economy grew at a 1 percent annualized rate from April through June, after expanding at a 1.8 percent pace in the previous three months, according to the median forecast of economists surveyed by Bloomberg. The revisions potentially could affect the numbers back to 1929. The updates may help narrow the disconnect between the pickup in hiring over the past year and the lackluster rate of growth. Payrolls climbed by 202,000 a month on average from January through June, up from 180,000 in the second half of 2012, according to the Labor Department. Such gains are typically linked with GDP growing close to 3 percent, about double what government data may show next week, say economists at UniCredit Group and Deutsche Bank Securities Inc. Shares Fall Shares fell today as the Standard & Poor’s 500 Index pared its biggest monthly gain since October 2011. The S&P 500 declined 0.4 percent to 1,685.33 at the close in New York. Data elsewhere today showed mortgage approvals in the U.K. unexpectedly declined in June and business lending fell, highlighting continued strains in credit markets that may act as a drag on the recovery. In the U.S., the rebound in housing may be taking a pause. The index of pending home sales dropped 0.4 percent in June after climbing a month earlier to the highest level since December 2006, figures from the National Association of Realtors showed in Washington. For the Commerce Department’s analysts, one way to gauge entertainment’s contribution to GDP was to go where film fans go. Needham used a credit card and an army of cinephiles to start a movie trivia site in 1990, incorporating it six years later. More than 160 million people access IMDb.com every month to read up on movies, buy tickets or DVDs and keep up with celebrities such as Lindsey Lohan. The BEA will be using the website and other sources to determine a film’s production budget and receipts, from which the agency can estimate future cash flow. Improving GDP “I’m confident in them,” said Bob Kornfeld, a BEA economist. “GDP specifics are better with them than without them.” Economists always have relied on trade group and business surveys to build data sets. More and more, they also are turning to newer, web-based sources of information. This time, reworking GDP “took several years of research with a lot of private and public data sources,” Kornfeld said. “It was a major research challenge.” For movies, the revisions will reflect Hollywood’s output starting in 1929, when “Gold Diggers of Broadway” appeared in color and was a top box-office draw. “The movie industry is not exactly a new industry,” said Michael Shaoul , chairman of New York-based Marketfield Asset Management. “It’s ludicrous that this wasn’t part of GDP in the first place.” Gauging Innovation Government statistics are often slow to keep pace with changing technology, Shaoul said. One reason the early 1990s looked weaker than they were, he said, was because economic data didn’t reflect what was happening with the Internet. “Government statistics don’t pick up innovation, and this revision is a reminder of that,” Shaoul said. Existing data sources also are adapting to changing reality. For example, music sales these days are driven by products such as ringtones and Internet services like Spotify and YouTube, which the Recording Industry Association of America didn’t include in annual revenue statistics until last year. “These new data sources will become more common, will allow for better, almost real-time readings of the economy than we’ve ever had before,” said David Berson, chief economist at Nationwide Insurance in Columbus, Ohio. “Ten years ago, 20 years ago, they didn’t have the Internet tools to find these things.” Seinfeld Effect In television, economists are buzzing about the Seinfeld effect on GDP. The cost of making sitcoms and dramas will be considered investments under the new system because those shows retain value long after they’ve originally aired through reruns and syndication. Reality shows, soap operas, news and sporting events won’t get the same treatment. That means that the “Seinfeld” series, the final episode of which was in 1998, is considered an investment for GDP accounting purposes. Reality-show star Kim Kardashian and the rest of her family, even at their peak, are still considered an expense. Reality shows, news, and sporting events are less like investments and more like non-durable goods, which are consumed quickly, said Peter D’Antonio, an economist at Citigroup Global Markets Inc. in New York. “Nobody’s going to be clamoring to get reruns of ‘ Jersey Shore ,’” D’Antonio said, citing another reality TV show following the lives of friends spending the summer in New Jersey. “It’s produced, there are commercials that go on it, and it’s over. It’s like office supplies, it’s completely consumed.” To contact the reporters on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net ; Jeff Kearns in Washington at jkearns3@bloomberg.net To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net |
2024-05-06 | Bloomberg | Itau Expects Growth to Slow for Private Banking in Brazil | (Corrects title in 16th paragraph of story published May 3.) Itau Unibanco Holding SA, the biggest wealth manager in Brazil , said growth in that industry will cool to 15 percent this year from 21 percent in 2012 as the nation’s economic rebound falls short of forecasts. “Banks are already starting to fight for the same clients,” Flavio Souza, 43, head of private banking at Itau, said at the firm’s headquarters in Sao Paulo. “We still will see a sound expansion of people’s fortunes in Brazil this year as real estate prices in Sao Paulo and Rio keep rising and private-equity activity brings new money to firm owners.” Private wealth managers such as Itau, which handles about a third of Brazil’s 527.3 billion reais ($262 billion) private- banking market, are responding to slowing growth and lower benchmark interest rates by offering clients a broader mix of investment options and extending loans for luxury purchases. Zurich-based Credit Suisse Group AG said it’s creating a private-equity fund of about 500 million reais to invest in real estate projects that may offer higher returns. Goldman Sachs Group Inc. President Gary Cohn said last month the firm would add 50 people in Brazil, including “aggressively” hiring for the New York-based bank’s private- wealth business there. HSBC Holdings Plc (HSBA) , Europe ’s largest bank by market value, said last month it expects revenue from retail banking and wealth management in Brazil to climb about 10 percent this year after an 11 percent increase in 2012. Bradesco, BTG Itau doesn’t disclose how much revenue or profit the business generates. Local banks including Banco Bradesco SA, Grupo BTG Pactual and Banco do Brasil SA (BBAS3) are the main private- wealth competitors in Brazil, as is Credit Suisse, according to Souza. Brazil’s economic expansion slowed to 0.9 percent in 2012 after annual growth averaged 3.8 percent from the end of 2003 through last year. Private-wealth managers benefited in the past decade as real average income rose 19 percent , according to IBGE, the nation’s statistics agency. In addition to a cooling economy, interest rates close to record lows will put a brake on gains in private wealth by shrinking returns, Souza said. The central bank kept its benchmark Selic (BZSTSETA) rate at an all-time low of 7.25 percent from October until last month, when policy makers raised the level to 7.50 percent. It was 12.5 percent in July 2011. Capital Markets Last year’s growth in the private-banking business followed a jump of almost 22 percent in 2011, according to Anbima, Brazil’s capital-markets association. Since 2009, private wealth has grown 82 percent in Brazil, the world’s second-biggest emerging market behind China. Bradesco, based in Osasco, has also been gaining market share with assets under management increasing almost 27 percent last year, according to Joao Albino Winkelmann, the company’s private-banking director. “Strong merger-and-acquisition activity is creating a lot of liquidity for company owners, and more and more top executives are becoming millionaires amid a considerable wage rise in the country,” Winkelmann said in an interview by telephone from Sao Paulo. Bradesco expects growth in its private-banking business to slow to about 23 percent from 27 percent last year because interest rates remain low, according to Winkelmann. The nation’s benchmark interest rate, known as CDI, grew 1.61 percent in the first quarter while the inflation rate measured by IPCA, the central bank’s inflation index, increased 1.94 percent. Seeking Diversification “Investors are anxious, uncomfortable, with the unusually low interest rates in Brazil and are seeking diversification and more sophisticated products,” Souza at Itau said. Fixed-income and floating interest-rate linked funds and assets represent the biggest share of total assets outstanding, even after falling to 44 percent in 2012 from about 49 percent in December 2011, according to Anbima. So-called multi-market funds, the Brazilian equivalent of hedge funds, have grown to 26 percent of private-banking investments from less than 23 percent. Investors are also swapping short-term investments for longer-term ones in search of higher returns, according to Bradesco’s Winkelmann. Credit Suisse (CSGN) , which focuses on creating real estate, private-equity and other types of structured funds, has benefited as those sectors expanded almost 60 percent last year. The bank’s assets under management grew 40 percent in 2012, to 57 billion reais, according to Marco Abrahao, head of private banking at Credit Suisse Hedging-Griffo, the bank’s Brazilian asset and wealth-management company. Bank Returns Return on assets under management for banks will grow from 60 basis points, or 0.6 percentage point, a year on average now in Brazil to 80 basis points, closer to the international level of about 100 basis points, as clients seek more sophisticated alternatives, Souza said. “Only if the banks succeed in giving clients a greater return will they manage to obtain better fees,” Abrahao said, adding that investors with more than 50 million reais pay about 50 basis points a year, a level closer to the international standard for those customers. Lending to wealthy clients is accelerating as well, Itau’s Souza said, as low interest rates drive clients to take on credit to buy executive jets, small planes, boats and real estate properties and to invest in their own businesses. Total credit for wealthy clients grew 51 percent to 14.5 billion reais in 2012 from a year earlier, according to Anbima. Credit for agriculture-related businesses represented 45 percent of the total outstanding. Attractive Rates “Clients can use their investment as guarantees and obtain credit with very attractive interest rates,” said Winkelmann, adding that Bradesco started to provide credit to its private- banking clients about six months ago. The practice of lending to invest in stocks or bonds, common in international markets, doesn’t exist in Brazil because interest rates are too high, according to Renato Cohen, partner and co-head of wealth management at Grupo BTG Pactual. “Most of the private-banking clients take credit only to invest in their business and pay a lower interest rate than their company would,” he said. BTG, which has 50 billion reais under management for wealthy clients in Brazil, sees the market growing about 20 percent this year, according to Rogerio Pessoa, partner and co- head of wealth management. Structured Products “Private banking in Brazil will keep the same pace of growth of the last few years as bigger returns from more structured products compensate for lower interest rates,” he said. The biggest share of assets under management still comes from Sao Paulo, with 56 percent of the total outstanding, according to Anbima. The Northeast and Central-West regions have grown faster, 29 percent and 27 percent last year, respectively, compared with 19 percent in Sao Paulo. “The rebound of agribusiness in the Central-West and the boom of the new middle-class consumption in the Northeast are creating a lot of wealth for company owners in those regions,” Cohen said. To contact the reporter on this story: Cristiane Lucchesi in Sao Paulo at clucchesi5@bloomberg.net To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net |
2024-12-22 | Bloomberg | Peru Bank Regulator Says Cap ‘Last Resort’ for Lowering Rates | Peru ’s chief banking regulator is working with lenders to bring down annual interest rates on loans that run as high as 120 percent by promoting competition and best practices, saying a cap on rates is “a last resort.” The regulator aims to help banks assess the risk of lending to clients, enabling them to charge less for loans, the Superintendent of Banks, Insurance and Private Pension Funds, Daniel Schydlowsky, said in a Dec. 20 interview in Lima. “Ceilings are a last resort,” said Schydlowsky, a former Harvard University professor who was appointed Superintendent in August. “We want to bring rates down in an efficient and effective way, and we’re getting cooperation from the financial system.” Ollanta Humala’s June 5 election as president led to calls from his party to impose a ceiling on interest rates. Humala’s campaign platform said high rates were preventing smaller businesses from obtaining credit. Chilean President Sebastian Pinera is seeking congressional approval to lower the maximum interest rate on loans to consumers and smaller businesses from above 50 percent. If the regulator doesn’t succeed in cajoling Peru’s banks into reducing interest rates in the next two to four years, Congress may seek to impose a cap, Schydlowsky said. Interest rates on consumer loans average 39 percent in Peru, while loans to the smallest companies carry an average 33 percent rate, according to the Superintendency’s website. Some lenders charge high-risk clients who don’t have a steady income as much as 120 percent for 90-day loans, which is “very high” Schydlowsky said. The central bank has kept its reference rate at a two-year high of 4.25 percent since June. Best Solution Lenders that lack the technology or expertise to calculate lending risks effectively charge their clients more, which encourages competing lenders with superior risk assessment to offer similar rates, Schydlowsky said. “The bank that’s better at calculating the customer’s risk is pricing at the second- or third-best bank’s prices,” he said. “Not all banks are created equal. You don’t solve that by a ceiling. You solve it by getting the laggard bank to be swifter.” Schydlowsky, a former Peruvian central bank director, has taught economics at Boston University and The American University in Washington and published four books. He was an economic adviser to former President Alejandro Toledo during his 2001 to 2006 term and has been a consultant to the World Bank and the United Nations. Competition, Technology As many as five foreign banks are likely to establish or expand operations in Peru next year, which will increase competition and eventually put downward pressure on interest rates, he said. Four lenders currently provide 84 percent of all loans, according to the country’s banking association. Chile’s Cencosud SA (CENCOSUD) will probably open a consumer finance unit in Peru next year, while Industrial & Commercial Bank of China (1398) , Bank of China Ltd, Japan ’s Bank of Tokyo-Mitsubishi UFJ Ltd. and Brazil ’s Itau Unibanco Participacoes SA may open offices, lured by Peru’s region-beating economic growth and the local industry’s “good” profits, he said. Chile’s Ripley Corp SA and Colombia’s BanColombia SA may expand existing financial operations in the country, he said. The introduction of mobile-phone banking to Peru next year will help lenders lower costs and charge less for loans, Schydlowsky said. ‘Much Safer’ Peru’s outstanding bank loans rose 16 percent in November from a year earlier to 125 billion soles ($46.3 billion), according to the Andean country’s banking association. The non- performing loan ratio fell seven basis points to 1.52 percent. Peruvian banks passed stress tests conducted by the regulator and are well-prepared in case a worsening debt crisis leads European banks to sever foreign credit lines, Schydlowsky said. Banks have begun increasing their capital requirements to an average 13.7 percent, from 10 percent previously, and they have “ludicrously high” liquidity ratios equivalent to 37 percent of short-term liabilities in local currency and 49 percent in foreign currency, he said. Around 10 percent of local banks financing comes from overseas, compared with 25 percent at the time of the 2008 collapse of Lehman Brothers Holdings Inc. “We’re much safer than last time around,” he said. “We’re covered against everything we can think of.” The Andean nation may pioneer a credit risk system designed to increase the cost of lending to investors, such as mining companies, who haven’t taken steps to mitigate the effects of their activities on the local community or the environment, Schydlowsky said. The regulator will consult the banking industry on its proposals and aims to introduce the legislation by 2013, he said. To contact the reporter on this story: John Quigley in Lima at jquigley8@bloomberg.net. To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net . |
2024-01-16 | Bloomberg | Goldman Sachs Discloses $1.1 Billion of 2012 Reinsurance Revenue | Goldman Sachs Group Inc. (GS) , which generates the most revenue from equity trading of any bank in the world, said $1.08 billion of that revenue comes from its reinsurance business. The unit produced $880 million of revenue in 2011, Goldman Sachs said today as it disclosed the contribution for the first time in its fourth-quarter earnings report. Reinsurance revenue accounted for 13 percent of the bank’s $8.21 billion of 2012 equities revenue. The bank is in talks to sell a majority stake in its reinsurance business in a deal that would value the unit at about $1.1 billion, The Insurance Insider reported yesterday. David Wells, a spokesman for the New York-based firm, declined to comment on the potential sale. Goldman Sachs Reinsurance Group has a global property and casualty reinsurance business as well as a life and annuity reinsurance operations primarily in the U.S. The bank agreed to in March to buy Ariel Holdings Ltd.’s Bermuda-based insurance and reinsurance businesses to expand property and casualty coverage. Increased reserves in the reinsurance unit added to non- compensation expenses, the firm said today without providing figures. Goldman Sachs’ equities division generated about $2 billion more than its closest competitor in the first nine months of the year. To contact the reporter on this story: Michael J. Moore in New York at mmoore55@bloomberg.net To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net |
2024-07-27 | Bloomberg | European Stocks Drop for Third Day; Clariant, Merck Lead Decline | European stocks fell for a third day as earnings from Clariant AG (CLN) to Merck KGaA (MRK) missed estimates and U.S. politicians wrangled over the nation’s debt limit. Clariant, a Swiss chemical maker, plunged the most in eight years. Merck, Germany’s second-biggest drugmaker, dropped 4.8 percent as it reported an unexpected loss. PSA Peugeot Citroen tumbled 7.6 percent after saying its automotive division may post a second-half loss. Banco Santander SA (SAN) led financial shares lower after Spain ’s biggest bank said profit declined as Spanish loan provisions surged. The Stoxx Europe 600 Index slid 1.1 percent to 267.05 at the 4:30 p.m. close in London. The gauge has retreated 8.3 percent from this year’s high in February amid concern that Europe’s fiscal crisis will derail the economic recovery and speculation that U.S. lawmakers will fail to agree on increasing the nation’s debt ceiling by next week’s deadline. “The earnings season has revealed that weakness in the global economy remains,” Philippe Gijsels , the head of research at BNP Paribas Fortis Global Markets, said in a phone interview from Brussels. “There have been some misses in terms of guidance and this shows us we’re in a mid-cycle slowdown with companies being held hostage by economic conditions.” U.S. Rating Moody’s Investors Service, Standard & Poor’s and Fitch Ratings have said they may cut the U.S.’s top-level sovereign rating if officials fail to resolve the stalemate on the $14.3 trillion borrowing ceiling. The government needs to boost the cap by Aug. 2 so it can keep paying its bills, according to the Treasury Department. “The likelihood of a U.S. sovereign-rating downgrade is around 50 percent,” Andrew Garthwaite , the London-based head of global equity strategy at Credit Suisse Group AG, wrote in a report to clients today. “If there is no increase in the debt ceiling for a prolonged period -- say 3 months -- with no agreement in sight, we believe stock markets could easily fall 15 percent.” He predicted that an agreement will be made to raise the debt limit before next week’s deadline passes. Profit has missed analyst estimates by an average of 3.3 percent for companies in the Stoxx 600 that have reported results since July 11, according to data compiled by Bloomberg. That compares with an average beat of 7.5 percent for members of the Standard & Poor’s 500 Index in the same period. Durable Goods Stocks extended losses after a report in the U.S. showed orders for durable goods unexpectedly dropped in June and inventories climbed at the slowest pace in a year, evidence that companies lost confidence in the strength of the recovery as the second quarter ended. Bookings for goods meant to last at least three years fell 2.1 percent after a 1.9 percent gain the prior month that was smaller than last reported, the Commerce Department said. National benchmark indexes fell in all 18 western European markets. The U.K.’s FTSE 100 slid 1.2 percent, Germany ’s DAX lost 1.3 percent and France ’s CAC declined 1.4 percent. Clariant plunged 14 percent to 13.19 Swiss francs, the largest drop since February 2003. Second-quarter earnings before interest, taxes, depreciation and amortization declined to 241 million francs ($301 million) from 264 million francs, the Muttenz, Switzerland-based company said. JPMorgan Chase & Co. analysts had predicted 293 million francs. Merck unexpectedly reported a second-quarter loss and cut its forecast for full-year operating profit. The Darmstadt, Germany-based company had a loss of 84 million euros ($122 million) in the quarter, compared with net income of 187 million euros a year earlier, and said operating profit will be about 1 billion euros this year due to one-time adjustments. The stock sank 4.8 percent to 73.76 euros. Peugeot Sinks Peugeot lost 7.6 percent to 27.26 euros after Europe’s second-largest carmaker abandoned a goal of increasing second- half earnings at the automotive division. Bank stocks posted the biggest decline among 19 industry groups on the Stoxx 600. Santander retreated 3.2 percent to 7.34 euros as second- quarter profit dropped 38 percent after Spanish loan provisions surged and it set aside funds for customers mis-sold personal- loan insurance in the U.K. UniCredit SpA (UCG) , Italy ’s largest bank, fell 4.3 percent to 1.22 euros and Intesa Sanpaolo SpA (ISP) lost 5.1 percent to 1.57 euros. Lloyds Banking Group Plc (LLOY) slid 4.3 percent to 42.24 pence and Banco Comercial Portugues SA retreated 6.7 percent to 30.5 euro cents. Italy, Spain Bonds Italian and Spanish government bonds slumped amid speculation Europe’s aid package may not be sufficient to prevent contagion. German Finance Minister Wolfgang Schaeuble said the government is against a “blank check” for the European Financial Stability Facility to buy bonds of troubled euro members in the secondary market. Jeronimo Martins SGPS SA (JMT) slid 5.6 percent to 13.54 euros even after the Portuguese retailer reported increased profit. The company said the second half is “expected to be marked by the sharp drop in consumption and by the increased financial difficulties of the Portuguese.” Distribuidora Internacional de Alimentacion SA, the Madrid- based discount retailer spun off from Carrefour SA this month, sank 6.3 percent to 3.07 euros. Alcatel-Lucent SA, France’s largest telecommunications equipment supplier, dropped 6.9 percent to 3.38 euros as U.S. rival Juniper Networks Inc. reported sales and profit that missed estimates. Meda AB (MEDAA) rallied 6.7 percent to 75.80 kronor as two people with knowledge of the matter said Valeant Pharmaceuticals International Inc. approached the Swedish company about a takeover. The approach was informal and may not lead to a deal, said one of the people, who declined to be identified because the situation is private. Provident Financial Plc (PFG) climbed 8.4 percent to 1,115 pence after the U.K.’s biggest publicly traded subprime lender posted first-half profit that beat analyst estimates as bad loans declined. To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net |
2024-07-27 | Bloomberg | Dow Climbs Past 13,000 as Treasuries Retreat; Metals Rise | The Dow Jones Industrial Average (INDU) surpassed 13,000 for the first time since May, while Treasuries fell and commodities gained on speculation the European Central Bank will purchase bonds to help lower borrowing costs and ease the debt crisis. The Dow average rallied 1.5 percent to 13,075.66 at 4 p.m. in New York and posted the biggest two-day jump since December. The Standard & Poor’s 500 Index (SPX) rose 1.9 percent to 1,385.97. Ten-year Treasury note yields added nine basis points, the most in almost four months, to 1.53 percent. S&P’s GSCI gauge of 24 raw materials increased 1 percent. The euro appreciated 0.2 percent to $1.2301. A measure of U.S. corporate debt risk dropped for a third day. Stocks extended gains after two central bank officials said European Central Bank President Mario Draghi will hold talks with Bundesbank President Jens Weidmann in an effort to overcome the biggest stumbling block to a new raft of measures including bond purchases. German Chancellor Angela Merkel and French President Francois Hollande said their countries are “bound by the deepest duty” to keep the euro area intact and that they will do “everything” necessary to protect the single currency. “Any ECB actions to buy bonds extend the lifeline to the region as the political leaders grapple for other solutions,” John Augustine, who helps manage $25 billion as chief market strategist at Cincinnati-based Fifth Third Bancorp, said in a phone interview. “This is what the market is focused on.” Buying Bonds Having secured the backing of governments in Spain, France and Germany, Draghi is now seeking to win over ECB policy makers for a multi-pronged approach to reduce bond yields in countries such as Spain and Italy, the officials said on condition of anonymity because the talks are private. The proposal involves Europe’s rescue funds buying government bonds on the primary market, flanked by ECB purchases on the secondary market to ensure transmission of its record-low interest rates , the officials said. The euro gained as much as 0.9 percent to $1.2390, before trimming its advance amid speculation that the cost of further moves to protect the currency will weaken it. “The realization became for the market that if we are going this route of another round of massive bond buying, that is going to have some pretty severe implications for the ECB’s balance sheet,” Shaun Osborne , chief currency strategist at Toronto-Dominion Bank (TD) ’s TD Securities unit, said in a telephone interview. The 17-nation currency has strengthened 1.2 percent this week, the most since February. Canada’s dollar rallied to a 10- week high against its U.S. counterpart, climbing 0.5 percent to C$1.0050 per U.S. dollar. Weekly Gain The S&P 500 has risen 1.7 percent this week and closed today at the highest level since May. The Dow average is up 2 percent for the week. In the U.S., data showed that the economy expanded at a slower pace in the second quarter as a softening job market prompted Americans to curb spending. Consumer confidence in July dropped to the lowest this year, according to a separate report. Cooling growth makes it harder to reduce unemployment, helping explain why Federal Reserve Chairman Ben S. Bernanke has said policy makers stand ready with more stimulus if needed. Earnings Season Merck & Co. and Amgen Inc. added at least 4 percent after earnings beat estimates. Expedia Inc. (EXPE) , an online-travel company, surged 20 percent after boosting its dividend. Facebook Inc. (FB) tumbled 12 percent after reporting slower sales growth and narrower profit margins. Operating margin, excluding certain costs, was 43 percent in the second quarter, a drop from 53 percent a year earlier, amid a fourfold surge in sales and marketing expenses, the company said yesterday. Starbucks Corp. (SBUX) , the world’s largest coffee-shop chain, plunged 9.4 percent after forecasting fourth-quarter profit that missed estimates. Cie. de Saint-Gobain SA, Europe’s biggest supplier of building materials, tumbled 11 percent after cutting its full-year outlook, citing Europe’s economic crisis. The Stoxx Europe 600 Index rose 1.3 percent today and posted an eighth weekly advance. Total SA, France’s largest oil producer, climbed 3.4 percent as second-quarter profit rose. Barclays (BARC) Plc surged 8.7 percent after reporting earnings that beat analysts’ estimates on growth in retail and investment banking. More Optimism Spanish and Italian bonds surged for a third day as Italy’s 10-year yields fell below 6 percent for the first time in a week. Spain’s 10-year yields fell 18 basis points to 6.74 percent. “There is a little bit more optimism about a plan coming together from European policy makers,” said Michael Cloherty , head of U.S. interest-rate strategy in New York at Royal Bank of Canada’s RBC Capital Markets unit, one of 21 primary dealers that trade directly with the Fed. The Markit CDX North America Investment Grade Index, a credit-default swaps benchmark used to hedge against losses on corporate debt or to speculate on creditworthiness, dropped 3.3 basis points to a mid-price of 108 basis points, according to prices compiled by Bloomberg. Oil rose for a fourth day, climbing 74 cents to settle at $90.13 a barrel in New York. Gold advanced 0.2 percent to settle at $1,622.70 an ounce. Earlier, the price reached $1,633.30, the highest for a most-active contract since June 19. The MSCI Emerging Markets Index (MXEF) climbed 2.8 percent. South Korea’s Kospi index led gains among emerging-market gauges, climbing 2.6 percent, the most since January. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong advanced 2 percent. Benchmark indexes added 0.4 percent in Russia and South Africa. To contact the reporters on this story: Julia Leite in New York at jleite3@bloomberg.net ; Cordell Eddings in New York at ceddings@bloomberg.net To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net |
2024-11-20 | Bloomberg | Taxpayer-Funded Technology Flops Plague U.S. Government | Almost a decade before the Obamacare website’s failed debut, the Air Force began work on a project to replace 240 outdated networks with a single logistics system. After spending about $1 billion, the program led by Computer Sciences Corp. collapsed last year. Senators Carl Levin and John McCain described it as “one of the most egregious examples of mismanagement in recent memory.” The list of federal information-technology lapses and flops includes systems to modernize air-traffic control and to secure the nation’s border, and now even President Barack Obama is wondering why the government can’t get it right. “How we purchase technology in the federal government is cumbersome, complicated and outdated,” Obama said Nov. 14 at a press conference, remarks he echoed yesterday. “You’re going through, you know, 40 pages of specs and this and that and the other and there’s all kinds of law involved,” he said Nov. 14. “And it makes it more difficult -- it’s part of the reason why, chronically, federal IT programs are over budget, behind schedule.” What the Air Force and healthcare.gov systems had in common were unclear requirements, according to contracting and technology specialists. Projects from a border surveillance program to an FBI case-filing system also have failed because of late changes, a lack of oversight, cost overruns and an emphasis on deadlines rather than the flexibility to let big, complex projects evolve, they said. ‘Force’ Projects “They try to force these IT projects through the same kind of process they use to buy desks and staples,” Chris Kemerer , a professor of information systems at the University of Pittsburgh, said in an interview. “The problem is, IT systems are never completely off-the-shelf.” The health-insurance website didn’t get exhaustive testing and had undergone late changes before it was unveiled Oct. 1 to a public that found it difficult to use. Its initial failure gave ammunition to critics of the Affordable Care Act, the law that set up what critics and supporters alike call Obamacare. Units of CGI Group Inc. and UnitedHealth Group Inc. , both behind the design of healthcare.gov, told lawmakers the government was responsible for testing that should have been done months earlier. CGI said it got late instructions from the government to make changes to the site. The agency responsible for the website didn’t give CGI final technical requirements until May, according to one person familiar with the project. About a third of the work the contractor had previously performed had to be thrown out and started over as a result, the person said. Big Contractors Marilyn Tavenner , who heads the Health and Human Services Department’s Centers for Medicare and Medicaid Services, cited “some issues with on-time delivery” by Montreal-based CGI. Contractors and federal agencies frequently don’t communicate well about the scope of government projects, said Mark Amtower, who runs a consulting firm in Clarksville, Maryland. He compared the process to a game of telephone, in which messages get increasingly garbled as they pass through different people. In addition, agency officials typically aren’t willing to take a chance on lesser-known companies that might do a better job, he said. “Nobody ever gets fired for buying IBM,” Amtower said in a phone interview. “And nobody gets fired for buying Northrop Grumman , Lockheed , General Dynamics or any of the other top contractors.” Taxpayer Dollars Big technology failures aren’t limited to the federal government. Large projects are typically handled by multiple companies, or multiple groups within a company, Michael Cusumano , a professor of management and engineering systems at the MIT Sloan School of Management in Cambridge, Massachusetts, said in an interview. In troubled projects, workers make changes that aren’t adequately coordinated, he said. “They make changes in an attempt to improve what you’re building,” Cusumano said. “Inevitably, they don’t sync up.” The result: two-thirds or more of large IT projects are late or over budget, he said. Unlike private industry, though, federal agencies are wasting billions of dollars in taxpayer funds. The U.S. government has spent more than $600 billion on information technology over the past decade, and “has achieved little of the productivity improvements that private industry has realized from IT,” the U.S. Government Accountability Office said in a July report. Air Force System The Air Force’s Expeditionary Combat Support System, for example, already had cost $1 billion, and the fixes would have cost about the same amount. The network, which would have been used by 250,000 people, was intended to provide the service with a single, integrated logistics system for tracking transportation, supply, maintenance, repair, engineering and acquisition. Computer Sciences , a Falls Church, Virginia-based contractor, served as the lead contractor and systems integrator. It was given extra time to develop an initial pilot project and was still unable to complete the task, according to a March report by the GAO. “CSC developed and provided to the Air Force foundational capabilities and IT assets for implementing a logistics software system in the future,” Heather Williams, a company spokeswoman, said in an e-mail. “We believe that the progress we made, jointly with the Air Force, and the software we have delivered could be the foundation for the next effort to develop and deploy a logistics system for the Air Force.” ‘Nebulous Requirements’ The Air Force took some responsibility for the project’s demise. There was a lack of an adequate acquisition process to handle a complex program with “nebulous requirements,” Lieutenant General Charles Davis , the service’s top uniformed acquisition official, said in a January interview. The Air Force system is among 15 information technology projects killed by the federal government since 2003, according to a list compiled by the GAO. The casualties include a remake of the Federal Bureau of Investigation’s case-filing system that had poorly defined requirements and limited oversight. It ended in 2005 after three years and $170 million in spending. An attempt to use surveillance technology to help secure the border also failed to deliver. Chicago-based Boeing Co. received about $1.3 billion for the work beginning in 2006, according to data compiled by Bloomberg Government. ‘Costly Rework’ The Department of Homeland Security didn’t properly oversee Boeing, the government’s No. 2 contractor, resulting in “costly rework” and contributing to the program’s “history of not delivering promised capabilities and benefits on time and within budget,” according to a 2010 GAO report. At the Federal Aviation Administration, a $438 million replacement of air-traffic computers went over budget and risked being delayed in part because the agency didn’t complete technical requirements or follow its own rules for setting completion schedules, an auditor found in May. In 2003, a database with initial funding of $36.8 million debuted to track foreign students with visas, according to the Justice Department’s inspector general. Schools reported that the system frequently lost data, and immigration forms needed at one school would print out elsewhere. Some students were barred from entering the U.S. because of problems with the system, said Mark Forman, chief executive officer of Government Transaction Services LLC, a technology company based in Vienna, Virginia. ‘Fearful’ Vendors “It was such a big disaster,” said Forman, who served under former President George W. Bush in a position now known as the U.S. chief information officer. A government official told a House subcommittee in 2003 that the student tracking system was developed and deployed under an aggressive schedule. The main contractor, Electronic Data Systems Corp., bought by Hewlett-Packard Co. for $13.2 billion in 2008, said it knew the system wasn’t properly set up and needed to be fixed before its debut, Forman said. The government didn’t listen, he said. “The government has told a lot of these contractors so many times that ‘We don’t want to hear what you think, we need you to do what we told you to do and make it work,’” he said. “A lot of the vendors are either fearful, or believe there is no point in telling the government how to do it right.” To contact the reporters on this story: Kathleen Miller in Washington at kmiller01@bloomberg.net ; Todd Shields in Washington at tshields3@bloomberg.net To contact the editor responsible for this story: Stephanie Stoughton at sstoughton@bloomberg.net |
2024-05-23 | Bloomberg | Armed Guards Can Help Cut Insurance Shipping Costs | (Corrects war risk additional premium in fifth paragraph of story published on May 11.) Insurance costs to pay ransoms if vessels are hijacked by Somali pirates can be reduced by 75 percent if ships employ private armed guards, Seacurus Ltd. said. The London-based marine insurance broker cuts its premiums by that amount, or more if additional security measures are taken on board vessels transiting a high-risk area, Nick Maddalena, company director, said yesterday. If owners employ four armed guards, kidnap and ransom insurance rates fall to about $4,500 from $15,000 for a large tanker’s single transit, Maddalena said, adding about 20 percent of all ship owners buy the coverage. Piracy attacks rose to a record off the coast of Somalia and Indian Ocean last year, an area of sea larger than continental U.S. through which 42,500 vessels sail each year. Owners paid $160 million in ransom payments in 2011 and $79.8 million in 2010, according to figures from the European Union Naval Force and Broomfield, Colorado-based non-profit One Earth Future Foundation. Kidnap and ransom insurance is optional, on top of premiums charged by other providers when ships travel through designated high-risk piracy areas, Maddalena said. The additional premium is typically 0.04 percent of the ship’s value, he said at the Tradewinds Marine Risk Forum in London. Additional premiums for very large crude carriers, tankers that ship 2-million barrels of oil, are reduced by 60 percent to $11,200 per transit from $28,000, if shipowners take out kidnap and ransom insurance, Maddalena said. The insurance pricing arrangements mean the price arbitrage can save some larger, more expensive ships, such as liquefied natural gas carriers, as much as $15,000 in fees for each journey, Maddalena said. Teams of armed guards cost about $60,000 for a crossing, Roland Hoeger, managing director of Hamburg-based shipping company Komrowski Group, said at a conference on April 25. To contact the reporter on this story: Michelle Wiese Bockmann in London at mwiesebockma@bloomberg.net To contact the editor responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net |
2024-05-24 | Bloomberg | SNB May Have Room to Increase Swiss Rates as Economy Defies Franc Strength | Swiss National Bank President Philipp Hildebrand may soon have room to raise borrowing costs for the first time in almost four years as the economy defies the franc’s surge. Policy makers are weighing the threat of near-zero interest rates stoking property prices against the risk that an increase in the benchmark will push up the franc. While the currency has gained about 20 percent against the euro since the SNB cut its benchmark to 0.25 percent in March 2009, there are few signs that the exchange rate is undermining the recovery, with exports increasing and leading indicators signaling quickening growth. “Does the economy really need interest rates near zero?” said David Kohl , deputy chief economist at Julius Baer Group in Frankfurt. “No, it doesn’t. Now is exactly the right time to raise borrowing costs because any increase would only show an impact on the economy in a year,” he said. The recovery is strong enough to weather borrowing costs of 1 percent to 1.5 percent, according to Kohl. While Swiss rates, the lowest among major global economies after Japan and the U.S., have spurred the economy’s recovery from a 2009 slump, they’re also fueling housing demand. Prices for single-family homes jumped 4.7 percent in 2010, data compiled by real-estate consultant Wueest & Partner AG show. The region of Geneva led the gains, with prices climbing 12 percent. Mortgage Market Hildebrand toughened his tone on the mortgage market last month, saying that “imbalances with serious repercussions” can emerge if borrowing costs remain at a “very low level for a long time.” In their March assessment , policy makers said the property market warrants their “full attention.” “An increase would be the beginning of a normalization,” said Caesar Lack, head of economic research at UBS AG’s Wealth Management Research in Zurich and a former SNB economist. “It wouldn’t have much of an impact on the franc. But the fact that they’ve kept rates on hold for so long indicates that they’re extremely worried about possible implications.” Five of 23 economists in a Bloomberg survey forecast that the Zurich-based SNB will raise its key rate on June 16, compared with none in March, marking the biggest division since the SNB cut its benchmark rate to near-zero more than two years ago. Among those predicting an increase are analysts at UBS and Bank of America/Merrill Lynch. Upside Risks The European Central Bank increased borrowing costs last month for the first time in almost three years, while central banks in Sweden , Norway and Russia also have raised their benchmark rates. Hildebrand has indicated a growing unease about price pressures, saying April 29 that the economy is expanding “more vigorously than anticipated” and “certain upside risks” on inflation “are beginning to emerge.” The median forecast among economists is for a rate increase in September. The SNB has four regular meetings a year. The franc was at 1.2422 per euro at 11:17 a.m. in Zurich, after reaching a record of 1.2324 yesterday. The currency, perceived as a so-called safe haven, has risen 6 percent since April 6 as the euro-area’s debt crisis worsened. It was at 88.23 centimes versus the dollar, down from an all-time high of 85.54 centimes on May 4. SNB Vice Chairman Thomas Jordan told Swiss state television in an interview broadcast last night that while policy makers are “very concerned” about currency developments, exporters have “coped relatively well” with the franc’s appreciation. “The currency isn’t having any significant impact on the economy,” said Dirk Schumacher , an economist at Goldman Sachs Group Inc. in Frankfurt. The SNB “clearly risks being behind the curve,” he said. Overcoming Appreciation Data suggest the recovery can withstand a policy tightening just as it has overcome the currency appreciation. Strengthening global growth has boosted demand for goods ranging from Swatch Group AG (UHR) watches to ABB Ltd. (ABBN) turbochargers, with exports surging 9.8 percent in the first quarter from a year ago when adjusted for inflation and work days. Unemployment is at 3.1 percent, the lowest since February 2009, and KOF leading indicators rose to the highest in almost five years last month. The Swiss economy may expand 2.4 percent this year and 1.9 percent in 2012, the BAK Basel Economics research institute said. That’s above the SNB’s forecast of about 2 percent for 2011. In 2010, gross domestic product rose 2.6 percent. In the euro region, GDP may advance 1.6 percent this year, the European Commission said. Foreign sales continued to grow even as the real effective exchange rate rose 10 percent in the past year, according to Jan Amrit Poser, the chief economist at Bank Sarasin in Zurich. Such an appreciation usually translates into a 15 percent plunge. ‘Export Miracle’ This “can only be described as an export miracle,” Poser said. “It appears that exports are less susceptible to prices than generally thought. We expect that the SNB will undertake its first tentative interest-rate hike in June.” For Alexander Koch, an economist at UniCredit Group in Munich, the SNB can afford to keep borrowing costs on hold until its September meeting. Inflation was 0.3 percent in April, compared with 2.8 percent in the euro area, partly as the franc’s gain softened the impact of rising oil prices. “The economic situation has improved further and exports have resisted the franc’s strength,” Koch said. “Still, as long as inflation remains subdued, there’s no need for the SNB to raise rates anytime soon.” To contact the reporter on this story: Simone Meier in Zurich at smeier@bloomberg.net To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net |
2024-10-05 | Bloomberg | Gehry Too-Tall Condo Towers Built for Bull Market: Mortgages | Architect Frank Gehry is designing three condo towers in Toronto that would be North America ’s tallest residences. His latest contribution to his home town comes as the Canadian government is trying to cool the market after home prices surged 85 percent in the past decade. The three sculpture-like towers, funded by theater promoter David Mirvish, will rise as high as 85 floors beside a century- old theater and near the Gehry-designed Art Gallery of Ontario. The skyscrapers, with a combined 2,600 residential units, will compete with hundreds of other projects in a city with more residential buildings under construction than anywhere else in North America. “We’ve definitely reached a peak and we’re on the way down,” Ben Myers, executive vice president of Urbanation Inc., a real estate research firm, said in a phone interview from Toronto. “We didn’t anticipate these kinds of super projects coming onto the market.” The building boom coincides with slowing property sales and prices after Canadian Finance Minister Jim Flaherty in June imposed tougher mortgage lending rules for the fourth time in as many years. Existing home sales fell 19 percent last month from a year earlier, based on data compiled by Bloomberg from six regional real estate boards. Sales in Toronto dropped 21 percent, even as prices rose 8.6 percent. Toronto condo sales were down 29 percent in September over the same month last year, according to the city’s real estate board. Prices of units rose 8 percent to C$377,422 ($385,000). The average sale price for a home in Toronto surged to C$465,412 in 2011 from C$251,208 in 2001. ‘Condo Bubble’ “Of course the condo bubble in Toronto is on my mind, but we’re in the early beginnings of it,” Gehry said on Oct. 1, at a press conference about the project at the Art Gallery of Ontario. “The culture of the city and the condo boom has nothing to do with me. That’s your problem.” Even as the market is softening, a record 224 condo projects with 58,995 units are under construction in Toronto, according to the most recent data from RealNet Canada Inc., which tracks housing across the country. More than a quarter of these are in the same area as the planned Mirvish, Gehry project along King Street, west of the city’s financial core, according to RealNet. Flaherty criticized “continuous building, without restriction” of condos as the central bank signaled record consumer debt and the chance of a sudden housing correction are major risks to the economy. ‘Economics Work’ The government shortened the maximum amortization period on mortgages the government insures to 25 years from 30 years, and lowered the maximum amount homeowners can borrow against the value of their homes to 80 percent from 85 percent. Canada also capped mortgage debt payments at 39 percent of income and limited government mortgage insurance to homes worth less than C$1 million. Gehry, the 1989 winner of the Pritzker Architecture Prize, was born Ephraim Owen Goldberg on Feb. 28, 1929, in Toronto, where his grandparents, Polish Jews, had settled. “You can make architecture comfortable, it can engage, and Old Toronto had that,” Gehry said at the press conference. “My buildings are on budget, on time, they deliver some kind of feeling, people like them, and they pay off somehow. The economics work.” Dancing Building He became a pioneer in using computer software to turn whimsical designs into precise building plans, and turned little-known Bilbao, Spain , into an international travel destination after he bested two competitors for the job of designing the New York-based Guggenheim’s branch museum there. Gehry’s first foray into designing skyscrapers, the 76-story rental apartment building at 8 Spruce St. in Lower Manhattan , opened in 2011 as New York ’s tallest residential building. Gehry’s Nationale-Nederlanden Building in Prague became known as the Dancing Building, or simply the Fred and Ginger, after dancers Fred Astaire and Ginger Rogers, because of the way one tower appears to be embraced by the other. Gehry’s Toronto towers are not the first ambitious project he’s embarked on as a market was reaching a peak. Construction of the architect’s 450,000-square-foot Guggenheim Abu Dhabi museum was halted in October 2011 by Tourism Development & Investment Co. as the emirate scaled back plans made before the financial crisis. ‘Risky Period’ The Toronto condo project “does seem a bit late,” said David Madani, an economist in Toronto with Capital Economics. “It’s definitely a more risky period to be thinking about building, particularly when inventories are very high and there’s already a backlog of work under construction.” The strongest sign that government efforts to damp the housing market came with the August home sales data, which showed sales falling the most in two years. That was the “first full glimpse” into Canadian housing after the mortgage rule changes, Sonya Gulati, senior economist at Toronto Dominion Bank (TD) , said in a note to clients Sept. 17. The weakness in August home prices and sales was expected and the regulatory-induced cooling will continue for the next eight months, she said. “The Canadian housing market has indeed ratcheted down its growth pace,” she said in the note. “In most local markets, it has reversed course with price and sales contractions becoming more the norm.” The Canadian housing industry fared better during the economic downturn than the U.S., said George Carras, president of RealNet. The main reason is that subprime mortgages made to people with poor credit history weren’t as prevalent. Banking regulators also required Canadian banks to have higher capital reserves, meaning none of the country’s lenders required government bailouts. No Bubble “I don’t think there is a bubble,” Flaherty told reporters yesterday. “I think there was the danger of a bubble in Toronto and Vancouver. I’m actually comfortable with the fact that we’ve seen some moderation in pressures.” Myers at Urbanation said there’s certainly potential for pricing to go down in the market. “But the unknown in the market is the fact that we have a high percentage of investors and if the market declines, we don’t know what their strategy will be,” he said. “We are essentially in year 16 or 17 of an increasing market so it’s very hard for me to finally say ’yes, this is the time when we’re going to see major declines in the market.’” Right Pricing The Mirvish, Gehry project has a better chance to succeed than most condos as long as “pricing is right” because it is a landmark project in the city and “investors are looking for Triple-A sites, which would have the better appreciation going forward,” he said. The housing market in Toronto has “normalized,” James Ritchie, senior vice president at Toronto-based Tridel, said in a phone interview. “There are opportunities for many more new developments over the next 10, 20 years in this city,” he said. Even with the growth, this year will “pale in comparison” to last year’s “velocity,” and the city will add about 16,500 new unit sales in 2012, he said. “By any standard on this continent, it’s still pretty darn good.” Mirvish says he’s not concerned about a housing bubble in Canada’s biggest city. “I can’t factor in a condo bubble,” he said at the unveiling of the building design this week. “Frank’s 83 and I’m 68. The bubble will take care of itself.” ‘Mamma Mia’ The second-generation theater executive is the son of the late Ed Mirvish, best known for founding Toronto’s “Honest Ed’s” discount department store. Together, the father and son built Toronto’s Princess of Wales Theatre in 1993, which will be leveled for construction of the three towers. He also owns and operates the Royal Alexandra Theatre, which will remain operational beside the new development. Theatrical productions Mirvish helped to bring to Toronto include “ Mamma Mia ,” “The Producers,” “The Lion King ,” “Les Miserables” and “The Lord Of The Rings.” The buildings are “transformative,” and their mixed use is exactly what Toronto needs, Mirvish said. “I want to see the building accommodate the evolution of the city, and initially what there is in the city is demand for smaller units,” Mirvish said. “We’re drawing attention back to the center of the city; we’re giving it a sense of pride.” The project, under review by the city, would compete with other recent residential housing developments, including the Trump International Hotel and Tower, which opened this year, and the Holt Renfrew Tower, built on top of the luxury department store of the same name and due in 2017. The Mirvish towers will be up to 285 meters (935 feet) high, taller than both of these. Art Collection The towers will also include retail space and a public 60,000 square-foot museum to house artwork collected by Mirvish. The target market isn’t luxury condo dwellers but young people looking for smaller spaces, Mirvish said. The first of the towers will need to be 70 percent sold to begin construction, estimated by the end of 2013, and the first tower should be completed in seven years, Peter Kofman, president of Projectcore Inc. and the project developer said. “Regardless of what we see today, we have to be responsible, we have to be prudent,” Kofman said. “It could be one tower, two towers, three towers depending on where the market is.” In a crane-lined city with so much condo competition, the project signals the tail end of the condo boom, Myers at Urbanation said. “You have to stick out,” he said. “Just bringing on your regular tower may not do it anymore - unless the pricing is low.” To contact the reporters on this story: Katia Dmitrieva in Toronto at edmitrieva1@bloomberg.net ; Sean B. Pasternak in Toronto at spasternak@bloomberg.net To contact the editor responsible for this story: Rob Urban at robprag@bloomberg.net |
2024-10-20 | Bloomberg | BVA Bondholders to Get $493 Million as Brazil Intervenes | Brazil’s privately owned deposit- insurance fund will pay 1 billion reais ($493 million) to some of Banco BVA SA’s local bondholders after the central bank took control of the company. The intervention triggered an investor-protection mechanism that allows the early redemption of the so-called DPGEs, bonds sold by the bank that carry a guarantee from Fundo Garantidor de Creditos, Celso Antunes da Costa, the fund’s executive director, said yesterday in a telephone interview in Sao Paulo. Payments will begin on Oct. 24, he said. BVA, a Rio de Janeiro-based lender that specializes in loans to midsize companies, became the seventh bank in Brazil seized or bailed out since 2010 after regulators found violations of industry standards and deteriorating finances. FGC has 31 billion reais in assets after paying 2 billion reais to holders of DPGEs sold by Banco Cruzeiro do Sul SA, a Sao Paulo-based lender liquidated by regulators last month, da Costa said. The fund was created in 1995 and is financed by the biggest lenders in Brazil. BVA has about 7.4 billion reais in debt, according to the central bank website, including $45 million in international bonds due 2014. The lender accounts for 0.17 percent of assets and 0.24 percent of deposits in Brazil’s financial system, according to the statement. BVA holds stakes in asset-backed receivables funds, known as FIDCs. Holders of its FIDC Multisetorial BVA Master II will vote on Oct. 29 whether to liquidate the fund after Austin Rating downgraded it, according to a regulatory filing. The fund had 107.4 million reais in assets as of September, according to data from the Brazil securities regulator’s website. Bank’s Deterioration The central bank is taking “all possible measures to investigate,” the authority said in a statement, adding that it had to act against BVA because of “the deterioration of its economic and financial situation and the violations of norms that discipline the institution’s activity.” The central bank named Eduardo Felix Bianchini the new manager of BVA, which has seven branches in Sao Paulo , Rio de Janeiro and Minas Gerais states. “There are two solutions for the bank now: its liquidation or to find a new owner,” Luis Miguel Santacreu, an analyst at Austin in Sao Paulo, said in a telephone interview. “The bank didn’t have sufficient capital levels.” Austin downgraded BVA in September to BB, meaning it “is vulnerable to the general and sector economic conditions,” according to the rating definition. Santacreu said the downgrade stemmed from a lack of information after BVA stopped reporting earnings. The bank’s last financial statement was for the second half of 2011. No Buyer Brazil sees slim chances of finding a buyer for BVA, a government official said. The bank had insufficient provisions for its credit portfolio, faced liquidity issues and had an unsustainable business model, the official said, requesting not to be named because he wasn’t authorized to speak publicly. The current owners are unlikely to come up with capital to put the bank on its feet again, the official said. The central bank declined to comment beyond what it said in its statement. BVA declined to comment, according to a spokesman who asked not to be named in accordance with bank policies. To contact the reporters on this story: Cristiane Lucchesi in Sao Paulo at clucchesi5@bloomberg.net ; Raymond Colitt in Brasilia Newsroom at rcolitt@bloomberg.net To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net |
2024-07-05 | Bloomberg | Alliance, Genetec, Hotai, Largan, PLDT, Rio: Asia Ex-Japan Stocks Preview | The following companies may have unusual price changes today in Asian trading, excluding Japan. Stock symbols are in parentheses and share prices are from the previous close, unless noted otherwise. Alliance Global Group Inc. (AGI) : Travellers International Hotel Group Inc., a venture of Alliance with Genting Hong Kong Ltd. (GENHK) (678 HK), has signed a so-called memorandum of understanding with a major international hotel management company to run the fifth hotel that will be put up in the first Philippine casino gaming estate, a stock-exchange filing showed. Alliance was unchanged at 11.64 pesos. Genting was unchanged at HK$2.92. Genetec Technology Bhd. (GENE) : The Malaysian industrial automated equipment maker won orders valued at 45.4 million ringgit ($15 million) from its existing and new clients, it said in a statement. Genetec last traded at 24 sen on July 1. Hotai Motor Co. (2207 TT): The Taiwanese car dealer for Toyota vehicles was raised to “buy” from “neutral” with a NT$130 share price estimate by Eric Yang, analyst at Jih Sun Securities. The stock fell 1.4 percent to NT$106.50. KB Financial Group Inc. (105560) (105560 KS): The owner of South Korea ’s largest bank wants to buy life insurance companies to expand its non-banking business, the company said in a mobile- phone text message to Bloomberg News, confirming remarks made by Chairman Euh Yoon Dae to reporters. No potential targets were specified. The stock gained 0.6 percent to 52,200 won. Largan Precision Co. (3008 TT): The Taiwanese supplier of camera lenses for Apple Inc.’s iPhones posted a 59 percent increase in sales in June to NT$1.20 billion ($42 million) from a year earlier, a stock-exchange filing showed. The stock decreased 0.6 percent to NT$960. MRC Allied Inc. (MRC) : The Philippine property developer said it signed an agreement with Capital Gold Pty Ltd. to explore and develop a copper-gold prospect in the southern province of Surigao del Sur. Sydney-based Capital Gold will give 40 million of its own shares to MRC Allied for a 40 percent stake in MRC Surigao, which will own the property, MRC Allied said. The stock increased 3.7 percent to 42 centavos. Philippine Long Distance Telephone Co. (TEL) : The nation’s largest company by market value will create voting preferred shares to align its capital structure with other domestic companies, it said in a statement. The Supreme Court last week ordered the Securities and Exchange Commission to investigate the company on possible violation of the constitutional cap on foreign ownership as 10 of 13 justices voted to define the term “capital” as referring only to voting stocks or common shares. PLDT, as the stock is also called, gained 0.1 percent to 2,398 pesos. RFM Corp. (RFM) : The Philippine food and drinks company may miss its goal of a 20 percent increase in profit this year even with another round of price increases, a stock-exchange filing showed. Still, Manila-based RFM is keeping its target of posting a 1 billion peso profit in 2015, according to the filing. RFM said net income last year was 625.7 million pesos. The stock decreased 1.7 percent to 1.18 pesos. Rio Tinto Group (RIO AU): The company’s unit in Serbia plans a $27 million pre-feasibility study for mining jadarite, a mineral rich in boron and lithium, Tanjug newswire reported, citing a local official in the area of exploration. The study will be completed in two years and mining may begin in 2016 for the materials used in making batteries and cleaning products, the report said, citing Vidoje Petrovic, the mayor of Loznica in western Serbia. The company has spent $10 million so far on 75 preliminary drills, the report said. Rio, the world’s second- largest mining company by sales, gained 0.2 percent to A$83.32. Samsung Heavy Industries Co. (010140 KS): Maersk Drilling, a unit of A.P. Moeller-Maersk A/S, said it has used a $1.3 billion option to order two more so-called ultra deepwater drill ships at Samsung Heavy. The stock fell 0.5 percent to 46,900 won. To contact the reporter on this story: Ian C. Sayson in Manila at isayson@bloomberg.net To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net |
2024-12-26 | Bloomberg | Home Prices Probably Fell, Baring Weak Link in Accelerating U.S. Recovery | Home prices probably dropped in October, a sign housing will remain a weak link as the U.S. recovery accelerates into the new year, economists said before reports this week. Property values in 20 cities were down 0.2 percent from October 2009, the first year-over-year decline since January, according to the median forecast of 14 economists surveyed by Bloomberg News ahead of a report from S&P/Case-Shiller in two days. Other data the same day may show consumer confidence rose to a seven-month high in December. A wave of foreclosures waiting to reach the market means home prices will remain under pressure in 2011, representing a risk to household finances. Rising equity values and an improving job market will probably help offset the damage, ensuring that confidence and spending continue to climb. “The inventory overhang is so big, with foreclosures looming, it’ll take five years to absorb the supply,” said Paul Ballew , chief economist at Nationwide Mutual Insurance Co. in Columbus, Ohio. “The consumer is feeling better although there is still a high level of caution and anxiety.” Economists surveyed projected the gauge of residential real-estate values declined 0.7 percent in October from the prior month, when it fell 0.8 percent. The index was down 29 percent in September from its July 2006 peak. The year-over-year gauge provides better indications of trends in prices, the group has said. The panel includes Karl Case and Robert Shiller , the economists who created the index. Evidence Mounts Reports earlier this month showed the housing market is stuck near recession levels even as the broader economy is recovering. Housing permits fell in November to the third-lowest level on record, while starts rose for the first time in three months, the Commerce Department reported Dec. 16. Sales of new and existing homes last month rose less than projected by the median forecast of economists surveyed by Bloomberg, reports from the Commerce Department and the National Association of Realtors showed last week. Figures on Dec. 30 may show pending sales of previously owned homes rose 2 percent in November from the prior month, according to the survey median. The National Association of Realtors’ gauge measures contract signings, which typically lead closings by one to two months. The lack of demand has depressed homebuilding stocks this year. The Standard & Poor’s Supercomposite Homebuilding Index , which includes Toll Brothers Inc. and Lennar Corp., is up 2 percent since Dec. 31, while the broader S&P 500 has increased 13 percent. Stocks Rise Rising stock prices are helping mend household finances even as home values slide, one reason why sentiment and spending are improving as 2010 comes to a close. The Conference Board’s confidence index increased to 56.3 this month from 54.1 in November, according to the median estimate of economists surveyed. The index averaged 96.8 during the last economic expansion that ended in December 2007. The International Council of Shopping Centers on Dec. 14 revised its November-December holiday-season sales forecast up by 0.5 percentage point to a range of 3.5 percent to 4 percent. Carnival Corp. , the world’s biggest cruise-line operator, last week forecast fiscal 2011 earnings will rise as ticket prices strengthen. “Booking trends have continued to improve for both our North American and European brands, particularly for our peak summer season,” Chief Executive Officer Micky Arison said in a Dec. 21 statement. The Miami-based company’s heaviest booking period, which begins in early January, will be “strong,” he said. Factory Gains Manufacturing remains a bright in the recovery. The Institute for Supply Management-Chicago Inc. will report on Dec. 30 that businesses in the U.S. expanded in December for a 15th consecutive month, according to the survey median. Economists in the past two weeks have boosted projections for fourth-quarter growth, reflecting the pickup in consumer spending and passage of an $858 billion bill extending all Bush- era tax cuts for two years. The legislation also continues expanded unemployment insurance benefits through 2011 and cuts payrolls taxes by 2 percentage points next year. To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net |
2024-08-04 | Bloomberg | RSA’s Simon Lee to Replace Haste as Chief Executive Officer | RSA Insurance Group Plc (RSA) said Chief Executive Officer Andy Haste will step down, a year after the failure of his attempt to create Britain’s biggest non-life insurer with a 5 billion-pound ($8 billion) takeover. Haste, 49, will be replaced at the end of this year by international head Simon Lee, 50, the London-based insurer said today in a statement. RSA didn’t give a reason for Haste’s exit. Since taking over in 2003, Haste has cut jobs, sold units and focused on writing fewer policies to revive profit after the insurer logged five consecutive years of losses between 2000 and 2005 due to surging asbestos claims in the U.S. After making more than 40 acquisitions, Haste last year tried to buy Aviva Plc’s U.K. non-life unit, an offer the target rejected. “He’s turned around the business and left it in terrific shape,” said Eamonn Flanagan , a Liverpool-based analyst at Shore Capital Plc with a “buy” rating on the stock. “But he wanted to punch much bigger. He’s a very ambitious guy.” Haste said the Aviva tie-up would allow RSA to cut costs and achieve capital gains. After Aviva CEO Andrew Moss rejected the offer, RSA, which would have funded the purchase with a rights offering, didn’t make another bid. Haste also considered making a $1 billion bid for American International Group Inc. (AIG) ’s non-life division in Latin America in 2009, according to the Sunday Telegraph. No formal offer was ever made public. ‘Still Young’ “I’ve had eight-and-a-half great years here and it’s been a real privilege to lead the team here,” Haste said on a call with reporters today. “Genuinely, I have no set plans at the moment. I’ll take my time to think about what to do next. I’m still young, still energetic, still passionate about business.” Haste declined to comment on any future career plans, saying he wouldn’t rule anything out. “Andy Haste could run any financial services company in Europe ,” Flanagan said. “He’s a great company doctor.” Lee joined RSA as head of its international unit eight years ago, and has since expanded the division to be the insurer’s biggest unit by revenue after making acquisitions in Ireland and Scandinavia. Before RSA, Lee spent 17 years at NatWest, part of Royal Bank of Scotland Group Plc. Lee’s salary will be raised to 800,000 pounds following his promotion, RSA said in the statement. His bonus and other compensation will remain unchanged. RSA’s pretax profit rose 25 percent to 376 million pounds in the six months to June 30, the insurer said in a separate statement. That beat the 322-million-pound median estimate of nine analysts surveyed by Bloomberg. The stock sank 5.3 percent to 118.1 pence in London , the lowest in more than a year, giving the firm a market value of about 4.2 billion pounds. To contact the reporter on this story: Kevin Crowley in London at kcrowley1@bloomberg.net To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net |
2024-06-30 | Bloomberg | HSBC Holdings Will Eliminate 700 U.K. Financial Advice Jobs | HSBC Holdings Plc (HSBA) , Europe ’s largest bank, will cut about 700 employees who offer branch-based advice on financial products as regulators force lenders to charge clients for the service. About 460 jobs will be cut in the financial advice team in retail banking and wealth management, as well as 240 support jobs such as compliance, human resources and finance, the bank said in an e-mailed statement today. The Financial Services Authority’s Retail Distribution Review will from the end of 2012 prevent the payment of commissions to advisers, and lenders are preparing to charge for the service. Barclays Plc (BARC) , Britain’s second-largest bank, said in January it would cut 1,000 employees offering face-to-face advice in branches. Lloyds Banking Group Plc (LLOY) , Britain’s biggest mortgage lender, said today it will cut 15,000 jobs to reduce costs by 1.5 billion pounds ($2.4 billion) by 2014. “HSBC has decided to bury its own bad news on the same day,” David Fleming, a Unite labor union spokesman, said in a statement. The union estimated the job cuts totaled 840. HSBC’s Hemingway declined to comment on the difference. Employees are being informed today of the reductions across the U.K., a person familiar with the plans said earlier. HSBC employs about 55,000 people in the U.K., the bank said. “We will work extremely closely with all those colleagues affected by today’s announcement so that we can try to find them alternative roles thereby minimizing the number of people who actually leave the HSBC Group,” Joe Garner, head of HSBC in the U.K., said in the statement. HSBC will create 50 “senior” financial planning adviser jobs and 50 mortgage adviser jobs in its wealth management business, it said. To contact the reporter on this story: Howard Mustoe in London at hmustoe@bloomberg.net. To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net |
2024-06-05 | Bloomberg | Latvia’s Euro Path Shows Allure of Crisis-Hit Currency, for Some | Five countries on emergency aid, six consecutive quarters of economic contraction and 19 million people out of work haven’t dimmed the euro’s allure for small states that, like Latvia, have nowhere else to turn. Latvia today was put on the path to becoming the 18th country to use the euro at the start of 2014, binding it deeper into the western European economy and providing an extra layer of insulation against Russia , its former imperial overlord. “Latvia doesn’t have another choice,” Roberts Zile, a former Latvian finance minister who is now in the European Parliament, said in a telephone interview. “It’s a signal that we are going to the West. It’s also important for the euro zone to say, look, small countries which are coming out of the crisis are going to join the euro, even if the euro is in trouble.” Latvia’s entry into the currency bloc will come after debt-encumbered Greece dodged leaving it and a newly elected government in Iceland decided that joining would be a bad idea. In making its endorsement, the European Commission said Latvia is already “well integrated” with the broader European economy. European finance ministers, who have never overturned a commission recommendation on euro eligibility, will make the final decision on Latvia on July 9. ‘More Germanic’ “I don’t think this says that the euro zone is out of trouble,” Simon Johnson , a professor at the Massachusetts Institute of Technology and a Bloomberg View columnist, said on Bloomberg Television’s “Surveillance” with Sara Eisen and Tom Keene. “It says that the euro zone is becoming more Germanic, more northerly in its orientation, in its attitude, perhaps in its culture. There are still big problems in the peripheral parts of Europe , particularly around the Mediterranean.” The 2 million Latvians are veterans of the boom-bust cycle, replete with a European Union and International Monetary Fund bailout, that besets countries along Europe’s southern rim. Latvia rebounded from Europe’s deepest recession, with the economy shrinking 17.7 percent in 2009, to notch its fastest growth, 5.6 percent, last year. The underside is an unemployment rate of 12.4 percent in March, with 21.9 percent of young Latvians looking for work and many emigrating to find it. Around 40 percent of Latvians risk “poverty or social exclusion” in the country’s downsized welfare state, the commission said last week. Social Costs Social tensions are part of the price Latvia paid for wrestling its budget deficit down to 1.2 percent of gross domestic product in 2012, below the euro’s 3 percent limit. Latvia also passed tests for inflation, debt, currency stability and long-term interest rates. While raising no objections to Latvia, the European Central Bank said today that it will be “challenging” for the country to maintain its track record in keeping inflation down. Latvian cost-of-living increases averaged 1.3 percent in the 12 months to April, below a 2.7 percent target. Latvia will follow its northern neighbor, Estonia , as the only countries to move into the euro’s orbit since the Greece-sparked debt crisis exposed the flaws in the currency’s management and fueled speculation that it might break up. Both countries and southern neighbor Lithuania , once barred from the euro and now set to reapply to join in 2015, form a Baltic bloc that spent a half century as fiefs of the Soviet Union until becoming independent after communism collapsed in eastern Europe. Euro’s Endurance “All three Baltic states are inside or are well on their way to the economic and political core of Europe, and that’s indeed great,” EU Economic and Monetary Commissioner Olli Rehn told reporters in Brussels. He called the currency’s expansion “further evidence that those who predicted a disintegration of the euro were indeed behind the curve and simply wrong.” By entering the EU and NATO, the Baltic states have taken out insurance policies against falling back under the sway of Russia, which has schemed to restore its influence during Vladimir Putin ’s 13-year reign. Adopting the euro strengthens that buffer. Addressing Putin yesterday, EU President Herman Van Rompuy said that after over three years of crisis fighting and 496 billion euros ($648 billion) in emergency loans, the single currency is here to stay. “I emphasized the restored financial stability in the euro zone,” Van Rompuy told reporters after an EU-Russia summit in Yekaterinburg. “The euro is no longer under an existential threat.” No Polish Target The combination of factors that make it attractive to the Baltic states, however, are absent elsewhere, at least for the moment. Poland , the largest eastern European economy, has resisted setting a target date for joining as the debt crisis endures. Poland’s deficit, at 3.9 percent of GDP last year, also tops the euro ceiling. In western Europe, Denmark is caught between the currency’s gravitational pull and the political downside of being associated with it. While successive Danish governments have shown no inclination to embrace the euro after voters rejected it in 2000, the country pegs its currency to the euro, effectively outsourcing domestic interest-rate policy to the ECB. For now, Denmark is alone in that halfway house. Other countries that have formally linked to the euro -- Greece, Estonia, Lithuania, Slovenia, Cyprus, Latvia , Malta and Slovakia |
2024-08-14 | Bloomberg | Deere Poised for Profit Boost as Drought Seen Affecting 2013 | Deere & Co. (DE) , the largest maker of agricultural equipment, may post a 37 percent gain in earnings on higher farm income and foreign sales while the worst U.S. drought in five decades weighs on performance next year. Deere will probably say tomorrow that fiscal third-quarter profit rose to $2.32 a share, according to the average of 17 analysts’ estimates compiled by Bloomberg. The Moline, Illinois- based company is effectively sold out of large farm equipment for the financial year ending Oct. 31 and the implications of the drought in the period are “limited,” Andy Kaplowitz, an analyst for Barclays Plc, said in a report yesterday. “It should be a good quarter,” Larry De Maria, a New York-based analyst for William Blair & Co. who has a hold rating on the shares, said in an interview yesterday. “The deteriorating sentiment on the drought would likely have more of an effect on 2013 than 2012.” Deere Chief Executive Officer Sam Allen is still reaping the benefits of U.S. farmers’ record $98.1 billion in net income last year, which has helped them to upgrade tractors and combines. His strategy of trying to boost sales outside the U.S. and Canada , the company’s largest source of revenue, will become even more important in 2013 as a poor harvest in the Midwest may cut farmers’ domestic spending power. Deere’s earnings have grown more than analysts’ projections for 10 consecutive quarters as U.S. farm receipts and income climbed for two years through last year. Combine Sales The company’s tractor and combine sales in June outpaced the industry as a whole, Deere said in its latest monthly audio report on its website. Row-crop tractor sales for June were up “considerably more” than the 25 percent industrywide increase while combine sales rose by “triple digits” compared with an overall 33 percent gain, Deere said. Shares of Deere rose 0.4 percent to $80.13 at the close in New York. They have climbed 3.6 percent this year. A dozen analysts recommend buying the company, eight have a hold rating and two recommend selling it, according to data compiled by Bloomberg. Ken Golden , a Deere spokesman, declined to comment ahead of the earnings due before the start of trading tomorrow. Deere will probably post a 16 percent increase in sales to $9.61 billion in the three months through July, according to the average of 14 analysts’ estimates. Per-share earnings will increase 24 percent to $8.25 a share in the current fiscal year and 5.6 percent to $8.71 in fiscal 2013, estimates show. USDA Forecast U.S. net farm income will drop to $91.7 billion this year, the second-highest total, the U.S. Department of Agriculture said in February. The USDA will update its forecast on Aug. 28 to reflect the drought that began hurting crops around June. While the hottest July since 1936 has seen corn and soybean prices surge to records, the weather also means damaged crops and distress for the worst-affected farmers. Corn production in the U.S., the largest grower and exporter, will drop 13 percent to a six-year low, the USDA said Aug. 10. The upcoming harvest is estimated at 10.779 billion bushels (273.8 million metric tons), compared with 12.358 billion in 2011. Crop insurance programs may help support equipment sales. As many as 80 percent of U.S. farmers have some form of the protection, which may “help dampen the magnitude” of a slowdown even in 2013, said Kaplowitz, who recommends buying Deere shares. Brazilian Farmers While farmer income from the U.S. harvest will drive agricultural capital spending in 2013, longer-term factors such as rising demand for higher-quality diets globally will give Deere a “bright future,” Joel Levington , the managing director for corporate credit at Brookfield Investment Management Inc., said in an e-mail yesterday. Deere’s sales outside the U.S. and Canada climbed to 39 percent in fiscal 2011, from 29 percent five years earlier. That trend may soften any blow from the U.S. drought as farmers in countries such as Brazil respond to record corn prices with increased planting. Foreign farmers “could respond to higher global commodity prices by planting even more acres of corn (and other cash crops including soybeans) next year, which ultimately could drive increased equipment demand in 2013 and beyond,” Kaplowitz said. To contact the reporter on this story: Shruti Date Singh in Chicago at ssingh28@bloomberg.net. To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net . |
2024-09-22 | Bloomberg | Romney Says His Stumbles Don’t Mean Campaign Needs a Turnaround | Republican presidential nominee Mitt Romney said his campaign doesn’t need an overhaul even though he’s trailing President Barack Obama in critical swing states and has come under fire from members of his own party over recent stumbles. “It doesn’t need a turnaround,” Romney said in an interview for CBS’s “60 Minutes” program. “We’ve got a campaign which is tied with an incumbent president.” An excerpt from the interview, scheduled for broadcast tomorrow, was released by the network yesterday. Obama also has been interviewed for the program. “There are some days we’re up. There are some days we’re down,” Romney said of poll results. Romney has been criticized by some Republicans as well as Democrats for his initial response to the fatal attack on the U.S. consulate in Libya and his remarks to donors, secretly recorded in a video, in which he said 47 percent of Americans are government-dependent “victims” who don’t pay federal income taxes. Obama has used the Romney comments in campaign speeches since the video was leaked on the Internet. “That’s not the campaign. That was me, right?” Romney said in the “60 Minutes” interview. The campaign organization is doing a “very good job. But not everything I say is elegant. And, and I want to make it very clear, I want to help 100 percent of the American people.” Deriding Romney At a rally in Virginia yesterday, Obama derided Romney’s statement that he would change things from the inside. “What kind of inside job is he talking about?” Obama asked to laughter from his audience. “Is it the job of rubberstamping the top-down, you’re-on-your-own agenda of this Republican Congress ? Because if it is, we don’t want it.” At an appearance in Las Vegas , Romney again said Obama has raised “the white flag of surrender” on the economy and making progress on legislation, keying off a statement the president made the day before about changing Washington from the outside. “Over history there have been people that have changed Washington from the outside,” Romney told donors at the Red Rock casino. “This president has not done that.” Social Security Earlier, Obama accused Republicans of threatening the future of Social Security and Medicare while Republican vice presidential nominee Paul Ryan said only he and Romney are offering “honest answers” about how to preserve the programs. Obama and Ryan addressed the biggest U.S. advocacy group for senior citizens as they made appeals for the votes of a constituency that traditionally goes to the polls on Election Day at a higher proportion than other groups. The president, speaking via satellite to a gathering of AARP in New Orleans , pledged to keep both programs solvent for current and future recipients and promised that over the next decade the average Medicare beneficiary will save $5,000 as a result of his health-care law. He said Republican criticism of the measure passed by Congress “hasn’t been completely on the level” and that a plan Ryan has pushed as House Budget Committee chairman would replace Medicare with a “voucher that wouldn’t keep up with costs.” Ryan, speaking in person to the group in New Orleans following Obama’s appearance, drew boos from the audience when he said he and Romney would work to repeal the health-care law. Law Repeal “The first step to a stronger Medicare is to repeal Obamacare because it represents the worst of both worlds,” Ryan said. Responding to the boos, he said, “I had a feeling there would be mixed reaction, so let me get into it.” He said the law “weakens Medicare for today’s seniors and puts it at risk for the next generation.” AARP claims more than 37 million members. In an election that both campaigns forecast will be close, Obama and Romney are seeking an edge with every constituency. Medicare and Social Security , which primarily benefit those 65 years of age and older, are key issues with older voters. In a dozen battleground states, including Florida and Virginia, voters said they have more faith that Obama will preserve Medicare than Romney by 50 percent to 44 percent, according to a USA TODAY/Gallup Poll. The Sept. 11-17 poll of 1,096 registered voters has a margin of error of plus or minus four percentage points. Medicare Impact The health-care law championed by Obama is one of the central points of debate in the campaign. The Patient Protection and Affordable Care Act scales back payments to Medicare Advantage plans, an alternative to traditional Medicare. It also slows the growth of Medicare payments to hospitals and other health-care providers. Seniors’ benefits weren’t reduced in the legislation. The nonpartisan Congressional Budget Office projects that Medicare spending will reach $887 billion in 2020, up from $499 billion in actual spending in 2009. Ryan, a U.S. representative from Wisconsin , has produced a budget blueprint that would convert Medicare to a voucher plan, a proposal that has drawn scorn from seniors’ groups, including the AARP, because it would end Medicare as a defined-benefit program. While the current law plows its projected savings back into subsidies to help low-income individuals buy insurance, the Ryan plan counts the money toward debt reduction. “We respect all the people in this country enough to talk about the clear choices we face on Medicare, Social Security, the economy and the kind of country our children will inherit,” Ryan said. “Our plan keeps the protections that have made Medicare a guaranteed promise for seniors throughout the years.” To contact the reporters on this story: Julianna Goldman in Washington at jgoldman6@bloomberg.net ; Lisa Lerer in Washington at llerer@bloomberg.net To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net |
2024-11-28 | Bloomberg | Should CEOs Get Involved in Politics? | Should business leaders be political? Let me rephrase — should business leaders be involved in politics? There is a difference, and it's not just a semantic one. At least in the US, we seemed to have developed a sort of allergy to the idea of a CEO getting into policy-shaping. Our only real debate on the issue has largely been confined to the issue of campaign finance reform, and there have really been just two dominant sides to that debate: either corporations are people (my friend) and money is speech, or business is a corrupting influence, a "special interest" that needs to be kept under quarantine (as if Washington DC were as pure as new-fallen snow). And yet business leaders are finding themselves drawn into the political process — oddly enough, to try and depoliticize it. This was clear at last night's HBR's 90th anniversary gala in New York , where Johnson & Johnson CEO Alex Gorsky and Starbucks CEO Howard Schultz both expressed concerns about America's current level of partisanship, and what such ideological gridlock could do to the economy. Discussing health care with HBR's Justin Fox, Gorsky said, "It concerns me when we politicize it," because it's so intertwined with the economy, and so many of our current economic issues can be tied back to it. As he noted, the relationship between health care and government is only going to grow in the coming years. Starbucks CEO Howard Schultz offered an even more direct broadside. "America is not the America our parents fought for," he said. "It's not the America we were promised." We are, he said, presiding over a once-great country that is now drifting towards mediocrity. And he sees little reason to expect Congress to pass a long-term solution to the fiscal cliff; instead, he thinks an "irresponsible," short-term "band-aid" solution. And concern about political gridlock is not just confined to the US. In a post-election survey of business leaders worldwide, released by HBR yesterday, 84% cited the euro zone as their chief concern for the coming months. Not competition or the war for talent — both more traditional business concerns. But whether European politicians will be able to hammer out a deal. And a full 20% of business leaders said they don't expect the euro zone to remain intact two years from now. It's not that business leaders don't have enough other pressing issues to grapple with. Burberry CEO Angela Ahrendts, also at last night's event, talked with Rotman Dean Roger Martin about the necessity to have an evolving digital strategy in the face of what she called a "mobile metamorphosis." Vineet Nayar, CEO of HCL, spoke to the challenge (and the tremendous promise) of motivating a new generation of employees who see meaningful work as a necessity, not just a nicety. And Clay Christensen talked about the increasing pace of disruption across all sectors. In what I hope is a case of hyperbole, Nayar put it thus: business today is "coming from a seven-year planning cycle to a seven-minute planning cycle." And yet there's no denying that politics has become as real a business issue as any of these megatrends. So why do we feel so uncomfortable with the worlds of business and politics colliding? It's a blowback I've gotten from commenters every time I've touched on politics in HBR's editors' blog. And it's a blowback that Howard Schultz says he gets from worried board members and shareholders. But I think it's time to recognize that being involved in policy is not the same thing as being partisan. Getting off the sidelines is not the same thing as choosing sides. As Schultz put it, this is not an issue of "being a Republican or a Democrat" — instead, he says, it's "about being an American." It's about "trying to lead." This is a nuance that can be hard to explain in an electorate where everything, even one's choice of adult beverage , becomes a red/blue issue. I ran into this conundrum last week, when I was interviewing another CEO interested in policy, Whole Foods Market's John Mackey, for the HBR IdeaCast (the podcast will air in January, when Mackey's new book, Conscious Capitalism , is published). In the book, Mackey pulls no punches when it comes to pointing out what he sees as misconceptions on both left and right. But he was quick to correct me when I suggested he'd staked out a "middle ground." "It's not a middle ground." Instead, it's a different ground. It's not about splitting the difference between opposite camps, saying that the truth must lie somewhere between two extremes (think of the old fallacy of the argumentum ad temperantiam ). Business leaders have no choice but to get involved in politics in a world where political gridlock is as real a threat to one's business as your competitor's new killer product or a hurricane bearing down on your warehouse. To do otherwise is not just short-sighted, it's an abdication of responsibility. In fact, the pragmatizing influence of business might be just what Congress needs. As Howard Schultz challenged the executives in the audience last night: "We all know that something is wrong. We absolutely know it. Yet we're sitting here as if everything is fine." When has more participation in our political system ever been a bad thing? Isn't that what government "of the people, by the people, for the people" is supposed to be about? "The question is this," as Schultz put it to the audience last night. "Are. You. A bystander?" Or are you a leader? |
2024-05-03 | Bloomberg | Chemed Declines Most in Five Years on Medicare Lawsuit | Chemed Corp. (CHE) , the provider of hospice care and Roto-Rooter plumbing services, fell the most in five years after its health unit was accused by the U.S. government of false billing for Medicare services. Chemed, owner of the largest for-profit hospice chain in the U.S., plunged 17 percent to $68 at the close in New York , its biggest one-day drop since April 2008. The shares of the Cincinnati-based company have increased 12 percent in the past 12 months. The U.S. filed a lawsuit claiming Chemed’s Vitas Hospice units knowingly billed the government’s Medicare program for crisis-care services that weren’t necessary or provided, and enrolled patients who weren’t eligible, the Justice Department said in a statement yesterday. The department has settled civil fraud complaints against at least eight hospice companies in the past four years as federal inspectors probe providers of end-of- life care for possible Medicare overbilling. Too often “we hear reports of companies that abuse this critical service by using aggressive marketing tactics to push patients into services they don’t need in order to get higher reimbursements,” said Stuart Delery, acting assistant attorney general for the department’s civil division, in the statement. Defend Vigorously Chemed and its Vitas business “intend to defend this lawsuit vigorously,” according to a statement from the company today. The businesses have made significant investments in their systems and procedures to be sure they meet regulatory requirements and the highest industry standards, Chemed said. The changes were designed to ensure services are provided only to eligible patients, the company said. Medicare is the U.S.-backed health insurance program for the elderly. The suit claims the units set goals for the number of crisis days they billed to Medicare, pressured staff to boost claims and used aggressive marketing tactics to increase improper billing. Crises-care services are billed at the highest daily rate for Medicare patients and are intended for brief periods to treat urgent symptoms of worsening health. Hospices are supposed to enroll only people who they believe will be dead within 180 days. About 21 percent of patients stay longer, the U.S. inspector general responsible for Medicare reported in July 2011, and more than 200,000 are discharged alive each year. Chemed acquired Vitas in 2004 and now provides hospice care in 18 states and Washington , D.C. The health-care business generated revenue of about $271 million in the first three months of 2013, or about three-quarters of the company’s total, Chemed said on April 18. To contact the reporter on this story: Michelle Fay Cortez in Minneapolis at mcortez@bloomberg.net To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net |
2024-01-08 | Bloomberg | How Cutting Health Costs $5 Billion Can Improve Birth Results | It's been clear for some time that, apart from putting babies and mothers at unnecessary risk , the excessive use of cesarean section in the U.S. is taxing the health system. Data from a comprehensive new study quantifies that cost: about $5 billion a year. The study, by the research firm Truven Health Analytics , found that c-section births generally cost 50 percent more than vaginal deliveries. For those with commercial insurance, the average cost of a c-section birth in 2010 was $27,866, compared with $18,329 for a vaginal delivery. For those covered by Medicaid, the respective costs were $13,590 and $9,131. The three advocacy groups that sponsored the study -- Childbirth Connection , Center for Healthcare Quality & Payment Reform , and Catalyst for Payment Reform -- calculated that $5 billion a year could be saved if the current cesarean rate of 33 percent of births was reduced to 15 percent. The lower level would reflect cases of genuine medical necessity, according to the World Health Organization. Four million babies are born in the U.S. annually. A number of hospital systems and states have enacted reforms that are reducing elective cesareans. Most hospitals in Oregon and Oklahoma only allow the procedure at 39 weeks of gestation in cases of medically necessity. Texas Medicaid no longer pays for it, except under those conditions. The Truven study should prompt other health systems to follow these examples. The result would not only be financial savings but healthier babies. The elective use of c-sections has contributed to babies being born too early. From 1990 to 2009, the percentage of U.S. babies delivered at 37 to 38 weeks grew to 27 percent from 19 percent. A growing body of research shows these babies, while not technically premature, are fragile. According to a 2011 study , children born at 37 weeks are twice as likely to die in their first year as those born at 40 weeks. They suffer from significantly more health problems , including respiratory ailments and sepsis. ( Lisa Beyer is a member of the Bloomberg View editorial board.) Read more breaking commentary from Bloomberg View at the Ticker |
2024-02-24 | Bloomberg | Spanish Savings Banks Seek Capital From Insurers, Expansion Says | Spanish savings banks are looking for additional capital from insurance companies to meet tighter solvency requirements as they convert to commercial banks, Expansion reported, without citing anyone. Insurers, which sell their products through the savings banks, may boost the banks’ capital by becoming shareholders or by subscribing to debt sold by the newly chartered banks, the newspaper said. To contact the reporter on this story: Manuel Baigorri in Madrid at mbaigorri@bloomberg.net To contact the editor responsible for this story: Angela Cullen at acullen8@bloomberg.net |
2024-11-14 | Bloomberg | EU Politicians Reach Agreement on Solvency II Rules | European politicians reached an agreement that may pave the way for new rules designed to make insurance companies safer. The deal among the European Commission, European Parliament and Council of the European Union in Brussels yesterday may allow the final adoption of Solvency II by the EU Council and the European Parliament, the Lithuanian Presidency, representing the EU Council, said in a statement on its website today. The agreement “will reduce taxpayer exposure to risks of the insurance sector by establishing EU-wide requirements for this industry on similar lines to those for banks,” the EU Parliament said in a statement today. Insurers are Europe ’s biggest institutional investors with 8.4 trillion euros ($11.3 trillion) under management. They are lagging behind banks in adopting a framework to help them withstand losses in any repeat of the 2008 financial crisis. Aegon NV (AGN) , the owner of U.S. insurance firm Transamerica Corp., and reinsurance company Swiss Re (SREN) were among firms that received financial support after the collapse of Lehman Brothers Holdings Inc. and the U.S. bailout of American International Group Inc. “We welcome the decision in Brussels very much and continue with our preparations for getting our internal model approved,” Immo Querner, chief financial officer of Talanx AG (TLX) , Germany ’s third-largest insurer, said in a call with journalists today. “We will now take a close look at the details of last night’s agreement.” Regulations Delayed Solvency II, intended to harmonize the way insurers allocate capital against risk, was scheduled to come into force last year. Its introduction was delayed several times over issues such as calculating capital needed for liabilities for products with long-term guarantees such as annuities and investments such as government bonds. Insurers and regulators plan to implement the rules on Jan. 1, 2016 with a transitional period, should an agreement be reached in time. “Good news for EU insurers -- deal just reached in trilogue between European Parliament and council on Omnibus,” Michel Barnier , the EU’s financial-services chief, said via Twitter. Last year, speculation increased that the regulations would be sidelined by some EU countries as they prepared to introduce some of the rules piecemeal. Basel III Policy makers intend Solvency II to be for Europe’s insurers what the Basel Committee on Banking Supervision ’s global capital rules are for the continent’s banks -- a common set of rules applied across the EU. They will replace regulations developed in the 1970s that had been superseded by a patchwork of national laws. Current Solvency I rules concentrate mainly on insurance risks, while Solvency II also takes account of investment risks. Like Basel III, the levels of capital reserves required under Solvency II can either be determined by the regulator’s standard model or a firm’s internal model, which must be approved by the regulator. Almost all of the biggest EU-based insurers have opted for internal models. “Years of intensive lobbying have paid off for the insurance companies of the largest member states ,” Sven Giegold, economic and financial spokesman of the Greens and a member of the European Parliament, said in statement on his website. “The deal between Council and the majority of the European Parliament ignores the advice of European Systemic Risk Board, academics heard by the Parliament and of Eiopa,” the European Insurance and Occupational Pensions Authority. To contact the reporter on this story: Oliver Suess in Munich at osuess@bloomberg.net To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net |
2024-07-25 | Bloomberg | Clean-Tech Index Declines to Nine-Year Low on Uncertainty | The WilderHill New Energy Global Innovation Index (NEX) , a global index of clean-energy stocks, declined to a nine-year low as the industry faces oversupply, falling prices and uncertain government support. The NEX index, as it’s known, fell 81 cents to $102.40 in New York yesterday, its fourth consecutive drop and its lowest price since April 2003. The index has lost 19 percent of its value this year. NEX tracks 96 solar, power-storage, energy-efficiency, wind and biofuel companies, all industries that have been hard-hit as governments in Europe and the U.S. scale back subsidies and the weak global economy slows demand, said Joseph Salvatore, an analyst at Bloomberg New Energy Finance in London. That’s pushing some investors to seek safer havens. “There is certainly a risk element to the sector,” Salvatore said in an interview yesterday. “There is a lot of policy uncertainty, which is not good for an industry that is still heavily reliant on government support.” The NEX is falling while the Standard & Poor’s 500 Index gained 6.4 percent this year. Investors are seeking stability and shifting away from industries perceived as speculative and risky, such as renewable energy, he said. “Investors are redeeming and exiting,” Salvatore said. “It’s been consistent for the last year.” The NEX is down about 78 percent since a 2007 high, before the global economic crisis drove down valuations. Valuations ‘Crumpled’ “Renewable-energy valuations got a bit out of hand and they crumpled,” said Aaron Chew, an analyst at Maxim Group LLC in New York. The clean technology industries may follow the same pattern as previous emerging industries, he said. “In 1998 to 2000, there was an Internet sector and we now call it technology or media,” he said. “Maybe that’s the way to see it --alternative energy is really just the energy and utility sector.” First Solar Inc. (FSLR) , the world’s largest maker of thin-film solar panels, has lost 88 percent of its market value in the past year, making it the worst performer on the NEX over that period. Prices for solar panels fell by half last year, driving down earnings for the Tempe, Arizona-based company. Dialight Plc (DIA) , a U.K. maker of light-emitting diodes, was the best performer with a 30 percent gain as demand increased for the energy-efficient lighting technology. Falling share prices may prompt acquisitions, as large companies or private equity investors buy up clean-energy providers, according to Andrew Musters, head of private equity for SAM Group Holding AG, a Zurich-based investment company. “Clean technology has evolved into a key global industry with significant growth potential,” he said in a July 2 report. “The global structural drivers of clean growth are intact, and capital needs remain high given the global demand for clean technologies.” To contact the reporter on this story: Ehren Goossens in New York at egoossens1@bloomberg.net To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net |
2024-09-17 | Bloomberg | U.S. Crop-Insurance Claims Jump Amid Planting Delays, USDA Says | U.S. farmers who were prevented from planting by rain this year filed crop-insurance claims on six times more land than last season, the government said. Farmers filed claims on 8.213 million acres of grains, oilseeds, cotton and sugar as of Sept. 1, according to revised estimates released today by the U.S. Department of Agriculture’s Farm Service Agency. That compares with 7.71 million acres at the beginning of August and last year’s total of 1.239 million acres. The FSA is set to update its data monthly through January, with its next report on Oct. 16. Parts of the Midwest, including top corn and soybean growers Iowa and Illinois , saw double the normal amount of rain in April and May, when farmers usually sow crops, National Weather Service data show. Farmers planted a total of 246.3 million acres enrolled in government programs, including failed acreage, down from 250.76 million a year earlier, the FSA said. “Some parts of the Corn Belt have been hit by weather problems throughout the season,” said Kieran Walsh, a broker of agricultural derivatives at Aurel BCG in Paris. “Delayed plantings and the higher number make sense.” Crop prices rallied today on the Chicago Board of Trade as corn for delivery in December rose as much as 2.6 percent to $4.685 a bushel and soybeans for delivery in November added as much as 1.2 percent to $13.65 a bushel. Corn is still down 45 percent since reaching a record $8.49 a bushel last year as drought slashed U.S. yields, while soybeans slumped 24 percent from last year’s all-time high of $17.89 a bushel. Corn Harvest Crop-insurance claims covered 3.57 million acres of corn as of Sept. 1, up from 3.41 million in August and from last year’s total of 262,467 acres, the FSA said. The USDA said Sept. 12 farmers might harvest a record 13.843 billion bushels of the grain, more than previously estimated, as yields recover from last year’s drought. Soybean claims were filed on 1.69 million acres, compared with 1.62 million in August and 159,579 acres last year, according to the report. The U.S. harvest may total 3.149 billion bushels, less than expected in August while still 4.4 percent more than last year. Farmers filed crop-insurance claims on 1.98 million acres of wheat, up from 1.74 million in August, while rice claims at 418,021 acres rose from 408,737 acres a month earlier, the FSA said. Claims for upland cotton increased to 205,410 acres from 197,116 acres, according to the report. To contact the reporters on this story: Whitney McFerron in London at wmcferron1@bloomberg.net ; Jeff Wilson in Chicago at jwilson29@bloomberg.net. To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net |
2024-05-19 | Bloomberg | Nationale Suisse Targets Premiums From Energy, Infrastructure | Nationale Suisse, which insures the construction of the world’s longest rail tunnel, plans to boost premium income by selling more protection to energy companies and infrastructure projects. The insurer aims to increase premiums from its specialty lines unit, which also sells policies covering maritime freight and art collections, to 700 million Swiss francs ($792 million) in 2013 from 490 million francs last year, business head Stefan Zemp said yesterday in an interview in Zurich. “We were founded as a marine company and have over 100 years experience in the engineering business,” he said. “This business will become even more important for the group.” Earnings from engineering policies will boost premiums at the unit to about 40 percent of the company’s total, said Zemp. Nationale Suisse and Allianz SE provide personal injury and property insurance for the 18.7 billion-franc project to drill the 57-kilometer (35-mile) Gotthard tunnel through the Alps. The tunnel, due for completion in 2017, will shorten the four-hour train journey between Zurich and Milan by 25 percent. To contact the reporter on this story: Carolyn Bandel in Zurich at cbandel@bloomberg.net To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net |
2024-04-01 | Bloomberg | Barclays Plans to Expand in Egypt as French Banks Retreat | Barclays Plc (BARC) plans to add branches in Egypt this year as Britain’s second-biggest bank by assets seeks to expand in the North African country after rivals from France sold local units. Barclays Bank Egypt SAE will boost its branch network by 10 percent in 2013 and is preparing to offer Islamic banking services, Omar Baig, consumer banking director at the Cairo- based lender, said in an interview. Barclays may consider acquiring another lender in the Arab country “should the opportunity present itself,” he said. “For us, Egypt is a very important economy,” Baig said on March 28. “Our view about Egypt in the long term still remains that it’s a place where we want to be and we want to be a significant player.” Egypt’s economy has struggled to recover since an uprising more than two years ago toppled Hosni Mubarak and led to a flight of foreign investment. Barclays’ expansion comes after Societe Generale SA (GLE) agreed in December to sell its 77 percent stake in an Egyptian lender to Qatar National Bank SAQ (QNBK) as Europe’s sovereign debt crisis squeezes profit. The same month, Dubai-based Emirates NBD PJSC (EMIRATES) agreed to buy BNP Paribas SA (BNP) ’s Egyptian unit. Weaker Pound The political turmoil this year prompted Moody’s Investors Service to downgrade Egypt’s credit rating last month for the sixth time since the 2011 uprising to Caa1, the fifth-lowest junk rating. The Egyptian pound has weakened 6.5 percent this year as the central bank took steps to curb access to dollars to stem a drop in foreign reserves. Trading of twelve-month non- deliverable forwards shows investors expect further depreciation of 18 percent over the life of the contracts. Egypt’s benchmark EGX 30 Index (EGX30) of equities has dropped 7.4 percent this year, making it the world’s seventh worst performer among 93 gauges tracked by Bloomberg. “We’re in a position today where it’s very very difficult to predict or assess what’s going to happen down the line,” Baig said. “It’s a crisis of confidence. We saw a lot of dollarization, which becomes a vicious cycle and it becomes very difficult to break out of. But we do see opportunities.” Barclays Egypt, which started operations in the mid-1800s when the country was under Ottoman rule, controls about 1.2 percent of the assets of Egypt’s 39 banks, data compiled by Bloomberg show. Egyptian Consumers Qatar National and Emirates NBD decided to expand in Egypt to gain access to the Arab world’s most populous country, home to more than 83 million people. HSBC Holdings Plc (HSBA) , Europe’s biggest bank, said in October it was seeking to boost its consumer lending and wealth management businesses in Egypt. Barclays Egypt makes up about 0.1 percent to the British bank’s asset base of 1.63 trillion pounds ($2.5 trillion) of assets as of June 2012, according to Bloomberg News calculations based on financial statements. The bank isn’t planning to issue debt to fund expansion, Baig said. It also has no plans to sell shares to the public, as the British lender’s units in Kenya and Botswana have done, he said. To contact the reporter on this story: Ahmed A. Namatalla in Cairo at anamatalla@bloomberg.net To contact the editor responsible for this story: Alaa Shahine at asalha@bloomberg.net |
2024-12-06 | Bloomberg | TD Bank, CIBC Top Estimates on Investment Banking | Toronto-Dominion Bank (TD) and Canadian Imperial Bank of Commerce posted profits that beat analysts’ estimates, helped by gains from their investment-banking units. National Bank of Canada matched estimates after reporting a 20 percent earnings gain. Toronto-Dominion, the country’s second-largest lender, said net income for the period ended Oct. 31 was little changed at C$1.6 billion ($1.61 billion), or C$1.66 a share. CIBC, the fifth-biggest bank, said profit rose 13 percent to C$852 million, or C$2.02 a share. National, the No. 6 bank, had net income of C$351 million, or C$1.97 a share. The three banks benefited from higher trading revenue and fees from advising companies on takeovers and arranging stock sales, helping counter rising provisions for bad loans. Royal Bank of Canada and Bank of Montreal (BMO) also beat estimates, fueled by gains in investment banking and trading. “Investment banking and trading were modestly better than expectations and the trends are positive,” Stephen Carlin, head of equities at Aegon Capital Management Inc. in Toronto, which manages C$8.5 billion, said in a phone interview. “There’s a slightly better economic environment. When you look at how things were a year ago, they were pretty darned ugly.” Tops Estimates Toronto-Dominion earned C$1.83 a share on an adjusted basis, topping the C$1.81 a share average estimate of 15 analysts surveyed by Bloomberg. CIBC said it had adjusted earnings of C$2.04 a share, beating the C$1.99 a share average estimate of 16 analysts. National said it earned C$1.93 a share, matching the average estimate of 15 analysts surveyed by Bloomberg. Toronto-Dominion led the stock decline of Canadian banks in trading, falling 1.8 percent to close at C$81.12 in Toronto. National Bank fell 1.4 percent to C$76.66 and CIBC fell 0.5 percent to C$80.14. Toronto-Dominion set aside C$565 million for bad loans, 66 percent more than a year ago, while CIBC had C$328 million in provisions, a 7.2 percent increase. National’s provisions fell 8 percent to C$46 million. “In Canada we’ve reached a point where our consumer debt is looking more precarious than the U.S., and mortgages are getting tighter,” Michael Sprung, president of Sprung & Co. Investment Counsel Inc. in Toronto, said in an interview. “Going forward, there’s some headwinds our banks are going to face.” Epoch Investment Toronto-Dominion also agreed to buy Epoch Investment Partners of New York for $668 million in cash. “It’s going to add to our Canadian capabilities, as well as our U.S. wealth story, and this is a very high-quality franchise,” Chief Financial Officer Colleen Johnston said in a telephone interview. Toronto-Dominion said Canadian consumer banking profit climbed 6.9 percent to C$806 million while U.S. consumer lending rose 7.1 percent to C$316 million. “I think we’re seeing very good numbers in the U.S., with more to come in 2013,” Johnston said. The bank reiterated its goal of earning $1.6 billion in U.S. consumer banking profit by the end of next year. Profit from its investment-banking unit rose 10 percent to C$309 million, driven by a 54 percent increase in underwriting and advisory fees and higher trading income. The Toronto-based bank reiterated its medium-term earnings per share goal of 7 percent to 10 percent growth. Canadian Imperial Canadian Imperial benefited from a 58 percent increase in profit at its investment-banking unit and gains in wealth management , offsetting a drop in earnings from consumer lending. Consumer lending and business banking earnings fell 4.7 percent to C$569 million from a year ago, after winding down its FirstLine Mortgages broker business. The Toronto-based bank reorganized its consumer lending business to shift away from using mortgage brokers in favor of selling home loans and other financial products through branches. CIBC’s “decision to exit the mortgage broker network and its impact on fourth quarter domestic retail loan growth could lead the market to conclude that it’s earnings growth could be one of the slowest of the group next year,” John Aiken , an analyst with Barclays Plc in Toronto, said in a note. Wealth management profit was C$84 million, up from C$70 million in the year-earlier period, while the lender’s investment banking business had profit of C$193 million, up from C$122 million a year ago, on a 26 percent surge in underwriting and advisory fees and a 41 percent increase in trading. National said personal and commercial banking profit rose 7 percent to C$168 million on higher revenue from lending and credit cards. The lender’s Financial Markets business, which includes investment banking, rose 57 percent to C$124 million, on higher underwriting and advisory fees and trading revenues. Wealth management earnings fell 10 percent to C$45 million. The Montreal-based lender increased its quarterly dividend to 83 cents a share. Bank of Nova Scotia , the third-largest lender, reports results tomorrow, wrapping up the quarterly earnings releases of the country’s biggest banks. To contact the reporters on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net ; Sean B. Pasternak in Toronto at spasternak@bloomberg.net ; Katia Dmitrieva in Toronto at edmitrieva1@bloomberg.net To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net ; David Scanlan at dscanlan@bloomberg.net |
2024-09-28 | Bloomberg | FirstRand Investors Approve Momentum's Merger With Metropolitan Holdings | Investors in FirstRand Ltd ., South Africa’s second-biggest financial services company, approved its insurance unit’s merger with Metropolitan Holdings Ltd. More than 99 percent of Johannesburg-based FirstRand’s shareholders approved the transaction at a meeting in the city today, according to votes tallied by Computershare Ltd. FirstRand, which owns South Africa’s largest provider of auto-loans and third-largest retail bank, is spinning off Momentum at a time when similar companies are splitting banking and insurance to reduce complexity. Old Mutual Plc , the biggest insurer in Africa, is in talks to sell its banking unit, Nedbank Group Ltd. , to HSBC Holdings Plc. When the transaction is completed in December, Momentum and Cape Town-based Metropolitan’s merged entity, to be called MMI Holdings Ltd., will be the third-largest listed insurer in South Africa, with an embedded value of about 30 billion rand ($4.28 billion). FirstRand’s stock has advanced 13 percent this year, valuing the company at 117 billion rand. To contact the reporter on this story: Renee Bonorchis in Johannesburg at rbonorchis@bloomberg.net To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net Edward Evans at eevans3@bloomberg.net |
2024-06-20 | Bloomberg | Euro, Asia Stocks Drop on Greek Debt Concerns; Oil, Copper Fall | The euro slid, starting a third week of losses, and Asian stocks fell for a fourth day after European governments failed to agree on a loan payment to avert Greek default. Oil and copper led commodities lower. Europe ’s shared currency weakened 0.6 percent to $1.4225 and retreated for a fourth day against the yen as of 3:02 p.m. in Tokyo. The MSCI Asia Pacific Index slipped 0.6 percent, bound for the lowest close in three months. Futures on the Standard & Poor’s 500 Index decreased 0.7 percent, while those on the Euro Stoxx 50 Index slumped 1.2 percent. Crude declined 1.5 percent in New York , while copper sank 1.1 percent in London. Euro-area finance ministers put off a decision on whether Greece will get the full 12 billion euros ($17.1 billion) promised for July as they pushed for budget cuts by Prime Minister George Papandreou , whose government faces a confidence motion this week. Stocks earlier gained as companies from Mazda Motor Corp. (7261) to Olympus Corp. (7733) forecast improving profits amid a sell-off that has dragged valuations for the MSCI Asia Pacific Index down to the lowest level in almost three months. “While Greece may have invented democracy, they certainly didn’t invent stability so you could see further pressure on the euro,” Nick Maroutsos, a money manager and co-founder at Kapstream Capital, said in a Bloomberg Television interview from Sydney. “They need to start implementing stronger austerity measures but it’s increasingly difficult given the social unrest and the political volatility that they’re facing.” Confidence Motion The euro slid against 11 of its 16 most-actively traded counterparts and declined 0.3 percent to 114.14 yen. Papandreou began a three-day debate yesterday on a confidence vote in his new government as he sought parliamentary approval for a 78 billion-euro ($111 billion) package of budget cuts. Antonis Samaras, leader of New Democracy , the largest opposition party in Greece , repeated his call for elections. Euro-area finance ministers will decide on a new financing strategy for Greece by early July, the group said in a statement distributed to reporters in Luxembourg after talks. The Australian dollar lost 0.8 percent to $1.0533 while New Zealand’s currency slid 0.8 percent to 80.63 U.S. cents. “They’ll come up with a short-term financing deal, which will answer the immediate funding issues,” Stephen Davies, chief executive officer of Javelin Wealth Management Ltd., said in a Bloomberg Television interview in Singapore. “But as far as resolving the really long-term issues, as in how on earth Greece and the Greek people afford the interest payments and principal repayments without cratering the economy, that’s going to be left for a later day.” Dollar, Treasuries The Dollar Index, which tracks the U.S. currency against those of six major trading partners, added 0.5 percent. Yields on 10-year Treasuries climbed two basis points to 2.93 percent, heading toward the lowest level this year. Home sales probably dropped in May to the lowest level this year, while orders placed with factories gained, economists said before reports this week. The S&P 500 climbed 0.3 percent on June 17, leaving the index little changed for the week. MSCI’s Asia Pacific Index is extending seven consecutive weekly declines, the losing streak since 2004. Last week’s drop drove the index’s valuations to 14.2 times reported earnings, the lowest level since March 30. Mazda Motor jumped 2.1 percent after the automaker forecast it will return to profit in the year ending March 31. Olympus increased 4.3 percent after the optical-equipment maker forecast profit may more than double. Caltex Australia Ltd. (CTX) , the nation’s biggest oil refiner, dropped 6.7 percent after it forecast a drop in first-half operating profit because of plant disruptions and higher crude prices. ‘Further Falls’ “Shares are starting to look good value,” said Shane Oliver , head of investment strategy at AMP Capital Investors Ltd, said in an e-mailed note. “But given the list of worries, you can’t rule out further falls. Europe and other issues mean there are still a lot of balls in the air, and still a lot of worries bubbling away in the background.” The Bombay Stock Exchange Sensitive Index sank 1.4 percent after the Business Standard reported India’s government sought to tax capital gains on investments routed through Mauritius. China ’s Shanghai Composite Index fell 1.1 percent, bound for the lowest close in almost nine months, after Credit Suisse Group AG said the country is heading for a “sluggish landing” as economic growth slows and bank risks rise. Bank of China Ltd. and Agricultural Bank of China Ltd. (601288) slipped after the brokerage cut its recommendation on the shares. Twelve-month non-deliverable yuan forwards fell to 6.3824 in Shanghai, compared with 6.3745 yuan at the end of last week, according to data compiled by Bloomberg. The possibility of a large appreciation of the yuan is small, the official Xinhua News Agency reported yesterday, citing an unidentified person. Oil for July delivery slipped 1.5 percent to $91.65 a barrel on the New York Mercantile Exchange , retreating for a second day. Futures fell 2 percent on June 17, capping a 6.3 percent weekly slump that was the steepest since the period ended May 6. Copper for three-month delivery lost 1.1 percent to $8,998 a metric ton on the London Metal Exchange. Nickel, aluminum and lead also declined. To contact the reporter on this story: Shiyin Chen in Singapore at schen37@bloomberg.net To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net |
2024-06-04 | Bloomberg | Clemens Loses Bid to Call U.S. Lawmaker Issa as Witness | Former New York Yankees pitcher Roger Clemens, accused of lying to Congress by denying his use of steroids, lost a bid to call Representative Darrell Issa as a witness at his federal perjury trial in Washington. U.S. District Judge Reggie Walton , ruling from the bench today, said testimony from Issa, a California Republican who made public comments criticizing the Clemens probe in 2008, was “too speculative” to be allowed. Walton said Issa later issued statements backing the perjury prosecution. “It is extremely, highly speculative what he would say,” Walton said. “There’s no definitive indication this witness would provide testimony that would, in fact, exonerate the defendant.” Issa asked Walton to block two subpoenas from Clemens received last month seeking his testimony and documents from the House Committee on Oversight and Government Reform. Issa is now the chairman of the committee, whose leaders in 2008 referred Clemens to prosecutors based on suspected perjury. The jurors weren’t present during today’s hearing in the trial, now in its eighth week. They are scheduled to return tomorrow as testimony by witnesses resumes. Denies Use Clemens has denied drug use since former U.S. Senator George Mitchell released a report on steroids in Major League Baseball on Dec. 13, 2007. Mitchell named Clemens in the report as having used drugs on 16 occasions between 1998 and 2001. The criminal charges stem from statements Clemens made to the oversight committee in February 2008 during a private interview with committee staff and later in a public hearing on ballplayers’ use of performance-enhancing drugs. Under oath, Clemens denied ever using steroids or human growth hormone, according to the indictment. Clemens sought Issa’s testimony to rebut Phil Barnett, a former chief of staff to the House committee who testified that the congressional hearing served a legitimate legislative purpose. Lawyers for Clemens argued that their client has a right under the U.S. Constitution’s Sixth Amendment to challenge Barnett’s testimony. Clemens’s lawyers cited Issa’s statements to the media before and after the Feb. 13, 2008, hearing that Congress never prosecuted or pursued users of drugs and that the committee was seeking publicity by inviting Clemens to testify. Issa, they argued, was an important voice because he was the only lawmaker to attend Clemens’s congressional deposition. ‘Highly Critical’ “We know that now chairman Issa was highly critical and said there’s no legitimate purpose and said it was a perjury trap set for Roger Clemens ,” Joe Roden, a lawyer for Clemens, told Walton. Issa’s statements at the time were “opinions” that “are not relevant to whether the committee had the power to conduct an investigation,” William Pittard, deputy general counsel to the House of Representatives , said during the hearing. Assistant U.S. Attorney Steven Durham argued that Issa was just one of 41 members of the committee. He also read a statement from Issa’s spokesman from the day Clemens was indicted, which said, “If there is evidence that someone has intentionally misled a congressional investigative committee, they should be prosecuted to the fullest extent possible.” ‘No Question’ Walton said “there’s no question Congress had a legitimate investigative purpose” to examine steroid use in baseball, citing Major League Baseball ’s antitrust exemption and evidence of a rise in younger athletes’ using performance-enhancing drugs. “I find it difficult to conclude one congressperson’s statements to the press is competent evidence to undermine the integrity of the committee to hold these hearings,” Walton said. He also said Issa’s testimony could backfire on Clemens. “You’d take that risk and put this man on stand when he said he believed your client lied,” Walton said. “That seems to me to be a death wish.” Also today, Durham said prosecutors have sought permission from the U.S. Justice Department to grant immunity to Eileen McNamee so she can testify for the defense. Durham said he expected to hear back from the department today. Rusty Hardin , a lawyer for Clemens, said Eileen McNamee will discredit the prosecution testimony of her husband, Brian McNamee. The two are involved in a divorce proceeding in New York. Criminal Exposure Michael Gold, a lawyer for Eileen McNamee, said during a May 31 hearing that the possible criminal exposure his client faces includes mail and wire fraud, insurance fraud tied to the reimbursement of prescription drugs , bank fraud and obstruction of justice. Clemens, a seven-time Cy Young Award winner, is charged with one count of obstructing a congressional investigation, three counts of making false statements and two counts of perjury stemming from his testimony to the House panel. He faces as long as 21 months in prison if convicted. The case is U.S. v. Clemens, 1:10-cr-00223, U.S. District Court, District of Columbia (Washington). To contact the reporter on this story: Tom Schoenberg in Washington at tschoenberg@bloomberg.net To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net |
2024-10-07 | Bloomberg | DAX Benchmark Advances; Infineon, Demag Gain, BASF Falls in German Trade | German stocks gained, as a slide in BASF SE was offset by a rise in Infineon Technologies AG after applications for U.S. unemployment benefits unexpectedly fell last week to the lowest level in three months. BASF fell 1.5 percent after it reported a chemical spill in the U.S. Chipmaker Infineon rose 1.5 percent after Morgan Stanley recommended the shares in new coverage. Demag Cranes AG jumped 6.2 percent after the Financial Times Deutschland reported that Finland’s Konecranes Oyj may make an offer for the company. The DAX Index gained 0.1 percent to 6,276.25 at the close in Frankfurt, after swinging between gains and losses at least 12 times. The measure rallied 4.4 percent in the third quarter as investors speculated that the U.S. Federal Reserve and other central banks will provide more stimulus for the ailing global recovery. The broader HDAX Index added less than 0.1 percent today. Jobless claims in the world’s largest economy dropped by 11,000 to 445,000 in the week ended Oct. 2, the fewest since July 10, Labor Department figures showed today in Washington. Economists projected 455,000 new claims last week, according to the median forecast in a Bloomberg News survey. The total number of people receiving unemployment insurance decreased and those getting extended payments jumped. German Economy Industrial production in Germany, Europe’s largest economy, increased at more than three times the pace that economists forecast in August, led by demand for investment goods such as machinery. Production jumped 1.7 percent from July, when it rose 0.1 percent, the Economy Ministry in Berlin said today. Economists had forecast a gain of 0.5 percent, the median of 36 estimates in a Bloomberg News survey showed. From a year earlier, production increased 10.7 percent when adjusted for the number of work days. Infineon climbed 1.5 percent to 5.16 euros, erasing yesterday’s 1.2 percent slide. The chipmaker was rated at “overweight” at Morgan Stanley. Demag, the world’s largest maker of harbor cranes, jumped 6.2 percent to 31.49 euros, its highest price since September 2008. Konecranes may make an offer for Demag, the Financial Times Deutschland reported, without saying where it got the information. Konecranes declined to comment. BASF, ThyssenKrupp BASF , the world’s biggest chemical company, declined 1.5 percent to 47.77 euros, paring two days of gains. The chemical company reported a spill in a process unit at its chemical plant in Port Arthur, Texas, according to a message left on a community hotline. Steelmaker ThyssenKrupp AG advanced 1.8 percent to 25.38 euros, the highest price since April. Societe Generale SA increased its price estimate on the stock to 30 euros from 28 euros. HeidelbergerCement AG, the world’s third-largest cement maker, tumbled 4.7 percent to 35.40 euros, the biggest fall since Aug. 24. “The market is a bit nervous about negative pricing in the U.S.,” Tim Cahill , an analyst at Davy Stockbrokers, said in an interview. “Industry discipline is being tested by very low utilization rates.” Kloeckner & Co. SE , the German metals trader, slipped 1.7 percent to 16.09 euros, falling for a second day. The company was cut to “neutral” from “add” at WestLB AG. Gerresheimer AG shares fell 3.2 percent to 28.58 euros and ElringKlinger AG shares slipped 0.5 percent to 22.28 euros. Both were cut to “hold” at from “buy” at Equinet Bank AG. To contact the reporters on this story: Adam Ewing in Stockholm at aewing5@bloomberg.net. To contact the editor responsible for this story: David Merritt at dmerritt1@bloomberg.net . |
2024-10-19 | Bloomberg | Pimco Says Osborne Must Stick to Budget Plans, Favors Shorter-Dated Gilts | Pacific Investment Management Co., manager of the world’s biggest bond fund, said Chancellor of the Exchequer George Osborne must stick to his budget-reduction plans even with the risk of “economic difficulty.” Pimco favors short-dated gilts, or those maturing within seven years, on bets that the Bank of England will resume debt purchases to bolster “weak” growth caused by the spending cuts, said Michael Amey , executive vice president for U.K. fixed income at Pimco in London. The view is echoed by Bank of America Corp.’s Merrill Lynch Wealth Management, which said it prefers U.K. notes to longer-maturity bonds. The Comprehensive Spending Review, intended to tackle the U.K.’s record deficit, will be presented by Osborne to parliament tomorrow. “We have a double-digit government deficit, we have a stated plan to deal with that problem, and we want to see the government keep to the message,” Amey said in an interview. “The one thing the market would be wary of is a change in plan this early on. There’s clearly concern over the profile of growth going forward. The government should not change the game plan at the first sign of difficulty.” Osborne says measures to eliminate most of the 156 billion- pound ($245 billion) deficit by 2015 are essential to prevent a loss of confidence from investors. The budget deficit was 11.1 percent of gross domestic product in the year through March, almost four times the European Union limit. The Chancellor said in June he expects borrowing to fall to 1.1 percent of GDP in 2015-2016. Recovery Stumbling Reports this month suggest the economic recovery is stumbling after the British economy grew at the fastest pace in nine years in the second quarter. A manufacturing index fell to a 10-month low in September as export orders declined, data from Markit Economics and the Chartered Institute of Purchasing and Supply showed on Oct. 1. U.K. house prices plunged last month by the most since at least 1983, the Halifax division of Lloyds Banking Group Plc said Oct. 7. The U.K. Office for Budget Responsibility will publish new forecasts for the economy based on the budget cuts on Nov. 29. Any adjustments to the gilt issuance plan for the fiscal year, which ends in March, will also be announced on that day, according to the Debt Management Office. The Treasury plans to sell 165 billion pounds of gilts this fiscal year. ‘Further QE’ “There is a high probability that the Bank of England will engage in a further round of quantitative easing, which will support the short end of the market,” said Amey. “We live in a world of high uncertainty. Undoubtedly there is a risk that growth turns out weaker than expected. Yield protection is less clear cut in the longer part of the market.” The spending review will be unveiled on the same day that the Bank of England publishes the minutes of its October meeting. Policy maker Adam Posen has said that officials should consider increasing the bond-purchase plan from the current 200 billion pounds ($314 billion). “I think the government will try to be as balanced as possible,” said Johannes Jooste , a portfolio strategist at Merrill Lynch Wealth Management in London. “I wouldn’t want to rule out completely a risk of a double dip, but my view is that they probably could avoid it.” There’s better value in corporate bonds and shorter-dated gilts than longer-maturity debt, Jooste said. The Bank of England is “probably more comfortable keeping a loose monetary policy a while longer than they might have otherwise.” ‘Resilient’ Jobs Market The “resilient” jobs market will reduce the impact of the spending cuts, said David Owen , chief European financial economist at Jefferies International Ltd. in London. Employment increased in the quarter through August by 178,000, taking the total of people in work to 29.16 million, data on Oct. 13 showed. That was the highest since the first quarter of 2009. “As the months have gone by, we have become more optimistic that significant public spending cuts and tax rises won’t completely derail the U.K.’s recovery,” Owen said. “It’s so much easier to push through aggressive fiscal tightening when an economy is growing, than in recession, as Ireland is now finding to its cost.” To contact the reporter on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net |
2024-10-08 | Bloomberg | FDIC May Seek More Than $1 Billion From Failed-Bank Executives | The Federal Deposit Insurance Corp. has authorized lawsuits against more than 50 officers and directors of failed banks as the agency aims to recoup more than $1 billion in losses stemming from the credit crisis. The lawsuits were authorized during closed sessions of the FDIC board and haven’t been made public. The agency, which has shuttered 294 lenders since the start of 2008, has held off court action while conducting settlement talks with executives whose actions may have led to bank collapses, Richard Osterman, the FDIC’s acting general counsel, said in an interview. “We’re ready to go,” Osterman said. “We could walk into court tomorrow and file the lawsuits.” The FDIC, which reviews losses for every bank failure, has brought only one case against officers or directors tied to recent collapses -- a suit filed in July seeking $300 million in damages from four executives of IndyMac Bancorp Inc. When a bank fails, the agency’s investigators take about 18 months to complete their autopsies, meaning most of the probes stemming from the financial crisis are ongoing, Osterman said. If FDIC investigators determine litigation is possible early in their review process, they send letters to officers and directors alerting them that a suit may be coming to recoup a portion of the losses to the agency’s insurance fund. BankUnited One such letter was attached to a Nov. 24 motion filed by the FDIC in the bankruptcy case of Florida’s BankUnited Corp. The Nov. 5 letter, addressed to 15 bank directors and officers, said that BankUnited “blindly made loans to borrowers who, for the most part, were un-creditworthy, creating an unduly high risk of inevitable failure when the housing market began to decline.” The executives “breached their fiduciary duties,” the letter said. As federal receiver for failed banks, the FDIC uses its deposit insurance fund to backstop the cost of the collapses, selling the bank assets to recoup any lost money. The agency has three years from the date of the failure to file suits seeking compensation for a civil wrong. The FDIC “brings suits only where they are believed to be sound on the merits and likely to be cost-effective,” according to an agency policy statement that dates from the savings-and- loan crisis of the 1980s. That requires considerations of whether an individual, if sued, has the means to pay or an insurance policy to cover all or part of the claim. “It doesn’t make sense to file a lawsuit if at the end of the day you have a low chance of recovery,” Osterman said. $1 Billion The recently authorized lawsuits, if filed by the agency and not settled, would claim damages of more than $1 billion, according to FDIC spokesman David Barr. Osterman said the goal is to reach as many settlements as possible. “It’s in both our interest and theirs to try and settle this matter before it gets into the court and we get into expensive litigation,” he said. If the savings-and-loan crisis is any guide, more lawsuits are coming. During that period, the FDIC sued executives from more than 24 percent of the 1,813 lenders that failed. “The process went on 20 years ago and is happening again now,” Thomas Vartanian , a partner at law firm Dechert LLP in Washington, said in an interview. “This is the way it’s going to go over the next few years as they catch up with doing these investigations and doing claims.” FDIC Chairman Sheila Bair has said 2010 will be the peak year for failures, and the agency’s list of so-called problem lenders suggests banks will keep collapsing at an accelerated rate in coming months. The confidential list had 829 banks with $403 billion in assets at the end of the second quarter. Compensation Structure In the IndyMac case, executives are accused of granting loans that were unlikely to be repaid while seeking to benefit from the bank’s compensation structure. The former employees have denied any wrongdoing. Lawrence Kaplan , an attorney whose firm is representing two of the IndyMac defendants, said the paucity of cases filed to date shows the difficulty of assigning blame for a crisis that took down so many financial companies. “The current crisis was caused by economic conditions that few, if any experts, including leading federal officials, saw coming,” said Kaplan, a lawyer at Paul Hastings Janofsky & Walker LLP in Washington. “As a result, claims that directors and officers of many failed banks engaged in negligence lack credibility as such claims attempt to hold those directors and officers to an impossible standard of care,” Kaplan said. To contact the reporter on this story: Phil Mattingly in Washington at pmattingly@bloomberg.net. To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net |
2024-01-31 | Bloomberg | Repeat Breast Cancer Surgery Varies Widely for Little Reason, Study Finds | The number of repeat surgeries in women who had a breast tumor removed varies dramatically based on their individual surgeons and medical centers, without any clear reason for the discrepancies, a study found. Almost one in four women who get breast-conserving “lumpectomy” surgery undergo another operation to ensure no malignant cells remain, according to a report in the Journal of the American Medical Association. Nearly half of those women had no conclusive evidence of lingering cancer, the data showed. “There continues to be considerable variation in how we deliver health care based on individual opinion rather than strong evidence,” said lead researcher Laurence McCahill, director of surgical oncology at the Lacks Cancer Center in Grand Rapids , Michigan , in a telephone interview. “In an ideal world, there would be a greater degree of logic or evidence as to why someone would undergo a second operation.” The investigators tracked 2,206 women with invasive breast cancer who elected to undergo a lumpectomy, a surgical removal of the tumor that leaves the healthy breast intact and has been shown in studies to be as effective as a full mastectomy, with similar survival rates. The need for additional surgery after a lumpectomy can extract a financial and psychological cost, the researchers said. Of those women who got a repeat operation, one-third had a mastectomy, which entails complete removal of the breast. Fine Line Surgeons walk a fine line between trying to cut out all of the cancer and leaving enough of the breast for cosmetic appearances. While some didn’t do any repeat surgeries on women whose tests were inconclusive, others brought back 70 percent of patients, the research found. The inconsistency is a challenge, said Shawna Willey, director of the Betty Lou Ourisman Breast Health Center at Georgetown University Hospital in Washington , who wasn’t involved in the study. Willey said she tells patients that as many as 40 percent of women may need a second surgery. One problem for doctors is determining if the surgeon removed all the cancer, Willey said in a telephone interview. Currently, physicians put six different colors of ink around the extracted tumor, then study it under a microscope to see how close the malignant cells are to the edge. While some are satisfied if there are no signs of cancer on the rim, called a clear or negative margin, others want a bigger zone of safety, she said. ‘Clear Margin’ “What’s the definition of a clear margin? We have whole conferences discussing that,” she said. “It would be nice if all practitioners in the breast cancer field could arrive at a consensus of what a negative margin is. That’s one reason we see so much variability among surgeons.” Fourteen percent of women with cancer at the edge of the extracted tissue didn’t undergo a repeat operation, known as a re-excision , the researchers said. While previous work found positive margins increase the risk that the cancer will return, no studies have shown how large a cancer-free rim is needed to reduce the risk. Removing additional tissue in women with no remaining signs of cancer hasn’t been shown to influence recurrence rates, they said. The findings show why tissue margins shouldn’t be used to evaluate the quality of surgical care for breast cancer, said Monica Morrow, from Memorial Sloan-Kettering Cancer Center ’s department of surgery in New York and Steven J. Katz, from the University of Michigan’s department of health management and policy in Ann Arbor. Many Causes The research didn’t take into account the reasons for returning to the operating room, Morrow and Katz wrote in an editorial. Some physicians may have low rates because they offer breast-conserving surgery only to patients with tiny tumors that are easiest to remove, leaving others to get an unnecessary mastectomy. It can also be avoided by removing large amounts of normal breast tissue, with a poor cosmetic result, they said. “Uncertainty about the link between process and patient health outcomes underscores the challenge of determining ‘which rate is right,’” they wrote. Providing retreatment rates for individual doctors “may result in greater use of mastectomy as surgeons restrict breast-conserving surgery to patients for whom negative margins are easily achieved.” The researchers used electronic medical records for patients treated from 2003 to 2008 at the University of Vermont , Kaiser Permanente in Colorado , Group Health in western Washington and the Marshfield Clinic in Wisconsin to conduct the study. It was funded by the U.S. National Institutes of Health. To contact the reporter on this story: Michelle Fay Cortez in Minneapolis at mcortez@bloomberg.net To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net |
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