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2024-04-07 | Bloomberg | HTC Market Value Passes Nokia as Smartphones ‘Change Mindsets’ | HTC Corp. (2498) , Asia ’s second-largest maker of smartphones, passed Nokia Oyj (NOK1V) ’s market value as consumers switch to more powerful, feature-rich phones at the expense of the Finnish maker’s simpler models. The 5.3 percent gain of HTC shares in Taipei trading yesterday took the Taoyuan, Taiwan-based company’s market value to $33.8 billion, exceeding the $33.6 billion value of its competitor. Nokia climbed 1.1 percent to 6.26 euros. HTC shares closed unchanged today. HTC stock tripled in the past year as smartphone shipments grew at more than twice the pace of the wider market for mobile handsets. Nokia shares slumped 19 percent this year as competition for basic phones intensified and the company’s Symbian operating system for high-end models lost ground to Apple Inc. (AAPL) ’s iOS and Google Inc. (GOOG) ’s Android. “Smartphones have changed the mindset of consumers,” said Jeff Pu, who rates HTC “buy” at Fubon Financial Holdings in Taipei. “Previously people went into a store and asked for Nokia or LG. Now they ask for Apple and HTC.” Smartphone Growth Global shipments of smartphones climbed 72 percent last year, more than double the 32 percent growth in the wider mobile devices market, researcher Gartner Inc. said in a Feb. 9 statement. Smartphones accounted for 19 percent of shipments for the year, it said. HTC’s 33 percent surge in market value this year means it now lags behind only Apple, maker of the iPhone and iOS operating system, and Samsung Electronics Co., which uses both Android and Windows in its handsets, among smartphone manufacturers. Nokia’s market share dropped to 28.9 percent last year from 36.4 percent in 2009 because of stiffer competition in low-end phones and the failure to match rivals’ offerings of high-end phones, Gartner said. Nokia maintained the overall lead, selling 461 million units in 2010. HTC sold 24.7 million devices for the year, Gartner said. Smartphones, which command a higher price and wider margins than normal phones, accounted for 23 percent of Nokia’s shipments in the fourth quarter, according to estimates from Credit Insights Inc. Debt Rating Standard & Poor’s on March 30 cut its debt rating on Nokia for the first time. “High competitive pressure” will push the operating margin on Nokia phones lower in the next two years as it makes “further significant market share losses,” S&P said at the time. HTC’s operating margin, which measures the percentage of sales less the cost of manufacturing and sales, was 16 percent in the quarter ended Dec. 31. Nokia’s was 7 percent. Of 36 analyst recommendations compiled by Bloomberg, 29 say investors should buy HTC shares while none say sell. Nokia has 23 “sell” ratings and 19 “buy” recommendations. Nokia in February announced it would adopt Microsoft’s Windows platform as its primary operating system for phones, helping it cut its $4 billion budget for research and development in its devices division. As Nokia moves into Windows models, HTC’s growth will be driven by its Android handsets, Fubon’s Pu said. Global smartphone shipments will climb 50 percent this year and Android will become the leading operating system for the devices, ahead of Research in Motion Ltd. (RIM) ’s BlackBerry and Apple’s iOs, IDC said in a March 29 statement. At NT$1,200 per share, HTC’s stock is the most expensive in the Taiwan market. Pu today raised his price estimate on the stock for the tenth time in the past year to NT$1,500, citing continued sales and shipment growth. “Most clients agree with our view that the smartphone growth story is intact for 2011,” Richard Ko, a Taipei-based analyst at KGI Securities Co. wrote in a report yesterday, citing conversations with the brokerage’s customers in Hong Kong and Singapore. “Investors we spoke with generally agree that HTC’s 2011 shipments will outperform the industry by a significant margin.” To contact the reporter on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net. To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net . |
2024-08-03 | Bloomberg | Yields Drop to Nine-Month Low on Central Bank Stimulus Bet: Japan Credit | Five-year Japanese bond yields are trading at an almost nine-month low as the yen approaches a post World War II record high, fueling speculation the Bank of Japan will expand stimulus this week to support the economy. Yields on Japan’s five-year government notes, which are more sensitive to changes in monetary policy than longer-term bonds, fell to 0.34 percent, the lowest since Nov. 12. U.S. five-year yields dropped to 1.18 percent, the least since November. The yen climbed to 76.30 against the dollar on Aug. 1, its strongest since a postwar record of 76.25 on March 17. The BOJ may move to ensure that the appreciating yen doesn’t damp exports and derail the economy’s recovery from the March earthquake and tsunami. Five of 14 economists surveyed by Bloomberg News said the central bank will increase monetary stimulus at its Aug. 4-5 meeting, while two said there’s a possibility of it and seven said it will probably stand pat. “The BOJ will likely announce an easing measure as soon as possible this time to respond to the strong yen and weak dollar caused by the U.S.’s slowing economy and worsening financial conditions,” said Masaaki Kanno, chief Japan economist at JPMorgan Chase & Co. in Tokyo and a former BOJ official. “The Japanese economy has become less resilient to a stronger yen as competition from Asian companies has become more severe.” The central bank may provide further monetary stimulus this week, the Nikkei newspaper reported yesterday without citing a source for the information. Japanese officials are also preparing to sell the yen, the report said. Strength of Yen Japanese Finance Minister Yoshihiko Noda said yesterday the yen was “overvalued” and that he’s watching the markets, while declining to comment on intervention. Toyota Motor Corp. “can’t keep up with the speed of the yen’s rise,” Takahiko Ijichi, senior managing officer at the world’s largest carmaker, said yesterday. The yen’s gains cut Toyota’s first-quarter operating profit by 50 billion yen ($647 million), the company said. Every 1 yen gain against the dollar cuts Toyota’s operating profit by 34 billion yen, according to the company’s full-year outlook. Amid speculation of a BOJ move this week, the benchmark 10- year government bond yield fell to 1.01 percent, the lowest since November. One-year discount bills have yielded 0.11 percent since July 14, barely above the BOJ’s overnight call loan rate target between zero percent and 0.1 percent, in another sign of the market’s expectation of easing. Relative Returns Government bonds returned 1.4 percent in the past three months in Japan, compared with 3.9 percent in the U.S. and 5.3 percent in Germany , according to indexes compiled by Bank of America Merrill Lynch. Of the five economists predicting a BOJ move this week, two expect it to raise the asset-purchase program by 5 trillion yen ($65 billion) from the current 10 trillion yen this week, one projects a 10 trillion yen increase, and two didn’t predict the amount, according to a Bloomberg survey. The BOJ buys assets such as government debt, corporate bonds and real-estate investment trusts to inject money into the economy. The central bank may increase the amount of government bonds it buys as part of the program, said Kazuhiko Sano , chief strategist at Tokai Tokyo Securities Co., one of the 25 primary dealers obliged to bid at government debt sales. “If the BOJ lengthens the maturity of government debt it buys in the fund, that may help push down yields on medium to long-term government bonds,” said Sano, who expects the BOJ to expand the fund this week, without predicting the amount. Yield Forecast The 10-year bond yield may fall to 0.9 percent as the yen rises to a record, Sano said. The BOJ buys government debt with a remaining maturity of between one and two years, in addition to discount bills, which mature in one year or less. It plans to buy up to about 5 trillion yen of government bonds and bills. BOJ Governor Masaaki Shirakawa said last week that the yen’s strengthening could hurt Japan’s economy. Board member Hidetoshi Kamezaki said the bank would need to act “proactively” should the yen’s gains pose a threat to growth. Japan’s industrial production rose a less-than-expected 3.9 percent in June from May, a government report last week showed. The world’s third-largest economy will probably expand in the third and fourth quarters after shrinking for three straight quarters, according to a survey of 41 economists by the government-affiliated Economic Planning Association. Before three out of the last five BOJ monetary easing decisions since December 2009, the yen strengthened more than 2 percent in the preceding month, according to data compiled by Bloomberg. The yen has gained more than 3 percent since the BOJ’s last meeting on July 11-12. Many Factors The BOJ may expand its asset fund by 5 trillion yen if there’s a sharp increase in the yen, stocks fall, economic conditions worsen or deflation concerns mount, said Mari Iwashita, chief market economist at SMBC Nikko Securities Inc. The Nikkei 225 (NKY) Stock Average has fallen 5.9 percent so far this year. It’s recovered about 17 percent from its low on March 15 right after the magnitude-9 quake in northeastern Japan. Central bankers may hold off from boosting stimulus this week as it takes a “wait-and-see stance,” said Hideo Kumano , chief economist at Dai-Ichi Life Research Institute in Tokyo. “The BOJ may not have changed its economic view that the economy is picking up with an easing of supply-chain constraints,” he said. With weak economic signs coming out of the U.S. including the Institute for Supply Management ’s factory index slumping to a two-year low this week, the yen will likely stay stronger than 80 to the dollar, according to Shinichi Horikawa, who helps manage the equivalent of about $12 billion at Mitsui Sumitomo Kirameki Life Insurance Co. in Tokyo. Should the yen strengthen sharply beyond its postwar high, “the BOJ will likely ease further to respond to it,” he said. To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net |
2024-06-14 | Bloomberg | Gupta ’Abused’ Role, Prosecutor Says in Closing Argument | Rajat Gupta “abused” his role as a director at Goldman Sachs Group Inc. (GS) and Procter & Gamble Co. by leaking secret tips to an associate, a prosecutor told the jury during closing arguments in Gupta’s insider-trading trial. Assistant U.S. Attorney Richard Tarlowe told jurors in Manhattan federal court that there is “overwhelming evidence” Gupta passed secret information to Galleon Group LLC co-founder Raj Rajaratnam , the hedge-fund manager now serving an 11-year prison sentence for insider trading. “Gupta abused his position as a corporate insider by providing secret company information to his longtime business partner and friend, Raj Rajaratnam,” Tarlowe said. These leaks allowed “Rajaratnam and his criminal associates at Galleon” to make millions of dollars through illicit trades, he said. In the defense summation, attorney Gary Naftalis decried the lack of “real, hard, direct evidence” in the U.S. case. “The prosecution failed here to prove that Mr. Gupta acted knowingly and willfully and with any specific intent to defraud,” he said in a conversational tone that contrasted with Tarlowe’s fiery closing. Gupta, 63, who ran McKinsey & Co. from 1994 to 2003, is on trial for allegedly leaking secret tips to Rajaratnam, 54, about New York-based Goldman Sachs and Cincinnati-based Procter & Gamble Co. (PG) He left the Goldman Sachs board in 2010 and the P&G board last year. Berkshire Hathaway U.S. District Judge Jed Rakoff, who’s presiding over the case, told jurors they will begin deliberations this morning, after he gives them instructions on the law. Gupta is accused of conspiracy and five counts of securities fraud. The most serious charge against him carries a maximum prison sentence of 20 years. Alleged tips by Gupta included information on a $5 billion investment by Warren Buffett ’s Berkshire Hathaway Inc. (BRK/A) in Goldman Sachs on Sept. 23, 2008, and on Goldman Sachs losses in the fourth quarter of 2008. Prosecutors also said Gupta told Rajaratnam that P&G planned to sell its Folgers Coffee unit to J.M. Smucker Co. (SJM) Tarlowe began his presentation yesterday by focusing on trades related to Omaha, Nebraska-based Berkshire. He said Galleon bought more than 200,000 Goldman Sachs shares beginning around 3:54 p.m. on Sept. 23, 2008, after Rajaratnam received an “urgent” call from a man Tarlowe alleged was Gupta. There was a single call to Rajaratnam’s direct line in the trading day’s final 10 minutes, Tarlowe said. ‘From Gupta’ “And that call was from Gupta,” he said. “That evidence is devastating.” The prosecutor replayed for jurors a Sept. 24, 2008, wiretapped phone conversation in which Rajaratnam tells an associate that he was told at 3:58 p.m. that “something good might happen to Goldman.” Tarlowe assailed defense witnesses “who knew nothing about Gupta’s relationship” with Rajaratnam or about Galleon’s stock trades on Sept. 23, 2008. “Those witnesses shed absolutely no light,” he said. Tarlowe highlighted for jurors how Rajaratnam’s trading coincided with board meetings which Gupta attended when the government says vital company secrets were disclosed. He noted for the jury how telephone records show that repeatedly, after Gupta hung up on those board calls, phones that evidence shows he used were in contact with Rajaratnam’s office numbers. He called “devastating” the testimony from an ex-Galleon trader, Michael Cardillo, that Rajaratnam’s brother said Rajaratnam had a “guy” on P&G’s board. ‘Extraordinary Profits’ Tarlowe said Gupta leaked the information because he wanted Rajaratnam’s help with a new fund he was starting, as well as a slice of the “extraordinary profits” at Galleon. Gupta was to become chairman of Galleon’s international fund, according to the prosecutor. Rajaratnam, for instance, “bumped up” by $4 million Gupta’s stake in a Galleon investment after Gupta told him about a Goldman Sachs board discussion held in Russia , he said. “Rajaratnam offered Gupta many benefits,” Tarlowe said. “What was good for Rajaratnam and Galleon was good for Gupta.” Anticipating defense arguments, Tarlowe told jurors that a case built on circumstantial evidence, like the one against Gupta, is as strong as one based on eyewitness testimony. He also attacked a defense claim that Gupta wouldn’t tip Rajaratnam after he lost Gupta’s $10 million investment in a Galleon fund. Gupta passed along tips because he wanted his money back, Tarlowe said. ‘Bamboozle’ Naftalis told jurors that there’s no claim that Gupta himself traded illegally, no evidence of secret payoffs from Rajaratnam to Gupta and no eyewitness to any illegal tip. “Where’s the beef in this case?” the lawyer asked, saying the U.S. tried to “bamboozle” jurors with “a parade of meaningless witnesses.” Before his October 16, 2009, arrest by the U.S., Rajaratnam was viewed by the business community as honest and successful, Naftalis said, adding that Gupta was one of those who had been deceived. “We don’t punish people for making mistakes, for being negligent, for trusting people, for not being smart enough to see through somebody that it took eight months of wiretaps for the government to find,” he said. Naftalis belittled phone records which prosecutors said were proof of Gupta’s illicit tipping. “There was no evidence of what was said in any conversation,” he said. He pointed out that prosecutors had no recordings of Gupta’s tips even after the Federal Bureau of Investigation tapped Rajaratnam’s mobile phone for eight months. ‘None, Zero’ “There is not a single wiretap recording out of those thousands of wiretapped calls where Rajat Gupta gave any inside information,” he said. “None, zero.” Naftalis told jurors that the wiretapped recordings they heard contain the unreliable “boasting” of Rajaratnam along with “second- or third-hand hearsay” that wasn’t subject to cross-examination. “That’s the vice” of the U.S. case, he said. He reminded the jury of the testimony from Ajit Jain, Berkshire (BRK/B) Hathaway’s reinsurance chief and a close friend of Gupta’s, who testified that Gupta told him during a Jan. 12, 2009, luncheon that Rajaratnam had “gypped, swindled or cheated” him. The defense lawyer also cited Galleon paperwork that the defense contends shows Rajaratnam hid from Gupta his withdrawal of $25 million from a fund in which they both invested. ‘Through the Heart’ He also said Gupta wanted to step down from the Goldman Sachs board on Sept. 12, 2008, before several alleged tips were passed. Goldman Sachs Chief Executive Officer Lloyd Blankfein testified that he talked Gupta out of resigning at the time. “This resignation drives a stake through the heart of the government’s case,” Naftalis said. “He resigned. They begged him to come back. The only reason that he stayed is Goldman Sachs panicked, because Rajat Gupta is a prominent and respectable business leader. His resignation might cause panic in investors in a volatile market.” Naftalis assailed the credibility of Blankfein, who spent three days on the stand and who the defense lawyer described as “a man with no memory of anything” and “less than candid.” 3,000 People The lawyer disputed prosecutors’ claim that Gupta told Rajaratnam on Oct. 23, 2008, about Goldman Sachs’s losses after Blankfein gave the information to the board earlier in the day during what a Goldman Sachs executive called a “posting call.” While Blankfein testified he had briefed board members about losses during that meeting, Naftalis argued that on the same day, Goldman Sachs had also announced it was laying off 3,250 people, which Blankfein testified he couldn’t recall. “I suggest to you that no one could be that cold and callous and not remember that he fired 3,000 people, as if it happens every day,” Naftalis said. “If you can’t remember firing 3,000 people without any kind of notice, how can you pretend to remember anything about some posting call?” Michael DuVally , a spokesman for Goldman Sachs, disputed the defense lawyer’s characterization of Blankfein’s testimony. “Mr. Naftalis distorts what Mr. Blankfein said last week,” DuVally said. “Mr. Blankfein said he did not remember a particular news article about possible layoffs in 2008. He was never asked whether he remembered the layoffs, which of course, he does.” ‘Unluckiest Man’ In the government’s rebuttal, another prosecutor, Assistant U.S. Attorney Reed Brodsky , told jurors Blankfein was truthful when he testified he couldn’t recall specific meetings. Brodsky said that for anyone to believe arguments posed by the defense, “they’d have to believe that Gupta was the unluckiest man in the whole world.” “He’s not a victim of unlucky coincidences,” Brodsky said. “No one is above the law, neither his positions, power, money or good deeds give him the right to violate the law or give him a free pass for having violated it.” The case is U.S. v. Gupta, 11-cr-00907, U.S. District Court, Southern District of New York ( Manhattan ). To contact the reporters on this story: Patricia Hurtado in New York federal court at pathurtado@bloomberg.net ; David Glovin in New York federal court at dglovin@bloomberg.net To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net |
2024-01-22 | Bloomberg | Ex-Senator Nelson to Run Insurer Watchdog Group | The National Association of Insurance Commissioners named ex-Democratic Senator Ben Nelson to be its chief executive officer as the regulators’ group tackles U.S. President Barack Obama ’s health-care overhaul. Nelson’s duties will include working with U.S. and international agencies as overseers increase their scrutiny on financial firms, the NAIC said today in a statement. A former industry executive, Nebraska governor and state regulator, he was one of the more conservative Democrats in the Senate. “We needed the gravitas, the phone calls returned, to go to Capitol Hill, to tell our story, defend our turf, and beyond, protect and promote our system around the world,” Jim Donelon, NAIC president and Louisiana insurance commissioner, said in an interview today at Bloomberg headquarters in New York. “I think all the way up to and including President Obama would return Senator Nelson’s phone calls.” Regulators in the U.S. states are contending with the Federal Insurance Office created by the Dodd-Frank law, expanded U.S. involvement in health insurance and European efforts to regulate capital known as Solvency II. State regulation has served U.S. consumers and insurers well and deserves to be defended, Nelson said in an interview. “To impose their standard solvency regulation I think is a mistake, and I hope to work to try to convince them of that,” Nelson said in an interview in New York. “It isn’t broken, so we’re not going to let them fix it.” State Regulation State commissioners are shaping their health-insurance markets to comply with the 2010 Patient Protection and Affordable Care Act. NAIC committees have considered standards for the online insurance exchanges mandated by the law. Nelson provided the 60th vote needed to help push the health legislation through the Senate. He secured a provision exempting Nebraska from paying for expanded Medicaid coverage, derided by Republicans as the “Cornhusker Kickback.” Nelson, 71, later asked the provision be dropped and that all states get equal treatment. Warren Buffett , the billionaire CEO of Omaha, Nebraska- based Berkshire Hathaway Inc. (BRK/A) , praised Nelson for voting for the health-care bill in 2010. “Senator Nelson knew that probably a majority of people in the state were not for it, but he went with what he thought was right,” Buffett said, according to an interview in the Lincoln Journal Star. “It is time for us to try to make an improvement.” Insurance Exchanges Eighteen states are building exchanges that will let uninsured residents buy medical plans starting in October. People who don’t get insurance through their employers would use the exchanges to select coverage from private insurers, often with taxpayer-subsidized premiums. Some states are also revamping Medicaid programs for the poor by broadening eligibility rules. Congressional budget projections show that more than half of the 30 million uninsured targeted by the law will eventually buy subsidized plans through the state exchanges and at least 11 million others will become eligible for state-run Medicaid coverage. Enrollment in the exchanges must begin by Oct. 1 for plans that will take effect next year. The U.S. government is giving states that run their own exchanges a share of about $2 billion to help get them started. The remainder of the 50 states will either have to let the U.S. run the exchanges or choose to provide services such as consumer assistance in a partnership with the federal government. Beal, Vaughan Nelson replaces NAIC’s acting CEO Andrew Beal, who took over the post at the end of November, when Therese Vaughan departed to revise a textbook. Beal will return to his role as the group’s chief operating officer, the NAIC said in the statement. Vaughan was CEO of the NAIC since 2009, and previously was the group’s president and the Iowa insurance commissioner. Nelson was replaced by Deb Fischer, a Tea Party-backed Republican, in last year’s Senate election. He had opted against running for a third term, saying in December 2011 it was “time to move on.” He was Nebraska ’s governor from 1990 to 1998. Nelson previously was the state’s insurance regulator and is former CEO of the Central National Insurance Group. As a politician, Nelson won endorsements from the National Rifle Association, the U.S. Chamber of Commerce and the National Federation of Independent Businesses. To contact the reporters on this story: Zachary Tracer in New York at ztracer1@bloomberg.net ; Alex Nussbaum in New York at anussbaum1@bloomberg.net To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-10-21 | Bloomberg | The President’s Anger Doesn’t Fix Obamacare | In remarks this morning in the White House Rose Garden , President Barack Obama said HealthCare.gov , the website that is supposed to be the conduit through which people buy insurance under the new health-care law, “hasn’t worked as smoothly as it was supposed to.” That’s a little like saying a plane that crashed into a mountain, caught fire and exploded didn’t land as smoothly as it was supposed to. Three weeks into the most flagrant debacle of his presidency, Obama didn’t say what went wrong , why or who was to blame. He offered no details about what the administration is doing to fix it (“We’ve got people working overtime”), or how long it will take. And he expressed no contrition, saying only that “Nobody’s madder than me.” Amid his professions of irritation, vague promises and unsubstantiated optimism, the president did express one important truth: The HealthCare.gov implosion doesn’t say much about the soundness of Obamacare writ large or the philosophical complaints that continue to plague it. The Affordable Care Act is more than a website; it’s a commitment to provide insurance for people who can’t get it. What the past three weeks have changed, abruptly, is the public’s confidence in the administration. HealthCare.gov is the face of Obama’s signature domestic achievement, rolling out according to a schedule that’s been fixed in law for three and a half years. When the administration blows this kind of big project it only corroborates Republicans’ feverish arguments that government cannot do anything efficiently. To regain public trust, here’s what the administration has to do. First, obviously, it has to fix the website. The administration still hasn’t decided whether to strip responsibility for managing the project from the Centers for Medicare and Medicaid Services and give it to one or more contractors with the capacity to run such a project, according to a report in the New York Times. That decision is late and should be made now. In the meantime, insurers, which depend on HealthCare.gov for the information they need to process applications, say the government has told them neither how nor when it will fix the site. This raises some questions, to say the least, about the president’s sunny promises of a quick resolution. Second, the administration should make clear whether, and under what circumstances, it might delay the tax penalty for people who are unable to buy insurance through the exchanges. That would impose some meaningful deadlines on the race to fix HealthCare.gov. Third, the president should demonstrate that failure has consequences. Obama is fond of comparing the rollout of HealthCare.gov to that of an Apple Inc. (AAPL) product. Surely, if less than 1 percent of the people who tried to use the company’s latest operating system could do so, the executives responsible would not keep their jobs. Yes, Obamacare is multifaceted. But this most visible part of the law has to work for the rest of it to succeed. Until the website problems are resolved, nobody cares how mad the president gets. All that matters is whether he can do the job. To contact the Bloomberg View editorial board: view@bloomberg.net . |
2024-09-02 | Bloomberg | Helvetia First-Half Profit Increases 15% on Acquisition | Helvetia Holding AG (HELN) , Switzerland’s No. 4 insurer, said first-half profit increased 15 percent, boosted by life-insurance sales and an acquisition in France. Net income rose to 179.5 million Swiss francs ($193 million) in the six months through June from 156.7 million francs a year earlier, the St. Gallen-based company said in an e-mailed statement today. That beat the 164.4 million francs average estimate of seven analysts surveyed by Bloomberg. Helvetia, which generates more than half of its revenue in Switzerland, last year acquired the transport insurance portfolio of Groupama SA’s Gan Eurocourtage, making it France’s second-biggest insurer for transport. Sales increased 5.5 percent to 4.78 billion francs in the first half, driven by life insurance units Switzerland , Germany and Austria. “Helvetia achieved profitable growth and raised its profit and premium volume further,” Chief Executive Officer Stefan Loacker said in the statement. “We are confident that we are ready for the future and will continue to strengthen our competitive position in our markets.” Helvetia said its ratio under the Swiss Solvency Test, which was introduced in January 2011, was between 150 percent and 200 percent, exceeding the limit of 100 percent. The rules require insurers to provide a mark-to-market valuation of assets and liabilities taking into account their investments. 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 |
2024-09-14 | Bloomberg | Aging Baby Boomers Face Losing Care as Filipinos Go Home | Stephanie Chan spent four years at Manila Doctors College qualifying to work as a nurse overseas. She never left the country. Instead, she switched careers and now earns almost as much monitoring people’s finances. Chan is one of thousands of Filipinos each year who study to become health workers to boost their chance of a higher income overseas. She’s also now part of a growing trend of workers who are opting not to go. Chan now works at a call center in Manila, where she reminds Macquarie Bank Ltd. credit- card holders to make payments. “I’m thankful this career opportunity opened up for me,” said Chan, 23, who works the night shift at a business-process outsourcing company and lives at home with her parents. “If I can maintain a relatively high standard of living as a customer- service representative, why go overseas to work as a nurse?” Developed countries that rely on Philippine nurses and Indian doctors to hold down costs in the $6.5 trillion global health-care industry face greater competition for talent just as baby boomers in the U.S., Europe and Japan reach the prime age for medical care. Economic growth in emerging economies, despite some signs of recent slowing, is stoking investment in hospitals and creating job opportunities in other industries that mean a growing number of health workers choose to stay at home. Worker Imbalance The growth and investments should help reduce an imbalance that has caused a severe shortage of health-care workers in developing nations. Japan had 2.2 doctors and 9.5 nurses per 1,000 people in 2009, while the U.S. had 2.4 doctors and 10.8 nurses, according to the OECD. In Indonesia , the proportion was 0.2 doctors and 1.4 nurses, while in India it was 0.7 and 0.9. Philippine President Benigno Aquino , for instance, plans to build and rehabilitate more than 2,700 hospitals, clinics and community health centers next year as part of $9.7 billion investment in infrastructure. The nation’s $225 billion economy expanded 6.1 percent in the first half, and the peso is the best performer against the dollar among Asia’s 11 most-traded currencies this year, advancing about 5.5 percent. “If you are taking more, somebody is losing, unless you put in place a policy that increases the overall supply,” said Kamalini Lokuge, a researcher at the Australian National University in Canberra, who has advised the World Health Organization on improving health care in developing countries. “There’s a shortage everywhere because of that.” The world is short more than 3 million health workers, including at least 1 million community nurses and doctors, Westport, Connecticut-based Save the Children said in May. Philippines, India In New Zealand , 34 percent of doctors and 21 percent of nurses are from abroad, the highest among developed countries, while in the U.S. 27 percent of doctors and 5 percent of nurses are foreign, the WHO said in its 2006 World Health Report. More than half of the health workers in the Persian Gulf states are foreign-trained, according to the Geneva-based agency. Philippine and Indian nationals lead the supply, each making up 15 percent of all immigrant nurses and doctors respectively in the 34-member Organization for Co-operation and Development. About 3 percent, or 89,000, of the 2.9 million registered nurses in the U.S. are Asian, Native Hawaiian or Pacific Islander, according to MinorityNurse.com , Westford, Massachusetts-based resource portal. The health-worker deficit has reached a crisis level in 57 countries, according to the Global Health Workforce Alliance , a partnership created in 2006 by the WHO. Thirty-six of those countries are in sub-Saharan Africa, which has a quarter of the global burden of disease and only 3 percent of the world’s health workers, it said. $78,000 a Year For countries that can afford to pay, the cost of health- care workers is likely to rise. That means migrant workers stand to more than double their pay from landing a job in an advanced economy. Full-time registered nurses in the U.S. make about $57,000 a year, according to MinorityNurse, while in Australia they earn as much as A$75,000 ($78,000). In the Philippines , an entry-level nurse at a public hospital earns about 8,000 to 13,500 pesos ($195 to $325) a month, according to the Bureau of Local Employment website. Indonesian Wahyudin lifted his pay 2,900 percent by moving to Japan from a clinic in East Java. To get the job as a caregiver in one of the world’s fastest aging nations , the 30-year-old nurse, who uses one name, had to study Japanese language and script day and night for three years to pass the country’s challenging examination. Coffee Plantation Wahyudin sends most of his salary home to his parents, who sold rice paddies to pay for his education. With the money, they have bought a coffee plantation and built a two-story house in the mountain village in Lampung, Sumatra. Wahyudin’s earnings pay for his younger sister’s schooling. “I cried when I first got my salary,” said Wahyudin, who earns 185,000 yen ($2,390) a month -- the equivalent of more than two and a half years’ pay as a nurse back home. He is one of 80 Indonesian and Filipino nurses at Kenshokai Group , which operates 114 nursing homes and daycares in Tokushima, southwest of Tokyo. The shortage of caregivers in Japanese hospitals and nursing homes is worsening as the population ages. About one in three Japanese will be over 65 by 2025, from one in 4.4 in 2009, according to government data. Japan opened its labor market for nurses and caregivers to Indonesia and the Philippines as a part of trade agreements in 2008. Since then, 1,360 candidates have come to Japan and only 100 of them -- or 7 percent -- have passed the exams. “We need to do whatever it takes to find workers,” said heart surgeon Takaaki Kameda, chairman of Kameda Medical Center in Chiba, east of Tokyo. “Demand for medical care will be much higher when baby boomers in urban areas get older. We definitely need to fill the shortages with immigrants.” Teaching Japanese The hospital opened a university for nurses in Japan and is considering setting up Japanese classes at colleges in China to help people there pass the test to work in Japan. More than 40 percent of the population will be at least 60 years old in Japan and South Korea by 2050 and almost 35 percent of the population in Europe is projected to be 60 or older by 2050, from 22 percent in 2009, according to the United Nations. The prospect of more, better-paid jobs back home appeals to migrant worker Angel Claudio, who went to Singapore in January to work as a staff nurse at Khoo Teck Puat public hospital. “If the economy gets better and the salary gets better, I think fewer Filipinos will work abroad,” said Claudio, 25, during her break in the hospital cafeteria. “Who wants to be far away from their family?” The biggest losers in the talent battle may be the poorest and most disease-prone countries. A billion people worldwide lack reliable access to basic health services , the Global Health Workforce Alliance said. Global Code Three quarters of doctors trained in Mozambique are working aboard, mostly in Portugal , South Africa , the U.S. and the U.K., the Alliance said. HIV treatments that require administration by physicians are being carried out by environment officers with six weeks’ medical training in Zambia, said Lukuge at the Australian National University. To address the challenge, the WHO adopted a Global Code of Practice in May 2010 -- the first such use of the organization’s constitutional authority in 30 years -- to provide a framework to regulate aggressive recruitment. It recommends countries aim for self-sufficiency of workers and developed nations provide poorer economies with technical and financial assistance. Meantime, nurses like Chan, who said she earns about 25,000 pesos a month at her call center, increasingly find opportunities elsewhere, often in related industries. Staying Put Vackie Jonn Licudan, who qualified to work as a nurse in the U.S., said he had wanted to move to America since he was a boy. While he was waiting for an immigration pass to work in Vermont , he took a job at an outsourcing company in Manila. Now he earns more than 80,000 pesos a month running a team of other nurses who review medical insurance claims. “I belong to an industry that is growing and, given the career path and opportunities I have and will have, I no longer want to move,” said Licudan, 31, who bought a 3.9 million-peso apartment, goes clubbing twice a week and eats out almost every day. “I can build my future here.” To contact the reporters responsible for this story: Kanoko Matsuyama in Tokyo at kmatsuyama2@bloomberg.net ; To contact the editor responsible for this story: Jason Gale at j.gale@bloomberg.net |
2024-01-11 | Bloomberg | Charoen Pokphand Says It Has Resources for Ping An Acquisition | Charoen Pokphand Group Co. said it has the resources to complete a planned purchase of a $9.4 billion stake in China ’s Ping An Insurance (Group) Co. (2318) , amid concern that the acquisition will fail. “The transaction is still under consideration by the China Insurance Regulatory Commission and we confirm that if approval is received from the CIRC, the CP Group has the necessary resources,” the Bangkok-based company said today in an e-mailed statement. HSBC Holdings Plc (HSBA) agreed on Dec. 5 to sell its 15.6 percent holding in Ping An to four subsidiaries of CP Group in two phases. The first stage, comprising shares valued at about HK$15 billion ($1.9 billion), was scheduled for Dec. 7. The sale of the remaining shares requires approval from the CIRC by Feb. 1, or else an extension of the accord. Concern is growing that Chinese regulators may block the deal, according to Goldman Sachs Group Inc. analysts Mancy Sun and Ning Ma. The China Insurance Regulatory Commission conducted a preliminary review of the application for the transaction, the watchdog said in a statement yesterday. China Development Bank , which had agreed to help finance the purchase by Thai billionaire Dhanin Chearavanont’s CP Group, canceled its loans, China’s Caixin Online reported Jan. 8. The first payment to HSBC has been made, Suthana Hongthong, CP Group’s assistant vice president for corporate communication, said on Jan. 9, without giving details. ‘Transparent’ Funding CP Group said on Dec. 25 that the acquisition of the shares was legal and the source of funding was “transparent.” Dhanin’s net worth was an estimated $6.2 billion on Dec. 7, according to the Bloomberg Billionaires Index. Almost 60 percent of the fortune is from overseas private companies. The group, whose historical ties to China range from becoming the first foreign investor after Deng Xiaoping opened the economy in 1979 to continued management of local agricultural projects, has said it can help develop rural areas through its investment in Ping An. To contact the reporter on this story: Supunnabul Suwannakij in Bangkok at ssuwannakij@bloomberg.net To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net |
2024-04-11 | Bloomberg | Medical School at $278,000 Means Even Bernanke Son Has Debt | Mark Moy came to the U.S. from China , paid his way through medical school at the University of Illinois in the 1970s and became an emergency room physician. His son Matthew, a third-year medical student, has racked up $190,000 in debt and still has a year to go. Accrued interest on his medical-school loans has swelled his balance by 13 percent over three years. “When I think about it, it will keep me up at night,” said Matthew Moy, 28. “I’m dreading the exit interview when I will find out exactly how much I’ll have to pay back.” The next generation of U.S. physicians is being saddled with record debt amid a looming shortage of doctors needed to cope with a rising elderly population. The burgeoning debt burden may be turning students away from primary care, which pays about $200,000 a year, toward more lucrative specialties and scaring off low-income and minority students fearful of taking on big loans. Median tuition and fees at private medical schools was $50,309 in the 2012-2013 academic year, more than 16 times the cost when Moy’s father became a doctor. The median education debt for 2012 medical-school graduates was $170,000, including loans taken out for undergraduate studies and excluding interest. That compares with an average $13,469 in 1978, said Jay Youngclaus, co-author of a February 2013 report on medical school debt. The 1978 amount would be about $48,000 in today’s dollars. Bernanke’s Son Even Federal Reserve Chairman Ben Bernanke ’s son can’t expect to escape the debt burden. The elder Bernanke testified before Congress last year that his son is on track to leave medical school with $400,000 in loans. The figure may include accrued interest and undergraduate costs. His son attends Weill Cornell Medical College in New York , according to the school directory. Bernanke, through a spokeswoman, declined to comment. The median four-year cost to attend medical school -- which includes outlays like living expenses and books -- for the class of 2013 is $278,455 at private schools and $207,868 at public ones, according to the Association of American Medical Colleges, a nonprofit group of U.S. schools. Record numbers of students still want to become doctors. First-time applicants to U.S. medical schools rose to 33,772 in 2012 from 24,884 a decade earlier, according to AAMC. New enrollment at U.S. medical schools grew 1.5 percent to 19,517 students, the highest ever. Doctor Shortage The U.S. faces a shortage of more than 130,000 physicians by 2025 as the population ages and 32 million more Americans obtain insurance under health-care reform, the AAMC estimates. Medical school is still worth the cost, said Cornell University President David Skorton , a cardiologist who took two decades to pay off his debt from college and medical school. “The best investment I ever made was to borrow that money,” Skorton said in an interview. He received his medical degree from Northwestern University in 1974. The majority of medical scholars -- like most graduate students -- finance their educations with loans. The interest rate on federal loans for graduate students is 6.8 percent for Stafford or 7.9 percent for Grad Plus, far higher than the benchmark U.S. 10-year Treasury note, which was 1.78 percent yesterday. Congress sets student-loan interest rates , which are typically higher than mortgages and car loans because they don’t require collateral and are given to borrowers who have no credit histories. Interest Accrues Interest on most medical-school loans continues to accrue on at least a portion of the balance during the multiyear residency period that students undergo after graduation if they don’t make full interest payments. That means a higher balance at the end of training, said Paul Garrard, president of PGPresents , an independent student-loan consulting company that specializes in medical debt. A residency for internal medicine is three years. A specialty such as cardiology or nephrology can be another two to four years while neurosurgery is typically a total of seven. David Lin, an anesthesiology resident at St. Barnabas Medical Center in Livingston, New Jersey, owes about $325,000. Because of accrued interest, the figure has risen 25 percent since he graduated from Chicago Medical School two years ago. He makes payments of about $450 per month. Priced Out “I’m barely touching the principal at all,” said Lin, 30, who had no debt from his undergraduate years at the University of California , Berkeley. Black medical-school graduates from 2012 reported the highest median debt, $184,125. Blacks and students from Puerto Rico had the lowest median parental income. Low-income students may shy away from entering medical school, said Ami Bera, a Democratic Congressman from California and one of 20 physicians in Congress. Bera served as a dean of admissions at the medical school at University of California, Davis. “You probably are pricing out a whole segment of lower-income kids that have the ability and the intellect to succeed,” said Bera, who left medical school at the University of California, Irvine , with less than $10,000 in loans in 1991. LeAnne Roberts , a black fourth-year student at the University of Medicine and Dentistry of New Jersey, said she would have a hard time recommending medical school to the low-income high-school students she tutors in Newark. False Dream “They have these goals of wanting to become a physician, and I’m almost not making it,” said Roberts, 27, who grew up in Sacramento and whose parents are retired schoolteachers. “I don’t want to sell them a false dream. All of these things are attainable, but it’s very difficult to pay for.” Grants rarely cover the entire cost of attending medical school, and there are very few “full-ride” scholarships available, according to the AAMC report. Billionaire entertainment executive David Geffen endowed a full scholarship for as many as 33 students a year at the University of California, Los Angeles , medical school for $100 million in December. They are based on merit. Medical students are starting to lobby to reduce debt loads. The medical school division of the American Medical Association passed a resolution in November calling for the reduction of the federal-loan interest rate to a variable rate capped at 5 percent. About 150 American Medical Student Association members in white coats lobbied their legislators in Washington last month. Primary Care Jacob Burns, 23, a first-year medical student at the University of Florida , expects to owe at least $220,000 at graduation. Because of his debt, he said he has almost ruled out primary care including pediatrics for a higher-paying specialty such as pediatric or cancer surgery. About 27 percent of 2012 medical school graduates polled by AAMC said their debt load affected their choice of specialty. “It’s a lot of money to pay off and then when you look at the different salaries for different specialties, you kind of lean one way,” Burns said. Students argue that interest rates could be lowered because default rates on medical-school loans are very low: For schools that report data to AAMC, the average is about 1 percent, with a quarter of schools reporting zero. “In the regular private market, taking out a lot more money when you are guaranteed to pay it back would have a lower interest rate,” said Matthew Shick, a senior legislative analyst with AAMC. Michael Burgess , a Republican Congressman and obstetrician from Texas , said changing the interest rate for physicians may be too narrow a focus. ‘Cheap Money’ “Cheap money never solves a problem,” said Burgess, who estimates he left medical school in 1977 with about $4,000 in student loans. “You make a lot of easy money available and someone will do you a favor and take it off your hands.” Matthew Moy, the Chicago medical student, said he’d like to follow in the footsteps of his father and specialize in emergency medicine. In addition to the $190,000 he already owes, he expects to have to borrow almost $50,000 to pay tuition and fees for his fourth year at Chicago Medical School, part of Rosalind Franklin University of Medicine and Science. To save money, he is using textbooks handed down by his brother, who is four years ahead of him on the medical training track, and living with his parents. “Their help, it’s kind of huge,” he said. To contact the reporter on this story: Janet Lorin in New York jlorin@bloomberg.net. To contact the editor responsible for this story: Lisa Wolfson at lwolfson@bloomberg.net . |
2024-11-09 | Bloomberg | Peru Keeps 4.25% Rate on Balanced Economy and Slowing CPI | Peru kept borrowing costs unchanged for the 18th consecutive month as policy makers said economic growth is near its potential and inflation is slowing to the mid-point of their target range. The five-member board, led by bank President Julio Velarde, held the overnight rate at 4.25 percent yesterday, matching all 14 forecasts of economist surveyed by Bloomberg. “Growth in the Peruvian economy has stabilized around its long-term sustainable level,” while the outlook for global growth remains “uncertain,” the central bank said in a statement on its website. October brought “a reversal of the supply shocks that had been affecting inflation temporarily, and with that inflation will return to the target range and trend gradually to 2 percent.” The bank raised reserve requirements last week for a third straight month to slow credit growth in South America’s fastest growing economy and to curb the rally by the sol , which touched a 15-year high against the dollar last month. The annual inflation rate fell to a 16-month low in October. “Capital inflows and the currency are their main concern in the short term,” said Mario Guerrero, an economist at Scotiabank Peru, in a telephone interview from Lima. “They would be comfortable with slower credit growth. Reserve requirements may be aimed at slowing consumer credit, which remains strong.” The central bank targets an annual rate of 2 percent plus or minus 1 percent. Reserves, Currency Record low borrowing costs in the U.S., the European Union and Japan have prompted Peruvian companies to turn to international bond markets and foreign banks for financing. Record foreign direct investment and demand for Peruvian government bonds have added to inflows. The central bank increased the average reserve requirement for sol and dollar deposits by 0.75 percentage point on Oct. 30, the largest of the four increases this year. The average deposit ratio in September was 16.9 percent for soles and 38.9 percent for dollars, it said. The monetary authority is evaluating the development of credit and liquidity to determine whether a further increase in reserve requirements is needed, Adrian Armas, the bank’s research director, said during a conference call with reporters today. Policy makers have boosted reserves by buying a record $12.5 billion in the spot market this year and last month proposed tightening restrictions on banks’ sales of greenbacks to tame the sol. Limits on private pension fund investments overseas will probably be relaxed by year-end to boost demand for dollars, Velarde said in an Oct. 25 interview. Swings in the currency can harm Peru ’s economy, where 43.8 percent of all credit is denominated in dollars, while appreciation can lead to calls for protectionism, Velarde said. Investment, Trade “Peru is one of the few countries in Latin America where people are used to taking out loans in dollars, so that makes monetary policy a bit more difficult,” he said. The sol depreciated 0.3 percent to 2.6130 per dollar at 12:59 p.m. in Lima, according to Deutsche Bank AG’s local unit. The currency touched 2.5770 on Oct. 22, the strongest since December 1996, according to data from the Superintendency for Banking, Insurance and Pension Fund Administrators. Private investment climbed 16 percent in the third quarter, fueling a 6.4 percent rise in gross domestic product, after a 6.1 percent rise in the first half, Finance Minister Miguel Castilla said at an event in Lima on Nov. 7. Though a weak global economy has hurt demand for Peru’s copper exports, there are signs of stronger growth in the U.S. and China , the nation’s biggest trading partners, Castilla said. Peru, the world’s third-largest copper producer, will boost output 62 percent over the next two years as new mines start producing, Velarde said Sept. 28. Copper has gained almost 16 percent in the past three year and traded at $3.4385 a pound on the Comex in New York. Exports, Markets The Andean nation posted a $403 million trade surplus in September, the widest in three months, Armas said. Consumer and business confidence is rising, while investment growth will fuel a 6.2 percent rise in gross domestic product this year, he said. Tax collection increased 7.8 percent to 6.92 billion soles ($2.67 billion) in October from the same month a year earlier, led by increased sales tax revenue, tax and customs agency Sunat said Nov. 6. Consumer prices last month fell the most since 2009, declining 0.16 percent largely because of lower food costs. The annual inflation rate fell to 3.25 percent from 3.74 percent in September. The Lima Stock Exchange’s benchmark index has advanced 8.2 percent this year and the sol has appreciated 3.2 percent against the U.S. dollar. The extra yield investors demand to own Peruvian government dollar bonds instead of U.S. Treasuries has decreased 92 basis points to 124 basis points, according to JPMorgan Chase & Co. Loan Growth Increased reserve requirements will cause loan growth to slow in the fourth quarter of 2012, said Eduardo Torres-Llosa, chief executive officer of Banco Continental, the Peruvian unit of Banco Bilbao Vizcaya Argentaria SA (BBVA) , in an Oct. 31 interview. Lending will increase 14 percent this year and 12 percent next year, after expanding 17 percent in 2011, he said. Banks are increasing provisions as a precautionary move amid rising loan delinquency rates and signs some consumers have taken on too much debt, Torres-Llosa said. “The economy is doing well,” he said. “Slowing the pace of credit doesn’t hurt anyone.” Policy makers are considering an increase in loan provisions to stem a rise in consumer borrowing in dollars, said Oscar Rivera, president of the country’s banking association, Asbanc. Lower interest rates on dollar loans and the sol’s appreciation are spurring demand for car and home loans in the U.S. currency, he said. “Recent monetary policy measures are aimed at easing the pace of currency appreciation and slowing credit in a preventive way,” Guerrero said. “Probably they’ll keep on raising reserve requirements. They’re not done yet.” To contact the reporter on this story: John Quigley in Lima at jquigley8@bloomberg.net To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net |
2024-04-23 | Bloomberg | Chile Plans First Overseas Peso Bond in Raising $1.5 Billion for Repairs | Chile plans its first global bond sale in pesos as part of an effort to raise $1.5 billion through 10-year international notes and help finance repairs after the February earthquake, Finance Minister Felipe Larrain said. The government plans to sell $1 billion of dollar- denominated bonds, its first offering in overseas markets in six years, and a debut peso bond to raise $500 million, Larrain told reporters in New York. He said the country will “certainly” issue the debt this year. “This will be the first issuance of a peso global bond in Chile’s history, and it is part of an agenda towards the internationalization of the Chilean peso,” Larrain said. Chile’s peso has climbed 12.3 percent against the dollar in the past year, the third-best performing major Latin American currency after the Brazilian real and Colombian peso. President Sebastian Pinera also plans to increase corporate taxes and mining royalties to fund the government’s $8.4 billion repair bill following Chile’s fifth-largest earthquake in a century pummeled. The temblor killed more than 400 people and caused as much a $30 billion of damage. “This is not just a one-time issue,” Larrain said. “It is part of a medium-term strategy to feed relevant points in the yield curve. We will be coming to the markets. We make no commitment we will come every year, but we will come to the markets to provide liquidity.” Ratings Chile, the world’s largest copper producer, is the region’s highest-rated borrower after it became a net creditor in 2007 for the first time by paying down debt and hoarding savings in an offshore wealth fund. Moody’s Investors Service lifted the country’s credit- rating last year to A1, the fifth-highest rating, citing the copper savings. Standard & Poor’s grades Chile’s debt A+, in line with Moody’s. Fitch Ratings ranks it one level lower at A. Chilean five-year credit-default swaps rose to 83 basis points yesterday from 74 basis points on Feb. 26, the day before the earthquake, according to CMA Datavision, Inc. A basis point on a swap insuring $10 million of debt for five years is equivalent to $1,000 a year. The peso rose 0.07 percent to 521.05 per dollar today and was the second-best performer this week among 26 emerging-market currencies tracked by Bloomberg after Mexico’s peso with a gain of 0.5 percent. Selling bonds in dollars will allow the government to leave money in its $11.2 billion copper savings fund, said Aldo Lema, chief economist at Banco Security in Santiago. “Debt issuance allows the government to keep those resources available in the future should capital flows and issuance opportunities dry up,” Lema said. “The question is how much does that insurance cost.” South America’s fifth-biggest economy was recovering from its deepest recession in a decade when it was struck by an 8.8- magnitude temblor that may have caused damage equivalent to 17 percent of gross domestic product, according to Pinera. To contact the reporters on this story: Fabiola Moura in New York at fdemoura@bloomberg.net ; Sebastian Boyd in Santiago at sboyd9@bloomberg.net |
2024-04-18 | Bloomberg | U.S. Supreme Court Doesn't Act on Virginia Bid to Scuttle Health-Care Law | The U.S. Supreme Court deferred taking action on a bid by Virginia’s attorney general for fast- track consideration of the state’s challenge to President Barack Obama’s health-care overhaul. Virginia, one of 27 states that say the measure is unconstitutional, is urging the justices to take the unusual step of scheduling arguments without waiting for rulings by the four appeals courts that are poised to consider the law. The case was on a list of petitions for review the justices were scheduled to consider at a private conference last week. The justices resolved most of those cases in a list of orders released today in Washington. They will release more orders a week from today. Attorney General Kenneth Cuccinelli of Virginia said in an interview last week that the petition was a long shot. He argued in court papers that the dispute “is of imperative national importance requiring immediate determination in this court.” The states say Congress overstepped its authority by requiring Americans to either obtain insurance or pay a penalty. The step sought by Virginia, known as certiorari before judgment, is one the court has taken only a handful of times, including its 1974 decision ordering President Richard Nixon to turn over Oval Office tape recordings and its 1952 ruling blocking President Harry S Truman from seizing the nation’s steel mills. The Obama administration argued that the health-care dispute doesn’t rise to that level of urgency, in part because the disputed provision doesn’t take effect until 2014. No Urgency “The constitutionality of the minimum coverage provision is undoubtedly an issue of great public importance,” acting U.S. Solicitor General Neal Katyal argued in court papers. “This case is not, however, one of the rare cases that justifies deviation from normal appellate practice and requires immediate determination in this court.” U.S. District Judge Henry Hudson ruled in December that Congress’s authority over interstate commerce didn’t give it the power to enact the insurance mandate. A federal appeals court based in Richmond, Virginia, is scheduled to hear the Obama administration’s appeal of that ruling May 10 -- alongside an appeal of a different judge’s decision upholding the law. Another appeals court, based in Cincinnati, will consider the issue June 1, and a third, based in Atlanta, will hear arguments June 8 in a case involving the other 26 states challenging the law. An appeals court in Washington will consider the matter later this year. Commerce Clause The Supreme Court hasn’t directly considered a challenge to Congress’s power under the Constitution’s commerce clause since John Roberts became chief justice in 2005. Opponents say the health plan is unlike anything the Supreme Court has ever upheld because the law would require people to take action: either buy health insurance or pay a fine. Hudson said no Supreme Court or appeals court ruling authorizes Congress to “compel an individual to involuntarily enter the stream of commerce” by buying something. The Obama administration argues that people who would opt not to buy insurance without the mandate will affect interstate commerce eventually -- and potentially impose costs on the government, insurers and hospitals -- when they seek emergency room or other medical services. The administration also contends that the individual mandate is essential to the law’s goal of increasing health-care availability and affordability. The government says that, without such a rule, people could forgo buying insurance until they became sick, at which point the new law would require insurers to provide coverage. The effect would be to eventually drive insurers out of business, the administration says. The Supreme Court case is Virginia ex rel. Cuccinelli v. Sebelius, 10-1014. To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net. To contact the editors responsible for this story: Mark Silva at msilva34@bloomberg.net . |
2024-11-12 | Bloomberg | Barclays Saudi Probe Adds to CEO Jenkins’s Regulatory Woe | Barclays Plc (BARC) Chief Executive Officer Antony Jenkins , almost two years after his predecessor said it was time for banks to stop apologizing, is still grappling with a multiplying number of probes by regulators. The U.S. Department of Justice is investigating whether the lender made payments that violated the Foreign Corrupt Practices Act to win a banking license for its wealth-management unit and investment bank in Saudi Arabia, the Financial Times reported on Nov. 9, citing unidentified people familiar with the talks. The bank is already being probed by the Serious Fraud Office over fees it paid in 2009 to Qatar’s sovereign-wealth fund as the lender sought money to avoid a government bailout. For Jenkins, who replaced Robert Diamond after the lender paid a record fine for manipulating Libor, the probes are likely to be a bigger setback to his efforts to show politicians the bank can put regulatory missteps behind it than the size of any fines, according to analysts. He may have to include stiffer internal controls to detect staff who break laws in pursuit of revenue when he announces the results of his review of Barclays’s operations in February, said Christopher Wheeler, a London-based banking analyst at Mediobanca SpA. “Jenkins has to continue to batten down the hatches, say these issues came out of the pre-crisis period and say he can create an atmosphere where it doesn’t happen again,” said Wheeler, who rates the shares an outperform. “The more that comes out, the more he can wave the big stick in February.” British Lawmakers In January 2011, Diamond told a panel of British lawmakers that the time for “remorse and apology” for banks needed to be over. Since then, the lender has paid a record 290 million-pound ($461 million) fine after regulators found its investment bankers tried to manipulate the London interbank offered rate. The consumer bank, which Jenkins, 51, previously ran, has also been hobbled by compensation claims from Britons wrongly sold so-called payment-protection insurance they didn’t require or lost them money. The lender last month set aside an additional 700 million pounds to cover the costs of redress, bringing the total to 2 billion pounds, second only to Lloyds Banking Group Plc (LLOY) , the country’s biggest mortgage lender. U.S. regulators this month also proposed levying a record $470 million in penalties on Barclays after it allegedly gamed energy markets in the Western U.S. from late 2006 to 2008. John McGuinness, a Barclays spokesman, and the Department of Justice’s Rebekah Carmichael declined to comment on the Saudi probe. The Saudi Arabian capital markets regulator, known as the CMA, said it is “not aware of any investigation” into Barclays and hasn’t received any inquiries from regulators on the matter. Shares Fall The stock fell as much as 1.1 percent to 227.55 pence in London and was down 0.6 percent to 228.85 pence at 8:59 a.m. local time, giving the lender a market value of 28 billion pounds. The shares have advanced 30 percent this year, the third-biggest increase among British banks after Lloyds and Royal Bank of Scotland Group Plc. (RBS) Barclays, Britain’s second-largest bank by assets, received a license from Saudi Arabia’s market authority to operate in the kingdom in August 2009. The London-based lender sought to expand its wealth-management operation in the region as the country’s oil wealth created more millionaires. The lender said in an Oct. 31 filing that the U.S. Justice Department and Securities and Exchange Commission were probing whether its relationships with unidentified third parties who help the bank win business comply with the Foreign Corrupt Practices Act. U.S. Probe Estimating the size of any fine U.S. authorities may impose is difficult without knowing more about the nature of the Justice Department’s investigation, said Cormac Leech, a banking analyst at Liberum Capital in London. “Manipulating the energy or Libor markets is more significant because of its scale, so I would think any penalty would be less,” he said by telephone yesterday. The bank’s wealth-management business contributed 6.1 percent of Barclays’s 33 billion pounds of revenue in 2011. The company doesn’t disclose how much the Saudi Arabian operation contributes. “Because the business is relatively small, I don’t think you’re talking about hundreds of millions of pounds” in fines, Mediobanca’s Wheeler said. The Saudi probe follows a U.K. inquiry by the Serious Fraud Office into fees the bank paid in 2008 to Qatar’s sovereign- wealth fund as the lender sought money to avoid a government bailout. The company has said it’s investigating and is co- operating with U.S. Authorities. The SFO has given Barclays a notice that requires it to hand over documents and witnesses, the FT reported. SFO spokesman David Jones declined to comment. ‘More Unsavory’ Allegations of improper payments could still drag more senior executives into the bank’s crisis than the traders implicated in the Libor scandal, said Ismail Erturk, a senior lecturer in banking at Manchester Business School. “This shows the problems are more than just about investment-banking culture,” he said by telephone. “It shows we need a much broader investigation into banking. This is a new category of wrongdoing by banks. It’s not about manipulating markets, it’s something else more unsavory.” 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 |
2024-03-13 | Bloomberg | Refusal to Expand Medicaid May Cost Employers $1 Billion | Governors who refuse to expand their Medicaid programs for the poor may cost employers in their states as much as $1.3 billion in federal fines, a study found. A clause in the 2010 health-care overhaul penalizes some employers when their workers aren’t able to obtain affordable medical coverage through the company. Employers can avoid those fees if their workers qualify for Medicaid as part of an expansion that as many as 22 states have rejected, according to a report today by Jackson Hewitt Tax Service Inc. Without Medicaid, a “shared responsibility” payment of as much as $3,000 may be triggered for each employee who can’t get insurance through their company. In Texas , the largest state to refuse to increase Medicaid, employers may be liable for as much as $448 million in fines, the study found. In Florida , where the legislature has refused an expansion supported by Governor Rick Scott, employers may pay as much as $219 million. “A lot of businesses have taken the position that they oppose a Medicaid expansion because it would increase their taxes,” Brian Haile, senior vice president for health policy at Jackson Hewitt in Parsippany, New Jersey, said in an interview. “The irony of this, or the paradox, is that the opposite may be true, at least for some businesses in some states.” Under the Affordable Care Act, states are expected to expand Medicaid, the joint federal-state health plan for the poor, to cover every person earning wages close to the poverty level. Medicaid’s expansion is one of two core provisions in the law’s mission of extending health coverage to about 27 million uninsured people. The Supreme Court said in June the federal government can’t force states to expand the program. Shared Responsibility With as many as 22 states potentially opting out, more workers will have to rely on the other core provision of the law, subsidized insurance sold through health exchanges. That would trigger the shared responsibility payment for each employee who can’t get insured through their company and in turn qualifies to use the exchanges. Employers wouldn’t have to pay the penalties if their workers enroll in Medicaid. Under the law, a family of four making about $32,500 this year would be eligible for the program. The shared responsibility clause applies to companies that offer health insurance and have at least 50 employees. To contact the reporter on this story: Alex Wayne in Washington at awayne3@bloomberg.net To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net |
2024-12-05 | Bloomberg | Miami Lowers Borrowing Costs as Latin-America Hub: Muni Credit | Miami, the Latin-American base for companies such as Harley-Davidson Inc. (HOG) , is set to lower its borrowing costs after posting a budget surplus five times greater than expected amid a real-estate revival. Florida ’s second-biggest city, where median condominium prices leaped almost 25 percent in October, is selling $50 million of tax-exempt bonds as soon as this week under the cloud of a U.S. Securities & Exchange Commission investigation. The agency is looking into possible fraud related to the disclosure of financial information dating to fiscal 2007 and 2008. Yet debt from a similar sale last year has gained as much as 20 percent in value, and the city’s finance chief predicts a lower interest rate than on that issue. Miami is benefiting in part from a three-month rally in the $3.7 trillion local-debt market. Investors are also drawn by a growing economy. The area’s jobless rate is at a four-year low, while Miami’s airport is the primary Latin America gateway for AMR Corp. (AAMRQ) ’s American Airlines. “You can’t deny the fact that it’s a thriving hub of Latin-American business,” said Howard Cure, director of muni research in New York at Evercore Wealth Management LLC, which oversees about $3.8 billion. “And the real-estate market’s picked up because of that and the foreign money that’s come in.” Best Performance Miami, with a population of 409,000, is tapping investors amid the best performance for munis in six years. City and state debt is set to earn more than Treasuries for the second straight year, the longest stretch since 2006, Bank of America Merrill Lynch data show. Investors looking for safety in local obligations have pushed yields to the lowest since 1965, according to a Bond Buyer index. “We know the market is hungry,” Janice Larned, Miami’s assistant city manager and chief financial officer, said in an interview. She anticipates Miami will pay a true interest cost of no more than 4.25 percent on the planned offer, with the debt maturing through 2030. By comparison, the city in July 2011 sold revenue bonds due in 18 years to yield 5.64 percent, data compiled by Bloomberg show. This week’s deal is limited to qualified buyers because of the SEC investigation. Tunnel Funds Bond proceeds will help finance a tunnel project that will increase access to the Port of Miami through the city’s downtown, Larned said. Miami had the most departing passengers of any U.S. cruise port in 2010 and 2011, with 1.97 million last year, according to the U.S. Maritime Administration. The debt will be repaid with non-property-tax collections, as well as some revenue from development districts that stand to benefit from the project, Larned said. The city had a budget surplus of $45 million for the fiscal year ending Sept. 30, according to unaudited numbers. That’s $37 million more than what officials anticipated, Larned said. “We’ve gone through a thorough due-diligence process,” Larned said. “We finished up the year with a very optimistic number that we’re confident it’s going to hold.” Since 2009, the SEC has been investigating Miami for potential fraud regarding fiscal statements and bond disclosures. July Letter SEC enforcement staff in July sent the city a letter stating that it will recommend that the agency file civil fraud charges against Miami based on transactions that occurred in fiscal years 2007 and 2008, according to bond documents. Larned said she and other city officials plan to meet with the SEC’s director of enforcement as soon as this week. “Our position is that we did nothing wrong,” Larned said. Moody’s Investors Service last month assigned this week’s sale an A3 rating, six steps below the top, with a negative outlook in part because of the SEC investigation. Fitch Ratings grades the debt one step lower, at BBB+. Fitch said fiscal 2012 would mark the second straight year the city has been able to bolster its reserves. Officials are analyzing whether to enhance this week’s borrowing with bond insurance, Larned said. Investors can find extra yield on Miami bonds because of the investigation and turnover in city management, said Paul Brennan of Nuveen Asset Management in Chicago. The firm oversees about $85 billion of munis. Volatility Appetite “You have to be willing to accept some volatility in the ratings and potentially in the performance of the bonds until these issues get resolved,” Brennan said. Fitch in its report cited the city’s position as an international trade center and tourist destination as bolstering its economy. The Miami-Fort Lauderdale area’s October jobless rate was 8.2 percent, down from 11.9 percent in 2010, U.S. Census data show. The 2010 level was the highest in at least eight years. At the same time, the median sales price for condominiums in Miami-Dade County, which encompasses the city, jumped about 24 percent in October from a year earlier, according to a report from the Miami Association of Realtors and the local Multiple Listing Service system. Miami hosts the Latin American headquarters for companies including Visa Inc. and motorcycle manufacturer Harley-Davidson. The city’s financial district along Biscayne Bay is lined with banks such as Brazil ’s Itau Unibanco Holding SA (ITUB4) , the largest lender in Latin America. The city’s airport this year doubled the size of its terminal for international arrivals. Following is a pending sale: MASSACHUSETTS is set to issue about $381 million of general-obligation bonds as soon as this week, data compiled by Bloomberg show. (Updated Dec. 5) To contact the reporter on this story: Michelle Kaske in New York at mkaske@bloomberg.net To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net |
2024-10-04 | Bloomberg | Court Can’t Kill Health Reform Without Collateral Damage: View | The commentariat can’t decide whether to give the Obama administration points for audacity, or to question its sanity. The Justice Department has asked the Supreme Court to rule on the constitutionality of its health- care reform sooner rather than later. If the court takes up the challenge, it could deliver a decision before the end of its current term in June. That would be just in time to assure that health care will be a major issue in the presidential campaign. Should the Supreme Court take up health-care reform this year? So far, only one appeals court has ruled that the “individual mandate” in Obamacare -- the requirement that virtually everybody must buy insurance, with government assistance if needed -- overreaches the federal government’s powers under the commerce clause of the Constitution. It’s not a trivial argument. But an affirmative ruling would be a huge departure from our understanding of the commerce clause going back to the New Deal. If the health-care law’s individual mandate is unconstitutional, so is much of what the government has been doing for 80 years or so, and it will be the duty of the Supreme Court to sort through the ruins of the federal government as we know it and find a few shards to start building again. We can’t help suspecting that the court will choose to avoid this opportunity, by not taking the case, by finding some other grounds for ruling, or by upholding Obamacare. Ever since it passed in 2010, Obamacare has been attacked as a costly and possibly unconstitutional intrusion of the federal government into people’s lives. Almost the central issue in the campaign for the Republican presidential nomination has been the resemblance between Obamacare and the state health-care plan enacted in Massachusetts under then-Governor Mitt Romney. Today, most Democrats feel the less said the better. But if the new law loses in the Supreme Court, the political ramifications may look very different. If the Supreme Court kills health-care reform, it will stay dead a long time. It took 17 years before anybody felt like scaling that mountain again after Hillary Clinton ’s failure two administrations ago. The Republican who was president for almost half that time made no effort. No prominent Republican presidential candidate made it an issue, nor did Republican leaders in Congress push legislation. If we wake up one day in June with no health-care reform and no prospect of getting it, who will cheer? Not the 40 million or so Americans who don’t have insurance now. Not the millions more with pre-existing conditions that leave them jobless or clinging to jobs they may not like. Not many of the doctors and nurses who labor in the current mess of a health- care system. Obama may figure that he’s going to pay for the real and imaginary burdens his major legislative accomplishment will impose. He might as well start people thinking about the benefits. To contact the Bloomberg View editorial board: view@bloomberg.net . |
2024-06-27 | Bloomberg | Croatian Debt Misses EU-Entry Premium as Economy Stumbles | Croatia ’s accession to the European Union on July 1 isn’t being celebrated on the debt market as the ex-Yugoslav republic’s borrowing costs rise relative to peers. The extra yield on Croatia’s dollar bonds over those of other developing countries in JPMorgan Chase & Co.’s EMBI Global index increased to 86 basis points yesterday, the most since April 2, before falling to 50 today, according to data compiled by Bloomberg. The yield on Croatia’s 2023 dollar note fell 8 basis points to 5.985 percent, after jumping to 6.40 percent this week, 62 basis points more than similar securities from Romania, an EU member with the same BB+ junk-rating from Standard & Poor’s. Unlike its former-communist peers that became EU members last decade, Croatia is entering a bloc in the midst of its longest recession. While nations from Estonia to Bulgaria benefited from joining the world’s biggest trading bloc, Croatia won’t get a similar boost as it depends on tourism for about one-fifth of gross domestic product and as rising labor costs make it harder to attract investment into export industries. “Although EU entry represents a very important development for the country in the long run, it should not bring in any very relevant short-term advantages,” Emanuele Del Monte, who helps manage $2.3 billion of bonds at Fideuram Asset Management in Dublin, said in an e-mail on June 24. “For yields to converge with eastern European peers, Croatia must deliver structural reforms and a serious attempt to tackle the fiscal deficit.” ‘Bitter Pill’ The Adriatic nation’s $63 billion economy hasn’t grown since 2008 as the crisis in Europe caused foreign direct investment to plummet to almost one fifth of the $4.2 billion in the last pre-crisis year. GDP fell 1.5 percent from a year earlier between January and March, government data show. Croatian unit labor costs rose 7.5 percent over the past four years even as the economy shrank by a combined 10.9 percent, according to Eurostat data compiled by Bloomberg. This compares with a 6.1 percent increase for the 27-member EU, where output dropped 1 percent in the period, the data show. By contrast, labor costs have declined since 2008 in EU members Latvia , Lithuania , Estonia, Ireland, Greece , Portugal and Spain. “Unfortunately Croatia didn’t swallow the bitter pill of structural reform during the window of opportunity that it had pre-accession,” Abbas Ameli-Renani, an emerging-markets strategist at Royal Bank of Scotland Group Plc, said. Prime Minister Zoran Milanovic ’s government on Feb. 20 reduced its 2013 economic growth forecast to 0.7 percent from 1.8 percent, citing declining consumption and low investment. Kia Exports Croatia’s economy will contract 1 percent this year and grow 0.2 percent in 2014, with net exports providing “limited support,” the European Commission said in a May 3 report. Growth in Slovakia, which joined the EU in 2004 with seven other former communist countries, doubled to a record 10.4 percent in 2007, fueled by exports from newly built assembly plants such as the one by South Korea ’s carmaker Kia Motors Corp. (000270) Romania’s economy advanced 6.3 percent when it became a member in 2007, double the EU’s pace in the period, and accelerated to 7.3 percent the following year. Croatia’s lingering recession combined with a lack of budget discipline and vulnerability to external shocks prompted Moody’s Investors Service to cut the country’s credit rating to junk in February, following a similar move by Standard & Poor’s in December. Fitch Ratings has the nation at BBB-, its lowest investment grade, data compiled by Bloomberg show. Market ‘Hostage’ “The downgrade, as well as the continuing growth of public debt make Croatia a hostage to sentiment on international markets,” Nikolay Gueorguiev, the former head of the International Monetary Fund’s mission to Zagreb, said in an interview in Dubrovnik, Croatia, on June 17. “The key is to find a balance between continuing with the fiscal adjustment and not hurting the growth at the same time.” Croatia, a nation of 4.2 million which emerged as an independent country from a violent break-up of Yugoslavia in 1991, has the equivalent of 25 billion euros ($32.5 billion) of outstanding debt, including 6.1 billion euros in loans, according to data compiled by Bloomberg. As much as 7.6 billion euros is due by next year, the data show. The country’s budget deficit is set to widen to 5.6 percent of GDP in 2014 from 3.8 percent last year and this year’s 4.7 forecast, according to the European Commission. Public debt will swell to 62.5 percent of GDP next year from 53.7 percent in 2012, the EU’s executive said on May 3. ‘Rational’ Policy EU membership will help encourage foreign investment, which will get a further boost from a draft bill that streamlines Croatia’s administration, Premier Milanovic said in an interview yesterday. The country needs a “rational approach” to budget policy to avoid choking growth while maintaining control over spending, he said from his office in central Zagreb. “The economic prospects for Croatia are certainly not rosy, but the government is well aware that it needs to deliver,” Stanislav Petrov, a London-based fixed-income strategist at BNP Paribas SA, said in an e-mailed comment on June 18. BNP Paribas has a buy recommendation for Croatia’s 2023 dollar bonds, which “offer value,” especially when compared with Romania , he said. The costs of insuring Croatia’s debt against non-payment for five-years with credit default swaps fell 11 basis points to 334 basis, still a 52 basis-point increase from May 6. This compares with 211 for Romania, 336 for Slovenia and 324 for Hungary , data compiled by Bloomberg show. Fed Effect Croat bond yields surged along with the country’s debt-insurance costs in past weeks because of speculation the U.S. Federal Reserve will trim its unprecedented asset-purchase program. The stimulus has kept Treasury yields near record lows and fed a global hunt for higher-yielding assets, cutting the borrowing costs of riskier sovereigns including Croatia. “Croatia is entering at a demanding time for both the EU and itself,” said Brigit Niesser, an economist at Erste Group Bank AG in Vienna. “We are facing optimistic expectations when it comes to EU membership, even though the success of previous enlargement rounds seems to be a demanding target to match.” To contact the reporters on this story: Jasmina Kuzmanovic in Zagreb at jkuzmanovic@bloomberg.net ; Radoslav Tomek in Bratislava at rtomek@bloomberg.net. To contact the editor responsible for this story: James Gomez at jagomez@bloomberg.net . |
2024-05-24 | Bloomberg | ‘Pay for Delay’ Deals Over Generic Drugs Should Be Halted, FTC Tells Court | The U.S. Federal Trade Commission urged an appeals court to outlaw certain settlements between brand-drug manufacturers and generic-drug makers over the timing of sales of copycat medicines, saying they harm competition and hurt consumers. The agency asked the U.S. Court of Appeals in Philadelphia to reverse a lower court’s ruling that accords between Merck & Co.’s Schering-Plough unit and generic manufacturers of K-Dur 20 high blood-pressure medicine didn’t violate antitrust laws. The FTC is fighting agreements between companies about when generic drugs can be marketed, known as “pay for delay” or “reverse-payment” settlements, saying they cost consumers the equivalent of about $3.5 billion a year in higher prices for pharmaceuticals. These transactions compensate the generic-drug maker in return for dropping challenges to a patent and establish a date when the non-branded version of the drug can be sold, the agency said. The FTC is pressing the courts and Congress to limit the settlements. Brand- and generic-drug makers say the deals may bring lower-cost copies of medicines to the market sooner than they would otherwise. The commission filed a court brief May 18 siding with retailers such as CVS Pharmacy Inc., Rite Aid Corp., Safeway Inc. and Walgreen Co. that have challenged the legality of patent settlements between Schering-Plough Corp. and two generic drugmakers for K-Dur 20, a potassium supplement. The U.S. Justice Department also filed a brief the same day seeking to overturn the lower court’s ruling based on antitrust laws. Consumer Spending Generic drugs now account for 78 percent of the $307.4 billion U.S. pharmaceuticals market, according to the IMS Institute for Healthcare Informatics. Consumer spending on generic drugs is growing, while spending on branded drugs is declining as patents expire and patients choose lower-cost options, IMS said on its website. A March 2010 ruling by U.S. District Judge Joseph Greenaway in New Jersey would allow name-brand companies to pay generic rivals to stay out of the market until the patents for the medication expire. These deals run counter to basic antitrust principles as well as the Hatch-Waxman Act of 1984, which Congress passed to foster competition from generic drug firms, the FTC said today in a statement. “The vast majority of the benefit of generic entry goes not to the generic sellers, but to the public, in the form of lower prices,” the FTC wrote in its brief. Deals Called ‘Outrageous’ FTC Chairman Jon Leibowitz called the deals “outrageous” and said they harm consumers in a May 3 interview with Bloomberg News. Deals that delayed the introduction of cheaper generic medicines rose 63 percent last year, he said in the interview. The number of deals increased to 31 from 19 in 2009, the FTC said. The agency said there were no such settlements in 2004. The cases involved 22 products and $9.3 billion in sales. The FTC tracks the drug patent settlements, which companies are required to report to the agency. “We continue to assert that patent settlements are a vital aspect of a patent owner’s ability to protect intellectual property,” Diana Bieri, executive vice president and general counsel of the Pharmaceutical Research Manufacturers of America, a Washington-based trade group, said in an e-mailed statement. “A patent owner has the right to defend a valid patent, and settlements are a tool that can allow this to happen without the burden of engaging in a costly, extensive legal battle.” Bieri said in the statement today she hasn’t reviewed the FTC filing. ‘Never Prevented Competition’ The settlements don’t prevent competition beyond a patent’s life, David Belian, a spokesman for the Generic Pharmaceutical Association, a Washington-based trade group, told Bloomberg News. “Patent settlements have never prevented competition beyond the patent expiry, and generally have resulted in making lower-cost generics available months and even years before patents have expired,” Belian said today. The agency sued Schering-Plough over the patent settlements in 2001. The Supreme Court in 2006 refused to give the agency more power to crack down on the practice when it left intact a decision by a federal appeals court that overturned FTC sanctions against Schering-Plough in 2005. Merck bought Schering-Plough in November, 2009. U.S. courts, including federal appeals panels in New York , Atlanta and Washington , have upheld such agreements as long as they don’t delay the entry beyond the expiration terms of patents held by the brand companies. Efforts in Congress Past efforts to persuade Congress to pass a law making the settlements illegal have failed. Senators Herb Kohl , a Wisconsin Democrat, and Charles Grassley , an Iowa Republican, have introduced a measure that would bar the settlements. It has run into opposition from lawmakers who say the deals actually help consumers. The FTC is an independent agency with authority over antitrust and consumer-protection matters that has three Democratic and two Republican commissioners. The FTC doesn’t answer to the White House or the Justice Department and the agency has the power to litigate its own cases. The case is In Re: K-Dur Antitrust, 10-02077, 10-02078 and 10-02079, U.S. Court of Appeals for the Third Circuit (Philadelphia). To contact the reporter on this story: Sara Forden in Washington at sforden@bloomberg.net. To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net |
2024-06-09 | Bloomberg | Initial Jobless Claims in U.S. Unexpectedly Increased Last Week | U.S. initial jobless claims unexpectedly rose last week, a sign that the labor market is struggling to gain traction. Jobless claims increased by 1,000 to 427,000 in the week ended June 4, Labor Department figures showed today in Washington. Economists surveyed by Bloomberg News projected a drop in claims to 419,000, according to the median forecast. The number of people on unemployment benefit rolls and those receiving extended payments decreased. Some employers are cutting staff as demand slows because of elevated energy prices, falling house prices and tight credit. The economy generated the fewest jobs in May in eight months and the unemployment rate rose, a report showed last week. “The labor market is obviously struggling,” Michael Feroli , chief U.S. economist at JPMorgan Chase & Co. in New York , said before the report. “I expect claims to stabilize and eventually come down.” It was the ninth consecutive week that claims were above 400,000. They reached a two-year low of 375,000 in February. The median forecast was based on a survey of 49 economists. Estimates ranged from 400,000 to 430,000. The Labor Department revised the prior week’s figure to 426,000 from the 422,000 initially reported. Payrolls grew by 54,000 workers last month after increasing by 232,000 in April, Labor Department data showed last week. The jobless rate rose to 9.1 percent from 9 percent. Barclays Forecast Economists at Barclays Capital Inc. last week cut their forecast for the year to 2.5 percent growth from a prior estimate of 3.1 percent at the beginning of the year. Housing prices in 20 major cities dropped in March to the lowest level since 2003, according to data from S&P/Case Shiller released last month. Declining home values weigh on consumer confidence and curb the household spending that makes up 70 percent of the economy. Prices for regular gasoline that rose as high as $3.99 in early May also hurt confidence and spending, likely leading to less hiring. Those prices have since come down more than 20 cents, which may provide some relief. Today’s data showed the four-week moving average, a less volatile measure than the weekly figures, fell to 424,000 last week from 426,750. The number of people continuing to receive jobless benefits fell by 71,000 in the week ended May 28 to 3.68 million. The continuing claims figure does not include the number of Americans receiving extended benefits under federal programs. Those who’ve used up their traditional benefits and are now collecting emergency and extended payments decreased by about 52,100 to 3.99 million in the week ended May 21. The unemployment rate among people eligible for benefits, which tends to track the jobless rate, fell to 2.9 percent from 3 percent, today’s report showed. Claims Increase Twenty-six states and territories reported an increase in claims, while 27 reported a decrease. These data are reported with a one-week lag. Initial jobless claims reflect weekly firings and tend to fall as job growth -- measured by the monthly non-farm payrolls report -- accelerates. Some employers are still considering possible cuts to their workforce. Morgan Stanley (MS) , owner of the world’s largest brokerage, may eliminate more jobs at its wealth management unit as Barclays Capital cuts positions in its equities division worldwide. “As we continue to take actions to improve broker efficiency we may reduce our broker headcount below previously announced targets,” Morgan Stanley Chief Financial Officer Ruth Porat said at the Deutsche Bank Global Financial Services Conference on June 7. The unit, which had about 17,800 employees at the end of March, was previously aiming to reduce that figure to as little as 17,500, according to a spokesman for the bank. The firm cut 300 brokers at the division in the first quarter. Barclays Capital, the investment-banking unit of London- based Barclays Plc (BARC) , cut as many as 50 jobs in its equities unit, a person familiar with the matter said. General Motors General Motors Co. (GM) and Ford Motor Co. may enter contract talks with the United Auto Workers this year seeking to close as many as six assembly plants to boost profit while the union tries to save jobs amid an industry recovery. Kim Carpenter , a GM spokeswoman, said last month the company hasn’t decided how many plants it may close and what savings might result. Ford, which intends to close a plant in Minnesota late this year, also may choose to shutter Michigan and Ohio plants making slow-selling vehicles, industry researchers said. 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 |
2024-09-05 | Bloomberg | Michelle Obama Makes Personal Appeal in Convention Speech | Michelle Obama used an opening-night convention speech to take Americans inside the White House, asking them for the patience to give her husband a second term and contrasting President Barack Obama ’s life experience with Republican Mitt Romney’s. “I have seen firsthand that being president doesn’t change who you are -- no -- it reveals who you are,” the first lady said yesterday in her address to the Democratic National Convention in Charlotte , North Carolina. The crises of Obama’s first term “tested my husband in ways I never could have imagined,” she said. “He reminds me that we are playing a long game here and that change is hard, and change is slow, and it never happens all at once.” Michelle Obama’s speech, without saying Romney’s name, drew subtle yet unmistakable contrasts to the Republican presidential nominee’s background as the son of an executive and politician and his business career in finance. Romney, former Massachusetts governor and a co-founder of Boston-based private equity firm Bain Capital LLC, has a net worth that is estimated between $190 million and $250 million. The first lady described seeing her husband in the White House “in those quiet moments late at night, hunched over his desk, poring over the letters people have sent him” about their woes. “For Barack, success isn’t about how much money you make, it is about the difference you make in people’s lives,” she said. Rusted-Out Car She recalled how her husband used to pick her up for dates in a rusted-out car. She spoke of how her father kept working as a pump operator at a water plant after his multiple sclerosis diagnosis and how the president’s grandmother’s banking career was limited by a glass ceiling for women. “They didn’t begrudge anyone else’s success or care that others had much more than they did,” she said of their families. “In fact, they admired it.” And today, her husband “believes that when you’ve worked hard, and done well, and walked through that doorway of opportunity you do not slam it shut behind you. No. You reach back, and you give other folks the same chances that helped you succeed.” Rogan Kersh, Wake Forest University ’s provost, said the first lady “faced an especially thorny task in her address: reintroduce herself and her husband, among the most widely- covered figures in America today. By striking a poignant note -- fearing that the presidency would change the man she married, but reaffirming in powerfully personal terms that he retains the qualities she fell for -- she fulfilled the task.” Key Constituencies Michelle Obama spent this morning working to energize Democratic constituencies, whose support will be critical in the coming election: blacks, Hispanics and gay voters. In separate morning remarks to the black and Hispanic caucuses, and later at a luncheon honoring homosexual lawmakers and delegates, the first lady said hard work will be crucial to winning what’s expected to be a close election. “We don’t have a single minute to waste,” she said at the reception organized by the Human Rights Campaign, a lesbian, gay, bisexual and transgender (LGBT) advocacy group based in Washington. “We need you all out there every single day between now and November the 6th.” She noted that the president won North Carolina by 14,000 voters, or five votes per precinct, and Florida by 230,000 votes -- or 36 votes per precinct. “You may finish lunch but after that I want you all to get out there and think about who your 36 votes are going to be,” she said. Latino Appeal Her convention night appearance came after that of Julian Castro, the 37-year-old mayor of San Antonio , Texas , and the first Hispanic to keynote a party convention. He reinforced the first lady’s themes, describing his upbringing by his single mother and casting Romney as oblivious to most Americans’ financial limitations. “We know that in our free market economy some will prosper more than others,” said Castro. “What we don’t accept is the idea that some folks won’t even get a chance. And the thing is, Mitt Romney and the Republican Party are perfectly comfortable with that America. In fact, that’s exactly what they’re promising us.” Castro chided Romney for his advice this year to students to start businesses by borrowing money from their parents, saying Romney “has no idea how good he’s had it.” Voter Appeals Their appearances at Time Warner Cable Arena aimed to energize two crucial voting blocs -- women and Latinos -- with whom the president enjoys an advantage over Romney. Still, Obama is running behind with white voters, raising the importance of a strong turnout among non-whites in a tight race as they enter the last two months of the campaign. Obama was leading Romney 47 percent to 46 percent in Gallup’s daily tracking poll, covering Aug. 29-Sept. 3. The first lady sought to underscore the personal stories behind the political and policy challenges Obama, 51, took on with her by his side, including dealing with the worst economic crisis since the Great Depression and expanding health insurance coverage and college tuition assistance. “I hear the determination in his voice as he tells me, ’You won’t believe what these folks are going through, Michelle -- it’s not right. We’ve got to keep working to fix this. We’ve got so much more to do’,” she said. Deeply Moved Kennis Wilkins and his wife, Brenda, business owners from Williamston, North Carolina, had front-row seats for the first lady’s speech and said they were deeply moved by it. “She just told the American story,” said Wilkins, 58. “We can all be one, we can become anything we want.” Brenda Wilkins, 55, said Michelle Obama will be an important asset for her husband’s re-election. “We need the women, and the women are behind the first lady,” she said. Tobe Berkovitz , a communication professor at Boston University , called her speech “brilliant,” in terms of its themes and personal focus, and “totally political.” “This speech will register with the voters until they return to thinking about their plight over the last four years,” he said. The president, who campaigned earlier in the day in the battleground state of Virginia , watched his wife’s remarks from the White House. That contrasted with Romney’s decision to make a special trip to the Republican National Convention in Tampa, Florida, last week, to join his wife, Ann Romney , on stage as she concluded her remarks emphasizing Romney’s commitment to his family and community. Close Race An ABC News/Washington Post survey released hours earlier showed Obama entering the convention with the highest unfavorable rating among registered voters of any incumbent going back to 1984, 49 percent unfavorable to 47 percent favorable. Romney had an unfavorable rating of 48 percent and a 43 percent favorable rating. Heavy rain marked the opening day of the convention. Though not as serious as the hurricane threat that had hovered over Republicans’ convention last week in Tampa, the weather nevertheless is forcing the Obama campaign to consider whether to keep the president’s acceptance speech tomorrow at Bank of America Stadium, which has almost 74,000 seats, or move it indoors to the smaller arena. To contact the reporters on this story: Margaret Talev in Charlotte, North Carolina at mtalev@bloomberg.net ; Lisa Lerer in Charlotte, North Carolina at llerer@bloomberg.net To contact the editor responsible for this story: Jeanne Cummings at jcummings21@bloomberg.net |
2024-08-10 | Bloomberg | Janus Strikes Dai-Ichi Deal Looking to Stem Redemptions | Janus Capital Group Inc. (JNS) , the fund company struggling to reverse 12 quarters of investor redemptions, lined up support from Japan ’s second-largest life insurer, sending its shares up the most in two years. Dai-ichi Life Insurance Co. (8750) , based in Tokyo , will buy a stake of as much as 20 percent in Denver-based Janus, owner of the Janus, Intech and Perkins funds, and plans to take a seat on the firm’s board of directors, according to a statement today. The life insurer will also invest $2 billion into Janus funds and help distribute them in Japan. Janus rose 10 percent to $8.46, the biggest gain since July 2010. “We think this is an undervalued asset and it may be a chance to get in at a good time,” Macrae Sykes, an analyst for Rye, New York-based Gabelli & Co., said today in a telephone interview. Sykes, who has a buy recommendation on the stock, expects Janus to use some of the money to create new products. Janus Chief Executive Officer Richard M. Weil, a former executive at Pacific Investment Management Co., the bond-fund manager co-founded by Bill Gross and now owned by German insurer Allianz SE (ALV) , is partnering with Dai-Ichi Life as falling markets and client withdrawals erode assets and the fees charge for overseeing them. Janus lost 47 percent of its market value over the past three years through Aug. 9. ‘Sizable’ Redemptions “The fundamental story for Janus’ core equity business remains the same,” Michael Kim , an analyst with Sandler O’Neill & Partners LP in New York , said today. “They are still dealing with sizeable redemptions and performance is an issue,” said Kim, who has a sell rating on the stock. Janus announced the deal a day after Los Angeles-based TCW Group Inc. ended 11 years under the ownership of Societe Generale SA, France ’s second-largest bank, through a buyout led by Carlyle Group LP (CG) that will give management a 40 percent stake. Weil said he had been talking to Dai-ichi about a relationship since he first came to Janus in 2010. The deal, he said, will help Janus’s efforts to diversify, both internationally and in its lineup of products. A “significant portion” of the money Dai-ichi invests with Janus will be in fixed-income, he said. “We are a high beta stock with a large exposure to equities,” Weil said in an interview. “Moderating that will make us a stronger company. Fixed income is too small a part of our business.” Shares Rise Before today, Janus had risen 22 percent this year, compared with an 11 percent increase in Standard & Poor’s 20 member index of asset managers and custody banks. “Janus is a powerful franchise in the largest asset management market in the world,” said Hideto Masaki, representative director and deputy president of Dai-ichi Life. “We are confident in Janus’ quality and leadership, and we are very pleased to acquire a substantial stake in the future growth of the firm at a level that we believe offers significant upside.” The purchase is Dai-ichi Life’s first overseas acquisition in asset management. The Japanese insurer plans to purchase between 15 percent to 20 percent of Janus stock within one year on the open market and potentially through options issued by Janus, according to the statement. Dai-ichi Life, which agreed to buy Tower Australia Group Ltd. for A$1.2 billion ($1.3 billion) in December 2010, has existing life insurance businesses covering four countries. Shares of Dai-ichi Life rose 1.1 percent to 80,900 yen at the close on the Tokyo Stock Exchange today before the statement was released. The stock has advanced 8.3 percent this year, outperforming the 4.3 percent gain by the six-member Topix Insurance Index. To contact the reporter on this story: Charles Stein in Boston at cstein4@bloomberg.net To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net |
2024-09-28 | Bloomberg | BOE Says Bank Earnings Outlook May Limit Capital Raising | The Bank of England ’s Financial Policy Committee said market strains related to the euro-area debt crisis have dented the outlook for bank earnings and may impede their ability to strengthen balance sheets. “The committee had advised U.K. banks in June that if their earnings were strong, they should seek to build capital levels further,” it said in London today. “But events had lowered the likelihood that banks would be able to strengthen their balance sheets in this way over the short term.” Finance ministers and central bankers at the International Monetary Fund’s and World Bank ’s annual meeting last week urged European officials to intensify efforts to contain the region’s debt crisis amid the specter of a Greek default. Today’s FPC report recommended that banks take “any opportunity” to strengthen capital and liquidity. “This could include raising long-term funding whenever possible and ensuring that” any profit decline is reflected in “discretionary distributions” such as pay and dividends, according to the report. In the event of a shock, it “would be natural for banks’ capital and liquidity ratios to be run down to ensure that lending” isn’t constrained. The interim FPC, which met Sept. 20, also said there have been “severe strains in financial markets” since its last meeting in June. These “stemmed in large part from continuing concerns” about debt levels in some nations, the committee said. “Anxiety about the consequences of these issues for banks had increased materially and, in turn, the perceived vulnerabilities of banks were adding to strains.” Rights Issues “It leaves the door open for rights issues,” said Cormac Leech, an analyst at Canaccord Genuity Ltd. in London. “Essentially the Bank of England is saying, ‘we want you to keep lending to the real economy; if you’re not able to do it, run your capital ratios down and raise more capital.’” The IMF said in a report this month that the euro-region crisis has left European lenders with as much as 300 billion euros ($408 billion) of credit risk. The Bank of England said in a separate report today that lenders in a survey “pointed to adverse wholesale conditions as a key factor which might constrain future lending.” The FPC met 12 days after the bank’s Monetary Policy Committee voted to maintain the key interest rate at a record low and leave its bond-purchase plan unchanged. Most MPC officials said it was “increasingly probable” that more stimulus may be needed to bolster the recovery. Easing Pressure “This announcement by the FPC is a good illustration of how macroprudential policy is viewed as a useful complement to monetary policy,” said Simon Hayes , an economist at Barclays Capital in London and a former central bank official. “The Bank of England now has a vehicle for more direct intervention in credit markets, taking some of the pressure off monetary policy for controlling the credit cycle.” Royal Bank of Scotland Group Plc (RBS) swung into a loss in the first half on writedowns on Greek debt and costs for compensating insurance clients. Barclays Plc (BARC) said last month it plans to cut about 3,000 jobs this year after second-quarter investment banking profit fell 27 percent amid a “difficult operating environment.” Europe’s Stoxx 600 Index fell 0.3 percent as of 12:47 p.m. in London. It has tumbled 22 percent from its 2011 high on Feb. 17. The Bloomberg Europe Banks and Financial Services Index fell 1 percent, taking its decline this year to 30 percent. Tools The FPC, part of a regulatory overhaul by Britain’s government, said it will continue to debate which tools it will need to promote financial stability once its powers are finally established. It said it may need power over the balance sheets of financial institutions, terms and conditions of some transactions and market structures. Among the tools it considered were maximum leverage ratios, countercyclical capital and liquidity buffers, limits on loan- to-value ratios and disclosure requirements. The FPC is due to report to the U.K. Treasury in the first half of 2012 and said today it may initially recommend a “relatively narrow” set of tools that could be broadened over time. In its Credit Conditions Survey, the Bank of England said that the availability of secured credit to households increased in the three months to early September and lenders expected availability to increase a “little further” in the coming three months. Demand for such loans also increased. Lenders in the survey reported that default rates on mortgages fell in the last three months and were expected to be unchanged in the coming quarter. The survey was conducted from Aug. 16 to Sept. 7. To contact the reporter on this story: Jennifer Ryan in London at jryan13@bloomberg.net To contact the editor responsible for this story: Matthew Brockett at mbrockett1@bloomberg.net |
2024-03-16 | Bloomberg | Aflac, IBM, Las Vegas Sands, Morton’s: U.S. Equity Preview | Shares of the following companies may have-unusual moves in U.S. trading. Stock symbols are in parentheses, and prices are as of 8:15 a.m. in New York. Aflac Inc. (AFL) : The insurance company, which gets most of its revenue in Japan , was raised to “buy” from “hold” at Deutsche Bank AG. BPZ Resources Inc. (BPZ) : The oil and gas company with operations in Peru reported sales for the fourth quarter that beat the average analyst projection, Bloomberg data show. International Business Machines Corp. (IBM) declined 1.1 percent to $157.31. The computer services company was cut to “market perform” from “outperform” at Sanford C. Bernstein & Co. Las Vegas Sands Corp. (LVS) : The casino company was cut to “hold” from “buy” at Argus Research Corp. Morton’s Restaurant Group Inc. (MRT) : The Chicago-based steakhouse chain said it’s exploring strategic alternatives, including a potential sale. Nvidia Corp. (NVDA) : The maker of three dimensional graphics processors said Chief Financial Officer David White resigned for personal reasons. Rambus Inc. (RMBS) rose 7.9 percent to $20.25. The company that sells technology used in computer memory renewed its five-year agreement with Toshiba Corp. Rambus receives royalty payments based on shipments in the agreement, which covers DRAM memory controllers. Rue21 Inc. (RUE) : The teen retailer said first-quarter earnings will be 27 cents to 29 cents a share, compared with the average estimate of 29 cents, according to Bloomberg data. Universal Display Corp. (PANL) rallied 7.4 percent to $41.00. The developer of technologies used in flat panels posted fourth-quarter revenue that exceeded the average forecast of analysts surveyed by Bloomberg. Vera Bradley Inc. (VRA) : The maker of women’s handbags reported fourth-quarter earnings per share that exceeded the average analyst estimate by 43 percent, on an adjusted basis, according to data compiled by Bloomberg. To contact the reporter on this story: Jennifer Johnson in New York at jjohnson156@bloomberg.net To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net |
2024-01-29 | Bloomberg | Doctors Heavy Caseloads Put Patients at Risk, Study Shows | Almost half of hospital doctors said they routinely see more patients than they can safely manage, leading in some cases to unneeded tests, medication errors and deaths, according to a survey by researchers at Johns Hopkins University. Seven percent of 506 hospital-based physicians surveyed said their heavy workload likely led to a patient complication, and 5 percent reported it probably caused a death over the past year. The findings are published in a research letter released yesterday by JAMA Internal Medicine. Doctors are increasingly taking on more patients to compensate for cuts in payments from health insurers, the researchers said. That workload is projected to increase as the 2010 health law expands insurance coverage to 30 million more Americans. The researchers, based at Johns Hopkins University in Baltimore, said there is a risk that rising patient volumes may increase costs by decreasing quality. “Excessively increasing the workload may lead to suboptimal care and less direct patient care time, which may paradoxically increase, rather than decrease costs,” the study’s authors wrote. Forty percent of doctors said they saw an unsafe number of patients at least once a month with 25 percent saying it prevented them from fully discussing treatment options or answering questions, according to the survey. Researchers electronically surveyed doctors in November 2010 using a physician networking website. The average age of the physicians was 38 with an average salary of $180,000. Doctors said they could safely manage 15 people during a shift if they were able to devote 100 percent of their time to patient care. Lawmakers have moved to prevent medical errors by putting restrictions on the number of hours doctors in training can work and set standards for nursing staffing levels. There are no similar limits on workloads for physicians who focus primarily on care of hospitalized patients. To contact the reporter on this story: Shannon Pettypiece in New York at spettypiece@bloomberg.net To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net |
2024-10-01 | Bloomberg | American Express to Pay $112.5 Million Over Credit-Card A | American Express Co. (AXP) , the biggest credit-card issuer by purchases, will pay $112.5 million to settle claims it violated consumer safeguards from marketing to collections in products sold to about 250,000 customers. “Several American Express companies violated consumer protection laws and those laws were violated at all stages of the game -- from the moment a consumer shopped for a card to the moment the consumer got a phone call about long overdue debt,” Consumer Financial Protection Bureau Director Richard Cordray said today in a statement announcing the settlement. Units of American Express, which is led by Chief Executive Officer Kenneth I. Chenault, deceived customers who signed up for a particular card, leading them to believe they would get $300 and bonus points, according to the statement. The New York- based firm also charged illegal late fees, discriminated against some older applicants and failed to report consumer disputes to credit-reporting companies, regulators said. The settlement involves state regulators from Utah , where American Express owns banks, and four federal agencies, according to statements from CFPB and the Office of the Comptroller of the Currency, the Federal Reserve and the Federal Deposit Insurance Corp. Under the agreement, the company will refund about $85 million to customers and pay civil penalties totaling $27.5 million to the four federal regulators, with $14.1 million going to the consumer bureau. American Express neither admitted nor denied regulators’ accusations in today’s settlement, which its board approved on Sept. 24, according to the Fed’s consent order. ‘Industrywide Review’ “Reserves were established in previous quarters for a substantial portion of these fines and the estimated customer refunds,” Michael O’Neill , an American Express spokesman, said in a statement. “Separately, the company is continuing its own internal reviews and cooperating with regulators in their ongoing regulatory examination of add-on products in accordance with the industrywide review.” The settlement is the third involving the consumer bureau, which was created by the Dodd-Frank Act of 2010. The agency previously resolved claims against card issuers Capital One Financial Corp. (COF) and Discover Financial Services (DFS) over sales of add-on products such as credit monitoring and debt protection. Kent Markus, CFPB’s assistant director for enforcement, said the credit-card industry has drawn the agency’s attention as it looks where to focus early on. “This is an area where there is substantial consumer harm or risk of consumer harm,” he said today in a conference call with reporters. Consumer Complaints The case stems from practices at American Express from 2003 to this year, according to the CFPB. Mark Pearce, director of the FDIC’s depositor and consumer protection unit, said the investigation originated in an examination of American Express banks, partly in response to consumer complaints. Some complaints related to the Blue Sky card that AmEx offered in exchange for a $300 payment that some consumers never got, Pearce said. The CFPB started work in July 2011 and the agency and other regulators uncovered more violations. “We have been troubled by the range of problems we discovered,” Markus said. The banks charged late fees to some customers based on a percentage of the debt owed, violating a ban in the Credit Card Accountability, Responsibility and Disclosure Act of 2009, according to legal documents. Some applicants for cards over the age of 35 may have faced discrimination because the bank didn’t fully implement its credit-scoring system. Old Debts American Express also deceived some customers into believing there were benefits to paying off old debts, regulators said. Consumers were wrongly told paying them off would improve their credit scores, and the companies weren’t reporting the information to credit-reporting firms. The Fed, FDIC and OCC also pursued coordinated actions against the company’s banking operations, including American Express Centurion Bank, American Express Bank FSB and American Express Travel Related Services. The company agreed to improve its compliance systems, which “failed to adequately identify, monitor, and control risks associated with the services provided,” according to the Fed’s order. American Express has 90 days to submit a plan to the Fed for enhancing firm-wide compliance in addition to the central bank’s $9 million penalty. Under the OCC settlement, American Express will pay $6 million in restitution to about 17,000 customers of the federal savings bank for the company’s failure to manage vendors involved in deceptive practices. The regulator also ordered the bank to fix its oversight of vendors. American Express shares rose $1.14 to $58 at 2:25 p.m. The stock has climbed 23 percent this year. To contact the reporters on this story: Carter Dougherty in Washington at cdougherty6@bloomberg.net ; Jesse Hamilton in Washington at jhamilton33@bloomberg.net To contact the editor responsible for this story: Maura Reynolds at mreynolds34@bloomberg.net |
2024-02-03 | Bloomberg | Canada January Labor Force Survey (Text) | Following is the text of Canada 's labor force survey released by Statistics Canada. Employment was virtually unchanged in January, and the unemployment rate edged up 0.1 percentage points to 7.6% as more people searched for work. Compared with 12 months earlier, employment rose by 129,000 (+0.7%), with most of the growth occurring in the first six months of this period. Employment Both full-time and part-time employment were essentially unchanged in January. Compared with 12 months earlier, the number of full-time workers was up 1.2% (+170,000), while the number of part-time workers declined 1.2% (-41,000). At the same time, the total number of hours worked grew 1.4%, with all of the increase in the first half of the period. Employment decreased in Prince Edward Island in January and was little changed in the other provinces. Employment increased in educational services; information, culture and recreation; and in "other services", such as personal and household services. There were declines, however, in professional, scientific and technical services; and in finance, insurance, real estate and leasing. The number of employees increased by 39,000 in January, with the gains shared between private and public sector workers. At the same time, the number of self-employed fell by 37,000. Compared with 12 months earlier, all of the employment gains have been among private sector employees (+1.3%), while both self-employment and public sector employment were virtually unchanged. Employment increased in January among women aged 55 and over and was little changed for the other demographic age groups. Unemployment rate Industry perspective In January, employment in education increased by 23,000. At the same time, employment increased by 19,000 in information, culture and recreation. Employment in "other services" rose by 14,000, bringing growth over the past 12 months to 5.5% (+42,000), one of the highest rates of all industries. There were fewer people employed in January in professional, scientific and technical services, down 45,000. Despite this decline, employment in the industry remained 23,000 (+1.8%) above the level of 12 months earlier. Employment in finance, insurance, real estate and leasing fell for the fifth consecutive month, down 23,000 in January. This left employment in the industry 50,000 (-4.6%) below its level of January 2011. While employment in natural resources was little changed in January, it has posted the highest 12-month rate of growth of all industries, up 8.5% or 28,000 since January 2011. Employment in January edged up in manufacturing, bringing gains over the last two months to 36,000. Despite the recent increase, the number of factory workers was down 2.5% (-44,000) from the level of 12 months earlier. Provincial summary Employment in Quebec edged up in January and the unemployment rate fell 0.3 percentage points to 8.4%. Compared with January 2011, employment in the province was down 1.1% (-45,000) as a result of losses in the final quarter of 2011. While employment in Alberta was little changed in January, the province posted the highest growth rate (+3.9% or +80,000) compared with 12 months earlier. The unemployment rate, at 4.9%, remained the lowest among all provinces. In Ontario, employment was little changed in January. However, an increase in the number of people searching for work pushed the unemployment rate up 0.4 percentage points to 8.1%. In the 12 months to January 2012, employment in the province increased 0.7% (+44,000), with all the growth occurring in the first half of the period. Employment in Prince Edward Island fell by 1,000 and the unemployment rate rose by one percentage point to 12.2%. More women aged 55 and over working Employment increased by 19,000 in January among women aged 55 and over. Employment for this age group grew 3.5% (+49,000) compared with 12 months earlier, in large part a result of the aging of the population. Men aged 55 and over saw little employment change in January. Their 12-month employment growth rate of 3.1% (+52,000) was entirely the result of the aging population. Among people aged 25 to 54, there was little employment change in January. Compared with 12 months earlier, employment for this age group was up 0.5% (+59,000). Employment among youths aged 15 to 24 edged down for the fourth consecutive month. As a result, youth employment was 31,000 (-1.2%) below its level in January 2011 and the unemployment rate was 14.5%. Note to readers Every January, seasonally adjusted estimates from the Labour Force Survey (LFS) are revised using the latest seasonal factors. Seasonally adjusted series have been revised going back three years, starting with January 2009. These series became available on CANSIM on January 27, 2012 (tables 282-0087 to 282-0094, 282-0100, 282-0116 and 282-0117) and are now available for download free of charge. The LFS estimates are based on a sample, and are therefore subject to sampling variability. Estimates for smaller geographic areas or industries will have more variability. For an explanation of sampling variability of estimates, and how to use standard errors to assess this variability, consult the "Data quality" section of the publication Labour Force Information (71-001-X, free). Unless otherwise stated, this release presents seasonally adjusted data, which facilitates comparisons by removing the effects of seasonal variations. For more information on seasonal adjustment, see Seasonal adjustment and identifying economic trends. Statistics Canada is moving to one release time, 8:30 a.m., for all data releases in The Daily. This will mean a change in the release time for the LFS, which is currently 7:00 a.m. This change will be implemented with the release of LFS data on April 5, 2012. To contact the reporter on this story: Ilan Kolet in Ottawa at ikolet@bloomberg.net To contact the editor responsible for this story: Marco Babic at mbabic@bloomberg.net |
2024-11-17 | Bloomberg | Medicare's Berwick Defends Health Law From Republicans in First Testimony | Republicans complained at Medicare Administrator Donald Berwick ’s first appearance before Congress that they have been unable to review his work implementing President Barack Obama ’s health-care overhaul. Obama appointed Berwick in July without Senate approval, denying Republicans a chance to question him in a confirmation hearing. He defended the law today before the Finance Committee, which supervises Medicare, the health insurance program for the elderly and disabled, and the Medicaid program for the poor. The session was held to just over an hour. The hearing previewed exchanges to come next year as Republicans take control of the House. Republicans on the panel didn’t question Berwick about remarks he’s made about rationing care or new boards and offices within his agency the law creates to slow health spending. Senator Orrin Hatch , Republican of Utah, said the hearing was too short. “It’s like asking us to drain the Pacific Ocean with a thimble,” he said, calling the hearing “pathetic.” Berwick called the health law “the best opportunity in a generation to make progress” on improving health care. Prompted by Senator Debbie Stabenow , Democrat of Michigan, he later warned that if Republicans succeeded in repealing the law, as they have promised, the outcome would be “terrible.” Repeal Consequences A repeal may mean Medicare beneficiaries returning 1.8 million checks for $250 each that they received under the law for drug costs and a loss of improved benefits, such as better coverage for preventive health services, he said. Efforts at Berwick’s agency to reduce hospital-acquired infections and increase anti-fraud efforts might stop, he said. “I can’t think of a worse plan than repealing this law,” he said. Senator Max Baucus , the Montana Democrat who leads the Finance Committee, said repealing the law signed in March would deepen the budget deficit. The overhaul would reduce the growth of spending in Medicare and Medicaid by about $455 billion during a decade, according to the Congressional Budget Office, the accounting arm of Congress. Republicans such as Kansas Senator Sam Brownback have said those cuts should be repealed. Texas Senator John Cornyn has introduced legislation to repeal a new board empowered to propose further spending reductions in Medicare, beginning in 2015. Twelve Republicans have signed on as co-sponsors to Cornyn’s bill, including Hatch. While no Republicans used the word “rationing” today in their questions to Berwick, he alluded to the topic himself. Needed Care “My principle is that patients should get all of the care they want and need, when and how they want and need it,” he said in response to a question from Senator Ron Wyden , Democrat of Oregon. Wyden told Berwick he wanted an approach to end-of- life care that is “the opposite of rationing.” Republicans have criticized Berwick for remarks he made to the journal Biotechnology Healthcare in June 2009. It had asked him whether research into the comparative benefits of different medical treatments might lead to rationing. “The decision is not whether or not we will ration care -- the decision is whether we will ration with our eyes open,” he responded in the interview. “And right now, we are doing it blindly.” In a prepared statement distributed before the finance hearing, Berwick said that the health law won’t cut guaranteed Medicare benefits “nor will it ration care.” He didn’t say the line during his testimony. To contact the reporters on this story: Alex Wayne in Washington at awayne3@bloomberg.net. To contact the editor responsible for this story: Adriel Bettelheim at abettelheim@bloomberg.net |
2024-10-15 | Bloomberg | Reid Slams House Debt-Cap Plan With Changes to Obamacare | Senate Majority Leader Harry Reid rejected a House plan to halt the fiscal impasse, as he tried to build support for an emerging bipartisan Senate agreement to end the government shutdown and prevent a U.S. default. The House proposal, which Republican leaders detailed to their members just hours earlier today, “can’t pass the Senate and won’t pass the Senate,” said Reid, a Nevada Democrat. It is “an extreme piece of legislation and it’s nothing more than a blatant attack on bipartisanship.” Reid’s comments were an attempt to force House Speaker John Boehner to accept the Senate agreement and rely mostly on Democratic votes in the House to pass it. Reid has said the Senate could come up with its deal as soon as today, and final votes could occur later this week. The House and Senate plans would both fund the government through Jan. 15, 2014, and suspend the U.S. debt limit until Feb. 7. As the differences narrow between the parties, a House vote as soon as tonight would test whether Republicans are willing to raise borrowing authority and end the shutdown without major changes to the 2010 health-care law. “Our leadership met with our members today, trying to find a way forward in a bipartisan way,” Boehner said after the meeting. “There are a lot of opinions about what direction to go. There have been no decisions about what exactly we will do.” Boehner didn’t say that the House would move ahead with the plan Republican aides and lawmakers described this morning. Reid Comments Reid said on the Senate floor today that credit-rating companies could downgrade the U.S. as soon as tonight. The main ratings companies have made no statements signaling an imminent downgrade. Moody’s Investors Service and Standard & Poor’s have stable outlooks on their U.S. ratings. John Piecuch, a spokesman for S&P, reiterated yesterday in an e-mail that the firm’s AA+ ranking already “incorporates the current level of discord” in Washington. Fitch Ratings , which has a negative outlook on the U.S.’s AAA grade, has said that it’s considering the budget impasse in its review of the ranking. The House proposal goes beyond the Senate with two smaller changes to the health care law. It would delay for two years a medical-device tax and prevent the government from contributing to the health insurance of members of Congress, the president, the vice president and the Cabinet. Health Law The plan falls far short of Republican efforts last month to defund or delay major pieces of the 2010 health law. Boehner told Republicans the approach was the chamber’s only possible strategy to respond to the emerging Senate deal that he described as a hand grenade being lobbed at the House, said Representative John Fleming , a Louisiana Republican. House Democratic Leader Nancy Pelosi of California said she didn’t think Boehner would “have the votes” to pass the Republican proposal. White House spokeswoman Amy Brundage in a statement today said Obama has repeatedly said that lawmakers “don’t get to demand ransom for fulfilling their basic responsibilities to pass a budget and pay the nation’s bills,” saying that’s what the House Republican proposal does. There are obstacles, including the disagreements between the Senate and the House. Furthermore, senators opposed to the deal may stall a final vote. Additionally, some House Republicans may oppose Boehner’s plan because it doesn’t go far enough in changing the health law. ‘Financially Irresponsible’ “Both plans are financially irresponsible,” said Representative Mo Brooks, an Alabama Republican. “Both kick the can down the road. Both force America to deal with a debt crisis where we’re weaker because we incur more debt.” Given objections from the White House and House Democratic leaders, Boehner may need to find all the votes for the plan in his own party, meaning that he can lose the support of no more than 15 Republicans. “For the most part we’re on board,” Fleming said, “There are a number of us that want to see more.” The emerging contours of an agreement would stave off a potential default, open shuttered federal services and change the immediate deadlines in favor of three new ones over the next four months, including a Dec. 13 target date for a budget conference between the House and Senate. Comprehensive Deal “There are productive conversations going on with the Republican leader,” Senate Majority Leader Harry Reid said today on the Senate floor, adding that he was “confident” a comprehensive deal could be reached this week to avoid a “catastrophic default.” Reid has been working with Senate Minority Leader Mitch McConnell of Kentucky. U.S. lawmakers, who have governed from fiscal crisis to fiscal crisis for more than two years, may be setting up more crises in the near future. The agreement would delay the next major deadline -- the Jan. 15 lapse in government funding -- until after the holiday shopping season. Benchmark Treasury 10-year yields rose four basis points, or 0.04 percentage point, to 2.72 percent at 11:53 a.m. New York time, according to Bloomberg Bond Trader prices. The rate touched 2.74 percent, the highest since Sept. 23. The Stoxx Europe 600 Index gained 0.8 percent to close in London today at its highest level in almost four weeks. The Standard & Poor’s 500 Index slipped 0.2 percent to 1,706.08 at 12:22 a.m. Delay Tactics There is a potential obstacle to a Senate agreement. A single senator would be able to use procedural tactics to push a final vote past the Oct. 17 lapse in borrowing authority. If the House votes tonight, the Senate would be able to pass its plan no later than Oct. 18, before the government starts missing promised payments. The U.S. will have enough cash and income revenue to avoid missing payments until Oct. 22 at the earliest, according to the Congressional Budget Office. Texas Republican Senator Ted Cruz , who spoke for more than 21 hours during a budget debate last month, wouldn’t rule out stalling maneuvers, saying he wants to see the details of the plan. The House Republican alternative would prevent the government from making any employer-side contribution to the health insurance of members of Congress, the president, the vice president and the cabinet. Obama has insisted that Congress raise the $16.7 trillion U.S. debt limit without add-ons and that stopgap spending bills be free of policy conditions. Democratic Votes The emerging Senate agreement again put pressure on Boehner, who has a 232-200 Republican majority. He may have to decide whether to side with hardliners insistent on changes to Obamacare or rely on Democratic votes to pass a bipartisan Senate plan through the House. Reid and McConnell may release their plan’s details as early as today, after conversations that started over the weekend. Democrats want as long a debt-limit increase as possible and as short a government funding extension at Republican-preferred levels. Republicans want the opposite. House Democratic leaders are scheduled to meet at the White House with Obama at 3:15 p.m. today. Possible sticking points to a Senate deal late yesterday included whether Democrats would agree to Republican demands that the Treasury Department be barred from using so-called extraordinary measures to extend the debt-limit deadline after Feb. 7. Such maneuvers pushed forward the deadline for five months this year, though it’s not clear how much time they would buy in 2014. Obama, McConnell Obama spoke with McConnell yesterday and said the administration wants flexibility for the Treasury Department’s borrowing, according to a person familiar with the conversation who requested anonymity to describe private discussions. The House proposal would bar the extraordinary measures and Reid cited that as one of his major objections. Yesterday’s version of the Senate plan would postpone a reinsurance fee the government is levying on health plans for the first three years of the health-care exchanges -- amounting to $63 a worker next year, said the person familiar with the talks. Labor unions, aligned politically with Democrats, have asked for the delay. That provision and a provision sought by Senate Republicans on verifying the income of those receiving subsidies may both get dropped, said a person familiar with the Senate talks, speaking on condition of anonymity to discuss the private conversations. Must-Pass Measure Democrats could claim that the Senate agreement is a trade of health-law measures favored by each party that just happens to be linked to a debt-ceiling increase and spending bill free of policy conditions. Republicans could say they got health-law changes attached to the must-pass measures. The Senate agreement also would give federal agencies flexibility to manage the across-the-board spending cuts known as sequestration if they occur in 2014. The partial government shutdown began Oct. 1 after Republicans insisted on changes to the 2010 Patient Protection and Affordable Care Act. Backed by Cruz, they started with a plan to defund the law and ended up seeking a one-year delay of the requirement for individuals to purchase health insurance. To contact the reporters on this story: Richard Rubin in Washington at rrubin12@bloomberg.net ; Kathleen Hunter in Washington at khunter9@bloomberg.net ; Roxana Tiron in Washington at rtiron@bloomberg.net To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net |
2024-05-01 | Bloomberg | Cnooc Climbs to Biggest Premium as Output Grows: China Overnight | Cnooc Ltd. (883) gained in New York to trade at the biggest premium over its Hong Kong shares in two weeks as data showed manufacturing expanded in the world’s two largest economies last month. American depositary receipts of China ’s largest offshore oil producer fetched 1 percent more in the U.S. than in Hong Kong after markets there were closed for a holiday. It was the biggest premium among dual-listed stocks in the Bloomberg China- US Equity Index (CH55BN) of the most-traded Chinese equities in the U.S. The gauge advanced 1.1 percent to 104.65 in New York, bringing its gain this week to 0.4 percent. Manufacturing in China, the world’s second largest economy after the U.S., grew for a fifth month in April, while factory output in the U.S. rose at the fastest pace in 10 months, reports yesterday showed. The Shanghai Composite Index’s (SHCOMP) longest bear market since 2005 is ending as the government loosens monetary policy to bolster the economy, according to Morgan Stanley Huaxin Securities and Guotai Junan Securities Co. The manufacturing numbers “are confirmation that there won’t be a hard landing,” said Christian Deseglise, the New York-based managing director of HSBC Global Asset Management for the Americas, said in a phone interview. “Investors who are looking at the Chinese market should be looking at the valuation of the equities. We are at levels that are historically very, very low.” Manufacturing Gains The IShares FTSE China 25 Index Fund (FXI) , the biggest Chinese exchange-traded fund in the U.S., rose 1.1 percent to $38.35 yesterday, the highest close since March 16. The MSCI China Index (MXCN) of Hong Kong-traded shares trades for 9.8 times earnings for member companies, compared with a 10.6 times average valuation for stocks on the MSCI Emerging Market Index. The Standard & Poor’s 500 Index (SPX) gained 0.6 percent yesterday after a report showed that the Institute for Supply Management’s U.S. factory index rose to 54.8 last month, the fastest growth since June. In China, the Purchasing Managers’ Index climbed to a 13- month high of 53.3, from 53.1 in March, the nation’s statistics bureau and logistics federation said yesterday. That compared with the 53.6 median estimate in a Bloomberg survey of 27 economists. Exchanges on China’s mainland were shut over the first two days of the week. Cnooc’s ADRs added 1.8 percent to $215.40 yesterday for a gain of 1.7 percent this week. The Beijing-based company rose 1.6 percent to HK$16.54, or $2.13, in Hong Kong on April 30, before markets closed yesterday for Labor Day. One ADR represents 100 shares. ‘Near-Term Bottom’ ADRs of China Life Insurance Co. (LFC) , the nation’s biggest insurer, advanced 2.6 percent to $40.99, trading at a premium of 1 percent over its Hong Kong-listed shares. Solar equipment makers including Yingli Green Energy Holding Co. (YGE) and Suntech Power Holdings Co. (STP) led gains in the Bloomberg China-US gauge yesterday as Citigroup Inc. said there are “signs of a near-term bottom” for the shares as demand for their products picks up. Yingli, a Baoding, China-based solar-module maker, jumped for a sixth day in New York, after Citigroup raised its recommendation on the stock to buy from neutral. The shares surged 5.2 percent to $3.83, the highest close since March 23. Citigroup’s field work shows that solar cell and module sales have increased “significantly” over recent weeks, signaling an “inflection point” for an industry that had been hurt by signs of oversupply, Timothy Arcuri , a technology analyst at Citigroup in San Francisco , wrote in a research note e-mailed yesterday. Short-Lived Bounce Suntech, the world’s biggest maker of solar panels, jumped 7.9 percent to $2.72, the biggest one-day gain since March 20. Trina Solar Ltd. (TSL) , China’s third-biggest maker of solar panels, climbed 3 percent to $7.48, the highest close since March 26. The bounce in solar stocks will be short-lived as governments in countries including Germany, the world’s biggest solar market, cut subsidies to the industry, which still suffers from overcapacity, according to Min Xu, an equity analyst at Jefferies Group Inc. “There are too many players,” Xu said yesterday by phone in New York. “We still don’t think, fundamentally, anything has changed.” China’s two domestic stock exchanges -- Shenzhen and Shanghai -- will lower fees charged for trading yuan-denominated shares by 25 percent from June 1, the nation’s securities regulator said in a statement on its website on April 30. Foreigners Restricted The Shanghai Composite Index of domestic Chinese stocks has rallied 12 percent from this year’s low reached on Jan. 5 as reports showing a revival in bank lending and manufacturing spurred investors to snap up shares trading at the cheapest levels on record, according to data compiled by Bloomberg. The gauge of mainland-listed stocks, restricted to local investors and qualified foreign institutional money managers, is still trading 61 percent below its 2007 peak after closing at 2,396.32 on April 27 before the holiday. The retreat, which kept the index below 20 percent of its peak for 423 days, ranks as the second-longest bear market since 1990, according to Birinyi Associates Inc. The Shanghai Composite may rally another 30 percent this year as lower reserve requirements boost bank shares, Jerry Lou, chief strategy officer at Morgan Stanley Huaxin in Shanghai, said in an April 24 phone interview. Three Chinese companies traded in the U.S. are scheduled to release earnings results this week. Youku Earnings Spreadtrum Communications Inc. (SPRD) , a Shanghai-based chip designer, will issue first-quarter earnings after the market closes tomorrow. The company’s shares fell 0.2 percent to $13.77 in New York yesterday. Youku Inc. (YOKU) , the biggest online video operator in China, and Seaspan Corp., a Hong Kong-based container ship operator, are expected to report earnings the following day, data compiled by Bloomberg show. Youku added 0.4 percent to $24.14 yesterday while Seaspan gained 4.4 percent to close at $17.44, the highest level since April 3. Of the 16 companies in the Bloomberg China-US index that have reported earnings since April 10, eight fell short of analysts’ forecasts, including Yanzhou Coal Mining Co. (YZC) and China Telecom Corp. (CHA) , according to data compiled by Bloomberg. To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net ; Leon Lazaroff in New York at llazaroff@bloomberg.net To contact the editor responsible for this story: Emma O’Brien at eobrien6@bloomberg.net |
2024-10-30 | Bloomberg | Aimco Pension Fund Says BlackBerry Proposals Still Not Concrete | Alberta Investment Management Corp., the Canadian pension fund, has been approached by at least four groups, including Fairfax Financial Holdings Ltd. (FFH) , to invest in BlackBerry Ltd. though it hasn’t seen a solid business plan yet for the smartphone maker. “There have been four or five different groups trying to do something here and nothing has gelled so far,” Leo de Bever, chief executive officer of Alberta Investment said in an interview on Business News Network television today in Toronto. “All the usual suspects on the investment side -- including my fund and other pension funds -- have been approached about this but there has been nothing concrete that would allow anybody to put money down.” Fairfax, the Toronto-based holding and insurance company, announced Sept. 23 its offer to take the struggling smartphone maker private with a group of investors. It hasn’t announced those partners or financing details for the bid. BlackBerry co-founders Mike Lazaridis and Douglas Fregin said this month they’re also considering a bid. Cerberus Capital Management LP, a New York-based private equity firm, also is said to be weighing an offer. Aimco hasn’t committed capital to any of the groups as the Nov. 4 deadline for the Fairfax bid approaches, de Bever said in a separate phone interview with Bloomberg News. “Nothing has come down to something that you can transact on,” he said in the phone interview. “As far as I know, we’re all being approached and we’re all scratching our heads and saying ’well, ok, what is the strategy?’” Circling Around De Bever declined to name the groups looking at BlackBerry, saying only that they are similar to Fairfax. “No one has really committed themselves to any group because none of the people that have been circling around BlackBerry has come up with a definitive business plan,” said de Bever, who oversees the fund managing C$68.6 billion ($65.5 billion) out of Edmonton , Alberta. Aimco isn’t discounting making an investment in the Waterloo, Ontario-based company, de Bever told the network. “I invest money for return and I’m waiting for a good business plan to invest in any solution that might be emerging,” he said. BlackBerry fell 1 percent to $8.23 at 3 p.m. in New York. Fairfax’s tentative bid is for $9 a share. To contact the reporter on this story: Katia Dmitrieva in Toronto at edmitrieva1@bloomberg.net To contact the editor responsible for this story: David Scanlan at dscanlan@bloomberg.net |
2024-11-06 | Bloomberg | Apple’s Ex-CEO Sculley Says Was Lining Up BlackBerry Bid | John Sculley , the former Apple Inc. chief executive officer, said he and a group of investors were lining up a bid for BlackBerry Ltd. and was surprised when the company abandoned its attempt to sell itself. “We were pretty confident that we had the funds to be able to do the deal,” Sculley, who now serves as chairman of Pivot Technology Solutions Inc ., said today on “Bloomberg Surveillance” with Tom Keene. Earlier this week, BlackBerry ended a review of its strategic options after the collapse of a $4.7 billion buyout deal. The smartphone maker is now raising $1 billion in convertible debt and will pursue a fresh turnaround plan under new interim Chief Executive Officer John Chen , the former chief of Sybase Inc. More BlackBerry News: Fairfax Financial Holdings Ltd. CEO Prem Watsa , who was leading the takeover bid for BlackBerry, walked away from the $4.7 billion buyout after struggling to raise financing, according to people familiar with the plan. Watsa is rejoining BlackBerry’s board and will work with Chen on a comeback strategy. “We were pretty confident that we had the funds to be able to do the deal, but we didn’t think Prem Watsa from Fairfax was going to be able get his deal fully funded,” Sculley said. “So we decided to wait and see what happened because we thought the price might drop or there may be other bidders coming in.” To contact the reporter on this story: Scott Moritz in New York at smoritz6@bloomberg.net To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net |
2024-08-01 | Bloomberg | Prudential Names Adler to Head $53 Billion Real Estate Unit | Prudential Financial Inc. (PRU) , the second-largest U.S. life insurer, promoted Eric Adler to chief executive officer of the real estate investment unit overseeing about $53 billion in assets. Adler, who has been chief investment officer of Prudential Real Estate Investors, will replace Allen Smith, who was hired to become CEO of Four Seasons Hotels and Resorts, according to a statement today from the Newark, New Jersey-based insurer. Prudential invests in real estate to generate fee income and back insurance policies. The unit has hired dealmakers to expand in Latin America and Asia. Adler joined PREI in 2010 as head of European operations. “Eric’s knowledge of global real estate markets brings a fresh view that will help us strengthen our current client relationships and build new ones as we seek to expand PREI’s business, particularly beyond its strong, well-known U.S. franchise,” David Hunt , CEO of Prudential Investment Management, said in the statement. Adler previously worked for Tishman Speyer Properties LP and Morgan Stanley. He graduated from the University of Arizona and has a graduate business degree from HEC Business School in France. To contact the reporter on this story: Zachary Tracer in New York at ztracer1@bloomberg.net To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-10-06 | Bloomberg | Former SEC Watchdog Violated Ethics Rules, Review Finds | The former internal watchdog for the U.S. Securities and Exchange Commission violated ethics rules by overseeing investigations that touched on people with whom he had “personal relationships,” an outside review found. H. David Kotz , who resigned as the agency’s inspector general in January amid questions about his tactics and conduct, shouldn’t have participated in a probe of the SEC’s office re- organization because he engaged in “extensive” and “flirtatious” communications with an employee associated with the project, according to the review. Kotz also shouldn’t have opened an investigation related to R. Allen Stanford’s Ponzi scheme because he was friends with a female attorney who represented victims of the fraud, investigators said in the 66-page report. The outside review of Kotz’s activities was led by David Williams , the inspector general of the U.S. Postal Service. It was requested by the commission after an investigator in the inspector general’s office raised allegations about Kotz’s personal conduct. The report, dated Sept. 17, was released in response to a public records request. Kotz, who didn’t respond to requests for comment, is a director at Berkeley Research Group, a consulting firm in Washington. Kotz “appeared to have a conflict of interest” when he opened and supervised an investigation into the court-appointed receiver in the Stanford case because of his relationship with Gaytri Kachroo, a Massachusetts attorney, the review found. One month after beginning the probe, Kotz listed her as a business reference and a “personal friend,” the report noted. Seeking Business Kachroo didn’t return an e-mail requesting comment. She declined to be interviewed for the report. In a response included in the report, Kotz said that he met with Kachroo after his departure from the SEC in an effort to “drum up business” for his new job. He indicated that their meeting didn’t result in a close business relationship or additional work for his company. The review also called into question Kotz’s work on his most high-profile investigation -- the SEC’s failure to catch the Bernard Madoff Ponzi scheme -- because of his friendship with whistleblower Harry Markopolos. While investigators were unable to determine when the two became friends, Williams concluded it would have violated U.S. ethics rules if their relationship began before or during Kotz’s probe. Markopolos had tried to flag the Madoff fraud to the SEC, but was rebuffed. On the office re-organization report, the review found there was no evidence Kotz interfered with his investigators’ conclusions. Still, it noted, Kotz’s “flirtatious communications” with a woman working at the SEC occurred during the investigation. ‘Retail Therapy’ In a July 20, 2008 e-mail included in the review, the woman, whose name was blacked-out in the text, wrote to Kotz that she had “resorted to retail therapy.” Kotz answered: “Nice, what are you buying? How about a short skirt or two?” The woman asked in response whether she was exempt from the dress code, to which Kotz replied, “Special exemption for after work get togethers.” During a Sept. 4 interview with investigators, Kotz denied having any personal, romantic or sexual relationship with the woman. When the e-mails were discussed, Kotz indicated he was simply talking to her the way he would talk to any other employee and that he didn’t believe any of the communications were inappropriate, the report said. The review of Kotz’s actions was reported earlier by the Wall Street Journal. Probes Questioned Kotz had a controversial four-year tenure at the SEC. He was lauded by some lawmakers for his thorough investigations and willingness to hold the agency accountable for missteps overseeing Wall Street. Still, the watchdog was publicly criticized by SEC employees and alumni who said some of his probes lacked evidence of wrongdoing and unfairly damaged workers’ reputations. He also drew criticism for an interview he gave last year to a Philadelphia-area financial adviser, Phillip Cannella III, for a paid radio program. Cannella uses Kotz’s remarks to market a “crash-proof retirement” to senior citizens and has refused requests by the SEC to take video clips from the interview off his website. After his meeting with Kotz, Cannella procured three club- level tickets to a sold-out Philadelphia Eagles football game for the watchdog and his children. Kotz reimbursed Cannella $95 apiece; the team said the tickets had a value of $240 each. Kotz has said his investigations helped turn around an ineffective agency that had fallen down on the job. He also said he followed ethics advice in his interactions with Cannella. The SEC watchdog office is being overseen on a temporary basis by Jon Rymer, the inspector general of the Federal Deposit Insurance Corp. For Related News and Information: To contact the reporters on this story: Robert Schmidt in Washington at rschmidt5@bloomberg.net ; Joshua Gallu in Washington at jgallu@bloomberg.net. To contact the editor responsible for this story: Maura Reynolds at mreynolds34@bloomberg.net . |
2024-04-10 | Bloomberg | Too Big to Fail Discounted as Moody’s Evaluates: Credit Markets | U.S. lawmakers are making progress convincing derivatives traders that taxpayers won’t bail out the biggest banks if another financial crisis erupts. Of seven U.S. banks that Moody’s Investors Service says have higher ratings because of an assumed government backstop, credit-default swaps on five of them, including Goldman Sachs Group Inc. (GS) and JPMorgan Chase & Co. (JPM) , trade as if they’re ranked as many as two steps lower, data from Moody’s Analytics show. The rankings company plans to update those assumptions by year- end, leading bank analysts at UBS AG to anticipate ratings cuts. The Federal Deposit Insurance Corp. is working on a rescue blueprint that would impose losses on bank holding company creditors to recapitalize systemically important operating units facing collapse, Moody’s said in a March 27 report. Federal Reserve Chairman Ben S. Bernanke said last month the swaps market is indicating some probability of bank failure. “The FDIC is determined to reduce too-big-to-fail risk,” said Edward Marrinan, a macro credit strategist at Stamford , Connecticut-based RBS Securities. While Moody’s is still determining whether to lower its ratings, “the market is already there, and gets that this is a significant development in how to assess the risk profile of banks,” he said. Swaps Gap Credit-default swaps linked to Goldman Sachs, JPMorgan, Citigroup Inc. (C) , Morgan Stanley, Bank of America Corp. (BAC) and Wells Fargo & Co. (WFC) , the six biggest U.S. bank holding companies, are trading an average of 25 basis points more than a benchmark index tied to U.S. companies, according to prices compiled by Bloomberg and CMA, a data provider owned by McGraw-Hill Cos. While the gap has narrowed from a record 246 basis points at the peak of the financial crisis in 2008, it’s still 10 basis points more than the median of 15 since 2004, the data show. Regulators and lawmakers including Fed Governor Daniel Tarullo, Dallas Fed President Richard Fisher and Senator Sherrod Brown, a Democrat from Ohio , are pushing for more steps to prevent the need for bailouts even with the central bank, wielding new powers under the 2010 Dodd-Frank Act, compelling the largest lenders to retain earnings and strengthen their buffers against losses. Cutting Jobs That’s coincided with about 320,000 jobs culled from U.S. financial companies in the past five years as lenders seek to boost profit amid weak revenue growth. The six largest banks, which announced plans in the first quarter to eliminate about 21,000 positions even after the industry posted its best results since 2006, may provide more details about personnel starting this week when they report earnings from the period. JPMorgan and Wells Fargo are scheduled to report results April 12. Elsewhere in credit markets, a gauge of U.S. corporate credit risk fell the most in six weeks after minutes of the Fed’s March policy meeting showed several members said the central bank should begin tapering its bond-buying program later this year and stop it by year-end. The Markit CDX North American Investment Grade Index, a credit-swaps benchmark that investors use to hedge against losses or to speculate on creditworthiness, declined 2.6 basis points to a mid-price of 82 basis points at 11:57 a.m. in New York, the lowest since traders began moving positions into a new version of the index three weeks ago, Bloomberg prices show. The gauge declined as much as 2.9 basis points, the biggest intraday drop since Feb. 27, the data show. Fed Minutes In London , the Markit iTraxx Europe Index , tied to 125 companies with investment-grade ratings, fell 4.8 to 110. The indexes typically fall as investor confidence in creditworthiness improves and rise as it deteriorates. Credit swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt. Fed officials, who met before a Labor Department report last week showed payroll growth in March was the slowest in nine months, debated how and when to curtail asset purchases that have swollen its balance sheet to a record $3.22 trillion. The committee decided at the gathering to press on with $85 billion in monthly bond buying until the labor-market outlook has “improved substantially.” Lacking Momentum “You have to take this with a really large grain of salt,” said John Herrmann, director of U.S. Rate Strategy at Mitsubishi UFJ Securities in New York, because the meeting was held before the March jobs report. That report showed “the economy doesn’t quite yet have the momentum to consistently grow near the Fed’s objectives” and an early tapering of Fed purchases is now “much less likely,” he said. Bonds of New York-based Goldman Sachs are the most actively traded dollar-denominated corporate securities by dealers today, accounting for 4.3 percent of the volume of dealer trades of $1 million or more, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. Moody’s, which placed “negative outlooks” on the holding company ratings of eight systemically important U.S. lenders in June, said last month it’s reassessing grades that are as many as two levels higher because of implicit taxpayer backing. “We do see holding company ratings as under pressure,” David Fanger, an analyst at Moody’s who helped author the March 27 report, said in a telephone interview. “The government is moving toward policies that would reduce the likelihood of taxpayer-funded bailouts in the future.” ‘Considerable Progress’ The FDIC has made “considerable progress” by identifying obstacles to implement its so-called orderly liquidation authority, which gives the agency power to wind down, split up or sell off companies considered a potential systemic risk to U.S. financial stability, Moody’s said in the report. Those challenges include coordinating with foreign regulators, ensuring holding companies have enough assets to recapitalize their operating units and detangling the interconnectedness of banks that threatens to spark contagion during a crisis. International cooperation “continues to be the biggest obstacle,” David Knutson, a Chicago-based credit analyst at Legal & General Investment Management America, said in a telephone interview. “While it’s probably easy to take care of a mess in your own house, it’s really hard to clean it up in someone else’s.” The FDIC expects to issue additional rules and policy statements this year, said Greg Hernandez, a spokesman for the agency. He declined to comment on credit-swaps trading levels. ‘Some Probability’ Credit swaps “indicate some probability of failure” even if too-big-to-fail assumptions haven’t disappeared, Bernanke said at a March 20 news conference. The central bank is buying $85 billion of assets a month to support the U.S. economy after lending excesses helped inflate a housing bubble that triggered the worst recession since the Great Depression. Contracts linked to JPMorgan, which has a holding company senior debt rating of A2 that Moody’s says benefits from two levels of presumed government support, imply a grade of Baa1. Goldman Sachs (GS) , rated A3 at Moody’s, have swaps that imply Baa2, two levels above junk. The banks included in the Moody’s review are Bank of New York Mellon Corp., State Street Corp., Wells Fargo, JPMorgan, Goldman Sachs, Morgan Stanley (MS) , Citigroup and Bank of America. Contracts linked to Citigroup and Bank of America imply a Baa2 rating for both firms, equivalent to their current Moody’s grades and two levels above their standalone credit assessments without potential bailout support. Swaps on State Street, whose rating doesn’t benefit from a potential bailout, aren’t actively quoted. Downgrade Assumptions Citigroup and Bank of America are rated “extremely low on a relative basis” with Moody’s not recognizing “improvements in capital, earnings and risk management at both these institutions,” JPMorgan analysts led by Kabir Caprihan wrote in an April 1 report. “Our base-case assumption is that there will be a one- notch reduction across the board” with “potential for future upgrades in the standalone credit ratings for Bank of America and Citigroup,” the analysts said. UBS strategists led by Robert Smalley also expect Moody’s to cut its ratings by one level as the probability for state support diminishes, according to an April 2 report. That would leave creditors of the holding company more vulnerable to losses as regulators develop an alternative strategy. “The swaps market is beginning to acknowledge that,” Smalley, based in New York, said in a telephone interview. To contact the reporter on this story: Charles Mead in New York at cmead11@bloomberg.net To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net |
2024-05-18 | Bloomberg | Treasury Yield Close to Record Low on Europe Debt Crisis | Treasury 10-year yields, the benchmark for everything from corporate bonds to mortgages, were four basis points from their record low as Europe ’s fiscal crisis drove up demand for the relative safety of U.S. debt. “The U.S. is the favorite safe haven,” said Hiromasa Nakamura, who helps oversee the equivalent of $41.4 billion in Tokyo as an investor for Mizuho Asset Management Co., a unit of Japan ’s largest publicly traded bank. “There’s a flight to quality. The world economy is declining. Recently the rally has gained strength.” Ten-year yields were little changed from yesterday at 1.71 percent as of 6:42 a.m. in London , Bloomberg Bond Trader data show. The record low was 1.6714 percent set Sept. 23. The price of the 1.75 percent security due in May 2022 was 100 13/32. Market participants are cutting their yield forecasts. The 10-year rate will be 2.48 percent by year-end, a Bloomberg survey of banks and securities companies shows, with the most recent projections given the heaviest weightings. The projection declined from last month’s high of 2.58 percent. Nakamura, who bet on Treasuries as they rallied over the past 12 months, predicts the rate will fall to 1 percent this year or next. He dropped his prior forecast for 1.5 percent. The MSCI Asia Pacific Index (MXAP) of stocks declined 3.1 percent to the lowest level in 2012, helping increase demand for debt. Yields are tumbling in the highest-rated debt markets around the world. Flight to Bonds Japan’s 10-year rate slid as low as 0.815 percent, a level not seen since 2003. The rate on the same-maturity note in Australia tumbled to 3.06 percent, the least ever. Germany ’s 10-year yield dropped to a record 1.41 percent yesterday as investors question the nation’s willingness to prop up the euro’s most indebted members. Banco Santander SA (SAN) and Banco Bilbao Vizcaya Argentaria SA (BBVA) , Spain’s biggest lenders, were cut three levels yesterday by Moody’s Investors Service, which cited a recession and mounting loan losses as it downgraded 16 of the nation’s banks. Greece ’s struggle to combat a recession is raising concern it will leave the euro bloc. The decline in yields may be curbed demand when the U.S. sells $99 billion of coupon-bearing debt next week, said Kevin Yang, who is in charge of bond investment at Hontai Life Insurance Co., which has $6 billion in assets and is in Taipei. Auctions Loom The auctions will consist of $35 billion of two-year and five-year securities and $29 billion of seven-year notes over three days starting May 22. “Demand may be lower,” Yang said. “They’re expensive. The economy in the U.S. is not so weak. It’s stable.” He trimmed his Treasury holdings yesterday, he said. U.S. gross domestic product will grow 2.3 percent in 2012, versus 1.7 percent in 2011, a Bloomberg News survey of banks and securities companies shows. The euro-area economy will shrink 0.3 percent, versus last year’s 1.5 percent growth rate, according to the estimates. Federal Reserve Bank of St. Louis President James Bullard said yesterday economic reports this year have been stronger than forecast and he expects the central bank to raise its target interest rate by 2013. Bullard doesn’t vote on monetary policy this year. Fed Action Several Fed policy makers said slowing growth or higher risks to their economic outlook may warrant additional action to sustain the recovery, according to minutes of their April meeting released May 16. The Federal Open Market Committee on April 25 reiterated its expectation that subdued inflation and economic slack will be grounds for keeping its target at almost zero at least through late 2014. The Fed plans to buy as much as $5.25 billion of Treasuries due from August 2020 to May 2022 today, according to the Fed Bank of New York ’s website. The purchases are part of the central bank’s program to replace $400 billion of shorter-term debt in its holdings with longer maturities by the end of June to help keep down borrowing costs. Treasuries rose yesterday as reports showed an index of leading economic indicators fell and manufacturing in the Philadelphia area shrank. Yields indicate investors are cutting bets on U.S. inflation. The difference between two- and 10-year rates narrowed to 1.39 percentage points yesterday, the least since the end of 2008. The spread between rates on 10-year notes and same-maturity Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices over the life of the debt, narrowed to 2.04 percentage points yesterday from this year’s high of 2.45 percentage points in March. To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net. To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net . |
2024-10-17 | Bloomberg | JPMorgan Likes North Asia Stocks on U.S. Growth, Tam Says | North Asia stocks to benefit from improving U.S. economy as they’re generally more export oriented, Grace Tam, a Hong Kong-based global market strategist at JPMorgan Asset, said in a briefing today. * Pick-up in global recovery to boost markets in S. Korea and Taiwan, Tam says * Emerging market and Asia dividend stocks, which have non-defensive characteristics, may outperform in rising interest-rate environment because higher rates reflect better economy, Tam says * Developed markets have better economic, earnings growth momentum vs. emerging markets in short term, Tam says * Japan economic data shows Abenomics is working; 2020 Olympics may give excuse for Abe to push ahead with structural reforms: Tam * Europe’s economic momentum could continue on more gov’t spending for growth, Tam says * U.S. data shows economic recovery still intact; stocks aren’t expensive in historical terms: Tam To contact the reporter on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net To contact the editor responsible for this story: Sarah McDonald at smcdonald23@bloomberg.net |
2024-02-26 | Bloomberg | Singapore to Raise Property Tax Rates for Luxury Homeowners | Singapore plans to raise taxes for luxury homeowners and investment properties, widening a four- year campaign to curb speculation after prices in Asia ’s second- most expensive housing market rose to a record. The higher tax will apply to the top 1 percent of homeowners who live in their own residences, or 12,000 properties, Singapore Finance Minister Tharman Shanmugaratnam said in his budget speech yesterday, without giving a definition of what constitutes a high-end home. The government will also raise tax rates for vacant investment properties or those that are rented out, he said. Singapore joins Hong Kong in extending anti-speculation measures as low interest rates and capital inflows drive up demand and make housing unaffordable. Residential prices in Singapore climbed to a record in the fourth quarter as an increase in the number of millionaires drove up demand. “The graduated property tax on luxury properties may impact investors, particularly corporates and high-net-worth investors,” Petra Blazkova, head of CBRE Research for Singapore and Southeast Asia said in a statement. “It may put pressure on the holding cost of investment properties held by developers and investors.” The property index tracking 39 developers fell 1.2 percent to a one-month low at the close in Singapore. CapitaLand Ltd. (CAPL) , Singapore’s biggest developer by assets, declined 1.5 percent to S$3.86. City Developments Ltd. (CIT) , the second largest, slid 1.8 percent to S$11.15. Hong Kong Singapore’s latest efforts were announced three days after Hong Kong increased property taxes. The Hong Kong government last week doubled sales taxes on property costing more than HK$2 million ($258,000) and targeted commercial real estate for the first time as bubble risks spread in the world’s most expensive place to buy an apartment. “The property tax is a wealth tax and is applied irrespective of whether lived in, vacant or rented out,” Shanmugaratnam said. “Those who live in the most expensive homes should pay more property tax than others.” For a condominium occupied by the owner in Singapore ’s central region with an assessed annual rental value of S$70,000 ($56,547), the tax will rise 5 percent to S$2,780, according to the budget statement. If that home is rented out, the tax will climb 21 percent to S$8,500, according to an example highlighted in the statement. Based on a 3 percent rental yield, that property is worth S$2.3 million. Gains in levies for properties assessed at higher rental values will also increase at a faster pace, it said. For a house with an assessed rental value of S$150,000, worth S$5 million based on the same yield assumption, the tax will rise 60 percent to S$24,000. The revised taxes will take full effect from January 2015, according to the statement. Singapore is Asia’s most-expensive housing market after Hong Kong, according to a Knight Frank LLP and Citi Private Bank report released last year that compared 63 locations globally. ‘Wealth Tax’ “It is a wealth tax,” Yee Jenn Jong, a non-elected member of parliament from the opposition Workers’ Party, told reporters. “There’s been a lot of people that have made a lot of money through property and the government is using that as a way to get additional revenue to offset certain goodies they’re giving to those in the lower income.” Singapore has since 2009 imposed measures to cool the property market. The government last month said home buyers have to pay 5 percentage points to 7 percentage points more in stamp duties. It also imposed the added levies for permanent residents when they buy their first home, while Singaporeans will have to pay the tax starting with their second purchase. Foreign Labor In the budget, Singapore also tightened curbs on foreign labor for a fourth consecutive year, as the government seeks to reduce companies’ reliance on overseas workers amid a public backlash over the influx. Increasing wealth in the island-state has contributed to rising property prices. Singapore’s millionaire households rose by 14 percent in 2011, according to a Boston Consulting study. The proportion of millionaire homes in the city of 5.3 million people was 17 percent, the highest in the world, followed by Qatar and Kuwait. “From a progressive tax view point, it’s to be expected and probably quite fair,” said Tan Su Shan, managing director of wealth management at DBS Group Holdings Ltd., who’s also a nominated member of Parliament. “From a developers’ point of view, it’s yet another pill to swallow.” To contact the reporters on this story: Pooja Thakur in Singapore at pthakur@bloomberg.net ; Sharon Chen in Singapore at schen462@bloomberg.net To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net |
2024-04-16 | Bloomberg | Brazil Swap Rates Decline as Inflation Slows; Currency Advances | Brazil ’s swap rates fell for the first time in seven days as an index indicated that inflation unexpectedly slowed, damping speculation that the central bank will raise borrowing costs tomorrow. Swap rates on the contract due in January 2014 dropped four basis points, or 0.04 percentage point, to 8.17 percent at 10:15 a.m. in Sao Paulo. The real appreciated 0.8 percent to 1.9860 per dollar after declining 1.6 percent yesterday, the biggest drop since November. The Getulio Vargas Foundation reported today that wholesale, construction and consumer prices as measured by the IGP-10 inflation index climbed 0.18 percent in the month through April 10, slower than the increase of 0.22 percent in the prior period and the 0.35 percent median forecast of economists surveyed by Bloomberg. “The IGP number helps the expectation that monetary tightening may not be so significant,” Flavio Serrano, a senior economist at Banco Espirito Santo de Investimento SA in Sao Paulo, said in a telephone interview. The real tumbled yesterday to a level weaker than 2 per dollar as regulators postponed the initial public offering of Banco do Brasil SA’s insurance unit, diminishing the prospects for investment in the nation’s assets. The central bank, which begins a two-day monetary policy meeting today, has maintained the target lending rate at a record low 7.25 percent since October to avoid jeopardizing the recovery without further fueling inflation. To contact the reporters on this story: Gabrielle Coppola in Sao Paulo at gcoppola@bloomberg.net ; Josue Leonel in Sao Paulo at jleonel@bloomberg.net To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net |
2024-02-11 | Bloomberg | NYSE-Deutsche Boerse Merger Is Free With Derivatives: Real M&A | Derivatives are so valuable that Deutsche Boerse AG ’s takeover of NYSE Euronext means the combined company may get a stock trading business for free. Deutsche Boerse, in talks to buy the owner of the New York Stock Exchange, would acquire a company that generates at least half its net income from trading options and futures contracts, according to Macquarie Group Ltd. That portion of earnings will reach $462 million by 2013, based on analyst estimates compiled by Bloomberg. Add Deutsche Boerse ’s projected profit from its Eurex unit and the combined entity will earn $1.18 billion from derivatives in the U.S. and Europe within three years. The derivatives business of NYSE Euronext and Deutsche Boerse alone would then be worth $24.7 billion, based on the average valuation for options and futures exchanges, more than the companies’ combined capitalizations before the talks were announced this week. The deal shows how lucrative derivatives have become for trading venues, producing operating margins as high as 55 percent. By creating the world’s largest futures exchange that also controls 40 percent of U.S. options, the new entity would offset revenue declines in equities trading. “The main reason that this deal occurred is that the market is moving towards the derivatives,” said Matt McCormick , a money manager at Cincinnati-based Bahl & Gaynor Inc., which oversees about $3.2 billion. “It’s not because they want real estate on Wall Street .” Medieval Fairs Ray Pellecchia , a spokesman at NYSE Euronext , and Deutsche Boerse’s Naomi Kim both declined to comment. Deutsche Boerse of Frankfurt and NYSE Euronext said on Feb. 9 they were in advanced talks, which would create an exchange with about $15 trillion of publicly traded companies. The all- stock transaction would give Deutsche Boerse, which traces its roots back to the Frankfurt Stock Exchange and the medieval fairs of the 11th century, about 60 percent of the new entity. Prior to the announcement, the companies had a combined market capitalization of $23.4 billion, based on their 20-day trading averages, with NYSE Euronext valued at $8.5 billion. The New York-based exchange said derivatives revenue climbed 14 percent last year, while cash equities fell 10 percent. By 2013, NYSE Euronext may generate more than 50 percent of its earnings from options and futures, according to Ed Ditmire , an analyst at Macquarie in New York , who has an “outperform” rating on the stock. A derivative is a contract between two parties linked to the future value or status of the underlying asset to which it refers, including the development of interest rates or prices of commodities such as oil or wheat. Relative Value Net income at Eurex, the derivatives unit of Deutsche Bourse, may increase to about $716 million by 2013, based on estimates provided by Credit Suisse Group AG analyst Rupak Ghose in London. Deutsche Boerse’s Xetra cash-market revenue declined about 10 percent last year, according to Ghose. “Derivatives are faster growing and the more profitable for exchanges,” said Sandler O’Neill & Partners LP’s New York- based Rich Repetto, the top-ranked exchange analyst according to Bloomberg rankings. “It’s one of the most valuable areas no question, and one of the main reasons” for the deal, he said. With CME Group Inc. and CBOE Holdings Inc. of Chicago and Atlanta-based IntercontinentalExchange Inc. trading at an average of 21 times earnings, the estimated $1.18 billion in net income would give the derivatives business of NYSE Euronext and Deutsche Boerse a value of $24.7 billion, or 5.7 percent more than the standalone companies together prior to the announcement, data compiled by Bloomberg show. Cost Savings That doesn’t include the 300 million euros ($410 million) in cost savings the two companies said the takeover will create. Deutsche Bank AG in Frankfurt and New York-based JPMorgan Chase & Co. are advising Deutsche Boerse, while Perella Weinberg Partners LP of New York is helping NYSE Euronext, said two people familiar with the matter, who declined to be identified because the discussions are private. The New York Stock Exchange, formed in 1792 under a sycamore tree on Wall Street, became the center of American capitalism through its grip on stock listings and trading. NYSE Euronext was formed when the operator of the New York Stock Exchange bought Europe’s second-largest exchange in 2007. It now owns exchanges in Amsterdam, Lisbon, Paris and Brussels, as well as London-based Liffe, Europe’s second-largest derivatives market. The company also runs three U.S. stock exchanges: NYSE Arca, NYSE Amex and the New York Stock Exchange, two options platforms and the NYSE Liffe U.S. futures exchange, which will trade contracts linked to interest rates. ‘De Facto Monopoly’ Deutsche Boerse operates the Frankfurt stock exchange and Clearstream, Europe’s second-biggest securities-settlement firm. The company also has Eurex Clearing AG and a holding in Eurex, the region’s largest futures market. Eurex owns International Securities Exchange , an options market that competes with CBOE. The takeover is subject to review in the U.S. and Europe and may be viewed as creating a “de facto monopoly” in some futures markets, making antitrust concern “the largest outside risk,” according to a report from New York-based Evercore Partners Inc. “Over a longer period of time, it makes sense, but the devil is going to be in the details,” said Bahl & Gaynor’s McCormick. “There are regulatory issues. This is a trade that does have some risk associated to it.” Futures exchanges around the world traded 8.2 billion contracts in 2009, almost three times the turnover in 2003, according to data from the Futures Industry Association, a trade group representing Wall Street banks active in derivatives. Size and Scope The deal would give the new company about 40 percent of U.S. options volume by adding NYSE Euronext’s two markets with the ISE. CBOE was the biggest options exchange operator last month with 30 percent of contracts handled on its venues. In all, the merged firm would control 11 derivatives markets that handled a total of 4.8 billion contracts in 2010, according to FIA. That compares to 3.1 billion trades last year at CME, the world’s largest futures exchange. NYSE Euronext would also handle clearing, the guaranteeing of payments for transactions and delivery of securities, for equities and futures in Europe through businesses run by Deutsche Boerse. Combining products in the same clearinghouse limits the ability of other markets to compete. ‘All About Scale’ “It’s all about scale in this business,” said Kevin Shacknofsky, who helps manage $6 billion in Purchase, New York, for Alpine Mutual Funds, which owns NYSE shares. “One of the main attractions is the derivatives area. At the end of the day, that was a good deal when you look at the synergies.” Elsewhere in mergers and acquisitions, Amadeus IT Holding SA of Madrid said in a filing to Spanish regulators yesterday that it had agreed to sell its Opodo online travel agency to Axa Private Equity and Permira Advisers LLP for 500 million euros. American International Group Inc .’s Chartis Inc. unit plans to buy the remaining shares of Oaska-based Fuji Fire & Marine Insurance Co. it does not already own for 46 billion yen ($553 million) to strengthen its business in Japan. The general insurance unit of New York-based AIG plans to buy all common shares and stock acquisition rights of Fuji Fire through its wholly owned unit Chartis Japan Capital Co. for 146 yen per share, Fuji Fire and Chartis said in statements. There have been 2,707 deals announced globally this year, totaling $226.2 billion, a 21 percent increase from the $186.9 billion in the same period in 2010, according to data compiled by Bloomberg. To contact the reporters on this story: Michael Tsang in New York at mtsang1@bloomberg.net ; Whitney Kisling in New York at wkisling@bloomberg.net. To contact the editors responsible for this story: Daniel Hauck at dhauck1@bloomberg.net ; Katherine Snyder at ksnyder@bloomberg.net ; Chris Nagi at chrisnagi@bloomberg.net . |
2024-05-11 | Bloomberg | Life Healthcare to Expand South Africa Mental Health Unit | Life Healthcare Group Holdings Ltd. (LHC) , South Africa ’s largest private-hospital owner by market value, plans to expand its operations in the country’s “grossly underserviced” mental-health industry. “In terms of capacity to demand, in South Africa we’ve only been scratching the surface,” Chief Executive Officer Michael Flemming said in a telephone interview in Johannesburg today. “Our plan is to develop more stand-alone facilities.” In the last year, Life opened two hospitals specializing in psychological and addiction treatments east of Johannesburg and in Durban, and both were full “within a couple of months,” Flemming said. “A normal startup hospital usually takes two to three years to reach capacity.” Profit at the sites has been “high,” with cash-paying patients not covered by insurance accounting for 10 percent of the total, he said. Life added 154 hospital beds in the six months through March, bringing the number systemwide to 8,212, the Johannesburg-based company said in a statement today. The company plans to add 141 beds in the fiscal second half and has “an additional potential pipeline” of 500 beds, Flemming said. More than half of the 686 million rand ($84.7 million) budget for capital spending for the financial year was allocated as of March 31. First-half net income increased 25 percent to 690 million rand, and the company plans an interim dividend of 45 cents per share, a 45 percent increase. Paid patient days rose 6 percent, while “weak” collections from government-related debt resulted in cash generated from operations falling 6.2 percent to about 1 billion rand. Life Healthcare rose 1.4 percent to 26.83 rand at the 5 p.m. close in Johannesburg, extending the stock’s gain this year to 30 percent. Mediclinic International Ltd. (MDC) , South Africa’s second-largest private hospital owner by market value, has advanced 13 percent this year and Netcare Ltd. (NTC) has added 4.1 percent. To contact the reporter on this story: Janice Kew in Johannesburg at jkew4@bloomberg.net To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net |
2024-05-09 | Bloomberg | Crude Drops as Dollar Strengthens After Jobless Claims | West Texas Intermediate crude fell as the dollar strengthened against the euro after the number of Americans filing jobless claims decreased to the lowest level in more than five years. Prices dropped as much as 1 percent as the dollar extended gains on Labor Department data that applications for unemployment benefits unexpectedly slid. Crude stockpiles were the most since 1931 last week, the Energy Information Administration said yesterday. The spread between WTI and Brent oil in London was below $8 a barrel for a second day. “The dollar, more than anything, being stronger right now, seems to be the main reason pushing down oil prices,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “It’s getting stronger after the very good weekly jobless claims number. The market is re-examining the fact that we have plenty of supplies in this country.” WTI for June delivery slipped 64 cents, or 0.7 percent, to $95.98 a barrel at 9:29 a.m. on the New York Mercantile Exchange. The volume of all futures traded was 10 percent above the 100-day average for the time of day. Futures climbed to $96.62 yesterday, the highest settlement since April 2. Brent for June settlement decreased 64 cents, or 0.6 percent, to $103.70 a barrel on the London-based ICE Futures Europe exchange. Volume was 11 percent below the 100-day average. WTI-Brent The European benchmark grade traded at a $7.72 premium to WTI, unchanged from yesterday’s settlement, which was the narrowest level based on closing prices since Jan. 20, 2011. The dollar rose as much as 0.4 percent to $1.3106 per euro. A stronger dollar and weaker euro reduce dollar-denominated oil’s appeal as an investment alternative. Applications for unemployment insurance payments decreased by 4,000 to 323,000 in the week ended May 4, the least since January 2008, the Labor Department said. Economists forecast 335,000 claims, according to the median estimate in a Bloomberg survey. “The jobless claims number is overshadowed by the movement in the dollar,” Flynn said. Crude inventories increased 230,000 barrels to 395.5 million barrels in the seven days ended May 3, rising for a third week, the EIA, the Energy Department’s statistical arm, reported. Stocks of distillate fuels, including heating oil and diesel, jumped 1.6 percent to 117.6 million. To contact the reporter on this story: Moming Zhou in New York at mzhou29@bloomberg.net To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net |
2024-03-07 | Bloomberg | Abraaj Buys $125 Million Stake in West African Insurance Firm | Abraaj Capital Ltd., the Middle East ’s biggest private equity company, bought a $125 million stake in a Moroccan investor in insurance companies to help it expand across the African market. The investment in Saham Finances will enable it to make acquisitions in the “high growth markets” of Africa and the Middle East, where insurance penetration remain “extremely low,” Dubai-based Abraaj said in an e-mailed statement today. Saham’s three subsidiaries, CNIA Saada (CNIA) , Colina and Isaaf, offer life and non-life products in Morocco and more than 10 other countries in French-speaking West Africa, Abraaj said. CNIA Saada, listed on the Casabalanca Stock Exchange, is the second-largest non-life insurance provider in Morocco with 16 percent market share, Abraaj said. Colina is ranked second in the life and non-life segments across 11 countries in Africa with an 11 percent market share, the firm said. “Our investment in Saham Finances is in line with our focus on supporting strong companies active in high-impact sectors in rapidly growing economies,” Matteo Stefanel, senior partner at Abraaj Capital, said in the statement. “As a leader in insurance in Morocco and francophone West Africa, we see tremendous opportunities for Saham Finances.” Abraaj oversees $7.5 billion across more than 30 emerging market countries. The private equity firm agreed last month to buy London-based Aureos Capital Ltd., which specializes in investing in small- and medium-sized firms. To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net |
2024-04-26 | Bloomberg | FIFA Made $873 Million in 2011, Beating Own Estimate by 22% | FIFA, soccer’s governing body, surpassed its revenue estimates for last year by 22 percent as it benefited from income from television and marketing rights to the 2014 World Cup. The Zurich-based organization had sales of $873 million, after budgeting for $715 million, according to an annual financial statement posted on its website. “I am delighted to note that, financially, FIFA stands on rock-solid foundations,” president Sepp Blatter said in a foreword to the 98-page document. FIFA’s reserves have increased to $1.3 billion as the body tries to protect itself from dangers such as the cancellation of its $5 billion World Cup. The World Cup, which is played every four years, is FIFA’s biggest revenue-producing event. Sales beat the estimate because of “extremely successful” marketing of television and branding rights for the next tournament in Brazil , the financial statement said. Expenditure was $37 million lower than the $703 million approved by FIFA’s Congress because of cost-cutting measures and deferred payments related to the World Cup. Julio Grondona, the chairman of FIFA’s finance committee, said contracts worth $2.3 billion have already been signed for the 2018 World Cup in Russia , while the revenue for the event in Brazil will be more than FIFA forecast. Rising construction costs, labor disputes and a disagreement between the Brazilian government and FIFA over legislation have slowed the preparations for the tournament. “FIFA’s economic success depends strongly on successful marketing, and above all, the smooth staging of the World Cup,” Grondona said. “Therefore, the upcoming World Cups must also be prepared financially with great care and precision, and the necessary reserves for any for any operative risks must be built up.” FIFA said it expects revenue of $954 million next year, with $575 million coming from television and $323 million from marketing. The financial report also says FIFA will pay $50 million in 2013 to meet the cost of worldwide insurance for players appearing in national team matches after reaching an agreement with clubs. To contact the reporter on this story: Tariq Panja in London at tpanja@bloomberg.net To contact the editor responsible for this story: Christopher Elser at celser@bloomberg.net |
2024-09-13 | Bloomberg | Goldman Sees Risk of Gold Below $1,000 on U.S. Economy | Gold is poised to extend declines as the U.S. Federal Reserve withdraws stimulus and economic data improve, according to Goldman Sachs Group Inc., which says that there’s a risk that bullion may drop below $1,000 an ounce. Futures retreated in New York. While debt-ceiling discussions in the U.S. and the Syrian crisis may support bullion in the near term, gold will resume its decline into next year, Jeffrey Currie , head of commodities research, said in an interview on Bloomberg Television today. The bank’s target for 2014 is $1,050, and the commodity may overshoot to the downside, Currie said in Singapore. Gold futures haven’t traded below $1,000 since October 2009. Bullion has dropped 22 percent this year as some investors lost faith in the metal as a store of value, the U.S. economy improved and stocks and the dollar rallied. The Fed will pare its $85 billion a month bond-buying program next week, according to a Bloomberg survey. Earlier this year, Currie issued a sell recommendation on bullion on April 10, before gold plunged 13 percent in a two-session slump that ended April 15. “While we agree with the mid-cycle price somewhere around $1,200, we believe that at least near term it can overshoot to the downside, which is why we have $1,050” as a target, Currie said. “It clearly could trade below $1,000.” Record Price Gold for December delivery fell as much as 2 percent to $1,304.60 on the Comex, the lowest since Aug. 9, and traded at $1,314.40 at 11:52 a.m. in New York. Most-active futures reached a record $1,923.70 in September 2011. Goldman’s three- and six-month targets are $1,300, according to a report on Sept. 11. Global stocks tracked by the MSCI All-Country World Index rallied 12 percent this year and the Bloomberg U.S. Dollar Index climbed 3.9 percent. The Fed began buying $40 billion of mortgage-backed securities per month in September of last year and then supplemented that with $45 billion of Treasury securities in December to bolster the recovery. Fed Chairman Ben S. Bernanke suggested on June 19 that the program might be wound up by the middle of next year. “For next year, a move to $1,000 is on the cards,” said Dominic Schnider, head of commodities research at UBS AG’s wealth-management unit in Singapore. “Once a timetable of tapering is known, then you probably will see a fresh selling wave of the exchange-traded fund side.” Most of the Fed’s expected decision next week to start tapering has been priced in, and Goldman expects an initial reduction of $10 billion a month in asset purchases, said Currie. A stronger dollar would diminish gold demand, he said. ETP Sales Investors have sold bullion at a record pace from exchange-traded products this year. Holdings in ETPs have contracted 684.1 metric tons to 1,947.8 tons after shrinking every month in 2013, according to data compiled by Bloomberg. Credit Suisse Group AG raised the possibility of gold trading below $1,000 in May as Ric Deverell, head of commodities research at the bank, said then that bullion was going to get crushed as inflation risks remained muted. That forecast was for bullion in five years’ time. “The real key in gold is to see the evidence of the improving economic data in the U.S.,” said Currie, who is based in New York. Weakening emerging-market currencies, especially the South African rand, will also help to reduce the cost of production in dollars, he said The Institute for Supply Management ’s factory index showed U.S. manufacturing expanded in August at the fastest pace since June 2011. The group’s gauge of service industries, which cover almost 90 percent of the economy, posted the highest reading since December 2005, according to data compiled by Bloomberg. Disaster Insurance Gold has fallen this year because investors see less need for disaster insurance, Bernanke said in July. One reason that prices are lower is that people are less concerned about extreme outcomes, particularly negative, he said. The U.S. federal government needs to increase its debt limit later this year, and Goldman expects that the ceiling will be raised by the end of next month, according to the Sept. 11 report. On Syria , U.S. Secretary of State John Kerry met with Russian Foreign Minister Sergei Lavrov this week to seek to get Syria to give up its chemical weapons. To contact the reporters on this story: Haslinda Amin in Singapore at hamin1@bloomberg.net ; Chanyaporn Chanjaroen in Singapore at cchanjaroen@bloomberg.net To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net |
2024-09-29 | Bloomberg | How I Learned to Stop Worrying and Love the Yen: William Pesek | If you want to know what’s wrong with Japan’s economy, start with Kazuo Mizuno. At 56, the government aide is too junior to have much say in seniority-based Japan. That’s too bad. Mizuno is the highest- ranking official in many a year to speak the truth about the yen: Japan has much to gain from a strong currency. This mere suggestion is heresy in Tokyo, and expect Mizuno to get some very testy phone calls this week. Perhaps even the odd suggestion that he should consider an early, early retirement. Yet the deputy director-general of economic assessment at Japan’s Cabinet Office is absolutely right. Japan’s preference for seniority-based leadership is a self-imposed straitjacket that restricts fresh thinking. By the time politicians rise to power, they are 100 percent convinced the strong yen is the main force holding the nation back. Sadly, Mizuno is too far down on the political food chain to push his let-the-yen-strengthen argument. To many in Tokyo, his idea has a “Dr. Strangelove” quality. Only in Japan’s case, a few currency strategists joked to me, it’s not “How I Learned to Stop Worrying and Love the Bomb” but “How I Learned to Stop Worrying and Love the Strong Yen.” Unlike director Stanley Kubrick ’s unhinged American general, there’s nothing crazy about Mizuno. Kan’s Intervention Markets ignored Prime Minister Naoto Kan ’s recent intervention efforts. The yen is near where it was on Sept. 14, the day before Japan’s first official attempt to drive it lower in six years. Traders know what Japan doesn’t. The yen is strengthening because other major currencies are weakening for fundamental reasons. The Federal Reserve, for example, may soon embark on another round of quantitative easing. That will push the yen higher no matter how many yen Japan dumps in markets. Let’s accentuate the positive. The strong dollar championed by U.S. President Bill Clinton ’s administration in the 1990s showed how a stronger currency can be a magnet for the foreign investment that tends to avoid Japan. It supports stocks and keeps long-term interest rates in check. Most importantly, it’s the ultimate sign of confidence in your economy. There’s no more faith in Japan’s outlook in Tokyo than in the trading pits of London and New York. Japan forgets that when its multidecade funk finally ends, the yen will be strong, and probably much stronger than it is today. Poor Trajectory The yen has become self-defeating dogma, not unlike views on deflation. Whether you work at the Bank of Japan in Tokyo, drive a taxi in Osaka or sell insurance policies in Kagoshima, you tend to believe deflation is what’s holding down the economy. Consumer prices are weak because the nation’s trajectory is so poor. A lack of confidence is the reason interest rates are at zero and growth isn’t much higher. A weaker yen won’t defeat deflation -- only a wholesale revitalization of Japan’s economic system can do that. “Japan should change its structure to raise living standards using the strong yen,” Mizuno said this week. On top of the usual benefits, a strong yen would encourage overseas mergers and acquisitions to make the nation more competitive. It would empower Japan to purchase mining rights for natural resources. It would change Japan for the better. Here’s another heretical view: Deflation has its benefits in an economy as rigid as Japan’s. True, falling prices are a nightmare for property owners and debt holders. It hurts corporate profits, depresses wages and eats into tax revenue. Stealth Tax Cut Yet falling prices are the closest thing to a break that highly taxed Japanese consumers enjoyed in many a year. It has been a kind of stealth tax cut that, at the margin, is helping the growing ranks of the working poor make ends meet. More importantly, deflation forced major change in the bloated, inefficient economy. It’s a destabilizing force that politicians and corporate executives can’t control. It shook up the nation’s labyrinthine distribution system that involves middlemen and keeps prices high. It pushed companies to become more competitive. Deflation was the phenomenon that finally got banks to reduce bad loans. A dozen years of waiting for growth to bail out Japan came to naught. It’s no coincidence that bad-debt writedowns accelerated once it became clear that deflation wasn’t a passing fad. Acceptance of a strong yen may unleash similar “animal spirits” of which John Maynard Keynes spoke. Sony Corp. would have to rely more on developing must-have products. Honda Motor Co. would have to focus more on raising productivity. Japan Airlines Corp. would have to be more efficient. The government would have to tweak corporate taxes in favor of startups that create new jobs, not the national champions of the past. Japan has spent an exorbitant amount of time worrying about the yen and trying to weaken it. Kan’s three-month-old government is proving to be no different. Japan really should learn to love a strong yen. ( William Pesek is a Bloomberg News columnist. The opinions expressed are his own.) To contact the writer of this column: William Pesek in Tokyo at wpesek@bloomberg.net To contact the editor responsible for this column: James Greiff at jgreiff@bloomberg.net |
2024-12-01 | Bloomberg | CIBC Fourth-Quarter Profit Rises 59% on Investment Banking | Canadian Imperial Bank of Commerce , the country’s fifth-biggest bank, said quarterly profit rose 59 percent, led by investment banking and consumer lending. Net income for the fourth-quarter ended Oct. 31 climbed to C$794 million ($780 million), or C$1.89 a share, from C$500 million, or C$1.17, a year earlier, the Toronto-based bank said today in a statement. Revenue fell 1.6 percent to C$3.2 billion. CIBC is the first Canadian lender to report fourth-quarter results. The Toronto-based bank’s profit was higher than a year ago, when earnings were pared by C$239 million in capital repatriation costs and losses in a structured credit business. CIBC said it had adjusted earnings of C$1.87 a share, topping the C$1.80 a share average estimate of 16 analysts surveyed by Bloomberg News. Canada ’s eight-biggest banks will probably report average profit growth of 12 percent from a year earlier, Scotia Capital analyst Kevin Choquette said in a Nov. 18 note. Toronto-Dominion Bank (TD) , the country’s second-largest lender, also reports today. “The Canadian banks continue to do pretty much the right stuff,” David Baskin, president of Baskin Financial Services in Toronto, which oversees about C$400 million including bank shares, said in an interview before earnings. “Everybody should be buying them, they’re really cheap.” Canadian Imperial rose 4.4 percent yesterday to C$72.91 in Toronto trading. The stock has fallen 6.9 percent this year, compared with the 5.4 percent decline of the eight-company S&P/TSX Commercial Banks Index. Loan Provisions Canadian Imperial said it set aside C$243 million for bad loans, up from C$150 million a year earlier. The CIBC World Markets investment-banking business earned C$172 million, compared with a loss of C$56 million a year ago when the unit posted losses from structured credit trading and corporate loan hedges. Canadian consumer lending and business banking profit rose 15 percent to C$580 million, from C$505 million in the year- earlier period. Wealth management profit, which includes mutual fund sales, rose 20 percent to C$65 million after adding earnings from its purchase of a 41 percent stake in American Century Investments from JPMorgan Chase & Co. in August. “CIBC has lacked a real strategic growth focus and I think that wealth management is an area where they might be able to excel,” Craig Fehr , an analyst with Edward Jones & Co., said in an interview before earnings. “American Century, while not a cannonball by any stretch, is at least a seed of growth for them in a compelling area.” Its corporate unit, which includes Caribbean banking, had a C$23 million loss, compared with a C$3 million loss a year earlier, the bank said. 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 |
2024-08-30 | Bloomberg | New U.S. Consumer Hotline Not Routing Some Complaints to Banks | Some consumer credit-card complaints haven’t reached banks that issued the cards because of technical problems in the new system created by the Consumer Financial Protection Bureau, industry groups and regulators said. The month-old complaint response system has failed to properly route all inquiries, a problem bureau spokeswoman Jen Howard said the agency will resolve “within a matter of weeks.” Howard didn’t say how many complaints have been held up. The agency launched the system, which is required by the Dodd-Frank financial-overhaul law, on July 21. Its website invites consumers to file complaints about credit cards, the most common form of consumer credit , and will eventually cover other financial services. Previously complaints about banks were handled by agencies including the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation and the Federal Reserve , all of which now refer calls to the bureau. Some banks found that their volume of complaints dropped as the bureau’s system failed to work properly, said Richard Hunt, head of the Consumer Bankers Association. The banks were concerned they might be blamed for unanswered queries, he said. “If you’re a bank, you don’t know there has been a complaint unless the CFPB tells you,” Hunt said in an interview. Howard said some issuers did not receive complaints filed through the agency’s website because of “browser compatibility issues.” As they were resolved, the issuers in turn experience a “one-time increase” in complaints referred via the consumer bureau. ‘Not Prepared’ “We expect that within a matter of weeks all remaining technological issues will be resolved,” Howard said in an e- mailed response to questions. Richard Riese, a senior vice president at the American Bankers Association Center for Regulatory Compliance, said the start-up problems demonstrate that the bureau is “clearly not prepared to take on the transfer of these responsibilities.” Not all banks are seeing the problems. Paul Hartwick, a spokesman for Chase Card Services, a part of JPMorgan Chase & Co. (JPM) said the bureau’s system is functioning properly. “We are receiving referrals and the volume is consistent with our expectations,” Hartwick said in an e-mail. Until 2010, as the mortgage crisis gained steam and a new credit-card law took effect, credit cards were the largest source of complaints filed with the OCC, which regulates nationally chartered banks including JPMorgan and Bank of America Corp. (BAC) Point of Contention In 2009, consumers registered 26,380 complaints on credit cards, or 37 percent of the total filed, according to the OCC’s website. In 2010, as changes mandated by the CARD Act of 2009 took effect, the number sank to 14,715, and mortgage-related inquiries hit 38,034. The consumer complaint system, which applies to the 111 banks with assets over $10 billion, became a point of contention between bank lobbyists and the new agency even before it opened. Consumer groups want the bureau to allow anyone to view raw complaints, while industry representatives contend that would allow frivolous complaints to damage a firm’s reputation. The bankers association, in an Aug. 1 letter to the Office of Management and Budget, said that information collected via the system “should be narrowly held for the purpose of addressing individual complaint resolution.” Committee Review “It should not be considered a source for analysis, reporting or sharing outside the Bureau’s or prudential regulators’ own supervisory purposes because the form of questions, content and reliability of information gathered and the interaction of all parties in handling this process are not finally settled,” Riese wrote in the letter. A committee within the consumer bureau is working on the issue of how much complaint information to release, according to a person briefed on its work. Whatever the bureau does decide to release will be entirely public, the person said. Dodd-Frank specifically permits, though it does not require, the complaints to be shared with the states. The bureau is already sharing information with some state attorneys general and the Federal Trade Commission through the FTC’s Consumer Sentinel system, according to an Aug. 12 blog post on the bureau’s website. Bankers oppose the release of consumer complaint data “in a non-aggregated fashion” to state attorneys general, Riese said in the interview. State officials do not need the data since the consumer bureau has enforcement authority already, Riese said. ‘Second-Guessed’ “They cannot just open the door to being second-guessed by attorneys general who want to take a complaint or two and barge into a CFPB institution that has already thought it had addressed the issues,” Riese said. Part of the initial problem with the bureau’s complaint system may have been the lack of testing before the launch. The bureau had said it would work with five issuers -- JPMorgan, Bank of America, American Express Co. (AXP) , Discover Financial Services (DFS) and Capital One Financial Corp. (COF) -- to test the system. The bureau didn’t follow through, according to an executive with a major credit-card issuer who spoke on condition of anonymity. Howard disputed that, saying that the bureau “consulted with and previewed the system with a number of issuers as well as with trade associations and consumer groups” before July 21. Bryan Hubbard , a spokesman for the OCC, said that the consumer bureau would take over complaints on all financial products, not only credit cards, by March 2012. Howard disagreed. “We haven’t announced a timeline,” she said. To contact the reporter on this story: Carter Dougherty in Washington at cdougherty6@bloomberg.net. To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net . |
2024-09-16 | Bloomberg | Risk of Default on Europe’s Junior Bank Bonds Posts Record Weekly Decline | The cost of insuring against default on Europe ’s junior bank bonds posted the biggest ever weekly decline after politicians met in Poland to discuss efforts to contain the sovereign crisis. The Markit iTraxx Financial index of credit-default swaps on the subordinated debt of 25 banks and insurers fell 70 basis points since Sept. 9 to 465, according to JPMorgan Chase & Co. at 5:30 p.m. in London. The senior index, which rose on the day, decreased 35 basis points to 265, the largest weekly drop since March 2008. European finance ministers met in Poland today, and are continuing their discussions tomorrow, as they debate how to resolve the euro-area’s deepening debt crisis. Clashing with U.S. Treasury Secretary Timothy Geithner , the regional ministers ruled out efforts to prop up the faltering economy and gave no indication of aid to complement yesterday’s coordinated central- bank measures to ease dollar lending. “No end in sight to debt crisis, but rays of hope prompt bear market rallies,” ING Groep NV analysts wrote in a note. The European Central Bank said yesterday it worked with other central banks to extend dollar loans to euro-area institutions, adding fuel to a rally that sent insurance costs tumbling from records set Sept. 12. Merkel on Euro German Chancellor Angela Merkel said today that Germany must make its contribution to help the common currency. Euro countries should pursue budget consolidation to help the region move away from a “debt union,” she said in a speech in Berlin. It now costs $5.85 million upfront and $100,000 annually to insure $10 million of Greek debt for five years, compared with $5.9 million in advance yesterday and $5.3 million Sept. 9, according to BNP Paribas SA prices for credit-default swaps. The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments fell three basis points today to 325, and clocked up the biggest weekly drop in seven weeks. A decline signals an improvement in perceptions of credit quality. Contracts on Belgium dropped 13 basis points to 243 today, France declined 3.5 to 165.5 and Germany was 0.5 lower at 82.5, according to CMA. Contracts on Ireland fell 11 basis points to 792, Italy tumbled nine to 443, Portugal was 24 lower at 1,035 and Spain was down eight basis points on the day at 365. Swaps on the Markit iTraxx Crossover Index of 40 companies with mostly high-yield credit ratings rose one basis point to 715, paring the weekly rally to the biggest since March 2008. It was earlier on track for the biggest drop of all time. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings climbed 2.25 basis points to 176, dropping 16 basis points in the week, JPMorgan prices show. A basis point on a credit-default swap protecting 10 million euros ($13.8 million) of debt from default for five years is equivalent to 1,000 euros a year. Swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. To contact the reporter on this story: Abigail Moses in London at Amoses5@bloomberg.net To contact the editor responsible for this story: Paul Armstrong at Parmstrong10@bloomberg.net |
2024-08-04 | Bloomberg | Consumer Confidence in U.S. Falls Last Week to Two-Month Low | Press Release The Bloomberg Consumer Comfort Index Was Minus 47.6 in the Period to July 31 New York -- Consumer confidence in the U.S. dropped last week to the lowest level in more than two months, paced by growing dissatisfaction among women and high earners. The Bloomberg Consumer Comfort Index was minus 47.6 in the period to July 31, the lowest since May, compared with minus 46.8 the prior week. Confidence among women fell to the lowest level since October 2009, while Americans making more than $100,000 a year were the most pessimistic since November 2009. For full CCI results, see: http://www.bloomberg.com/cci The biggest one-week drop in the Standard & Poor’s 500 Index in a year, political wrangling over raising the debt ceiling and a stagnant job market probably weighed on consumers’ moods. The loss of confidence heightens the risk that consumer spending , which accounts for 70 percent of the economy, will be slow to rebound in the second half of the year. The comfort gauge “has resided at recession-like levels for some time, and the likely direction of the economy now reflects that,” said Joseph Brusuelas , a senior economist at Bloomberg LP in New York. “The cumulative impact of a weak labor market and the recent spate of announced mass layoffs over the past two months has probably put a significant dent in the consumer psyche.” Another report today indicated limited improvement in the job market. Applications for unemployment insurance payments fell by 1,000 in the week ended July 30 to 400,000, the fewest in four months. Economists forecast a climb to 405,000 claims, according to the median estimate in a Bloomberg News survey. Today’s comfort report showed sentiment among Democrats fell to the lowest level since February, while confidence among Republicans dropped to a nine-week low. Democrats were 8 points more pessimistic than Republicans, the biggest gap since March. The report underscores “the impact of political brinksmanship on already tender economic sentiment,” Gary Langer , president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg, said in a statement. President Barack Obama signed a bill this week raising the U.S. debt ceiling by at least $2.1 trillion and reducing federal spending by $2.4 trillion or more, after party leaders spent months wrangling over the measure. The Bloomberg Consumer Comfort Index has been minus 40 or less, a region typically associated with recessions and their aftermath, for 170 of the past 172 weeks. That’s “an unprecedented period in the dumps, with every tentative breakout attempt, to date, quickly cut short,” said Langer. Two of the comfort index’s three subcomponents declined last week. The measure of personal finances fell back into negative territory after two weeks of positive readings. The buying climate index fell to the lowest level since early June. A backup in fuel prices may explain the deterioration. After reaching a three-month low of $3.54 a gallon in late June, the average price of regular gasoline climbed to $3.71 at the end of last week. The comfort gauge reached a nine-month low of minus 49.4 in May after gasoline climbed to $3.99 a gallon. The gauge of Americans’ views of the economy, which is the difference between those with positive versus negative opinions, rose to minus 86.5 from a more than two-year low. Even here, the news wasn’t good. Fifty percent of respondents gave the economy a poor rating, the worst of four categories. That’s the highest share in more than a year. Falling share prices may be to blame for the drop in sentiment among those with the highest incomes. Weekly changes in the overall comfort gauge have moved in the same direction as the Dow Jones Industrial Average about 80 percent of the time since the measure’s inception in 1985, according to Langer. Stocks fell today. The Standard & Poor’s 500 Index dropped 1.5 percent to 1,241.92 at 9:40 a.m. in New York. The outlook among those with a full-time job declined to minus 39.3, the weakest reading since March, indicating that even employed consumers may be hesitant to shop, today’s report showed. Consumer spending dropped in June for the first time in almost two years as savings climbed, Commerce Department figures showed earlier this week. The U.S. economy grew less than forecast in the second quarter after almost stalling at the start of the year, another report from the agency showed. The Bloomberg comfort index, which began in December 1985, has averaged minus 44.7 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. The measure has been less volatile than other confidence gauges, hovering this year within about 5 points of the 2011 average. In contrast, the Thomson Reuters/University of Michigan index of consumer sentiment dropped in July to its lowest level in more than two years. The Conference Board’s index unexpectedly rose in July from an eight-month low. Smaller employment gains and lagging consumer confidence are holding back the economic recovery, said Jenny Lin, senior U.S. economist for Ford Motor Co. (F) U.S. employers in July probably boosted payrolls at a pace that failed to reduce the jobless rate, according to a Bloomberg News survey before a Labor Department report tomorrow. “The budget negotiations likely contributed to the drop in confidence, which has cast a shadow on the modest recovery so far,” Lin said on an Aug. 2 conference call with analysts. “The modest labor market recovery is holding back income gains and consumer confidence.” The Dearborn, Michigan-based automaker reported an increase in sales in July that trailed analyst estimates. The Bloomberg Consumer Comfort Index is based on responses to telephone interviews with a random sample of 1,000 U.S. residents age 18 and over. Each week, 250 respondents are asked for their views on the economy, personal finances and buying climate. Results are combined with data from the previous three weeks, and the percentage of negative responses is subtracted from the share of positive views on each question, with the results then averaged. 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. Field work for the index is done by Social Science Research Solutions in Media, Pennsylvania. Contact for Bloomberg: Meghan Womack, +1 212-617-8514, mwomack4@bloomberg.net |
2024-09-12 | Bloomberg | Banco do Brasil Failed Deals Reward Investors: Corporate Brazil | Banco do Brasil SA ’s failed attempts to expand through acquisitions are making the government-run lender the best-performing stock in the nation’s financial industry. The bank has gained 14 percent including dividends in Sao Paulo trading since Aug. 20, the day before it postponed talks to increase its 50 percent stake in auto lender Banco Votorantim SA. Banco Daycoval SA, based in Sao Paulo, has the second-best return during that period, advancing 12 percent. The Votorantim deal as well as proposed acquisitions in the U.S. would have consumed cash Brasilia-based Banco do Brasil needs to fund loan growth while reducing chances that the lender would increase its dividend, said analysts including Rodolfo Amstalden of Empiricus Research in Sao Paulo. Banco do Brasil would have funded the purchases with part of the 11.5 billion reais ($5.1 billion) it raised in April from the initial public offering of insurance unit BB Seguridade Participacoes SA. (BBSE3) “Investors were skeptical of Banco do Brasil making acquisitions as it has been growing its portfolio of loans at a very fast pace,” Amstalden said in a telephone interview Sept. 9. “We always have to calculate whether an acquisition is the best capital allocation.” Banco do Brasil, Latin America’s largest lender by assets, increased its loan book 26 percent in the second quarter from a year earlier, according to filings. That compares with growth of 8 percent and 10 percent, respectively, for Itau Unibanco Holding SA and Banco Bradesco SA, the nation’s biggest banks by market value. The government-run firm paid 1.99 reais per share in dividends this year, the most among Brazilian banks, according to data compiled by Bloomberg. U.S. Talks Banco do Brasil sought to buy the preferred shares of Votorantim it didn’t already own and boost its stake in the company’s capital to 75 percent, two people with direct knowledge of the plan said in January. Votorantim would have remained a private company, allowing Banco do Brasil to use its brokerage to build an investment bank with a more flexible wage policy than state-owned firms must follow, the people said. Banco do Brasil, which paid 4.2 billion reais for its 50 percent stake in 2009, agreed last month to postpone the discussions indefinitely, according to a filing. Spokesmen for Banco do Brasil and Banco Votorantim declined to comment in separate e-mailed statements. Sao Paulo-based Votorantim Financas SA, which owns the remaining half of Banco Votorantim, didn’t immediately return e-mails and a telephone call. Banco do Brasil was in talks to make acquisitions in Florida and New Jersey to provide banking services to Brazilians living in those states, Paulo Rogerio Caffarelli, the firm’s vice-president for international business, said in January. He declined to name the companies involved. ‘Still Interested’ In May, Banco do Brasil was near a deal with Spanish lender Bankia SA (BKIA) to buy its City National Bank of Florida unit for about $900 million, two people familiar with the negotiations said at the time. It was beat out by Chile ’s Banco de Credito e Inversiones, which agreed to pay $882.8 million for the Miami-based lender. Chief Executive Officer Aldemir Bendine said last month that Banco do Brasil is “still interested” in a U.S. acquisition, though it’s being more “prudent” in its approach. Had the U.S. and Votorantim deals been successful, it would have diverted Banco do Brasil from returning capital to shareholders while adding “unnecessary risks” to the bank’s auto-loan portfolio, said Henrique Kleine, head analyst at Sao Paulo-based brokerage Magliano SA. He calculates Banco do Brasil could pay about 6 billion reais in dividends this year. Cash Injection “Now Banco do Brasil is a very attractive stock for investors seeking dividends,” Kleine said in a telephone interview Sept. 10. “Banco do Brasil has a lot of cash.” Votorantim posted eight straight quarterly losses through the three months ended June 30 as delinquency rates on its auto-loan portfolio increased, according to earnings statements. The losses led Banco do Brasil and Votorantim Financas to inject 1 billion reais each in the company last year. Banco do Brasil expects the auto-loan lender to post its first profit in more than two years by the fourth quarter, Chief Financial Officer Ivan Monteiro said last month. Banco do Brasil’s shares are rising faster than those of privately owned competitors in Brazil because of its growth strategy, said Pedro Galdi , head strategist at SLW Corretora, a Sao Paulo-based brokerage. ‘Stealing’ Share “Banco do Brasil and the other state-controlled banks are boosting credit and stealing market share from privately owned banks, which are restraining credit expansion,” Galdi said in a telephone interview Sept. 10. Improving economic indicators in China and the U.S. are also helping the firm’s shares, he said. Expanding in the U.S. by buying City National would have been “irrelevant” when compared to Banco do Brasil’s size in its domestic market, Empiricus’s Amstalden said, while increasing its Votorantim stake “isn’t exactly a very good deal.” “The money Banco do Brasil raised with the IPO of its insurance unit should finance organic growth, which is the biggest bet of Banco do Brasil,” Amstalden said. To contact the reporter on this story: Francisco Marcelino in Sao Paulo at mdeoliveira@bloomberg.net To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net ; Christine Harper at charper@bloomberg.net |
2024-02-19 | Bloomberg | AIG Offers to Buy Back $1.25 Billion in Bonds as CFO Cuts Debt | American International Group Inc. , the insurer that repaid a U.S bailout last year, began tender offers for as much as $1.25 billion of the company’s securities as Chief Financial Officer David Herzog works to lower debt. The securities include junior subordinated debentures denominated in pounds and euros, with rates as high as 8.625 percent, the New York-based firm said today in a statement. Other securities are denominated in dollars and tied to the SunAmerica Financial Group life insurance unit. AIG is focusing on “selected and targeted debt reduction” to cut leverage, Herzog said on a November conference call with analysts. AIG struck deals to sell more than $70 billion in assets since 2008, including non-U.S. life insurers, as Chief Executive Officer Robert Benmosche simplified the company and repaid the rescue. “We do have some bonds that are callable that I think make a lot of sense for us to go after,” AIG Treasurer Brian Schreiber said on a Nov. 2 conference call with analysts. The early participation date for AIG’s tender is March 4, and March 18 is the expiration. To contact the reporter on this story: Zachary Tracer in New York at ztracer1@bloomberg.net To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-11-09 | Bloomberg | Allstate Announces Plans to Repurchase $1 Billion in Shares by March 2012 | Allstate Corp. , the largest publicly traded U.S. home and auto insurer, approved a $1 billion share buyback program as Chief Executive Officer Thomas Wilson called the company “exceptionally well-capitalized.” The repurchases will happen through the open market and be completed by the end of March 2012, the Northbrook, Illinois- based insurer said today in a statement. “We can resume providing additional cash returns to shareholders,” Wilson said. The insurer has about $15.1 billion of statutory capital at insurance subsidiaries and $3.5 billion of holding company investments, he said. Allstate, which gets the largest portion of revenue from auto insurance and sells most policies through agents, is competing for customers with Progressive Corp. and Warren Buffett ’s Geico Corp., which increased Internet and phone sales. Third-quarter net income climbed to $367 million, or 68 cents a share, from $221 million, or 41 cents, a year earlier, as investment losses narrowed. The insurer’s board also maintained a 20-cents-a-share dividend payable on Jan. 3. 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 |
2024-05-10 | Bloomberg | FDIC Seeks Comment on Rule Governing Retail Forex Transactions | The Federal Deposit Insurance Corp. will seek comment on a measure that would govern banks’ off- exchange foreign currency transactions with retail customers, part of the agency’s rulemaking under the Dodd-Frank Act. FDIC board members voted 5-0 at a meeting in Washington today to seek comment on the proposal, which would impose requirements for foreign currency futures and options that would be prohibited as of July 16 in the absence of a rule. The FDIC proposal would cover retail transactions involving individuals with $10 million or less to invest, the agency said. “These are retail customers who don’t meet a sophisticated investor standard,” FDIC Vice Chairman Martin Gruenberg said at the meeting. The measure wouldn’t apply to foreign currency forwards or spot transactions that banks engage in with business customers to hedge foreign exchange risk, according to the FDIC’s notice of proposed rulemaking. Today’s vote by the FDIC board approves sending the measure out for public comment for 30 days after its publication in the Federal Register. To contact the reporter on this story: Meera Louis in Washington at mlouis1@bloomberg.net To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net |
2024-06-20 | Bloomberg | Calpers Gains 14% as End of Biggest Pension’s Year Nears | The California Public Employees’ Retirement System , the largest U.S. public pension, reported a 14.3 percent gain on invested assets for the first 10 months of its fiscal year as stocks soared to records. The fund’s performance through April, announced yesterday by Theodore Eliopoulos, the senior investment officer for real assets, means the $261.6 billion fund is set to beat its assumed 7.5 percent rate of return for a second consecutive year. Its assets gained 13.3 percent in fiscal 2012, which ended June 30. The increase so far this year “reflects very strong performance of public equity over the last 10 months,” Eliopoulos said at a meeting of the fund’s board in Sacramento. The Standard & Poor’s 500 Index (SPX) of U.S. stocks had a total return of about 17 percent in the same period, touching 1,597.57 on April 30, a record that has since been eclipsed. The pension, known as Calpers, in May passed its pre-recession high of $260.6 billion in assets, five years after the global financial crisis wiped out more than a third of its value. Local governments and state agencies have been forced to help make up the loss to cover benefits promised to public employees. The system serves about 1.7 million members. Separately, the board approved rate increases averaging about 3 percent for members’ health-care insurance in 2014. Calpers, fully funded when the recession began in December 2007, had about 74 percent of the money needed to meet long-term commitments as of June 2011, the most recent figure available. Eliopoulos, 49, took over day-to-day investment operations from Chief Investment Officer Joe Dear , 62, who is being treated for prostate cancer, the fund said June 14. To contact the reporter on this story: Michael B. Marois in Sacramento at mmarois@bloomberg.net To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net |
2024-11-15 | Bloomberg | UBS Recovery Fizzles as Gruebel Sees Less Profit | Oswald Gruebel is walking a tightrope. He can encourage UBS AG ’s investment bank to take more risk or watch it fall further behind rivals. UBS, Switzerland ’s biggest bank, had the lowest revenue from sales and trading in the first three quarters of this year compared with eight main competitors and was the only one to report a third-quarter pretax loss at its investment bank. The Zurich-based firm made more from trading stocks and bonds than the average of its competitors in 2005, before more than $57 billion of writedowns and losses from the credit crisis forced it to shrink the investment bank’s risk-weighted assets 44 percent. A lack of client business, combined with the lowest value-at-risk, meant UBS barely made enough in the third quarter to pay the 17,000 bankers in the unit. “They have to start taking risk again or to pay less,” said JPMorgan Chase & Co. analyst Kian Abouhossein , whose recommendations on UBS produced the second-highest total returns over the past year, according to data compiled by Bloomberg. “The question is do you really need the best people in the market if you’re just running a very flow-oriented business? That’s the dilemma that they need to decide.” Gruebel, 66, will probably reiterate his profit targets at a UBS investor conference tomorrow in London, analysts said. He intends to boost annual pretax profit at the investment bank to about 6 billion Swiss francs ($6.2 billion) and overall company earnings to 15 billion francs in the next two to four years. The securities unit earned 2.1 billion francs in the first nine months of this year. ‘Playing Catch-Up’ UBS’s sales and trading revenue averaged $2.58 billion a quarter this year, 45 percent less than the average of $4.7 billion at Goldman Sachs Group Inc ., JPMorgan, Citigroup Inc ., Bank of America Corp ., Deutsche Bank AG , Barclays Plc , Morgan Stanley and Credit Suisse Group AG , and 27 percent behind its own targets, data compiled by Bloomberg shows. Gruebel, known as “Ossie,” set goals a year ago for the investment bank to be making more than 2 billion francs a quarter from trading bonds, currencies and commodities, and more than 1.75 billion francs from equities trading. “In equities, they’re massively off what was a leadership position before the crisis,” said Christopher Wheeler , an analyst with Mediobanca SpA in London. “In debt trading, the 2 billion-franc target is not that mad, but Ossie will clearly have to change the mix of the business. He’ll have to put a bit more capital on the table because they’re playing catch-up.” Value-at-Risk UBS was the second-biggest equities trader behind Goldman Sachs in 2005, taking home a 14.4 percent share of the total sales and trading-revenue pool. That share was 10.4 percent in the first three quarters of this year, as Credit Suisse, Morgan Stanley , JPMorgan and Bank of America overtook it, according to data compiled by Bloomberg from company reports. In debt trading, the bank’s share of the revenue pool shrunk to 5 percent from 8.6 percent in 2005. Gruebel told German newspaper Welt am Sonntag last month that the investment bank needs to take higher risks again to keep up with competitors. UBS, which declined to make Gruebel available for an interview ahead of tomorrow’s presentation, said in an e-mailed comment that he was referring to the bank’s “considerably lower value-at-risk,” or VaR, numbers compared with peers. “Higher value-at-risk will mainly be driven by increased client activity levels and the rebuild of selected client businesses,” the bank said. Neither Gruebel nor UBS said how much the bank would increase its VaR. Twiddling Thumbs UBS cut risk-weighted assets at its investment bank to 126.2 billion francs in the third quarter from 225.2 billion francs in the first quarter of 2008. The bank’s VaR, a measure of how much it could lose in the markets on average in a single day, was $56 million in the third quarter, the lowest among its main competitors that report the data. By comparison, the gauge of risk was $121 million at Goldman Sachs and $142 million at Morgan Stanley. The two banks are based in New York. “Relative to peers, UBS is still fairly under-risked,” said Dirk Hoffmann-Becking, a London-based analyst at Sanford C. Bernstein with an “outperform” rating on the company’s stock. “As a client-driven bank, you’re completely exposed to client activity swings. If there is no client phoning, then literally people sit there and twiddle their thumbs because they’re not allowed to do anything else.” ‘Balancing Act’ UBS put aside 83 percent of the investment bank’s revenue in the third quarter as compensation for employees. For the first nine months, that ratio was 56 percent, the highest compared with Barclays, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan and Morgan Stanley. Citigroup and Bank of America don’t report such data. Chief Financial Officer John Cryan, 49, told analysts and investors last month that while the bank would like to bring that ratio to below 50 percent, UBS has to pay its people “to some extent regardless of the performance.” “There is obviously a balancing act between the public interest in banks reducing their bonus or compensation payments generally, and what it takes to retain and attract stars,” Cryan said. “We are a living example of a bank that experimented with not paying people, and it didn’t come off very well in 2008.” The bank cut the 2008 bonus pool for all employees, excluding U.S. brokers, by 78 percent to 2.16 billion francs, with most of that going to wealth-management staff. The reduction in variable pay was greater than at any other competitor, the bank said at the time. UBS Shares UBS shares fell 5 percent in Swiss trading on Oct. 26 after the bank reported a 406 million-franc third-quarter pretax loss at the securities unit, even as wealth-management businesses attracted the first net new client investments since 2008. The stock advanced 0.9 percent by 2:07 p.m. today, bringing the gain this year to 6.2 percent, compared with a 4 percent decline in Bloomberg’s European banks index. “Going forward Gruebel will be measured on what happens at the investment bank,” said JPMorgan’s Abouhossein, who is based in London. “The private bank has had a continuous improving trend, whereas the investment bank has not.” Gruebel Hires Gruebel, who joined UBS out of retirement in February 2009, appointed Carsten Kengeter, 43, as sole head of the investment bank in September. The former co-head, Alexander Wilmot-Sitwell, 49, took on a new role this month as co-CEO of Asia Pacific. In January, the bank named Rajeev Misra, 48, and Dimitri Psyllidis, 44, formerly with Deutsche Bank and Merrill Lynch & Co. respectively, as co-heads of the fixed-income unit, and in May UBS appointed Yassine Bouhara, formerly with Deutsche Bank, and Francois Gouws, 45, to head the global equities business. Gruebel hired more than 850 people to expand trading units and promised to pay bankers “market rates” after bonus cuts in 2008 led to defections. This produced some dividends: UBS beat its target in debt trading in the first three months and surpassed Goldman Sachs in revenue from stock trading in the second quarter. “Unfortunately the recovery fizzled away a little bit,” said Mediobanca’s Wheeler, who cut his rating on UBS after third-quarter results to “neutral” from “outperform.” Gruebel knows about trading and risk-taking first hand. His 37-year career at Credit Suisse, which he headed before retiring in 2007, started at the bank’s Eurobond trading desk in 1970. By 1991 he had become head of global trading. Under his leadership, the Zurich-based bank started cutting its holdings of U.S. subprime mortgage bonds in 2006, when competitors including UBS were still buying them. Perils of Risk UBS’s writedowns and losses from the credit crisis --second only to the Royal Bank of Scotland Plc among European lenders -- forced it to tap investors and the Swiss government for capital. Some of those losses were the result of a strategy pursued by the investment bank under the leadership of Huw Jenkins to boost debt-trading revenue after part of that business was spun off to the Dillon Read Capital Management LLC hedge fund in 2005. “We saw what happened five years ago when UBS decided to catch up to rivals and take more risks, and that wasn’t a good idea,” said Dirk Becker , a Frankfurt-based analyst at Kepler Capital Markets who has a “buy” rating on UBS. While the bank doesn’t need to build up big positions again, UBS could benefit from more inventory to help its market- making, he said. The bank’s trading assets amounted to 246 billion francs in the third quarter, less than half of the 654 billion francs it had at the end of 2005. Swiss Rules Gruebel told investors a year ago that he wants the investment bank to focus mainly on clients. To keep risks under control he started weekly calls with management of the securities unit and top risk officers. Kengeter is having risk calls and talking to traders every day, something that didn’t happen during the past four to five years before he joined, Cryan said in July. A Swiss government-appointed committee, which examined how to limit risks from the country’s biggest banks, ruled out banning proprietary trading as the U.S. did in the Dodd-Frank Act. The Swiss regulator instead is raising capital requirements on trading assets from the beginning of next year. UBS could benefit from increasing risk-taking in foreign exchange, equity derivatives and rates products, said Abouhossein, who has an “overweight” rating on the shares. The bank’s revenue from equity derivatives fell 46 percent in the third quarter from the second, to 268 million francs, posting a bigger decline than cash equities and prime services. Revenue from the firm’s macro business, which includes foreign- exchange and rates trading, slumped 56 percent to 291 million francs in the same period, while credit trading, at 587 million francs, rose 27 percent. ‘Moving Sideways’ Cryan said in an interview on Oct. 26 that UBS benefited from a higher frequency of trading in credit in the quarter -- a strategy Kengeter and Wilmot-Sitwell outlined a year ago. Instead of accumulating assets, the bank would trade more frequently, making higher returns without expanding its balance sheet, they said. “They’ve been trading a lot,” Cryan said. “In credit they traded, and it moved up and down enough that they actually made very good revenue. In equities they traded, but it was moving sideways, and volatility wasn’t changing.” The bank couldn’t benefit from the volatility in foreign- exchange markets, the business Cryan called “the big disappointment” in the third quarter, because it doesn’t do any proprietary trading there, he said. Deutsche Bank UBS was ranked the second-biggest currency trader in the foreign-exchange market in 2009 behind Deutsche Bank, according to a survey by Euromoney Institutional Investor Plc. Deutsche Bank said foreign-exchange trading helped to boost the bank’s fixed-income revenue in the third quarter. Deutsche Bank is probably benefiting from higher risk- taking in the business, while UBS lost market share during the crisis, Wheeler said. UBS’s share in the currency market shrank to 11.3 percent last year from 15.8 percent in 2007, according to the Euromoney survey. “It’s going to be very difficult to wrestle market share from Deutsche Bank,” Wheeler said. UBS may also try to build up commodities trading, which “has been one of the most enormous revenue machines” for U.S. banks, said Wheeler. UBS sold all of its commodities businesses during the credit crisis, except index and exchange-traded commodities and precious metals. The bank in January hired Neal Shear , 56, a former Morgan Stanley executive who specialized in commodities for at least 18 years of his career there, to head its global securities business. In August, UBS appointed Jean Bourlot, a former head of agriculture trading at Morgan Stanley, as head of commodities in London. As the bank tries to boost its trading revenue, the main target for UBS is not to let risks spiral out of control, said Hoffmann-Becking of Sanford C. Bernstein. “For UBS, the focus is on wealth management, and that means the first priority is nothing must ever blow up again.” 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 |
2024-08-21 | Bloomberg | Insurers May Have $5 Billion U.S. Drought Cost | Private crop insurers, a group led by Wells Fargo & Co. (WFC) and Ace Ltd. (ACE) , may face losses that exceed $5 billion if this year’s U.S. drought is worse than one in 1988, Standard & Poor’s said. Hot, dry weather across much of the Midwest has damaged crops, led to a rally in corn and soybean futures, and boosted insurance loss estimates. The U.S. subsidizes farmers’ premiums for so-called multiperil coverage, which protects against a loss of revenue or production as a result of drought, hail, wind, frost or other natural causes. Private insurers sell and administer the coverage in the U.S. In return, the federal government backstops the firms with payments and reinsurance. “Insurers with higher concentrations of premiums in the most-affected states, such as Kansas , Illinois , Kentucky , Indiana , Missouri and Tennessee , will see a larger share of the losses,” S&P analysts led by Jason Porter said today in a report. “Farmers in the most affected states are expecting one of their worst harvests since the drought in 1988.” Losses among crop insurers will vary depending on how much government and private reinsurance they use, S&P said. The companies can withstand the losses because of capital levels and revenue from other businesses, according to the ratings firm. “Underwriting losses will be a drag on earnings, but by themselves, will not affect the capital of most insurers that we rate,” S&P said. “We do not expect to take any rating actions solely because of crop insurance losses.” Reinsurance Coverage Wells Fargo has reinsurance, in which other companies agreed to absorb losses on policies sold by the firm, said Katie Ellis, a company spokeswoman. She said San Francisco-based Wells Fargo, the fourth-largest U.S. bank by assets, has spread its risks to limit liabilities from a single event. “It’s a diversified, nationally based business so we’re not concentrated in any one area,” Ellis said. “It’s really too early to know how this is going to play out.” Evan Greenberg, chairman and chief executive officer of Ace, said in July that the dry conditions would affect second- half earnings. Projected third-quarter crop losses prompted the company to include a deduction of 19 cents a share in its full- year earnings forecast. Stephen Wasdick, a spokesman for Ace, declined to comment further. Wells Fargo advanced 1 percent to $34.40 at 2:18 p.m. in New York and has climbed 25 percent since Dec. 31. Ace slipped 2 cents to $74.07, trimming its gain this year to 5.6 percent. Ace, QBE Wells Fargo’s Rural Community Insurance Co. was the largest approved provider of crop insurance in 2011 with $1.79 billion in policy sales, according to National Association of Insurance Commissioners data compiled by S&P. Zurich-based Ace was No. 2 with $1.67 billion in sales, followed by QBE Insurance Group Ltd. (QBE) ’s NAU Country Insurance Co. American Financial Group Inc., which sells crop insurance along with property, casualty and supplemental health protection, last month reduced its earnings projection for the year, saying the drought will weigh on results. Soybeans climbed to an all-time high today, and corn reached a record $8.49 a bushel on Aug. 10 on the Chicago Board of Trade. The Department of Agriculture has slashed its corn harvest forecast by 27 percent since June, after declaring more than half of U.S. counties as disaster areas amid drought conditions that stretched from California to New York. Losses this year may rival costs from the 1988 drought and a 1993 flood, Tom Zacharias, the president of National Crop Insurance Services, an industry group, said last month. Federal crop insurance dates to the Dust Bowl droughts of the 1930s. The program and subsidies were boosted in 2000 as lawmakers sought to use it as a way to avoid what by the 1980s had become near-annual disaster payouts. 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 |
2024-02-22 | Bloomberg | Alleghany CEO Hicks Likens Central Banks to Medieval Bloodletter | Federal Reserve efforts to boost liquidity in the banking system haven’t shown proof of helping the economy and are punishing savers, Alleghany Corp. (Y) Chief Executive Officer Weston Hicks wrote to shareholders. “Much like Theodoric of York, the medieval barber on ‘Saturday Night Live’ whose solution to every health problem was more bloodletting, central bankers continue to force liquidity in the banking system without any objective proof that it is helping,” Hicks said in a letter posted on the New York-based insurer’s website, referring to the character played by comedian Steve Martin on the U.S. television show. “We do know that it isn’t helping retirees, pension funds, or insurance companies.” Hedge-fund manager David Einhorn and Tad Montross, CEO of Berkshire Hathaway Inc .’s General Re unit, have also said central bank monetary policy hurts savers. The Fed, led by Chairman Ben S. Bernanke , has kept interest rates near zero since December 2008 and expanded its balance sheet to more than $3 trillion for the first time through bond purchases. Bernanke defended the Fed’s interest-rate policy in an Oct. 1 speech in Indianapolis, saying it will spur growth and support employment. Savers may also own homes, run businesses, have jobs or hold stocks in their portfolios, meaning they will benefit from a stronger economy, Bernanke said. “I know that people who rely on investments that pay a fixed interest rate, such as certificates of deposit, are receiving very low returns, a situation that has involved significant hardship for some,” Bernanke said. “Only a strong economy can create higher asset values and sustainably good returns for savers.” Home Values Home values in 20 U.S. cities rose 5.5 percent in the 12 months from November 2011, the most in more than six years, according to the S&P/Case-Shiller index of property prices. The Standard & Poor’s 500 Index climbed to a five-year high on Feb. 19 and unemployment fell below 8 percent last year for the first time since 2009. Hicks joined Alleghany in 2002 and helped build the insurer through investments and takeovers , including the purchase of Transatlantic Holdings Inc. last year for more than $3 billion. The insurer has a market value of more than $6 billion after posting an annualized return of 8.5 percent in the 10 years ended Dec. 31, beating the S&P 500’s 7 percent. Persistent low interest rates will push Alleghany to invest more in equities, said Hicks, who became CEO in 2004. The insurer’s fixed-income portfolio was valued at about $16 billion at the end of December, according to a regulatory filing. ‘Overvalued’ Bonds “While the equity market remains expensive by historical standards, it appears to be less overvalued than the bond market , which now discounts all but the most extreme deflationary scenarios,” he wrote. “If this environment persists, we would expect over time to increase our allocation to equity securities.” Fed spokesman David Skidmore in Washington declined to comment about the letter. Einhorn said in May that the Fed’s interest-rate policy was “no longer useful” and risked inflation. Montross, the CEO of reinsurer Gen Re, said last year that low rates were hurting insurers and spurring companies to raise the cost of coverage. Hicks’s criticism overlooks the damage that could be caused by higher rates, said Josh Feinman, the global chief economist for DB Advisors, the Deutsche Bank AG asset management unit that oversees $228 billion, and a former Fed senior economist. “If you were to raise rates that would really be a bloodletting,” Feinman said. “The overall economic situation would be worse if the Fed were prematurely and artificially trying to jack up rates.” To contact the reporters on this story: Noah Buhayar in New York at nbuhayar@bloomberg.net ; Jeff Kearns in Washington at jkearns3@bloomberg.net. To contact the editors responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-04-27 | Bloomberg | French Stocks Retreat: Credit Agricole, Societe Generale, Lagardere Slide | France’s CAC 40 Index declined 152.79, or 3.8 percent, to 3,844.60 in Paris for the biggest decrease in a year. The SBF 120 Index dropped 3.5 percent. The indexes slid after Standard & Poor’s Ratings Services lowered its long- and short-term sovereign credit ratings on Greece to ‘BB+’ and ‘B’, respectively, from ‘BBB+’ and ‘A-2’. Stocks also fell, led by banks, amid concern Greece will ask investors to accept delayed or reduced payments on its debt and that its deficit crisis may spread. The country is likely to default or inflict “significant” losses on bondholders unless it receives more generous terms on its planned aid package, according to Willem Buiter, chief economist at Citigroup Inc. Credit Agricole SA, France’s biggest bank by branches, lost 6.4 percent to 11.44 euros. BNP Paribas SA, France’s largest bank by assets, plunged 7 percent to 50.73 euros. Societe Generale SA, the country’s second-biggest bank, declined 6 percent to 41.05 euros. The following shares rose or fell in Paris. Stock symbols are in parentheses. April Group (APR FP) sank 6.6 percent to 24.90 euros, declining the most since September. The Lyon-based insurance broker said first-quarter revenue fell 9.6 percent to 184 million euros. ArcelorMittal (MT NA), the world’s biggest steelmaker, retreated 3.8 percent to 31.22 euros as metals prices fell in London. Cie. Generale de Geophysique-Veritas (GA FP), the world’s largest seismic surveyor, lost 4.7 percent to 23.80 euros, the biggest drop in nearly 12 weeks. The stock was cut to “reduce” from “add” at AlphaValue. Lagardere SCA (MMB FP) dropped 6.1 percent to 29.72 euros, the biggest decline in nearly seven weeks. The biggest French publisher announced at its AGM that activist investor Guy Wyser- Pratte didn’t win election to the board after receiving 22 percent support. To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net . |
2024-03-08 | Bloomberg | CIBC First-Quarter Profit Tops Estimates on Consumer Lending | Canadian Imperial Bank of Commerce , the country’s fifth-biggest lender, said first-quarter profit topped analysts’ estimates, led by consumer lending and wealth management. The company may sell its FirstLine Mortgages broker. Net income for the quarter ended Jan. 31 rose 9.4 percent to C$835 million ($839 million), or C$1.93 a share, compared with C$763 million, or C$1.80, a year earlier, the Toronto-based bank said today in a statement. Revenue rose 2 percent to C$3.16 billion. CIBC, the last Canadian lender to report quarterly results, joins the country’s five other big banks in posting profit that met or beat analysts’ expectations. Royal Bank of Canada (RY) , Toronto-Dominion Bank (TD) and Bank of Nova Scotia (BNS) reported record profit from domestic consumer and business lending. “I was impressed with how well the banks have done in terms of being in a relatively poor environment,” David Cockfield , who helps oversee C$200 million including banks at Northland Wealth Management in Toronto. “It’s a nice place to park money.” CIBC said adjusted earnings were C$1.97 a share, beating the C$1.93 average estimate of 16 analysts surveyed by Bloomberg News. Earnings benefited from a lift in trading revenue and a lower-than-expected tax rate , according to Barclays Capital Inc. analyst John Aiken. ‘Dim View’ “Although CIBC’s earnings notionally came in ahead of expectations, the market took a dim view of its quality,” Aiken said today in a note. “Weaker retail banking earnings disappointed against what had been reported by its peers.” CIBC declined 16 cents to C$76.11 at 4 p.m. in Toronto, the only Canadian bank to fall. CIBC had slower earnings growth from Canadian consumer lending than larger rivals Royal Bank, Toronto-Dominion and Scotiabank, which benefited as mortgages, loans and deposits grew. CIBC’s deposits fell 2 percent from a year ago, and the lender set aside C$338 million for bad loans, 20 percent more than the year-earlier period. Chief Executive Officer Gerald McCaughey said today in a conference call that a goal set in 2010 to reach C$3 billion of annual profit in three years from consumer lending and wealth management remains “intact” though “somewhat stressed” and depends on further wealth management acquisitions. Canadian consumer lending and business-banking earnings rose 5 percent to C$567 million on higher revenue from business lending. CIBC said today it will spend C$50 million this year on projects to better serve retail and business-banking clients. ‘Exploring Options’ The bank, which said in January it’s shifting away from using mortgage brokers in favor of selling home loans through branches, said it’s “exploring options” including a sale of its FirstLine brand. “Over the past number of years, we have invested in our branch-based mortgage business, including a substantial build of our mortgage advisers,” David Williamson, head of retail and business banking, said in the statement. CIBC bought FirstLine Trust in 1995, and expanded its mortgage origination business to C$10 billion from C$500 million in 10 years, according to its website. “CIBC has made no secret of the fact that it is not happy with returns from this channel,” Darko Mihelic , an analyst at Cormark Securities Inc., said of FirstLine in a Feb. 17 note. He estimates FirstLine holds about C$50 billion in mortgages. Mutual Funds Wealth-management profit, which includes mutual fund sales, rose 52 percent to C$100 million from C$66 million after adding earnings from the purchase of a 41 percent stake in American Century Investments from JPMorgan Chase & Co. in August. The CIBC World Markets business earned C$133 million, compared with C$140 million a year earlier. Underwriting and advisory fees fell by a third to C$107 million. Trading revenue rose 9.9 percent to C$167 million, led by trading of interest rates and foreign exchange. The corporate unit, which includes Caribbean banking, had profit of C$35 million, double that of a year earlier, the bank said. 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 |
2024-08-27 | Bloomberg | Most Japan Stocks Fall as China Industrial Profit Drops | Most Japanese stocks declined, with the Topix (TPX) Index falling for a second day, after profit at Chinese industrial companies fell, pointing to a deepening slowdown and outweighing optimism central banks in the U.S. and China will move to boost growth. Komatsu Ltd. (6301) , a construction-machinery maker that gets 14 percent of its sales from China, lost 1.3 percent. Fuji Heavy Industries Ltd. (7270) , a carmaker that counts North America as its biggest market, gained 0.5 percent after the yen weakened against the dollar, boosting prospects for exporters. Kansai Electric Power Co. (9503) sank 5.3 percent on a report the utility won’t pay an interim dividend for the first time since 1980. Olympus Corp. (7733) soared 4.4 percent after it agreed to sell the telecommunications business of its ITX Corp. subsidiary. The Topix fell 0.3 percent to 755.37 at the 3 p.m. close in Tokyo, after rising as much as 0.7 percent earlier. About three shares dropped for every two that gained. The Nikkei 225 Stock Average (NKY) added 0.2 percent to 9,085.39. Volume was more than 30 percent below the 30-day average before a Fed symposium this week at Jackson Hole , Wyoming. “A tug of war is being seen in the markets,” said Seiichiro Iwamoto, who helps oversee about $34 billion at Mizuho Asset Management Co. in Tokyo. “Investors are groping for reasons to trade shares with few catalysts available. The economy is deteriorating globally, including in China, boosting expectations countries will take stimulus measures to support the markets.” The Topix has fallen 13 percent from this year’s peak on March 27 on concern earnings will be hurt by Europe’s debt crisis and slowing growth in China and the U.S. The decline has cut the price of shares on the gauge to 0.9 times book value, compared with 2.2 for the Standard & Poor’s 500 Index and 1.4 for the Europe Stoxx 600 Index. A number less than one means companies can be bought for less than the value of their assets. Industrial Slump Exporters to China fell after the National Bureau of Statistics said Chinese industrial companies’ profits dropped 5.4 percent last month from a year earlier to 366.8 billion yuan ($57.7 billion). Komatsu slid 1.3 percent to 1,665 yen. Murata Manufacturing Co. , an electronic-parts company that depends on China and Taiwan for half of its sales, slumped 0.7 percent to 4,070 yen after rising as much as 1.8 percent. Futures on the S&P 500 were little changed today. The gauge rose 0.7 percent on Aug. 24 in New York after Federal Reserve Chairman Ben S. Bernanke , speaking in a letter dated Aug. 22 to California Republican Darrell Issa , reiterating the statement from the Federal Open Market Committee ’s Aug. 1 meeting that the central bank will provide “additional accommodation as needed.” Investors will be watching the Aug. 30 meeting at Jackson Hole closely for signs of another round of quantitative easing. Yen Weakens The yen depreciated to as low as 78.84 against the dollar today in Tokyo, compared with 78.59 at the close of stock trading on Aug. 24, boosting overseas income at some Japanese companies when repatriated. Fuji Heavy, which makes Subaru vehicles and gets more than 45 percent of its sales in North America, gained 0.5 percent to 651 yen. Uniden Corp. (6815) , a communications-equipment maker that gets almost 60 percent of its revenue in North America, climbed 1.7 percent to 180 yen. “Clearly the chances of further quantitative easing are higher than they were six months ago,” said George Boubouras, Melbourne-based head of investment strategy at UBS AG’s Australian wealth management unit. The Swiss bank has about $1.5 trillion in assets under management. “The market is looking to Bernanke’s speech at Jackson Hole for additional guidance on policy.” Wen Remarks Chinese Premier Wen Jiabao urged additional measures to support Chinese exports and help meet economic targets as evidence mounts that the nation’s slowdown is deepening. “The third quarter is a crucial period for realizing full-year targets on export growth,” Wen said during an inspection tour of Guangdong, the nation’s biggest exporting province, the official Xinhua News Agency reported on Aug. 25. “Facing the current difficulties, China should substantially improve the environment for companies’ operation and improve companies’ confidence.” Olympus jumped 4.4 percent to 1,562 yen, the most on the Nikkei 225, after agreeing to sell subsidiary ITX’s telecommunications arm for 53 billion yen to boost capital as it recovers from a 13-year accounting fraud. Olympus will book a one-time gain in the current quarter from the sale to Japan Industrial Partners, it said in a statement on Aug. 24. Kansai Electric Power declined the most on the Nikkei 225, falling 5.3 percent to 660 yen after the Nikkei reported the utility won’t issue an interim dividend due to earnings uncertainty, the first non-payment since the 1980 oil crisis. Power companies led the decline among the Topix’s 33 industry groups. -- With assistance from Adam Haigh in Sydney. Editors: Stuart Biggs, Jim Powell To contact the reporter on this story: Norie Kuboyama in Tokyo at nkuboyama@bloomberg.net To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net |
2024-10-18 | Bloomberg | Debts Keep Water Firms Off-Limits for Politicians: U.K. Credit | The debt mountain at U.K. water companies is their best defense against politicians seeking to cut the cost of living. The Labour opposition, which has pledged to freeze gas and electricity prices for 20 months if it wins the 2015 general election, may be wary of imposing a similar cap on highly leveraged water businesses, according to Lakis Athanasiou, a utilities analyst at Agency Partners LLP. Water companies have debt-to-equity ratios as high as 80 percent and rely on borrowings to keep infrastructure intact. “I really can’t see them going after the water industry,” Athanasiou said in a phone interview. “Because they are highly leveraged structures, they need masses of debt, not just for expansion but for replacement of existing debt. ” United Utilities Group Plc, the biggest publicly traded U.K. water company, has net debt to earnings almost twice that of SSE Plc, one of the Big Six power companies, data compiled by Bloomberg show. The extra yield investors demand to own its bonds maturing in 2028 instead of similar maturity government debt has fallen 26 basis points this month to 325 basis points. The spread on Severn Trent Plc (SVT) 2026 bonds has dropped 8 basis points to 103. Polls give Ed Miliband ’s Labour Party a lead of about 5 percentage points over David Cameron ’s Conservatives, which plan to curb gas and electricity bills by simplifying tariffs. Standard & Poor’s and Moody’s Investors Service say a price freeze could push up financing costs for energy companies. ‘More Vulnerable’ “The U.K.’s water companies are significantly more vulnerable to shocks -- of the Miliband variety or anything else,” said Andrew Lyddon, a Schroder Investment Management Ltd. fund manager. “At these high levels of leverage, a business will have little ability to withstand any kind of shock.” In the past six years a series of debt-funded acquisitions of water companies by financial institutions seeking stable, regulated returns has driven up borrowings at the utilities. Equity in companies has slumped from 42.5 percent of their funding in 2006 to 30 percent today, with several as low as 20 percent, raising questions about their sustainability, Jonson Cox , chairman of regulator Ofwat, said in March. Net debt at United Utilities was 6.31 times earnings before interest, tax, depreciation and amortization in the year ended March and the second-largest publicly traded U.K. water company, Severn Trent, was about 5.62 times, according to figures compiled by Bloomberg. SSE’s ratio was 3.20 times. Centrica Plc, the biggest energy supplier to households, had debt 1.1 times earnings in 2012, the latest available annual period. Capital-Intensive Severn Trent and United Utilities declined to comment on their debt or political intervention when contacted by phone. Thames Water Utilities Ltd., a unit of Kemble Water Holdings Ltd., had a net debt to regulated-assets value of 79 percent in March 2012 compared with 72.7 percent in March 2009, according to Moody’s. At Kelda Group Ltd., the parent of Yorkshire Water Services, the ratio has risen to 81.7 percent in March last year from 66.2 percent in March 2009. “They have so much debt because these businesses are very capital-intensive and they’ve had to fund a lot of investments; debt is a lot cheaper than equity,” Andrew Moulder, a senior utilities analyst at Creditsights Inc., said by phone. “I wouldn’t expect that you would get a government intervening to try to cut water bills.” Debt-Funding This borrowing is set to continue after Ofwat raised assumed debt levels in a price review, according to Impax Asset Management Group Plc investment manager Simon Gottelier. “It is prepared to let the utilities take on even more debt given its view that interest rates will remain low for a prolonged period,” he said. “High levels of ‘allowed’ debt within the industry-wide tariff and cost of capital calculation suggest that debt-funding to the industry is here to stay.” With water and sewage costing households 388 pounds ($629) on average this year compared with 1,279 pounds for gas and power in 2012, according to Department of Energy and Climate Change data, the water industry has escaped political scrutiny as the squeeze on living standards emerges as a key election battleground. Thames Water’s plan to raise bills for 14 million clients in the London area by about 8 percent a year was rejected by Ofwat two days ago as too high. The industry needs to borrow for investment at a rate of more than 20 billion pounds ($32 billion) every five years, Ofwat says. “Spending on water is a necessity -- it isn’t a feel-good spend like renewables,” Athanasiou said. The U.K. “doesn’t want to end up paying for it. Government, Ofwat and political parties understand fully that they can’t upset debt holders.” 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 |
2024-03-14 | Bloomberg | Arch Coal, Caterpillar, NYSE Euronext: U.S. Equity Movers | Shares of the following companies had unusual moves in U.S. trading. Stock symbols are in parentheses, and prices are as of 4 p.m. in New York. Solar stocks rallied after explosions at two nuclear reactors in Japan triggered speculation that renewable energy plants may win favor. Jefferies Group Inc. said solar and wind power equipment producers will benefit from the country’s rebuilding program. MEMC Electronic Materials Inc. (WFR) had the biggest gain in the Standard and Poor’s 500 Index, climbing 11 percent to $13.37. First Solar Inc. (FSLR) rose 5.1 percent to $146.91. Trina Solar Ltd. (TSL) gained 7.3 percent to $26. LDK Solar Co. (LDK US) advanced 8.8 percent to $11.58. Power-One Inc. (PWER) climbed 13 percent to $8.20. Power plant operator Entergy Corp. (ETR) declined 4.9 percent to $70.09 for the third-biggest retreat in the S&P 500 , after being cut to “market perform” from “outperform” by BMO Capital Markets. General Electric Co. (GE) , the world’s biggest maker of power-generation equipment and designer of one of the reactors at a plant north of Tokyo that exploded, declined 2.2 percent to $19.92. Babcock & Wilcox Co. (BWC) , which makes nuclear components to support U.S. defense programs, slumped 9 percent to $31.28. Shaw Group Inc. (SHAW) fell the most in the Russell 1000 Index, sinking 9.2 percent to $34.87. JPMorgan Chase & Co. said the construction company with a nuclear unit may be affected by the earthquake. Uranium stocks slumped on demand concerns after the Japan nuclear power accidents. Denison Mines Corp. (DNN) plunged 22 percent to $2.55. Uranium Energy Corp. (UEC) erased 19 percent to $3.92. Uranium Resources Inc. (URRE) dropped 25 percent to $1.75. Cameco Corp. (CCJ) tumbled 13 percent to $32.62. Ur-Energy Inc. (URG) declined 27 percent to $1.82. USEC Inc. (USU) slipped 11 percent to $4.59. Paladin Energy Ltd. (PALAF) dropped 21 percent to $3.78. Coal producers rallied on expectations that the shutdown of Japanese nuclear reactors will lead to more coal use. Peabody Energy Corp. (BTU) added 3.4 percent to $65.27. Arch Coal Inc. (ACI) advanced 1.2 percent to $32.88. Alpha Natural Resources Inc. (ANR) gained 3.6 percent to $52.93. Cloud Peak Energy Inc. (CLD) climbed 2.7 percent to $20.62. Aflac Inc. (AFL) slipped 3 percent, the most since Nov. 26, to $53.90. The world’s largest seller of supplemental health insurance reiterated that operating earnings growth in 2011 will be at the low end of an 8 percent to 12 percent forecast. The Columbus, Georgia-based company said sales in Japan will be minimally affected by the earthquake and that offices in Japan are fully operational with no casualties. American Superconductor Corp. (AMSC) dropped 4.5 percent, the most since Dec. 16, to $23.19. The maker of wind- turbine components and transmission lines said it agreed to buy Switch Engineering Oy of Finland for 190 million euros ($265 million). Caterpillar Inc. (CAT) added 2.1 percent to $102.10 for the biggest gain in the Dow Jones Industrial Average. The world’s largest construction equipment maker may be among the U.S. companies to benefit as Japan rebuilds after the world’s strongest earthquake since 2004 hit last week, according to analysts at Susquehanna Financial Group and Sterne Agee & Leach Inc. Corinthian Colleges, Inc. (COCO US) rose 8.2 percent, the most since Dec. 30, to $4.91. The for-profit operator of North American colleges and trade schools said an increase in tuition prices may ensure that the company will remain in compliance with a federal rule that no more than 90 percent of revenue can come from federal student grants and loans. Las Vegas Sands Corp. (LVS) dropped 3.6 percent to $38.62, the lowest price since Oct. 21. The casino company with most of its business in Asia was cut to “hold” from buy” at Jefferies & Co. The 12-month price estimate is $45.00 a share. Lawson Software Inc. (LWSN) rose 6 percent to $12.24, the highest price since March 2002. The maker of business software received an unsolicited $11.25 a share cash buyout offer from Infor and Golden Gate Capital. The deal values the company at $1.84 billion according to Bloomberg calculations. Lubrizol Corp. (LZ) soared 28 percent to $134.68, the highest intraday price since at least 1980. Warren Buffett ’s Berkshire Hathaway Inc. agreed to buy the world’s largest producer of lubricant additives for about $9 billion in the cash-flush investor’s second-biggest acquisition in the past five years. NYSE Euronext (NYX) rose 3.6 percent, the most since Feb. 9, to $36.55. Nasdaq OMX Group Inc. (NDAQ) is in talks with lenders about funding a hostile bid for the owner of the New York Stock Exchange, two people with knowledge of the matter said. Nasdaq declined 3 percent $26.38. Pfizer Inc. (PFE) climbed 1.8 percent to $19.81, the second-biggest gain in the Dow Jones Industrial Average. The world’s biggest drugmaker is considering spinning off some units, shrinking its sales base by 40 percent, Sanford C. Bernstein & Co. said in a note, citing Chief Executive Officer Ian Read. Star Scientific Inc. (CIGX) jumped the most in the Russell 2000 Index, rallying 18 percent to $3.48. The tobacco company appealing the loss of an intellectual-property lawsuit brought against Reynolds American Inc. (RAI US) climbed for a second day after saying a U.S. government reexamination has affirmed two patents central to the case. To contact the reporter on this story: Jennifer Johnson in New York at jjohnson156@bloomberg.net To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net . |
2024-03-07 | Bloomberg | Canadian Dollar Appreciates as Central Bank Is Seen Keeping Rates Steady | Canada ’s dollar advanced versus its U.S. counterpart as policy makers prepared for a meeting tomorrow that economists predict will see interest rates remaining at 1 percent for a 12th time. The currency rose against the euro and the majority of its most-traded peers amid concern Greece won’t get sufficient private-sector participation in a debt swap. Traders will be watching Canadian and U.S. jobs reports on Feb. 9 for signs that the North American economic recovery is intact. “The market was caught long U.S. dollars, so there’s a bit of a pain trade as we drift back under parity,” Steve Butler , managing director in Toronto at Bank of Nova Scotia (BNS) ’s Scotia Capital unit, said of traders who had to cover bets the U.S. dollar would rise by buying Canadian dollars.“There’s plenty of event risk going into Friday’s numbers, so the market isn’t holding onto positions for very long.” Canada’s currency, nicknamed the loonie for the image of the aquatic bird on the C$1 coin, rose 0.5 percent to 99.74 cents per U.S. dollar at 5 p.m. in Toronto after touching C$1.0029 yesterday, the weakest level since Feb. 27. One Canadian dollar purchases $1.0024. The Bank of Canada will leave its benchmark interest rate at 1 percent, where it’s been for more than a year, according to all 28 responses in a Bloomberg survey. Investors are renewing bets for the first time in six months that Bank of Canada Governor Mark Carney ’s next move will be to raise borrowing costs amid signs of an improving U.S. economy. ‘More Modest’ The 12-month overnight index swap rate, which is tied to forecasts for the Bank of Canada’s policy rate, advanced to a seven-month high of 1.024 percent March 1. That would suggest odds of a rate increase by October of more than 20 percent, according to Bloomberg calculations, up from zero probability a month earlier. Policy makers led by Carney said after the bank’s most recent decision on Jan. 17 growth in Canada and the U.S. will be “more modest” than forecast in October as European leaders struggle to contain a debt crisis. The meeting will be a non-event unless Carney “changes the mantra,” Askari said. “We’ll scour the statement for changes, such as hints of hikes quicker than anticipated due to the global crisis subsiding.” Jobs Reports Canadian employers added a net 15,000 jobs last month, economists in a Bloomberg survey forecast before the government issues the data March 9. Payrolls grew by 2,300 in January. The U.S. Labor Department may say on the same day that total payrolls rose by 210,000 last month, according to the median estimate of economists surveyed by Bloomberg News. It would mark the strongest three-month stretch in almost a year. The jobless rate may have held at a three-year low of 8.3 percent. “We’re waiting for employment on Friday,” said Firas Askari, head currency trader at Bank of Montreal (BMO) in Toronto. “The U.S. showing signs of stabilizing will be more Canadian- dollar friendly than anything else.” Implied volatility for one-month options on Canada’s dollar versus the greenback increased from the lowest level in almost five years. It touched 8.39 percent today after reaching 6.90 percent on Feb. 24, the least on an intraday basis since June 2007. Implied volatility, which traders quote and use to set option prices, signals the expected pace of swings in the underlying currency. The five-year average is 12 percent. Weekly Gains The Canadian dollar gained 0.2 percent over the past five days, while the yen and the U.S. dollar each rose 1.6 percent, the highest among 10 major currencies tracked by Bloomberg Correlation-Weighted Indexes. Crude for April delivery rose 1.1 percent, to $106.20 a barrel on the New York Mercantile Exchange. The Thomson Reuters/Jefferies CRB Index of raw materials declined 0.1 percent after falling 1.6 percent yesterday, paring the year’s gain to 2.9 percent. The MSCI World Index rose 0.4 percent. “We’re fairly favorable on commodity currencies,” said Neil Mellor , a currency strategist in London at Bank of New York Mellon Corp. (BK) “I would prefer to hold the Canadian dollar heading into a period of uncertainty in the euro zone , than holding the Australian dollar. The Canadian dollar benefits from a strengthening U.S. economy.” Shorter-term government bonds fell, pushing benchmark two- year yields four basis points, or 0.04 percentage point, higher to 1.12 percent. The price of the 0.75 percent bonds due in May 2014 fell 8 cents to C$99.25. The difference in yields between Canadian and U.S. two-year bonds widened to 81 basis points today, from 72 at the end of 2011, amid increasing expectations Carney will raise rates. To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net |
2024-11-05 | Bloomberg | Rovio’s ‘Angry Birds’ Reach Wallets in Prepaid Visa Deal | “Angry Birds,” the video game downloaded more than 1 billion times, is finding its way into consumers’ wallets. Rovio Entertainment Oy, the game’s Finnish creator, licensed out the scowling fowl for use on prepaid Visa cards in a deal with California-based issuer Kaiku Finance LLC, the closely held companies said yesterday in a statement without disclosing terms. Four designs of the Kaiku Angry Birds Visa Prepaid Card will begin selling online early next year. The deal marks Helsinki-based Rovio’s latest effort to capitalize on its successful mobile-game business ahead of a possible initial public offering next year. The company has more than 200 agreements for clothing, footwear, books, film and personal finance. On Nov. 8, the company plans to offer an “Angry Birds Star Wars” game in partnership with LucasFilm Ltd., according to the Rovio website. The prepaid card business is becoming a battleground for Wells Fargo & Co. (WFC) , Bank of America Corp. , Wal-Mart Stores Inc. (WMT) and others looking to profit from fees on the fast-growing service. Consumers loaded $57 billion onto prepaid cards in 2011, a sum that’s expected to grow 42 percent annually through 2014, according to the Consumer Financial Protection Bureau, which cited Mercator Advisory Group. More consumers are turning to prepaid cards to avoid checking-account fees that have surged as the Dodd-Frank Act curbs banks’ revenue from other sources, including debit transactions and overdraft charges. Prepaid Fees Kaiku, based in Thousand Oaks, California , offers prepaid cards issued by Westlake Village-based First California Bank, part of First California Financial Group. (FCAL) Customers pay $1.95 a month for fee-free purchasing online and at stores, along with withdrawals at AllPoint Network’s 50,000 ATM machines nationwide. They pay $2.95 to $4.95 to reload cards at participating stores, with free reload options also available. The Angry Birds cards will come in four designs: The Red Bird, The Yellow Bird, Bomb Bird and the Bad Piggies. They will be sold only on Kaiku’s website. Rovio is preparing for an initial public offering as early as next year, Henri Holm, senior vice president for Asia, said in a Bloomberg Television interview in April. Last year, it generated $106.3 million in revenue and $67.6 million in profit before tax on sales of the game and merchandise, according to a May statement on its website. About 30 percent of its revenue came from merchandise and licensing. Rovio, established in 2003, found a hit six years later with “Angry Birds,” in which players use a virtual slingshot to fling birds at structures populated by green pigs. The game and its follow-ons have had more than 1 billion free and paid downloads since 2009, according to the statement.| To contact the reporter on this story: Cliff Edwards in San Francisco at cedwards28@bloomberg.net To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net |
2024-01-09 | Bloomberg | Ireland to Sell at Least Half its Bank of Ireland Notes | Ireland’s government said it sold its entire 1 billion euros ($1.3 billion) of so-called contingent convertible capital notes in Bank of Ireland Plc as investors bid for almost five times the amount on offer. The sale was completed at a 1 percent premium to par value, and the proceeds will be used to lower the nation’s debt, Finance Minister Michael Noonan told reporters in Dublin today. The government received 4.8 billion euros of orders for the notes, which are a form of fixed-income security that convert into stock automatically if capital levels fall. Noonan said the state intends to sell its almost 7 billion euros of remaining non-equity investments in Irish banks “in time,” with CoCos in state-controlled Allied Irish Banks Plc (ALBK) the next potential offering. The government acquired the CoCos in Bank of Ireland in July 2011 as part of a 5.2 billion-euro recapitalization of the nation’s lenders. “The sale of the Bank of Ireland notes, and indeed the demand for them, gives comfort that the market’s perception of risk that Irish banks need further capital is reducing,” said Stephen Lyons , an analyst with Davy, a Dublin-based securities firm. The CoCos sold today automatically convert into equity if Bank of Ireland’s core Tier 1 ratio, a measure of financial strength, falls below 8.25 percent. State Control Ireland has committed 64 billion euros of capital to its banks over the past four years as their bad loan losses soared following the collapse of a domestic real-estate bubble. Today’s sale lowers the bill to 63 billion euros. Bank of Ireland is the only one of the country’s six largest lenders to have moved on from state control. The government sold a 34.9 percent stake in 2011 to five investors, including Toronto-based Fairfax Financial Holdings Ltd. (FFH) and WL Ross & Co., a New York-based investment firm. The lender remains 15 percent state-owned. U.S. billionaire Wilbur Ross , the chairman and co-founder of WL Ross, said today’s move is a “major step toward the complete privatization” of the lender. “The austerity of recent years has been very difficult for the Irish people, and reopening the capital markets to both the sovereign and the banks is essential to the ultimate recovery from the crisis,” Ross said in an e-mailed response to questions. Ireland is three-quarters of the way through budget cuts that amount to about a fifth of the size of the economy. The austerity program is stretched over eight years through 2015. ‘Good News’ Bank of Ireland’s core Tier 1 ratio was 14.9 percent at the end of June, according to its interim report. Eamonn Hughes of Goodbody Stockbrokers said he expects the ratio to fall as low as about 12 percent this year, based on so- called Basel capital rules. Bank of Ireland hired Deutsche Bank AG, UBS AG and Dublin- based Davy to manage the secondary placement of the CoCo notes, which pay a coupon of 10 percent. “This is good news for Bank of Ireland -- and Ireland,” said Paul Smillie, a Singapore-based global banking analyst at Threadneedle Asset Management, which oversees about $45 billion of fixed-income securities. Ireland’s National Treasury Management Agency yesterday sold about 2.5 billion euros of bonds in its first sale through a banking syndicate in three years. The general government debt stood at 169.2 billion euros at the end of December, according to the NTMA. Bank of Ireland sold its first public debt in two years on Nov. 13, raising 1 billion euros through the issuance of residential mortgage-backed bonds. It sold 250 million euros of subordinated debt in December. Bank of Ireland shares were unchanged at 13.5 cents at the 5:10 p.m. close of trading in Dublin. They have gained 65 percent over the past year. To contact the reporter on this story: Joe Brennan in Dublin at jbrennan29@bloomberg.net To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net |
2024-06-04 | Bloomberg | U.K. Stocks Climb as FTSE 100 Rebounds From One-Month Low | U.K. stocks climbed, with the FTSE 100 Index rebounding from a one-month low, after a Federal Reserve official said the U.S. economy isn’t strong enough to justify a reduction in stimulus measures. Rentokil Initial Plc (RTO) rose the most in almost eight weeks after a report that private-equity investor Clayton Dubilier & Rice LLC is considering combining the company’s office-maintenance unit with that of Balfour Beatty Plc. Cobham Plc dropped 4.6 percent as a shareholder sold a 3.6 percent stake in the maker of defense and aerospace equipment. The FTSE 100 advanced 33.46 points, or 0.5 percent, to 6,558.58 in London. The gauge yesterday declined to the lowest level since May 3 amid speculation the Fed would start to taper its bond-buying program if the economy improved. The broader FTSE All-Share Index also also added 0.5 percent today, while Ireland’s ISEQ gained 0.4 percent. “The market is perhaps too quickly discounting an end to quantitative easing,” Johan Jooste, chief market strategist at Merrill Lynch Wealth Management in London, said. “Although the U.S. economy is improving, both unemployment and inflation remain below Fed targets. The growing market belief in a continued economic recovery -- however stuttering in some regions -- should continue to provide enough impetus to equity markets.” The volume of shares changing hands in companies listed on the FTSE 100 (UKX) was 26 percent lower than the average of the past 30 days, according to data compiled by Bloomberg. Stimulus Adjustment In the U.S., Fed Bank of Atlanta President Dennis Lockhart, who doesn’t hold a policy vote this year, said officials at the central bank are committed to continuing stimulus measures. “To the extent that the markets are seeing mixed messages, it simply reflects the debate that’s going on among the colleagues on the Federal Open Market Committee,” Lockhart said in a Bloomberg Television interview. “The bigger picture is that any adjustment is not a major policy shift.” U.K. construction returned to growth last month, for the first time since October, a report showed today. An index of building activity rose to 50.8 from 49.4 in April, Markit and the Chartered Institute of Purchasing and Supply said. Economists had forecast a reading below 50, the dividing line between expansion and contraction. Separately, UBS AG raised its year-end target for the FTSE 100 to 7,000, from its earlier prediction of 6,300, according to a note to clients. “An improving growth backdrop should help cyclical sectors to outperform, especially in the context of more attractive valuations and improving relative earnings momentum,” strategist Matthew Gilman wrote. Rentokil Deal Rentokil rose 2.6 percent to 90.75 pence, for its biggest increase since April 10. Clayton Dubilier & Rice is considering buying the pest-control provider’s Initial Facilities unit and combining it with Balfour Beatty’s WorkPlace, the Financial Times reported, citing four people familiar with the matter. GKN Plc rallied 5.1 percent to 313.4 pence, the largest advance since July 2012. UBS raised its price estimate on the stock to 350 pence, from 275 pence, reiterating a buy recommendation for the supplier of parts to aircraft makers. HSBC Holdings Plc advanced 1.9 percent to 731.9 pence, for the largest contribution to the gains on the FTSE 100. Goldman Sachs Group Inc. reiterated its “conviction buy” rating for Europe’s biggest bank. HSBC is poised to beat consensus estimates for earnings through 2016, as well as increasing dividend payments and share buybacks, Goldman Sachs said. Cobham Plc (COB) , the world’s largest maker of airborne refueling kits, tumbled 4.6 percent to 272.9 pence. An investor, who was not named, was sold 39.1 million shares at 273.5 pence to market price, according to terms obtained by Bloomberg News. Wolseley Plc, the distributor of heating and plumbing products, lost 6.3 percent to 3,145 pence, the biggest slump in three years. Comparable sales in France dropped 9.2 percent in the third-quarter from a year ago as construction remained weak, the company said today. To contact the reporter on this story: Sofia Horta e Costa in London at shortaecosta@bloomberg.net To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net |
2024-11-03 | Bloomberg | Most Read on Bloomberg: Goldman, Shrinking Pay, FX Dealers, Fed | The following list comprises the most-read Bloomberg News reports from the past week. STORIES 1. Goldman Pushes Junior Investment Bankers to Take Weekends Off Oct. 29 (Bloomberg) -- Goldman Sachs Group Inc., this year’s top merger adviser, is discouraging investment banking analysts from working weekends as it overhauls demands placed on entry-level employees and the support they receive. 2. Goldman Shrinking Pay Shows Wall Street Set for Bonus Gloom Oct. 31 (Bloomberg) -- Goldman Sachs Group Inc., which set Wall Street pay records when stocks surged and cheap credit abounded in 2007, is again leading the industry as markets boom anew: putting aside less money for staff and more for investors. 3. Citigroup, JPMorgan Said to Put Senior Currency Dealers on Leave Oct. 31 (Bloomberg) -- Citigroup Inc. and JPMorgan Chase & Co. are putting their top London currency dealers on leave after regulators probing the manipulation of foreign-exchange rates started investigating the traders’ use of an instant-message group, three people with knowledge of the moves said. 4. Fed Keeps $85 Billion QE Pace Awaiting Signs Growth Picks Up Oct. 30 (Bloomberg) -- The Federal Reserve decided to press on with $85 billion in monthly bond purchases, saying it needs to see more evidence that the economy will continue to improve. 5. Sally Dawson, Deutsche Bank Debt Executive in London, Dies at 39 Oct. 29 (Bloomberg) -- Sally Dawson, a Deutsche Bank AG executive in London who specialized in high-yield and distressed-debt sales, has died. She was 39. 6. Deutsche Bank Profit Slumps 94% on 1.2 Billion-Euro Charge Oct. 29 (Bloomberg) -- Deutsche Bank AG, Europe ’s largest investment bank by revenue, said third-quarter profit slid 94 percent after it set aside 1.2 billion euros ($1.65 billion) to cover potential legal costs and income from debt trading fell. 7. Insurance Policies Are Canceled in New Hurdle for Obamacare Oct. 29 (Bloomberg) -- The Obamacare rollout is leading to the cancellation of hundreds of thousands of health insurance plans nationwide, contradicting President Barack Obama ’s repeated pledge that people who like their coverage can keep it. 8. Barclays Said to Suspend Chief FX Dealer Ashton Amid Probe Nov. 1 (Bloomberg) -- Barclays Plc has suspended three currency traders, including a chief dealer in London, amid a probe into potential foreign-exchange manipulation, according to a person with knowledge of the decision. 9. Citigroup Currency Staff Work London Evenings on Dodd-Frank Oct. 28 (Bloomberg) -- For the foreign-exchange sales team in Citigroup Inc.’s London office, Dodd-Frank regulations mean extra hours at work. 10. U.S. Stocks Fall With Gold, Treasuries on Fed Policy Statement Oct. 30 (Bloomberg) -- The Standard & Poor’s 500 Index fell for the first time in five days and gold and Treasuries dropped, while the dollar reversed earlier declines, as the Federal Reserve fueled speculation it will begin to slow the pace of stimulus in coming months. COLUMNS 1. Apple’s New IPad Is Slimmed Down, Speeded Up: Rich Jaroslovsky Oct. 30 (Bloomberg) -- Apple calls the latest version of its full-sized tablet the iPad Air, which is a better name than “iPad Semi Mini.” 2. If Fed Can’t Get Good Numbers, Check the Leaders: Caroline Baum Oct. 31 (Bloomberg) -- Financial markets have become increasingly dependent on the Federal Reserve. The Fed is dependent on data (just in case you didn’t know). The data for the next few months will be distorted by the federal government shutdown during the first half of October. So what’s a responsible policy maker or investor to do to get a handle on how the U.S. economy is faring? 3. China Mimics the Worst of Abenomics at Worst Time: William Pesek Oct. 29 (Bloomberg) -- If imitation really is the greatest form of flattery, Shinzo Abe should be thrilled the Chinese are copying his “Abenomics” strategy to excite investors. The rest of the world shouldn’t be. 4. Federal Reserve’s Bubble Alarm Is Stuck on Snooze: Jonathan Weil Nov. 1 (Bloomberg) -- The Federal Reserve’s policy of unrestrained quantitative easing has worked like rocket fuel for U.S. stocks this year. Case in point: Rocket Fuel Inc. 5. Edward Snowden Has Japan Copying China’s Playbook: William Pesek Nov. 1 (Bloomberg) -- Shinzo Abe is so obsessed with China eclipsing Japan on the global stage that he’s adopting some of his neighbor’s policies. What else can we say about the secrecy law the prime minister’s cabinet approved on Oct. 25, an act that would do so much to undermine and constrain his people’s right to know? MULTIMEDIA 1. Rocker Lou Reed Dies at 71, Sales of Songs May Surge Oct. 28 (Bloomberg) -- Lou Reed , a New York-based rock musician who co-founded the Velvet Underground and wrote and sang “Walk on the Wild Side,” has died at the age of 71. Mark Beech reports with Francine Lacqua on Bloomberg Television’s “The Pulse.” 2. Sebelius Apologizes for Obamacare Website Problems Oct. 30 (Bloomberg) -- U.S. Health and Human Services Secretary Kathleen Sebelius testifies before the House Energy and Commerce Committee in Washington about problems with healthcare.gov, the federal health-insurance exchange website. 3. Red Sox Beat Cardinals 6-1 for Third World Series Title Oct. 31 (Bloomberg) -- The Boston Red Sox won their third World Series title in the last decade with a 6-1 defeat of the St. Louis Cardinals , wrapping up a championship at home for the first time in 95 years. 4. New Apple IPad Is Slimmed Down, Speeded Up: Rich Jaroslovsky Oct. 30 (Bloomberg) -- Bloomberg’s Rich Jaroslovsky reviews Apple Inc.’s iPad Air, the latest version of its full-sized tablet. 5. Cook Says Apple Is Exploring New Product Categories Oct. 28 (Bloomberg) -- Tim Cook , chief executive officer of Apple Inc., and Peter Oppenheimer , chief financial officer, speak on a teleconference about the company’s fiscal fourth-quarter results and first-quarter forecast. To contact the reporter on this story: Audrey Barker in New York at abarker3@bloomberg.net To contact the editor responsible for this story: Alan Mirabella at amirabella@bloomberg.net |
2024-11-25 | Bloomberg | Qantas Minds Bonds as Dreamliner Order Pulled: Australia Credit | Qantas Airways Ltd. (QAN) ’s plans to cut debt for the first time in five years with funds from a canceled $8.5 billion Boeing Co. (BA) order have been welcomed by bondholders as its default risk fell the most in Australia. Contracts insuring against non-payment on the debt of Australia’s biggest carrier tumbled 87 basis points over the past three months, the biggest drop in the nation’s benchmark bond-risk index, to 300 on Nov. 23, CMA data show. The contracts cost 204 basis points less than the average for global peers, about five basis points from the biggest discount since June. Chief Executive Officer Alan Joyce this year grappled with a loss-making international division and Virgin Australia Holdings Ltd. (VAH) ’s efforts to steal local business travelers, sending bond risk to a record 445 in June and the stock to an all-time low. He responded by forging a partnership with Emirates Airline and canceling the purchase of 35 Boeing 787 Dreamliners ordered before the 2008 global financial crisis, helping raise enough cash to repay A$650 million of debt early. “Its balance sheet and capital management is quite impressive versus its global peers,” George Boubouras, chief investment officer at UBS AG in Melbourne, said by phone. “Credit conditions have vastly improved.” Default-swap investors have enjoyed a better performance than shareholders since Qantas’s perceived risk peaked earlier this year, Boubouras said. The 33 percent fall in the bond- insurance contracts from June 28 to Nov. 23 outstrips a 20 percent gain in the shares. Qantas shares rose 2 percent to A$1.30 as of 10:34 a.m. in Sydney their highest level in nearly three weeks, while the benchmark S&P/ASX 200 index gained 0.2 percent. Debt Reduction Qantas will reduce debt by A$1 billion in the year through June 2013, the company said Nov. 15. The airline has increased net debt every year since 2008, data compiled by Bloomberg show. It plans to repay its 5.125 percent dollar-denominated bonds in January, five months early, and is also using A$100 million to repurchase its own shares, the company said. Canceling the Boeing order and selling its stake in a road freight business gave Qantas A$750 million to spend without threatening its credit rating , according to the airline. The company, the only carrier other than Southwest Airlines Co. (LUV) to be rated investment-grade by more than one major ratings company, will also gain from a partnership deal with Emirates, helping it to turn around the A$450 million of losses it made on international routes last year. Qantas reported its first annual loss in at least 17 years in the 12 months through June as a 16 percent rise in fuel prices and the highest labor costs among carriers worth more than $1 billion eroded profit margins for its core business. Spending Cuts The carrier has cut back spending plans, canceled its loss- making Frankfurt route, and raised cash from penalty payments related to Boeing’s delays of the 787 Dreamliner. “We’re now in the second year of our five-year turnaround plan and we’re making clear progress,” Andrew McGinnes, a Sydney-based spokesman for the company, said in an e-mailed statement. The early debt repayment and an associated A$100 million share buyback “reflect the underlying strength of the Qantas Group,” he said. Under the Emirates plan, the Australian carrier will make Dubai its main hub for European routes instead of Singapore , with passengers traveling on the Gulf airline under codesharing for one of the two legs. Dubai Hub That will open up 64 one-stop destinations in Europe , the Middle East and North Africa, compared to 5 at present, and help return the international division to profit, Joyce said Sept. 6. Qantas credit-default swaps have fallen 144 basis points this half, according to CMA. That’s outpaced the benchmark Markit iTraxx Australia gauge, which fell 51 basis points to 135 on Nov. 23 in Sydney, the data show. Benchmark 10-year sovereign bond yields jumped 27 basis points last week to 3.30 percent, the steepest climb since the period ended Feb. 10, as signs of a strengthening global economy reduced demand for the safest assets. The Australian dollar, the world’s fifth-most traded currency, bought $1.0460 as of 10:46 a.m. in Sydney today, taking its advance this month to 0.8 percent. The cancellation of the Dreamliner order will result in Qantas getting $433 million from Chicago-based Boeing, including more than $300 million in compensation payments, Gareth Evans , the airline’s chief financial officer, said at the time of the Aug. 23 announcement. A deal announced Oct. 2 -- under which Qantas and government-owned Australia Post swapped stakes in joint-venture freight assets -- will also give the airline net proceeds of more than A$408 million, the company said at the time. High Volatility Much of the improvement in Qantas’s CDS has resulted from their high volatility, which has allowed the contracts to benefit disproportionately from a broader rally in credit markets, said Michael Bush , head of credit research at National Australia Bank Ltd. “It’s been driven by these one-off events, raising capital through, effectively, asset sales and compensation payments,” he said by phone from Melbourne. “It’s hardly as if it’s reflective of improving operating performance: when you look at their guidance it’s clear that’s miserable and staying that way.” ‘Miserable’ Guidance It’s still too early to tell whether the deal with Emirates will be a long-term positive for the carrier, Bush said. Standard & Poor’s cut Qantas’s debt one level to its lowest investment grade of BBB- on Sept. 7, the day after the announcement of the Emirates agreement. “Material benefits from the partnership may take some time to eventuate due to the magnitude of Qantas’s losses over the past few years,” Melbourne-based analyst May Zhong wrote in the rating opinion. The carrier holds a Baa3 rating from Moody’s Investors Service, also the lowest investment grade ranking. The company must take care not to deviate from its current path if it wants to keep debt holders happy, UBS’s Boubouras said. “They’ve got the benefits from freight, Jetstar, and the strong domestic market,” said Boubouras, referring to Qantas’s budget carrier. “They must maintain the same approach to cost controls and prepare this company for the next 10 years.” To contact the reporter on this story: David Fickling in Sydney at dfickling@bloomberg.net To contact the editor responsible for this story: Stephanie Wong at swong139@bloomberg.net |
2024-03-08 | Bloomberg | Dai-ichi Said to Plan to Sell Around $1.3 Billion of Bonds | The Dai-ichi Life Insurance Co., Japan’s second-biggest life insurer, plans to sell as much as $1.3 billion of bonds as soon as today, according to a person familiar with the matter. Tokyo-based Dai-ichi Life told investors the bonds will be priced to yield between 7.25 percent and 7.375 percent, said the person, who asked not to be identified as the information is private. Goldman Sachs Group Inc. and JPMorgan Chase & Co. are managing the sale, the person said. To contact the reporter on this story: Yusuke Miyazawa in Tokyo at ymiyazawa3@bloomberg.net To contact the editor responsible for this story: Will McSheehy at wmcsheehy@bloomberg.net |
2024-09-20 | Bloomberg | US Airways Puts Highest Since 2007 Show Most Pessimism: Options | US Airways Group Inc. (LCC) options traders are skeptical the nation’s fifth-largest carrier will avoid a global economic slowdown, driving up insurance against declines to the highest levels since 2007. Three-month puts betting on 10 percent losses cost 1.1 times more than calls wagering on a rally, compared with the five-year median of 1.057, according to data compiled by Bloomberg. The price relationship known as skew was at similar levels in August 2010, before Tempe, Arizona-based US Airways retreated 19 percent in less than six weeks while the Standard & Poor’s 500 Index slipped 0.4 percent. Equity derivatives showed increased bearishness after US Airways President Scott Kirby told analysts and investors last week that industry demand is “very robust.” The shares have dropped 40 percent this year for the second-worst performance in the 10-company Bloomberg U.S. Airlines Index after American Airlines parent AMR Corp. (AMR) “US Air could be printing money hand over fist and it won’t matter in that scenario if people start liquidating in a panic,” Alec Levine, an equity derivatives strategist at Newedge Group SA in New York, said yesterday in a telephone interview. “They’re saying there’s robust demand, but if equity markets collapse, it’s somewhat irrelevant. In very volatile markets, metrics don’t matter.” VIX Jumps The VIX, as the Chicago Board Options Exchange Volatility Index is known, rose 0.4 percent to 32.86 at 4:15 p.m. New York time today after rising 5.7 percent yesterday amid concern Greece will fail to qualify for more financial aid needed to avoid default. It fell 20 percent last week. The VStoxx Index, which measures the cost to protect against declines in the Euro Stoxx 50 Index, declined 6.2 percent to 42.79 today. US Airways spokesman Todd Lehmacher declined to comment yesterday on the put-option pricing. Earnings before interest, tax, depreciation and amortization at US Airways amounted to 6.9 percent of revenue in the second quarter, below the 9.6 percent average for 14 carriers tracked by Bloomberg Industries and less than every company except AMR and Hawaiian Holdings Inc. US Airways, the smallest of the nation’s major full-fare carriers, trades for 4.7 times earnings from the past year, half the valuation for the Bloomberg U.S. Airlines Index. “There’s a perception that US Airways is one of the financially weaker companies,” Jim Corridore , an equity analyst at S&P in New York, said in a phone interview yesterday. “They don’t have a merger partner lined up like United did or Delta did. They clearly don’t have as strong an international route network as companies like American or Delta or United.” Airline Acquisitions United Airlines bought Continental Airlines in October to form United Continental Holdings Inc. (UAL) of Chicago, the world’s largest airline. Delta Air Lines Inc. (DAL) , based in Atlanta, purchased Northwest Airlines LLC in 2008. Delta, the second-biggest U.S. carrier, said last week that it will shrink capacity next year by as much as 3 percent. United Continental and Dallas-based Southwest Airlines Co. (LUV) , the biggest low-fare airline, have said capacity will be unchanged in 2012 from this year. US Airways hasn’t announced its seat availability for next year. “The demand environment is very robust,” Kirby said Sept. 13 at a Deutsche Bank AG event. “We just don’t see any evidence yet of a slowdown, and we’ve seen this kind of strong demand environment really from mid-July through yesterday.” Bearish Bets Skew for US Airways’s rivals has declined after peaking since the start of 2010. Puts priced 10 percent above Delta’s stock cost 1.11 times calls betting on 10 percent gains, compared with the high of 1.17, according to data compiled by Bloomberg using three-month contracts. For United Continental, the figure fell to 1.13 from 1.14. AMR’s slipped to 1.10 from 1.16, and it slumped to 1.16 from 1.27 at Southwest Airlines. The Bloomberg U.S. Airlines Index has tumbled 29 percent in 2011, including an 11 percent drop since July 15, amid speculation the European debt crisis will cause slower global economic growth. The S&P 500 has lost 4.4 percent from Dec. 31. US Airways shares rose 2.9 percent today to $5.97. They slipped to $4.85 on Sept. 12, the lowest since January 2010. US Airways posted $502 million of net income in 2010, following two years of losses totaling $2.42 billion. Should the industry slow, the company had $2.2 billion in cash at the end of the second quarter. Its ratio of cash to assets was 26.3 percent, second-highest behind Calgary-based WestJet Airlines Ltd. and more than double the 12.6 percent industry average. Manufacturing Gauge The Institute for Supply Management index of U.S. manufacturing, which fell to the weakest level since 2009 in August, shows airlines will face less demand, Wolfe Trahan & Co.’s Hunter Keay said in a Sept. 16 report. The analyst said US Airways will do worse than United Continental and Delta during the next few years in terms of cash generation. “Legitimate risk to 2012 demand trends remains due to macro uncertainty,” William Greene, a Morgan Stanley airline analyst, said in a note to investors. “Our key economic indicators reinforce our macro model’s forecast and point to slowing revenue growth -- with the unemployment rate and consumer confidence , both highly correlated with airline revenues, having been particularly weak of late.” The unemployment rate remained at 9.1 percent in August, the U.S. Labor Department said earlier this month, as employers became less confident in the strength of the economic recovery. Consumer confidence remains near the lowest levels of the year as the Bloomberg Consumer Comfort Index held at minus 49.3 in the period to Sept. 11. October $5 Puts The number of existing US Airways October $5 puts has surged fourfold during the past week, the biggest increase among bearish contracts on the company, according to data compiled by Bloomberg. The strike price on the options is 14 percent below yesterday’s closing level for the stock. “There continues to be concern about the economy,” Timothy Ghriskey , who oversees $2 billion as chief investment officer of Bedford Hills , New York-based Solaris Group LLC, said in a telephone interview yesterday. “Airlines would be part of that because they are leveraged to the economy. The concern is, of course, that demand would dry up.” To contact the reporters on this story: Jeff Kearns in New York at jkearns3@bloomberg.net ; Cecile Vannucci in Amsterdam at cvannucci1@bloomberg.net To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net |
2024-01-18 | Bloomberg | No One Knows Truth About $300 Billion Bonds From Alleged Crash | Chris Estrella, a Filipino social worker, says he led a troop of five porters out of a Mindanao jungle in January 2000 with a weather-beaten iron and leather box crammed with $25 billion of U.S. government bearer bonds. “The elders of the Umayamnon tribe told me an American plane crashed in their river in the 1930s,” Estrella, 47, says by mobile phone from a footpath between the tribal village and Davao, the largest city on the Philippine island. “The river dried up in the 1990s, and the natives went into the plane and found 12 boxes that contained $300 billion in bonds.” Each box, emblazoned with the Great Seal of the United States and the words “Federal Reserved Bond,” held five gold coins struck with a portrait of George Washington on one side, Estrella says. They rested atop stacks of certificates purporting to have been issued by the Federal Reserve Bank of Atlanta in 1934 and redeemable in gold bullion. The notes bore the signature of then Treasury Secretary Henry Morgenthau Jr. Such fixed-income instruments, also known as coupon bonds, belong to whoever holds them, rather than to a registered owner. Vouchers representing interest payments were attached to the 30- year bonds that were denominated in amounts of as much as $100 million. Estrella says he later brought three other similarly filled chests out of the jungle. Exotic Attack What happened next led to the unraveling of what Scott Winslow, a financial-instrument specialist, bond collector and founder of Professional Authentication Services & Standards Co. in Bedford, New Hampshire , calls an episode of “remarkably unique” deception. It secured Estrella’s place in what the U.S. Secret Service says is one of the most sustained and exotic attacks ever mounted against U.S. currency, and it illustrates how even sophisticated businessmen can be duped. “Chris brought two boxes to the Apo View Hotel in Davao, and I gave him $46,280, above what I usually give him to buy provisions for the Umayamnons,” says Ronaldo Quiwa, 68, a Mindanao construction executive who serves on the board of the insurance subsidiary of Manila-based Landbank of the Philippines and is a member of its risk-management committee. “Then we took them to Peping’s house,” Quiwa says. That would be former Philippine Congressman Jose “Peping” Cojuangco, the 77-year-old brother of former President Corazon Aquino , who helped topple the regime of Ferdinand Marcos , and uncle of current President Benigno Aquino III. The Cojuangco clan also includes Peping’s cousin, Eduardo Cojuangco, chairman of San Miguel Corp., the country’s largest listed company, which has interests in beer, power and telecommunications. Manila Closet “We opened two trunks in my living room,” Jose Cojuangco says by phone from his home in Manila. “I wanted to believe what was inside because after Marcos was overthrown the governor of Mindanao found gold bullion hidden in the jungle. During the 1990s, Manila’s hotels were filled with foreign treasure hunters. I met people who had 40, 50 boxes of bonds, and I looked at them. They were different from ours. What a mystery.” Nonetheless, both men say they brought no urgency to solving the puzzle. Quiwa says he let the loot sit in a Manila closet for two years. In the summer of 2002, Quiwa took the two boxes of bonds across the Pacific to Garden Grove, California , for review by Kurt Schwalbe & Associates, a document-examination firm. Schwalbe’s signed one-page report dated Aug. 18, 2002, says he examined “250 Federal Reserve notes with 33 interest coupons attached from box 9494” and “determined them to be genuine as to date and origin.” Quiwa says the analysis didn’t satisfy him. “Schwalbe’s report was not complete enough,” he says. The phone number on the report is no longer working, and further efforts to locate Schwalbe proved unsuccessful. Demon Horse From California, the chests went to New York , where they were stashed in a closet in an apartment in the Rego Park section of Queens belonging to Quiwa’s brother, a pediatrician. “We were nervous,” Ronaldo Quiwa says, sipping sweetened coffee in the kitchen above his brother’s clinic. “We could never firmly establish whether the bonds were real or fake, or if somebody was trying to set us up.” Jose Cojuangco contacted Bloomberg News last month. “There’s $50 billion in U.S. Treasury bearer bonds we’d like you to take a look at,” he said. “Would you mind?” Cojuangco said he still wanted to believe the bonds were real. After all, they came from Mindanao, an island regularly ravaged by typhoons and inhabited by the demon horse Tikbalang, the vampire Aswang and armed insurgents who have made kidnapping an industry. As Quiwa says, it’s a place where there’s nothing extraordinary about a tropical rain forest chieftain trying to figure out U.S. Treasury bond coupon yields. Ponte Chiasso It wasn’t the first time a cache of bogus U.S. bonds emerged from the Philippines. “We were matching wits with the underworld on an op in southern Italy when the call came in,” says U.S. Secret Service Special Agent Robert Gombar, head of the agency’s Rome office. The date was June 16, 2009, and Gombar, 65, recalls rolling his eyes at the news delivered by Italy’s Guardia di Finanza fiscal police via his liaison officer in Rome. “The Guardia caught two Japanese guys secreting U.S. Treasury bonds in the false bottom of a suitcase aboard a freight train about to cross into Switzerland ,” Gombar says, twirling a pencil behind his desk inside the U.S. Embassy in Rome. “It was suspicious, so we jumped an express north.” What Gombar found in the border village of Ponte Chiasso was a stack of 1934 U.S. Treasury bearer bonds with a face value of $134 billion, making the two suspects the U.S. government’s fourth-biggest creditor at the time, behind Russia with $138 billion of U.S. debt and ahead of the U.K. with $128 billion. Hybrid Counterfeits Although a local magistrate released the suspects because of a lack of evidence of intent to sell or proof the pair was involved in the manufacture of what turned out to be a suitcase of sham bonds, the incident marked the sixth time Italian authorities had called upon Gombar to authenticate a haul of what looked to be smuggled U.S. securities. Like most of the other cases, this one pointed to Asia : The two Japanese suspects had arrived in Italy from the Philippines, Gombar says. “We call these bonds hybrid counterfeit instruments because there’s no such thing as a $500 million Treasury bond,” explains Gombar, who has chased global funny-money rings from the Secret Service’s Rome outpost since 1998. “It’s like counterfeiting a $3 bill, something that doesn’t exist.” Although Treasury securities were shifted from paper to electronic form in the 1980s and the government stopped issuing bearer bonds in 1982, Gombar says the pre-World War II provenance of the bogus bonds, stamped with Morgenthau’s forged signature, remains a lure in the con artist’s tackle box. Fictitious Instruments “People are gullible,” Gombar says. “Even those who work in the financial world. The $134 billion worth of 1934 Morgenthau bonds seized in Ponte Chiasso was nearly five times more than America’s $27 billion national debt that year.” The largest U.S. Treasury bond ever issued had a face value of $10 million, says Gombar’s partner, Special Agent Michael Giovanniello. Only about $105.4 million in outstanding bearer bonds have yet to be cashed in, he says. “Bogus bonds are officially referred to as fictitious financial instruments,” Giovanniello, 44, says. “Counterfeit financial instruments reflect something that actually exists. Either way, it’s a fraudulent scheme that we’re extremely interested in pursuing.” The Secret Service averages about 100 cases a year related to bonds and other fictitious instruments, resulting in about 70 arrests, says Special Agent Edwin Donovan, a spokesman for the agency in Washington. The average annual loss to victims is about $11 million, he says. ‘Great Extremes’ Gombar says his first whiff of the bond con came in 1976, while working in the agency’s Los Angeles office investigating a similar bluff involving Venezuelan government paper. “Nowadays the bonds are almost always U.S. Treasuries from the 1930s, and the forgers have grown more sophisticated,” Gombar says. “They go to great extremes, putting them in antiquated treasure chests stuffed with newspaper clippings from the 1930s. It takes a great deal of time and trouble to print these bonds and establish the con.” Across the Atlantic, in New Hampshire, financial-instrument specialist Winslow takes one of the gold coins from Quiwa’s treasure chest shown to him by Bloomberg News and flips it in the air. It falls on an oak table in his office with a clink. “Cheap metal,” he says. $100 Million Bond He runs his fingers over a $100 million bond. It is lithographed instead of engraved, as are real federal debt issues, Winslow says. Printed on faded sepia paper is the same portrait of George Washington that appears on a $1 bill. Thirty coupons are attached, each bearing the promise: “Will pay to bearer four thousand dollars in United States gold coin.” “I’ve never seen forgeries like these,” says Winslow, who for 27 years has authenticated bonds for governments, companies, museums and private collectors. He describes the box set of 250 Umayamnon bonds as a series of 10 historically inaccurate and haphazardly assembled $100 million “bundled instruments,” each packet designed to represent and lend support to an illusionary $25 billion “United States of America Federal Reserved Bond.” The validation documents, all printed on paper in fonts Winslow says didn’t exist in 1934, include a Government Insurance Certificate, Treasury Certificate, Gold Bullion Certificate, General Bond Certificate and a Global Immunity Certificate that promises “the redeemer will be free from criminal offense and covered by complete immunity.” And in case the bearer should misplace an item and need to authenticate ownership at the bank, the chest comes with a microfilmed “Federal Reserved Bond Inventory List.” ‘Marvelous Deception’ “For a collector, these counterfeit bonds are awesome because somebody spent a lot of time trying to justify their authenticity,” Winslow says. “It’s a marvelous deception.” Bond collector Sylvan Feldstein, 70, an analyst at Guardian Life Insurance Co. of America in New York and co-author of “The Handbook of Municipal Bonds,” a history of and guide to the bond trade, also was impressed. “The only problem might be a lingering federal criminal issue,” says Feldstein, who declined to place a value on the Umayamnon paper. “Counterfeiting bonds goes back to colonial America. After the Civil War, the South Carolina legislature authorized $4 million in general obligation bonds, but Governor Robert Scott printed $20 million worth. He gave some to his girlfriend, and they became known as ‘whorehouse bonds.’ There’s always a market.” Pulp Fiction Moving a magnifying glass across one of Quiwa’s bonds in a Manhattan conference room, Malcolm Barber, chief executive officer of Bonhams auction house, says there are clients willing to pay for pulp fiction with a 30-year maturity whose time ran out in 1964. “The market value would be determined by the story behind the scam,” he says. The Umayamnon bonds first appeared in the Philippine wilderness courtesy of “tao-boung, the white men who fell from heaven,” says Estrella, who for the past 20 years, according to Cojuangco and Quiwa, has helped government officials tend to the needs of the 18 indigenous and mostly Muslim clans that inhabit the archipelago’s easternmost island, encouraging them to break ties with the radical Islamic group Abu Sayyaf. He says the chests were given to him by a datu, or tribal chief. “I believe the bonds are real,” Estrella says. “A datu does not tell lies.” Filipino Priest Cojuangco says he never doubted Estrella’s account of how he obtained the bonds. “There were allowances from the government to get information from the areas where he works,” Cojuangco says. Ronaldo’s role was to help develop those assets, so there was nothing special about contributing money to Chris’s efforts.” Gombar says the story of the plane crash is one he has heard many times over the years and is fictitious. “We’ve never been able to find and shut down the manufacturing plants,” he says. Giovanniello says agents came close in February 2001, when a joint Secret Service and Philippine National Police unit detained Archie Mingoc, Filipino, with $2 trillion worth of pretend U.S. bonds in Cagayan de Oro, a city on Mindanao. The hunt began three years earlier, Giovanniello says, when U.S. Customs Service agents discovered billions of dollars of fraudulent bonds in the luggage of a Filipino priest at Los Angeles International Airport. It eventually led to a shanty outside Cagayan de Oro, where police found two more suitcases. One was filled with $773 billion in fake bonds. The other held $1.38 trillion worth of bogus federal paper. Vanished Treasure “It’s always the same vanished-treasure story,” Gombar says of the persuasive hustle based on the Wall Street maxim “old debt never dies.” “The con can work in two ways,” he says. “The holder sells the bonds privately for pennies on the dollar or is somehow convinced to visit a bank, attempting to use the bonds as collateral or cash them in for full value.” Gombar and Giovanniello, who continue to follow leads on the gang that can’t counterfeit straight, say possession of a fictitious fiscal instrument isn’t necessarily a crime. “It all depends on whether you have possession with intent to defraud,” Gombar says. “We once came across a Filipino priest bringing them into Italy from Manila. He’d been conned. The question is whether the guy with the bonds actually believes them to be real and then walks into a bank to redeem them.” Quiwa says he intends to use the $50 billion in his brother’s kitchen closet as wrapping paper. To contact the writer on the story: Craig Copetas in Paris at ccopetas@bloomberg.net. To contact the editor responsible for this story: Robert Friedman in New York at rfriedman5@bloomberg.net |
2024-12-28 | Bloomberg | IPOs Slump to Lowest Level Since Financial Crisis | Initial public offerings in 2012 slumped to the lowest level since the financial crisis as signs of an economic slowdown and Facebook Inc.’s (FB) disappointing debut curbed demand and prompted companies to push back sales. IPOs have raised $112 billion worldwide this year, the least since 2008, according to data compiled by Bloomberg. Initial sales in western Europe dropped to one-third of last year’s level, while concern about China’s economy helped cut proceeds in Asia by almost half. U.S. offerings raised $41 billion, little changed from last year, as Facebook’s IPO spurred a monthlong drought in U.S. deals. With the possibility of $600 billion in U.S. spending cuts and tax increases that could cause another recession also weighing on the IPO market this year, the global backlog of potential offerings has now swelled to the largest year-end size since 2007, data compiled by Bloomberg and Ipreo show. That could set the stage for a rebound if lawmakers avert the so- called fiscal cliff, according to Credit Suisse Group AG and Barclays Plc, with companies from China Petrochemical Corp. to ING Groep NV poised to potentially move ahead with offerings. “A lot of people have been very selective,” Joe Castle, head of equities syndicate at Barclays, said at a briefing this month in New York. “If we see some deals go out early in the year that go well and trade well, then it feeds on itself for more volume to come out in the U.S. and on a global basis.” Europe Surge In the fourth quarter, IPOs in western Europe surged more than fivefold from a year earlier to $5.71 billion, and U.S. initial offerings increased 15 percent to $8.8 billion, data compiled by Bloomberg show. First-time share sales in Asia fell by 46 percent to $10.9 billion, the data show. Globally, IPOs this quarter edged up to about $32.4 billion from $29.5 billion in the year-earlier period. The annual global IPO tally declined for a second straight year as Europe slipped back into a recession, cutting the amount raised in the region by about two-thirds to $9.91 billion. In Asia, the biggest region for IPOs, proceeds fell by 43 percent to $46.7 billion. The U.S. total barely eclipsed last year’s mark, even including the $16 billion debut of Facebook, the biggest technology IPO on record. After Facebook fell as much as 32 percent in the first three weeks after its IPO, companies such as Party City Holdings Inc. and American International Group Inc.’s airplane-leasing unit pulled planned offerings in favor of private sales. Swollen Backlog The global IPO backlog swelled to about $115 billion at the end of this year, including a sale by Japan Post Holdings Co. that’s planned for 2015, according to Ipreo, a New York-based provider of market data. Excluding that offering, the backlog would be about $65 billion, larger than the $52 billion a year ago, the data show. “Many companies may have felt that the broader economic environment and their resultant earnings didn’t represent the true worth of their businesses,” Darrell Uden, co-head of equity capital markets for Europe, the Middle East and Africa at Zurich-based UBS AG, said in a phone interview. “Many chose to wait for a few more earnings cycles to ensure a better valuation.” U.S. lawmakers last week scrapped a proposed plan for higher taxes, stalling budget talks and fueling concern that the officials will fail to prevent tax increases and spending cuts from taking effect in January. President Barack Obama and the Republican-led U.S. Congress returned to Washington yesterday with five days left to reach a deal. Cash Pile Unease on the part of companies and investors may give way to an increase in new-share sales as a possible rise in mergers and acquisitions prompts more fundraising for strategic takeovers, according to Alasdair Warren, co-head of investment banking in Europe at New York-based Goldman Sachs Group Inc. Global M&A in the fourth quarter rose to the highest since 2008 as companies started to draw on cash piles totaling more than $3.5 trillion to make acquisitions. “In the period post summer, there’s been a pickup in issuance, but overall there’s still a degree of nervousness and uncertainty in the market,” Warren said in a phone interview. “In the first half of next year you are going to see more meaningful primary capital raisings in the corporate space, in many cases to improve strategic flexibility.” Direct Line In Europe, the fourth quarter was this year’s busiest for IPOs, picking up even after the region’s economy shrank for the second quarter in a row during the July-September period. IPOs in Europe since 2007 haven’t managed to recover to even half of their pre-crisis level, data compiled by Bloomberg show, as concerns over sovereign debt across the region have persisted. Telefonica SA’s German unit Telefonica Deutschland Holding AG raised 1.45 billion euros ($1.9 billion) in October in Europe’s largest IPO in 2012, listing in Frankfurt. Britain’s Direct Line Insurance Group Plc raised $1.5 billion in October, and Russia’s OAO MegaFon raised $1.8 billion in November. All three offerings were increased after underwriters exercised over-allotment options to buy more shares. There may be additional large telecom IPOs from Europe next year, as Telefonica seeks to raise as much as 6 billion euros by listing its Latin American assets, and Deutsche Telekom AG evaluates a sale of its stake in a venture with France Telecom SA. Privatization sales, including that of state-owned postal service Royal Mail , are also being lined up. Creating Capital “As cash-strapped governments in Europe look for ways to create new capital, more state-owned entities will come to market next year to repay government debt and reinvest in new assets,” said Maria Pinelli, global vice chairman at Ernst & Young LLP in London , who oversees the firm’s IPO advisory business. Separately, ING U.S. Inc., an insurance unit of the largest Dutch financial-services company, filed for a New York IPO in November. ING Groep was ordered by the European Union to sell insurance operations, its U.S. online bank and a Dutch mortgage lender before the end of 2013 as a condition for approval of a 2008 bailout. Slowing growth in China for a seventh straight quarter hampered Asia’s IPOs, even as People’s Insurance Co. (Group) of China Ltd. raised $3.6 billion in a Hong Kong initial sale last month. Companies raised $5 billion in Hong Kong in the last three months of the year, down 24 percent from the year-earlier period, while deals in China in 2012 reached $15 billion, down 64 percent. Proceeds from Hong Kong IPOs, which are at the lowest since 2003, may rebound next year as the Chinese economy improves, said Michiya Tomita, a fund manager at Mitsubishi UFJ Asset Management Co., which oversees $70 billion. China Petrochem China Petrochemical, the nation’s biggest refiner, plans to seek about $1.5 billion in an IPO of its engineering unit, people with knowledge of the matter have said. The IPO of Sinopec Engineering (Group) Co. may start in Hong Kong in the second half of 2013. Japan’s biggest IPO this year helped narrow the region’s loss of deal volume. Japan Airlines Co. raised 663 billion yen ($7.7 billion) on Sept. 10, bringing Asia’s value of initial sales to just over half the amount raised in 2011. Elsewhere in Asia, Malaysia’s IPOs raised $6.5 billion in 2012, data compiled by Bloomberg show. About half of that was the May debut by palm-oil maker Felda Global Ventures Holdings Bhd. Malaysia’s economy is set to expand 4.8 percent next year, nearly double the anticipated global rate of 2.45 percent, according to economists surveyed by Bloomberg. “Investors have begun to realize the growth potential of Southeast Asia and the bright prospects of companies here,” Dato’ Charon Wardini Mokhzani, chief executive officer of CIMB Investment Bank, said in an e-mail. “The success of the Malaysian IPOs and the overwhelming demand from domestic and international investors for those IPOs have given other issuers the confidence to proceed with their respective IPOs.” Oil, Gas The amount of money raised in IPOs globally this quarter was about 44 percent greater than in the previous three months, data compiled by Bloomberg show. The quarterly proceeds were boosted by a combined $2.3 billion of oil and gas IPOs that Credit Suisse led, helping the bank surpass JPMorgan Chase & Co. for the year’s biggest share of U.S. IPO underwriting for the first time since at least 1999, the data show. Morgan Stanley was the top global IPO underwriter for the third straight year in 2012, beating JPMorgan after helping lead the Japan Airlines IPO. New Stock While a resolution to avert the so-called fiscal cliff in the U.S., continued momentum in Asia’s emerging markets , and more government privatizations in Europe would help spur increased IPO activity next year, fluctuations in the broader equity markets may mean that companies will have to move quickly to complete sales, said Ernst & Young’s Pinelli. The market will see further benefit next year if investors are willing to put more money into equity mutual funds, enlarging the pool of cash available for new stock, according to David Hermer, Credit Suisse’s head of Americas equity capital markets. Investors have withdrawn money from equity mutual funds in favor of bonds every year since 2009, with outflows from stocks totaling $135 billion this year, according to the Washington-based Investment Company Institute “There should be a continued pickup in IPO volumes,” Hermer said in a phone interview. “But at the same time, you need a receptive market to be able to absorb that.” To contact the reporters on this story: Lee Spears in New York at lspears3@bloomberg.net ; Ruth David in London at rdavid9@bloomberg.net ; Fox Hu in Hong Kong at fhu7@bloomberg.net To contact the editors responsible for this story: Jeffrey McCracken at jmccracken3@bloomberg.net ; Philip Lagerkranser at lagerkranser@bloomberg.net ; Jacqueline Simmons at jackiem@bloomberg.net |
2024-12-09 | Bloomberg | Hong Kong IPOs Prove Less Lucrative as Chinese Banks Take Share | Hong Kong ’s market for initial public offerings is becoming less profitable for investment banks as a record number of underwriters vie for fees. IPOs that raised at least $500 million counted an average of 5.3 advisers this year, compared with 3.1 in the past decade, and the most since Bloomberg began tracking the data in 1999. That’s exacerbating a slump in sales that compressed total fees in the city to $456 million, less than a third of those in China or New York, according to researcher Freeman & Co. Competition is increasing as Chinese securities firms, such as China International Capital Corp., take more business from Wall Street rivals, with their share of the market surging to a five-year high as more mainland companies pursue Hong Kong IPOs, data compiled by Bloomberg show. Companies are also enlisting more underwriters to ensure deals get done as markets fluctuate. “Hong Kong’s IPO underwriting market is getting very crowded,” said Arif Khurshed, a senior lecturer at the Manchester Business School who studies IPOs in Asia and Europe. “Competition from Chinese securities firms is squeezing fees.” Underwriters in Hong Kong are getting an average commission of 2.2 percent of an IPO’s proceeds, compared with 3.5 percent a decade ago, Bloomberg data show. By comparison, the average fee for managing a U.S. initial offering is about 5.5 percent. New China Life Chinese banks captured a combined 30 percent of the Hong Kong IPO market this year, the most since 2006, Bloomberg data show. Beijing-based CICC , which helped manage New China Life Insurance Co.’s $1.9 billion IPO in Hong Kong and Shanghai this week, is in third place, while Bank of China Ltd. ranks sixth and China Construction Bank Corp. is ninth, the data show. Of the 66 companies that went public in Hong Kong this year, 36 were based in China, compared with 26 from Hong Kong and four from other regions, Bloomberg data show. Chinese companies accounted for six of the top 10 initial sales, including the $1.2 billion offering of shares in Sun Art Retail Group Ltd., the biggest hypermarket operator in China, and the IPO of billionaire Li Ka-shing ’s Hui Xian Real Estate Investment Trust, Hong Kong’s first stock sale denominated in yuan. Chinese investment banks “saw opportunities as global banks weakened in the crisis while they did well in China’s domestic capital market, so they became ambitious about going beyond the boundary,” said Fang Fang, chief executive officer in China for New York-based JPMorgan Chase & Co. (JPM) , which ranks 11th so far this year in Hong Kong initial public offerings. Chinese Ambition The firms, however, are missing out on some of Hong Kong’s largest sales, including Chow Tai Fook Jewellery Group Ltd.’s IPO, which will raise about $2 billion after pricing today, according to two people with knowledge of the deal. JPMorgan is among seven underwriters on the sale, which lists no Chinese banks. On top of rising competition, volatile stock markets are contributing to pressure on fees, said Josef Schuster, founder of Chicago-based IPOX Schuster LLC, which oversees $2.5 billion. The Hang Seng Index fell as much as 33 percent from its 2011 high in January and is down 17 percent so far this year. “In a challenging market like this, companies are trying to get as many underwriters as possible to optimize distribution and reduce risk,” said Schuster, whose firm invests in IPOs globally, including Hong Kong offerings. “It’s not like two years ago when IPOs were just flying off the shelf.” Fewer Deals PCCW Ltd. (8) , Hong Kong’s largest phone carrier, hired eight banks to manage the $1.2 billion IPO of some of its telecom assets in November, while Sun Art used seven underwriters, including Citigroup Inc., HSBC Holdings Plc and UBS AG (UBSN) , for its July stock sale. New China Life has enlisted eight banks for the Hong Kong portion of its debut. By comparison, Chinese retailer Belle International Holdings Ltd. completed a $1.3 billion IPO four years ago with just two underwriters. Initial stock sales in Hong Kong have raised $17.7 billion this year, the lowest amount since 2008, Bloomberg data show. IPOs in the city raised $52 billion last year. At $456 million, fees in the year through Dec. 5 are half the annual average for the past five years, when Hong Kong generated $4.5 billion in total IPO fees, behind New York and China, Freeman data show. ‘Massive Opportunities’ While Hong Kong offerings are likely to rebound, increased competition will remain as more Chinese banks seek to make inroads in Hong Kong. Guosen Securities Co. and Haitong International Securities Group Ltd., two of the 10 biggest IPO underwriters in China, are expanding investment-banking divisions in Hong Kong. Guosen, based in Shenzhen, doubled headcount at its Hong Kong operations to about 200 this year and is eying “massive opportunities” outside China, CEO Lu Xiao Ning said in July. Haitong Securities CEO Lin Yong said in April his firm would “pay what’s needed” to lure talent as part of a plan to increase its investment-banking team by 50 percent this year. CICC led the $1.3 billion Hong Kong part of New China Life’s IPO. The Chinese bank is acting as joint global coordinator with UBS and Goldman Sachs Group Inc. China Merchants Securities (HK) Co. is also on the deal. China’s CMB International Ltd. is a joint bookrunner on the IPO of Baoxin Auto Group Ltd. Morgan Stanley and JPMorgan led the deal. “It is no longer as profitable as several years ago, when Goldman Sachs et al were able to corner the big IPOs,” said Francis Lun, managing director at Lyncean Holdings Ltd., a Hong Kong-based brokerage. To contact the reporters on this story: Fox Hu in Hong Kong at fhu7@bloomberg.net ; Zijing Wu in London at zwu17@bloomberg.net To contact the editor responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net ; Jacqueline Simmons at jackiem@bloomberg.net |
2024-09-26 | Bloomberg | India Mergers, BofA Suit, Chilton on Commodities: Compliance | India ’s market regulator said investors can raise their holdings in companies to as high as 25 percent without having to offer to buy additional shares from the public starting next month. The Securities and Exchange Board of India raised the limit from 15 percent, according to a statement on its website. Investors who exceed the limit will have to buy an additional 26 percent, according to SEBI. The regulations will help companies attract investors amid a fall in the stock market. India’s benchmark stock index had its biggest two-day drop in 31 months with the BSE India Sensitive Index, or Sensex, declining 1.2 percent Sept. 23. The gauge retreated 4.6 percent last week. In Japan , the trigger for an open offer is 33.3 percent, while in Hong Kong it is 30 percent and in Singapore 29.99 percent. In all three, breaching the limit requires an acquirer to make an offer for the entire company. Compliance Policy Insurers, Asset Managers May Face EU Curbs on Use of Ratings Michel Barnier , the European Union’s financial-services chief, said he may propose rules to combat “potential overreliance” of the insurance and asset-management industries on assessments by credit-ratings firms. Barnier said the measures may be added to other proposals to rein in banks’ use of external credit ratings. He was responding to a written question from a member of the European Parliament published on the assembly’s website. While the European Commission is examining the “high concentration in the rating industry,” it “has no concrete evidence” that ratings companies are abusing their dominant position in the market, Barnier added. European Bank Capital Raising Not the Answer, Goldman Sachs Says Recapitalizing 16 European banks, which came close to failing stress tests, won’t ease the financial crisis because the banks are small and the market’s attention is on larger French lenders, Goldman Sachs Group Inc. (GS) analysts said. The banks that didn’t achieve a core Tier-1 capital ratio of at least 6 percent under the European Banking Authority’s tests are “individually small,” and they weren’t examined for their entire investments in sovereign debt, which is now the market’s concern, the analysts led by Jernej Omahen in London wrote in a note to clients Sept. 23. European Union officials may speed up the recapitalization of the 16 banks, the Financial Times reported Sept. 22. The EBA is pushing banks to raise more and better capital to meet the Basel III guidelines and boost investor confidence in the industry amid the sovereign debt crisis. “The current bank crisis is a symptom of markets’ skepticism in sustainability of European public finances; to this, recaps do not provide an answer,” the note said. The 16 banks include Banco Comercial Portugues SA (BCP) , Espirito Santo Financial Group SA (ESF) , Germany ’s HSH Nordbank AG and Norddeutsche Landesbank. Compliance Action Staffing Woes Harm Fannie and Freddie Oversight, Watchdog Says Regulators lack the staff to effectively oversee Fannie Mae and Freddie Mac and have scaled back examinations of the two mortgage companies as a result, a government watchdog reported. A hiring campaign by the Federal Housing Finance Agency has missed targets and, when completed, will still leave the agency shorthanded. Those conclusions were part of a report released Sept. 23 by the FHFA’s Office of Inspector General. The report singled out the agency’s monitoring of the housing inventory that Fannie Mae and Freddie Mac own. Despite a surge in foreclosures that has increased Fannie Mae’s inventory sixfold since 2007, “FHFA has yet to conduct a targeted examination” of how the companies manage repossessed homes, known as real-estate owned properties or REO, the report said. The FHFA this year set out to recruit and hire 26 people to join its team of about 120 examiners. Even if those hires are completed, agency executives told the inspector general they will have only about half the examiners they need. FHFA Deputy Director Stephen M. Cross said the agency has hired 18 examiners since January. Noting that the inspector general’s conclusions were based on interviews with unnamed FHFA officials, Cross said the report offers “no evidence” that the agency’s oversight has been compromised. S&P May Face SEC Sanctions Over 2007 Rating of Subprime CDO McGraw-Hill Cos. said the U.S. Securities and Exchange Commission may recommend a civil injunction against the company’s Standard & Poor’s unit in connection with its rating of a 2007 mortgage-linked security. The SEC’s so-called Wells notice is related to a $1.6 billion collateralized debt obligation known as Delphinus CDO 2007-1, New York-based McGraw-Hill said today in a statement. Agency staff may recommend civil penalties, disgorgement of fee and other actions, the company said. Delphinus was highlighted in a U.S. Senate panel’s report as a “striking example” of how banks and ratings firms branded mortgage-linked products safe even as the housing market worsened in 2007. S&P rated six tranches of Delphinus AAA in August 2007 and began downgrading the securities by the end of the year, according to the report released in April by the Senate Permanent Subcommittee on Investigations. By the end of 2008, they were rated as junk, according to the report. About three-quarters of the CDO, which was underwritten by Mizuho Financial Group Inc. (8411) and managed by Delaware Asset Advisors, was based on subprime mortgages, according to a Fitch Ratings Ltd. report. Magnetar Capital Partners LLC invested in the deal, according to a ProPublica report. “S&P has been cooperating with the commission in this matter and intends to continue to do so,” McGraw-Hill said in the statement. A phone call to Steven Lipin, a spokesman for Magnetar, wasn’t immediately returned. Clearwire Is Latest U.S. Stock Halted by Circuit Breakers Clearwire Corp. (CLWR) is the latest U.S. stock halted by circuit breakers implemented in June 2010. The curbs were created after the 20-minute rout on May 6, 2010, erased $862 billion from the value of U.S. equities before prices rebounded. New rules proposed by exchanges on April 5, 2011, would shift the market to a limit-up/limit-down system that prevents shares from moving more than a certain amount. China’s Banking Regulator Reviews Trust Loans to Developers China’s banking regulator is looking into financing of developers through trust companies as part of a broader evaluation of real estate lending, a person familiar with the matter said. The inquiries by the China Banking Regulatory Commission are part of regular monitoring and aren’t targeting any individual company, said the person, who declined to be identified because the regulator’s queries were meant to be private. Chinese property developers led by Greentown China Holdings Ltd. (3900) plunged in Hong Kong trading for two days last week on concern tightened access to loans will force them to cut prices. Greentown said it hasn’t received any notice following a Reuters report that the banking regulator ordered trust companies to report dealings with the developer. Greentown, the largest builder in the eastern province of Zhejiang, said it has no trouble financing its loans and it hasn’t been queried by the banking regulator. For more, click here. Courts BofA Case May Be Followed by More Mortgage Suits by Counties Bank of America Corp. (BAC) is among a group of lenders that may face a wave of new lawsuits claiming cash-strapped counties were cheated out of millions of dollars by a system used for more than a decade to register mortgages. Dallas County District Attorney Craig Watkins said state attorneys general and county officials across the U.S. have expressed interest in his lawsuit against Mortgage Electronic Registration Systems Inc. and Bank of America, filed in Texas state court on Sept. 21. Dallas County could be owed as much as $100 million in filing fees, he said. MERS, a unit of Reston, Virginia-based Merscorp Inc., says on its website that its aim is to place every mortgage in the country on an electronic, rather than a paper, system that allows members to buy and sell mortgages. MERS acts as the lender’s nominee and remains the mortgagee of record as long as the note promising repayment is owned by a MERS member. Dallas County claims this allows banks to buy and sell loans without properly recording transfers with counties and paying the fee. “The MERS business model and practices are legal and comply with the recording statutes and regulations of Texas,” Janis Smith, a spokeswoman for Merscorp, said in an e-mail. The claims in the lawsuit “are without legal or factual merit.” Shirley Norton , a spokeswoman for Charlotte, North Carolina-based Bank of America, the biggest U.S. lender by assets, declined to comment on the suit. Liability in the Dallas case could exceed $1 billion, based on the number of mortgages in the county, Peterson said. Local laws impose substantial penalties, as well as back payments of fees and taxes, if false documents were filed in land transactions, said Christopher L. Peterson, associate dean and professor at the University of Utah S.J. Quinney College of Law, who has advised private plaintiffs making similar claims. Faulty mortgages and foreclosures have already cost the five biggest home lenders $66 billion, according to data compiled by Bloomberg. For more, click here. Interviews/Speeches Commodity Rules Needed to Control Speculation, Chilton Says Regulation of international commodities markets will control price volatility and benefit consumers by making trading more efficient and effective, said Bart Chilton , a commissioner at the U.S. Commodity Futures Trading Commission. The commission is writing rules on market regulation as supply and demand fundamentals can’t explain the high price volatility seen this year and in 2008, Chilton said in a speech to the United Nations Sept. 22, according to transcript of his comments on the CFTC’s website. Policy makers globally should work together so regulations and position limits correspond internationally, he said. “We need to ensure that to the extent that we can, respecting sovereignty of course, we do our best to harmonize rules and regulations,” Chilton said. “Those nations that do so will reap a reward in my judgment in that they will make themselves more competitive, more efficient and effective.” Comings and Goings Barclays Says Rake to Replace Broadbent as Independent Director Barclays Plc (BARC) , the U.K.’s second-largest bank by assets, said Michael Rake will become senior independent director replacing Richard Broadbent, who retires on Sept. 30. Rake is chairman of the lender’s audit committee and takes up the new role on Oct. 1, the London-based bank said Sept. 23 in a statement. Barclays said in May that Broadbent, who is also deputy chairman, would step down after accepting the position of chairman at Tesco Plc. (TSCO) Broadbent joined Barclays’s board in September 2003, after retiring as executive chairman of the U.K.’s customs office. 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 . |
2024-08-15 | Bloomberg | Paulson, Soros Add Gold as Price Declines Most Since 2008 | Billionaire investors George Soros and John Paulson increased their stakes in the biggest exchange- traded fund backed by gold as prices posted the largest quarterly drop since 2008. Soros Fund Management more than doubled its investment in the SPDR Gold Trust to 884,400 shares as of June 30, compared with three months earlier, a U.S. Securities and Exchange Commission filing for second-quarter holdings showed yesterday. Paulson & Co. increased its holdings by 26 percent to 21.8 million shares. Gold slumped 4 percent in the second quarter, the biggest such loss since Sept. 30, 2008. Prices fell as European Central Bank President Mario Draghi and Federal Reserve Chairman Ben S. Bernanke failed to increase stimulus measures, damping the outlook for global growth and demand for the metal as a hedge against inflation. The price fell 0.1 percent since June 30 through yesterday. “It’s all about easing, and people are especially waiting for the Fed since investors expect prices will rise,” if the central bank announces more bond purchases, said Walter “Bucky” Hellwig, who helps manage $17 billion of assets at BB&T Wealth Management in Birmingham, Alabama. “People are willing to hold on to gold to see what the Fed will say.” The metal surged 70 percent from the end of December 2008 to June 2011 as the Fed kept borrowing costs at a record low and bought $2.3 trillion of debt in two rounds of so-called quantitative easing. Paulson’s Fund Paulson, 56, who became a billionaire in 2007 by betting against the U.S. subprime mortgage market, lost 23 percent in his Gold Fund through July as lower bullion prices and slumping mining stocks contributed to declines. Holdings in the SPDR Gold Trust are Paulson’s largest position. He also bought shares of NovaGold Resources Inc. (NG) last quarter and sold other stocks, leaving his $21 billion hedge fund with more than 44 percent of its U.S. traded equities tied to bullion. Paulson’s U.S.-listed holdings peaked at $34.3 billion at the end of March 2011, with about $7.7 billion of that amount, or 23 percent, invested in gold related stocks. He had 33 percent of his U.S. stock holdings in gold-related securities at the end of the first quarter and 25 percent a year ago. Armel Leslie , a spokesman for Paulson, declined to comment. Michael Vachon , a spokesman for Soros, declined to comment. Erased Gains Gold erased its gains this year in May as investors favored sovereign debt and the dollar as economic growth slowed. The U.S. currency gained 3.3 percent against a basket of currencies last quarter. Hedge funds have cut their net-long position, or bets on higher prices, by 66 percent from a record in August 2011. Their holdings fell to 85,510 futures and options on Aug. 7, according to the U.S. Commodity Futures Trading Commission. Still, prices have rallied for 11 consecutive years, gaining more than sevenfold, as investors snapped up the metal after government and central bank stimulus programs boosted speculation that inflation would accelerate. The metal is up 2.2 percent this year. Vinik, Mindich Vinik Asset Management, the Boston-based hedge fund founded by Jeffrey Vinik, who formerly ran the Fidelity Magellan Fund (FMAGX) , cut its entire stake in the gold ETF. On March 30, the fund held 2.3 million shares, SEC data show. Eric Mindich’s Eton Park Capital also sold all of its 739,117 shares last quarter, a filing showed. Jonathan Gasthalter, a spokesman for Eton Park, declined to comment. Moore Capital Management LP acquired 120,000 shares of SPDR Gold Trust in the second quarter, a filing showed yesterday. The hedge fund held no shares in the gold fund as of March 31. Global holdings in exchange-traded products rose to a record 2,417.3 metric tons on Aug. 10, according to data compiled by Bloomberg. Central banks and the International Monetary Fund are the largest bullion owners with 29,500 tons at the end of last year, or 17 percent of all mined metal, World Gold Council data show. Central banks have been net buyers for two straight years, the council said. Purchases this year will probably exceed the 456 tons added in 2011, the WGC estimates. Holding On “People expect prices to rise in the third quarter since historically it has been proved that it’s one of the best periods for gold, and investors who see easing coming in from various central banks are either increasing or holding on to their positions,” Donald Selkin , the New York-based chief market strategist at National Securities Corp., which manages about $3 billion of assets, said by telephone. Money managers who oversee more than $100 million in equities must file a Form 13F with the SEC within 45 days of each quarter’s end to show their U.S.-listed stocks, options and convertible bonds. The filings don’t show non-U.S. securities or how much cash the firms hold. To contact the reporter on this story: Debarati Roy in New York at droy5@bloomberg.net To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net |
2024-11-10 | Bloomberg | U.S. Jobless Claims Fell Last Week to Lowest Level Since July | The number of Americans filing initial jobless claims last week fell to the lowest level in four months, reinforcing evidence the U.S. labor market is healing. Applications for jobless benefits declined by 24,000 to 435,000 in the week ended Nov. 6, lower than the median forecast in a Bloomberg News survey, Labor Department figures showed today in Washington. The total number of people collecting unemployment insurance fell to the lowest level since November 2008, and those receiving extended payments also declined. Fewer firings are a first step to improvement in the labor market, followed by faster job and income growth that will help fuel gains in consumer spending. Bigger increases in payrolls are also required to bring down an unemployment rate that’s close to 10 percent. “This is further confirmation that the job market is slowly improving,” said Russell Price , a senior economist at Ameriprise Financial Inc. in Detroit. “We are now headed in the right direction and may make some progress in breaking free of the range we’ve been stuck in since the beginning of the year.” Stock-index futures erased earlier losses and Treasury securities dropped after the report. Futures on the Standard & Poor’s 500 Index rose 0.1 percent to 1,212.3 at 8:46 a.m. in New York. The yield on the 10-year note, which moves inversely to price, rose to 2.71 percent from 2.66 percent late yesterday. Trade Gap The Commerce Department said today that the trade deficit narrowed to $44 billion in September from $46.5 billion a month earlier. Import prices in October rose 0.9 percent, Labor Department figures showed. Jobless benefits applications, which dropped to the lowest level since the week ended July 10, were projected to fall to 450,000, according to the median forecast of 46 economists in the Bloomberg survey. Estimates ranged from 435,000 to 469,000. There were no special factors behind the drop in claims, a Labor Department said as the figures were released. The government’s seasonal factors anticipated a bigger increase in unadjusted claims than actually occurred, the official said. The four-week moving average, a less volatile measure than the weekly figures, dropped to 446,500 last week, the lowest since Sept. 13, 2008, from 456,500, the report showed. Continuing Claims The number of people continuing to receive jobless benefits dropped by 86,000 in the week ended Oct. 30 to 4.3 million, in line with the median projection. The continuing claims figure does not include the number of Americans receiving extended benefits under federal programs. Those who’ve used up their traditional benefits and are now collecting emergency and extended payments decreased by about 286,000 to 4.73 million in the week ended Oct. 23. The unemployment rate among people eligible for benefits, which tends to track the jobless rate, dropped to 3.4 percent in the week ended Oct. 30, from 3.5 percent in the prior week. Twenty-eight states and territories reported an increase in claims, while 25 reported a decrease. These data are reported with a one-week lag. Initial jobless claims reflect weekly firings and tend to fall as job growth -- measured by the monthly employment report |
2024-10-25 | Bloomberg | Ask Unions Whether Foreign Money Is Pouring In: Kevin Hassett | Foreign money may be having a profound influence on the U.S. elections, more so than many people are aware. I’m talking about the tens of millions of dollars that flow each year from foreign sources to organizations with an immense stake in the course of U.S. politics. More groundless speculation about the U.S. Chamber of Commerce? No. This is real money going to American labor unions, an influx of foreign cash that is now harder to trace thanks to actions taken by President Barack Obama ’s administration. This is the same Obama who is riling Democratic campaign rallies with warnings, backed by no evidence, that Republican “front groups” and even the U.S. Chamber of Commerce may be using money from foreign interests to support Republicans. “Tens of billions of dollars are pouring in” to “special interests,” Obama told supporters at a rally on Oct. 15 for Chris Coons , the Democratic nominee for Senate in Delaware. “And they don’t have the courage to stand up and disclose their identities. They could be insurance companies or Wall Street banks or even foreign-owned corporations. We will not know because there’s no disclosure.” Here are some things we do know: Unions and corporations got the green light from the U.S. Supreme Court earlier this year to spend their own money on political advertising. The 1.6 million-member American Federation of State, County and Municipal Employees is, for now, the biggest outside spender of the 2010 elections, according to the Wall Street Journal. And America’s unions, which are among Obama’s biggest political backers, rake in foreign money by the bushel. Loophole Lives According to financial reports filed with the Labor Department -- and available online -- unions received at least $46 million from foreign sources in 2008 alone. Even this most basic of public disclosure is in peril. The Obama administration has abandoned a reasonable effort to close a huge loophole that allows unions to avoid reporting requirements by creating exempt offspring organizations. Historically, unions have been required to fill out the Department of Labor’s Form LM-2, which, among other things, details their revenue sources and major contributors. A number of holes in the reporting requirement developed over time, including exemptions for union subsidiaries, such as the AFL- CIO-affiliated Working America , and trusts in which unions have interests, including strike funds, credit unions, pension plans, training funds and apprenticeship programs. No Paper Trail At least hypothetically, funds from non-U.S. sources could flow through such organizations to political activities, and the public would not be able to follow the paper trail. President George W. Bush ’s administration tried to close down the potential for these financial shell games. In 2008 it issued a rule requiring unions to file a new form, the T-1, detailing the finances of trusts in which they have a controlling interest or to which they have supplied at least 50 percent of the revenue. The fate of the T-1 was probably sealed when Obama took office in 2009 and nominated as his labor secretary Hilda Solis , a California congresswoman who was a director and former treasurer of American Rights at Work , an organization funded by the AFL-CIO and other unions. She had been one of organized labor’s foremost champions in Congress, voting with the AFL-CIO 97 percent of the time and receiving three-quarters of her campaign funds from organized labor. Come Together Solis stopped the T-1 in its tracks. The Labor Department’s new rule, proposed on Feb. 2, 2010, would remove the requirement that financial information be disclosed for organizations that are not wholly owned subsidiaries of a single union. In other words, if a union sets up a subsidiary on its own, the public can monitor its income and spending. If it joins with a few of its friends to do so, the public is in the dark on matters such as whether it receives money from outside the U.S. It’s illegal for a non-U.S. citizen or corporation to spend money in connection with a U.S. election -- a prohibition, it’s worth noting, that hasn’t stopped Obama and his backers from dishing accusations against the Chamber of Commerce and other Republican-allied groups. But money is fungible, of course, so even for law-abiding unions, having tens of millions of dollars on hand from foreign sources could free up more domestic cash for political activities. Of foreign-money suspicions directed at Republicans, the Annenberg Public Policy Center’s Factcheck.org website said : “Democrats, from President Barack Obama on down, are trying to turn an evidence-free allegation into a major campaign theme, claiming that foreign corporations are ‘stealing our democracy’ with secret, illegal contributions funneled through the U.S. Chamber of Commerce. It’s a claim with little basis in fact.” This same disregard for facts might explain why the Obama administration wants to limit, rather than increase, available information about an actual -- not imagined -- avenue of foreign money into American affairs. ( Kevin Hassett , director of economic-policy studies at the American Enterprise Institute, is a Bloomberg News columnist. He was an adviser to Republican Senator John McCain in the 2008 presidential election. The opinions expressed are his own.) To contact the writer of this column: Kevin Hassett at khassett@bloomberg.net To contact the editor responsible for this column: James Greiff at jgreiff@bloomberg.net |
2024-11-05 | Bloomberg | Economy Set for Better Times Whether Obama or Romney Wins | Mitt Romney says Barack Obama ’s policies will consign the U.S. to an extended period of sluggish economic growth, at best. The president says his Republican challenger’s plans will sow the seeds of another mammoth recession. Both are wrong. No matter who wins the election tomorrow, the economy is on course to enjoy faster growth in the next four years as the headwinds that have held it back turn into tailwinds. Consumers are spending more and saving less after reducing household debt to the lowest since 2003. Home prices are rebounding after falling more than 30 percent from their 2006 highs. And banks are increasing lending after boosting equity capital by more than $300 billion since 2009. “The die is cast for a much stronger recovery,” said Mark Zandi , chief economist in West Chester, Pennsylvania, for Moody’s Analytics Inc. He sees growth this year and next at about 2 percent before doubling to around 4 percent in both 2014 and 2015 as consumption, construction and hiring all pick up. The big proviso, according to Zandi and Yale University professor Ray Fair , is how the president-elect tackles the task of shrinking the $1.1 trillion federal-budget deficit. The Congressional Budget Office has warned that the U.S. will suffer a recession if more than $600 billion in scheduled government- spending reductions and tax increases -- the so-called fiscal cliff -- take effect next year. Positive Signs “There are a lot of things that are positive going forward for the economy,” Fair said. “Hopefully, we can get a handle on the deficit” without dragging down growth too much. While concern about the threatened fiscal squeeze may hit gross domestic product this quarter and next, the expansion should pick up strength by the middle of 2013, said Eric Green , a Philadelphia-based fund manager at Penn Capital Management Co. GDP “will surprise to the upside,” said Green, whose firm manages $7.2 billion. “We could grow at a 3 to 4 percent rate over the next couple of years.” Full Bloomberg Coverage of 2012 Election Hiring in the U.S. increased more than forecast in October as employers looked past slowing global growth and political gridlock at home. In the last jobs report before tomorrow’s election, the Labor Department said a net 171,000 workers were added to payrolls, beating the 125,000 median forecast of economists surveyed by Bloomberg. ‘Defensive’ Stocks Shares of manufacturers, materials producers and energy and technology companies should rise as the expansion gains speed, Green said. More “defensive” stocks that aren’t as affected by rising demand, such as real-estate investment trusts, health- care providers and consumer staples, won’t perform as well. The Standard & Poor’s 500 Index is up about 12 percent this year. Slideshow : Battle for the Presidency ... of Ohio? The U.S. also should benefit next year from a rebound in the rest of the world, according to Green, especially as China, the second-largest economy, “seems to be bottoming out.” Chinese manufacturing expanded in October for the first time in three months, according to a purchasing managers’ index compiled by the government. A similar gauge from HSBC Holdings Plc and Markit Economics posted the biggest gain since 2010. While manufacturing in the euro area continues to contract, the region “can’t be in a recession forever,” said Allen Sinai , chief executive officer of Decision Economics Inc. in New York. Economists surveyed by Bloomberg see the 17-nation group expanding 0.2 percent next year and 1.2 percent in 2014. ‘Albatross’ Deficits U.S. growth will pick up only gradually during the next few years, to a little more than 3 percent in 2015, held back by an “albatross” of deficits and debt, Sinai said. Mohamed El-Erian, chief executive officer of Pacific Investment Management Co., is more downbeat, emphasizing the structural challenges the U.S. faces rather than the cyclical forces Zandi highlights. “The prospect is for 2 percent growth,” said El-Erian, whose Newport Beach, California-based company manages more than $1.9 trillion in assets. “The downside risks are larger than the upside risks.” He argues that policy makers must tackle such “deep-seated problems” as elevated youth and long-term unemployment and a broken housing-finance system to enable the U.S. to grow faster. And while the president-elect will face an economy in much better shape than four years ago, he and the Federal Reserve will have less leeway to support expansion by employing fiscal and monetary policies, as they have already been loosened considerably, El-Erian said. Optimistic Households Households seem increasingly inclined to side with the optimists, preferring to see the economic glass as half-full rather than half-empty. Consumer confidence climbed in October to a more than four-year high as Americans took comfort from an improving job market, according to figures from the New York- based Conference Board. Adam and Allyson Straight are among those looking ahead to more prosperous times. Adam, a 35-year-old official at the Georgia Dome stadium, and his 27-year-old wife bought a $227,000 three-bedroom house in Roswell, Georgia, on Oct. 26 after renting for the past 10 months. They moved in the following weekend and spent $2,500 on new living-room and dining-room furniture. “I am optimistic,” said Allyson, a civil attorney. The economy “seems to be moving in a better direction.” Romney disagrees. He told supporters in Ames, Iowa, on Oct. 26 that Obama has the nation headed in the wrong direction, with “trickle-down government policies that have failed us. Better Future ‘‘It’s time for new, bold changes that measure up to the moment and that can bring America’s families the certainty that the future will be better than the past,” he said. The day before, Obama said Romney is the one proposing policies that have failed, such as lower tax rates for all Americans, including the wealthiest. “We just tried that philosophy in the decade before I took office,” the president said in Cleveland, Ohio. “And we know what happened.” Slideshow : Battle for the Presidency ... of Ohio? Pent-up demand, more than presidential policies, will drive the expansion forward in the next few years, said Peter Hooper , chief economist at Deutsche Bank Securities in New York and a former Fed official. Households that put off purchases during the recession and its aftermath are starting to buy amid rising optimism about their prospects. Retail sales jumped 1.1 percent in September as Americans snapped up goods from cars to iPhones, according to Commerce Department data. The gain followed a 1.2 percent increase in August, the best back-to-back showing since late 2010. ‘Strong’ Quarter While U.S. sales of cars and light-duty trucks will suffer temporarily from the disruption caused by Hurricane Sandy , the industry “will have a strong fourth quarter and continue growing next year,” Kurt McNeil, vice president of U.S. sales for General Motors Co. (GM) in Detroit, said in a Nov. 1 conference call with analysts. Easier credit terms are contributing to the rise in consumer spending. Banks reported that they continued to ease standards on auto loans and credit cards last quarter, according to a Fed survey of senior lending officers. Financial institutions “are very well capitalized,” Zandi said. “They are slowly but surely lowering their lending standards.” Commercial banks and savings institutions recorded a 21 percent rise in net income for April-June, the 12th straight quarter that earnings have risen on a year-over-year basis, according to the Federal Deposit Insurance Corp. in Washington. The 19 biggest banks have boosted equity capital by more than $300 billion since 2009, Fed Chairman Ben S. Bernanke said in a speech earlier this year. Increasing Demand Demand for auto loans and residential mortgages increased last quarter, the Fed survey found. Households are feeling more comfortable about credit after reducing their cumulative debt as a share of disposable income to 113 percent in the second quarter, the lowest in nine years, Fed figures show. The housing market is one of the beneficiaries. New-home sales climbed 5.7 percent in September to the highest level in two years, based on Commerce Department data. Demand was 27 percent higher than a year ago. “Clearly, demand conditions have changed for the better,” Richard Dugas , chief executive officer of PulteGroup Inc., the largest U.S. homebuilder by revenue, told analysts on Oct. 25. The last time residential construction contributed to growth over the course of an entire year was 2005, when it accounted for 0.4 percentage point of the 3.1 percent increase in GDP. From 2006 to 2009, the homebuilding slump subtracted an average of 0.8 percentage point from the economy. Through the first three quarters of 2012, it’s contributed 0.3 point. Distressed Properties “Housing typically adds 1 to 2 percentage points” in a recovery, said Dean Maki , New York-based chief U.S. economist at Barclays Plc, who worked at the Fed from 1995 to 2000. As the overhang of distressed properties is cleared away, “you may get a bigger kick from housing” in 2015 and 2016, he said. Home values already are rising. Residential real-estate prices increased in the year ended August by the most in two years, according to the S&P/Case-Shiller index of property values in 20 cities. The improvement in the housing market is alleviating one of the headwinds holding back the economy, Dennis Lockhart , president of the Federal Reserve Bank of Atlanta, told reporters Nov. 1. If concerns about the U.S. fiscal cliff and European debt crisis also abate, “there would be the impetus for more economic activity, more investment and more hiring,” he said. While tomorrow’s presidential contest “may have some influence on the decision of businesses,” more generally “I don’t think the election results per se are going to have a noticeable effect on how this economy is evolving.” To contact the reporters on this story: Rich Miller in Washington at rmiller28@bloomberg.net ; Steve Matthews in Atlanta at smatthews@bloomberg.net To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net |
2024-06-18 | Bloomberg | AIG Falls as Bernstein Cites Risk to ILFC Deal | American International Group Inc. (AIG) fell in New York trading as Sanford C. Bernstein & Co. cut its earnings projections on the prospect that delays in the sale of a plane-leasing unit extend the wait to resume share buybacks. AIG slumped 68 cents, or 1.5 percent to $44.47 at 11:12 a.m., the biggest decline in the 22-company Standard & Poor’s 500 Insurance Index. The insurer said yesterday it is open to new offers for its International Lease Finance Corp. and may pursue an initial share sale of the business after extending for a second time a deadline for a group of Chinese investors to buy the unit. The group, led by New China Trust Co. Chairman Weng Xianding, agreed in December to pay $4.2 billion for an 80 percent stake in ILFC. “We think investors should recognize an announcement of the deal’s termination may soon be coming -- and would expect the shares to be weak on any headline making clear that the deal is definitively off,” Bernstein analysts led by Josh Stirling said in a note today. “The revised purchase contract shows evidence of AIG itself beginning to disengage from these buyers.” Steven Lipin, a spokesman for the acquirers at Brunswick Group, declined to comment. Matt Gallagher, an AIG spokesman, didn’t respond to a request for comment. AIG Chief Executive Officer Robert Benmosche has been targeting share repurchases to help boost the New York-based company’s operating return on equity to 10 percent by the end of 2015. He has said the sale of ILFC would simplify the company and reduce its debt, which he considers an essential step before resuming buybacks. “As the probability of a successful near-term closing declines, we are recognizing this delay in our forecasts for capital returns, and shift the timing of the firm’s dividends and buybacks back by a quarter” to the last three months of this year, the Bernstein analysts wrote. Stirling is now projecting earnings of $4.03 a share this year at AIG, down from his prior estimate of $4.10. To contact the reporters on this story: Megan Hickey in New York at mhickey18@bloomberg.net ; Zachary Tracer in New York at ztracer1@bloomberg.net To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-10-22 | Bloomberg | Travelers Profit Beats Estimates as Fishman Pushes Rate | Travelers Cos. (TRV) , the lone property-casualty insurer in the Dow Jones Industrial Average , posted third-quarter profit that beat estimates as Chief Executive Officer Jay Fishman increased rates for coverage. The company boosted its share buyback plan by $5 billion. Net income was $864 million, or $2.30 a share, compared with $864 million, or $2.21, a year earlier, the New York-based insurer said today in a statement. Operating profit, which excludes some investment results, was $2.35 a share, 26 cents higher than the average estimate of 24 analysts surveyed by Bloomberg. Fishman, 60, began raising prices for coverage and changing some policy terms as low interest rates pressured income from his company’s bond portfolio and natural disasters boosted claims costs in recent quarters. The strategy has helped the insurer expand its margins and contributed to a 51 percent gain in the share price in the two years through yesterday. “They’ve been able to raise pricing and keep retention rates in a good place,” Brian Meredith, an analyst at UBS AG who recommends buying Travelers’ stock, said in an interview before the results were announced. The share repurchase authorized today is in addition to the $759 million that remained in previous programs as of Sept. 30. Buybacks were $800 million in the third quarter. Book Value Repurchases helped increase book value per share, a measure of assets minus liabilities, to $68.15 from $66.65 at the end of June. The figure is used by analysts and investors to gauge how much insurers are worth. Travelers slipped 0.1 percent to $86.71 at 4:15 p.m. in New York. The insurer made an underwriting profit of 11.1 cents for every premium dollar it collected in the quarter, compared with 9.7 cents a year earlier. Policy sales were little changed at $5.7 billion, as the company boosted premiums from its business insurance and financial, professional and international segments, while reporting lower results from its personal insurance unit. The Federal Reserve has held its benchmark lending rate near zero since December 2008 to help stimulate the economy and has also expanded its balance sheet to more than $3.8 trillion by buying bonds. The efforts have lowered borrowing costs for governments, companies and individuals, and hurt investors that rely on fixed-income securities. Net investment income fell to $657 million before tax from $722 million a year earlier. Falling bond yields have pressured insurers’ returns as proceeds from maturing bonds are reinvested at lower rates. Catastrophe Costs Travelers and other U.S. property insurers have benefited from calmer weather after tornadoes and other natural disasters caused claim costs to surge in past quarters. Catastrophes cost Travelers $99 million in the quarter pretax and net of reinsurance, compared with $91 million a year earlier. “It was a light catastrophe quarter,” Paul Newsome, an analyst at Sandler O’Neill & Partners LP, said in an interview before results were announced. Lower claims costs allowed Travelers to buy back more stock, Fishman said at a conference last month. The company has typically limited repurchases in the third quarter should it need to pay claims from natural disasters. 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 |
2024-04-30 | Bloomberg | Slovenia Bank Rescue at 20% GDP Means No Escaping EU Aid | Slovenia, the first former Communist nation in the euro zone , is facing a typically capitalist dilemma: whether to protect creditors of big banks. Rising loan losses resulting from a housing bust and a second recession in two years have left a hole of about 7.5 billion euros ($9.9 billion) at Slovenia-based lenders, investment bank Keefe Bruyette & Woods estimates. That’s a lot for a 35 billion-euro economy: A bank bailout would push government debt above 70 percent of economic output. Even after a successful domestic debt sale two weeks ago, the country may need assistance from the European Union, and holders of bank bonds, including the most senior creditors, could be forced to take losses, according to Raoul Ruparel, head of research at London-based Open Europe. Such a bail-in, which would be the second in the euro zone, after Cyprus, risks deepening divergence in the monetary union by keeping borrowing costs higher in economically weak nations. “It’s not impossible, but it’s very unlikely that Slovenia can manage to pull off the bank restructuring without any EU money,” said Ruparel, who tracks economic and political developments in the region. “And when it turns to official funds, the conditions will most likely include a bail-in of creditors, especially because banks are the main problem.” ‘Heavily Exposed’ Moody’s Investors Service cut Slovenia’s debt rating two levels to junk today, citing potential bank-rescue costs increasing government debt as the main reason for the decision. The country may have to ask for financial aid from the EU as its borrowing costs become unsustainable, the ratings firm said. “Moody’s expects bank asset quality to continue to deteriorate given the weak economic environment,” the firm said in a statement. Delays by the new government to establish a bad bank “suggest that the sovereign remains heavily exposed to contingent liabilities.” The central European country delayed the sale of five- and 10-year dollar bonds that it had started marketing this week, following the downgrade. Slovenia became the fifth nation in the 17-member euro region to have its debt rated junk. The downgrade wasn’t a surprise, said Vanguard Group Inc.’s Jonathan Lemco. ‘Serious Problems’ “Slovenia has serious problems and the market is not blind to that,” said Lemco, a senior sovereign-debt analyst at the largest provider of U.S. bond funds. “Everyone was looking for a downgrade. Their banking system is in real need of support, although policymakers continue to insist they don’t need a bailout of any kind.” Slovenia is trying to avoid following Cyprus as the sixth country using the euro to require a bailout. The sale of 1.1 billion euros of 18-month bills gave the government some breathing room. The yield on its dollar bonds due October 2022 has fallen 58 basis points to 5.67 percent since the April 17 sale. Still, the cost of cleaning up its banks may force Slovenia to join Ireland, Spain and Greece in seeking aid and Cyprus in having to impose losses on creditors. “We need to see the size of the assets that actually will be transferred,” said Christopher Allen , a London-based director at BlackRock’s Fundamental Euro Fixed Income team. “We have to understand whether the valuations of those loans are really realistic.” Stay Away The government has injected about 1 billion euros into Slovenia’s three largest banks since 2008, according to data compiled by Andraz Grahek, a managing partner at Capital Genetics, a financial-advisory firm in Ljubljana, Slovenia. The country’s lenders will need an additional 900 million euros by the end of July, the government said in a document last week. The three biggest banks -- Nova Ljubljanska Banka d.d., Nova Kreditna Banka Maribor d.d. and Abanka Vipa d.d. -- are government-owned or controlled and make up almost half the financial system. They have been buying sovereign debt as foreign investors stay away. About 79 percent of bills sold this year prior to the most recent sale were purchased locally, according to the Finance Ministry. The proportion for the latest sale was 71 percent, the nation’s securities-clearing firm said. Meanwhile, government debt has more than doubled since 2008, partly because of the cash injections to keep banks alive. Those reciprocal money flows have reinforced the link between sovereign indebtedness and bank solvency that euro-zone leaders vowed last year to break. The government, in power for less than two months, has pledged to carry out the previous administration’s bank- restructuring plans, including the creation of a so-called bad bank to move as much as 4 billion euros of nonperforming debt out of the lenders and recapitalize them. Soured Debt Delinquencies account for 20 percent of total loans, and that could rise to 27 percent, KBW estimates. As much as 90 percent of the soured debt is held by locally owned banks whose bad-loan ratio could surge to 34 percent, according to the firm. That would amount to 5 billion euros for the three biggest lenders, some of which would be absorbed by provisions already set aside by the banks. The government might have to inject 3 billion euros of capital to cover the shortfall and finance the bad bank that will take over the nonperforming assets, KBW said. The EU aid package might have to be about 8 billion euros because the government needs to finance a widening budget deficit as well as bank restructuring, estimates Mai Doan, a London-based economist at Bank of America Merrill Lynch. The Organisation for Economic Co-operation and Development has criticized the government’s 900 million-euro figure as too low and urged some costs to be borne by owners of bank debt. Nonperforming Assets The government plans to give banks bonds in exchange for the nonperforming assets they transfer to the bad bank. In an interview yesterday with Delo newspaper, Finance Minister Uros Cufer said the asset-management company to take over the bad loans would have to be established in less than a year. Prime Minister Alenka Bratusek said she will sell state assets, including government stakes in banks as high as 90 percent of the largest lender, to help pay for recapitalization. That has been met with skepticism by some because of Slovenia’s historical resistance to government divestiture and a lack of investor interest in its banks. Bratusek has promised more- detailed plans. “The government continues to emphasize it won’t request a bailout, but the pipeline of potential debt issuance in the coming year is quite large,” Doan said. “Investors would like to have a backstop from the EU to comfortably invest in Slovenia’s bank restructuring. The government will resist an EU package until it’s pushed to do it by markets, when yields rise to unsustainable levels.” Romania, Chile The yield on 10-year dollar bonds already exceeds that of Romania, Chile or Mexico. Slovenia had to resort to dollar funding in October to tap emerging-markets investors, an unusual move for a euro-zone country. The yield on Slovenia’s 2018 euro- denominated bond is 4.46 percent, compared with 4.34 percent for Portugal , which is rated two levels below Slovenia, after today’s downgrade. Slovenia, a nation of 2 million people that accounts for 4 percent of the euro-zone’s economic output, joined the monetary union in 2007. Now its membership may require it to impose losses on senior bank creditors, as Germany leads a chorus advocating such burden-sharing in restructuring costs. Struggling Economies The new bail-in strategy risks widening the gap between lending rates in weaker countries such as Slovenia and stronger ones including Germany, according to Alberto Gallo , head of European credit research at Royal Bank of Scotland Group Plc. That could push struggling economies further into recession and make it more difficult to end the region’s crisis. Banks in weaker euro-zone countries already pay more interest for deposits, ranging from 2.5 percent to 4.5 percent, while German or Finnish counterparts pay as little as 0.5 percent. That translates to higher lending rates for companies in countries from Slovenia to Spain, hurting efforts to improve their competitiveness with German counterparts. Nonfinancial corporations in Spain, Ireland, Greece, Italy , Portugal, Slovenia and Cyprus pay an average of 5.4 percent for new loans maturing in one-to-five years, according to European Central Bank data. Companies in Austria , Belgium , Germany, Finland , France and the Netherlands pay 3.3 percent. “Financial fragmentation isn’t getting any better and causes economic fragmentation within the region,” Gallo said. Meanwhile, foreign banks operating in Slovenia are leaving or shrinking, which worsens the prospects of an economic recovery any time soon, said Ronny Rehn , a KBW analyst. ‘Too Bullish’ “Loans are shrinking in the country, so the economy which is built on local demand is collapsing,” said Rehn, who’s based in London. “We might end up being too bullish on asset-quality assumptions for the banks in the next two years if the economy gets much worse.” Slovenia joins a growing list of euro-zone countries whose banks have pushed them to the brink of collapse. Ireland was shut out of bond markets in 2010, when it tried to prop up its domestic banks, whose assets had peaked at four times the nation’s gross domestic product. It agreed to a 68 billion-euro aid package that year. Spain’s borrowing costs surged to as high as 7.5 percent last year as the government delayed recapitalizing savings banks. The country reached an accord for 100 billion euros of assistance and has so far tapped about half of that credit line. Senior Creditors Cyprus, whose banking system is also eight times the size of its economy, received a 10 billion-euro aid package last month after agreeing to shut its largest bank. In Ireland, junior bondholders were forced to take losses. Irish leaders, who wanted to penalize senior creditors as well, were rebuked by ECB and EU officials at the time. Two years later those officials demanded that Spain force some losses on subordinated debt of failed banks. When it was Cyprus’s turn, German and Dutch politicians demanded that a bigger portion of bank-restructuring costs be borne by creditors. Because Cypriot lenders had little debt, depositors with more than 100,000 euros at the two largest lenders face losing as much as 60 percent of their savings. Slovenia’s banks aren’t as big, with total assets about 140 percent of GDP. They also have enough debt to cover the bail-in amount that European leaders will probably require. The three largest banks have 8.7 billion euros of debt, KBW estimates. OECD and KBW data show that less than 10 percent of that is junior bonds, so senior creditors may have to take losses. Hasten Implementation Dutch Finance Minister Jeroen Dijsselbloem initially said the Cypriot rescue would become the new template for the euro zone. While he later recanted, European officials have since moved to speed up implementation of new rules that would institutionalize bail-in of bank creditors. ECB President Mario Draghi said on April 4 that the rules need to go into effect as early as 2015, not be delayed until 2018 as originally planned. Rehn and Doan said they can’t rule out depositors being included in a bail-in. The European Commission bail-in plan lumps uninsured depositors with other senior creditors, Rehn said. If that model is used in Slovenia, depositors could be forced to share the costs. Draghi has said he favors modifying the proposal to elevate all depositors above other creditors. The shift from blanket protection of almost all bank creditors to demanding they share restructuring costs has contributed to higher borrowing costs for the financial institutions in the weaker countries, RBS’s Gallo said. Banco Santander SA, Spain’s largest lender, pays 4.875 percent for 10- year senior bonds, compared with 2.375 percent for Deutsche Bank AG, Germany’s largest, data compiled by Bloomberg show. Default Swaps The impact also can be seen in the cost of insuring subordinated debt at the weakest banks in the weakest economies. Credit default swaps to protect against losses cost about 10 percent for Italy’s Monte dei Paschi di Siena SpA and 7 percent for Spain’s Banco Popular Espanol SA (POP) , according to Bloomberg data. That translates to 1 million euros to insure 10 million euros of Monte Paschi junior bonds against default annually and 700,000 euros to insure the same amount of Banco Popular debt. CDS on Monte Paschi’s senior debt costs about 6 percent and Banco Popular’s is about 5 percent. Comparable credit-insurance for UniCredit SpA, Italy’s largest bank, is about 3 percent for senior debt and 5 percent for subordinated. The divergence between junior and senior debt rates, as well as between weaker and stronger banks, is healthy for the long-term functioning of the banking industry, RBS’s Gallo said. ‘Paying More’ “This is how it’s supposed to be -- higher risk of failure being reflected in the cost of borrowing by the institution,” Gallo said. “So smaller, second-tier banks are paying more to borrow, but partly because the biggest banks are too big to fail and investors still believe governments will rescue them.” In the short run, the divergence in borrowing costs between weaker and stronger countries hurts economic recovery efforts. Banks paying more to borrow have to lend at higher rates. That’s partly because French, German and U.K. banks have been reducing their lending to banks and companies in southern European countries. In 2010, when Ireland had to bail out its banks and was prevented from imposing losses on creditors, lenders based in those three countries had $112 billion of exposure to the Irish banking system. By the end of September 2012, that was down to $31 billion, according to the Bank for International Settlements. While a country breakdown showing who owns Slovenia’s bank debt isn’t available, total foreign exposure to lenders in the Adriatic nation fell by 50 percent in a year to $3 billion at the end September, BIS data show. ‘Run Away’ “Now that the bankers have run away from the periphery, German and French politicians no longer care about bank creditors,” said Paul De Grauwe, an economics professor at the London School of Economics. “Germany now says taxpayers shouldn’t bear the costs of bank restructuring, but what it really means is German taxpayers shouldn’t. Slovenian or Cypriot people are stuck with the costs since German bankers are gone.” Slovenian taxpayers may wind up better off than their Cypriot counterparts because their banking industry is smaller, according to Timothy Ash, chief emerging-markets economist at Johannesburg-based Standard Bank Group Ltd. The government needs to move fast to detail its restructuring plans and seal a deal with the EU to keep those costs under control, he said. “It’s all manageable unless there’s a run on the bank,” said Ash, who’s based in London. “The longer you mess around, the higher possibility for such a run to happen. They need to get serious soon. If they wait too long, they’ll be toast.” To contact the reporter on this story: Yalman Onaran in New York at yonaran@bloomberg.net To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net |
2024-06-14 | Bloomberg | Medicaid Fraud Audits Cost Five Times Amount U.S. Found | A program to fight fraud in the Medicaid health system for the poor has cost the U.S. at least $102 million in auditing fees since 2008 while identifying less than $20 million in overpayments, investigators found. The majority of the audits conducted by 10 companies were discontinued, produced “low or no findings” or were “put on hold,” the Government Accountability Office , the nonpartisan investigative arm of Congress, said today in a report. Three companies won’t have their contracts renewed, and two others will be reassigned, said Peter Budetti, the director of program integrity at the Centers for Medicare and Medicaid Services. “The results were extremely disappointing, way below what the expectations had been,” Budetti said in a telephone interview. He declined to name the companies terminated because he wasn’t sure whether the actions have been made public. Medicaid and Medicare, the U.S. insurance program for the elderly and disabled, are plagued by $60 billion in fraud a year, the Justice Department estimates. The Medicaid audit program, which was supposed to identify erroneous payments to doctors and hospitals, has produced “a negative return on investment,” aides to Senator Tom Carper, a Delaware Democrat, said in a staff memo to the Senate Homeland Security and Governmental Affairs committee. A subcommittee headed by Carper is holding a hearing today in Washington where the GAO report will be released. ‘Trickling Out’ “These programs resemble a funnel through which significant federal and state resources are being poured in and limited results are trickling out,” Ann Maxwell, a regional inspector general for the Department of Health and Human Services, said in prepared testimony for the hearing. Reducing fraud and waste in government health programs “will help us as we work to curb our federal debt and, in the case of Medicaid, it will help states as they grapple with their own budget problems,” Carper said in an e-mail from a spokeswoman, Emily Spain. While Medicaid is run by states, more than half its bills are paid by the federal government, which spent about $270 billion in 2011. Anti-fraud efforts in Medicaid were left to states until 2005, when a federal law aimed at reducing the deficit created the Medicaid Integrity Group. The government then hired 10 companies to conduct Medicaid audits -- five to analyze state data to identify audit targets, and five to audit targeted health providers, Budetti said. More than two-thirds of 1,550 audits of state records since fiscal 2008 were deemed “unproductive” by the GAO after they identified $7.4 million in possible Medicaid overpayments. Twenty-six audits of health providers turned up $8.1 million in overpayments. Audits conducted in partnership with states, found $4.4 million, according to the GAO. Audits of state Medicaid records were stopped in February 2011. Budetti’s office plans to assign the auditors to work with states on “collaborative” audits, in which state Medicaid officials select health providers or industries they think federal auditors should target. There are 137 such audits already in progress, he said. To contact the reporter on this story: Alex Wayne in Washington at awayne3@bloomberg.net To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net |
2024-08-26 | Bloomberg | Economy in U.S. Expands at 1% Annual Pace, Less Than Economists Estimated | The U.S. economy expanded less than previously estimated in the second quarter, underscoring the weakness that has prompted the Federal Reserve to mark down its growth forecasts. Gross domestic product climbed at a 1 percent annual rate from April through June, down from a 1.3 percent prior estimate, revised Commerce Department figures showed today in Washington. Fed Chairman Ben S. Bernanke , speaking today at a conference in Wyoming , said the central bank still has tools to spur the economy without signaling whether policy makers are likely to deploy them. Another report showed consumer sentiment this month fell to the lowest level since November 2008 amid financial-market turmoil and political wrangling over the budget deficit. “The consumer is clearly unnerved,” said John Herrmann , senior fixed-income strategist at State Street Global Markets LLC in Boston. “With growth so tepid and the economy so fragile, any kind of shock could tip us over into a double-dip recession.” Stocks erased early losses after Bernanke’s comments. The Standard & Poor’s 500 Index, which broke a four-week losing streak, rose 1.5 percent to 1,176.8 at the 4 p.m. in New York. Treasury securities also climbed, sending the yield on the benchmark 10-year note down to 2.19 percent from 2.23 percent late yesterday. The median forecast of 81 economists surveyed by Bloomberg News called for a 1.1 percent increase in GDP. Estimates ranged from 0.3 percent to 1.6 percent. Recovery Weakens Combined with the 0.4 percent annual rate of growth in the first three months of the year, the past two quarters were the weakest of the recovery that began in mid 2009. At $13.26 trillion, GDP has yet to surpass the pre-recession peak. The report also contained some positive news as corporate profits grew and wages and salaries were revised up at the start of the year to show the biggest gain in more than four years. The Thomson Reuters/University of Michigan sentiment measure fell to 55.7 this month from 63.7 in July, pointing to little pickup in the biggest part of the economy. “Consumers don’t look like they’re in much of a mood to buy,” said Robert Brusca , chief economist at Fact & Opinion Economics in New York. “The economy continues weaker than we thought. It looks like it’s losing momentum.” Consumer spending , about 70 percent of the economy, grew at a 0.4 percent annual rate in the first quarter, the smallest gain in more than a year. Nonetheless, the reading was revised up from the 0.1 percent previously estimated, reflecting more outlays for financial services, insurance and health care, today’s GDP report showed. Cutting Forecasts Economists have cut growth forecasts as the S&P 500 slumped 18 percent between April 29 and Aug. 8, following S&P’s downgrade of U.S. debt amid wrangling over deficit-cutting measures and on rising concerns of a euro zone default. IHS Global Insight Inc., a Lexington, Massachusetts-based research firm, this week raised the odds of a recession to around 40 percent from a prior 20 percent to 25 percent probability. It cut its growth forecast for 2011 to 1.6 percent from 2.5 percent, adding that a “double-dip downturn is still not the most likely scenario.” “It appears that the U.S. economy is losing further momentum,” Goldman Sachs Group Inc. (GS) said Aug. 19. While several indicators for July were “surprisingly strong,” economist Zach Pandl wrote that “timelier survey-based data have turned down sharply, and weakness in the hard statistics seems likely to follow.” No Pickup Seen Goldman Sachs cut its GDP forecast to 1 percent in the third quarter and 1.5 percent in the fourth quarter, both from prior 2 percent estimates. The bank’s economists said on Aug. 5 that they saw a one-in-three chance of another recession. Lack of jobs is discouraging shoppers. Payrolls grew by about 95,000 in August, according to the median forecast of economists surveyed so far by Bloomberg before the Sept. 2 jobs report. That would compare with 117,000 in July which brought the average gain over the past three months to 111,000. Employment gains averaged 204,000 in the first four months of the year. “Although important problems certainly exist, the growth fundamentals of the United States do not appear to have been permanently altered by the shocks of the past four years,” Bernanke said in prepared comments at Jackson Hole symposium hosted by the Kansas City Fed. “The Federal Reserve has a range of tools that could be used to provide additional monetary stimulus,” he said. Falling Sales Lowe’s Cos., the second-largest U.S. home-improvement retailer, said profit in its fiscal 2011 will be less than it previously projected as sales drop at stores open more than a year. The company also announced it would close seven “under- performing” stores. “Recent headlines regarding slowing growth and the U.S. credit rating downgrade underscore the continued weakness in the U.S. economy,” Robert A. Niblock, chairman and president, said on an Aug. 15 conference call. “The volume of negative news and the unsettling impact on equity markets is having a significant effect on an already fragile consumer mindset.” Wages and salaries climbed by $101.2 billion from January through March, the biggest increase since the last three months of 2006 and up from a prior estimate of $82.8 billion, today’s GDP report showed. Today’s report also offered a first look at profits. Earnings climbed 3 percent from the prior quarter, after rising 1 percent in the prior period. They climbed 8.3 percent from the same time last year. Inventories, Exports The cut in second-quarter growth reflected a smaller increase in inventories and fewer exports. Inventories subtracted 0.2 percentage point from growth last quarter, instead of adding 0.2 point. Fewer exports also meant trade added 0.1 point to GDP rather than 0.6 percentage point. The bigger increase in consumer spending and more business investment prevented growth from being revised down even more. The economy last quarter was also hurt by a drop in government spending as state and local agencies tried to close budget gaps. To contact the reporters on this story: Bob Willis in Washington at bwillis@bloomberg.net ; Timothy R. Homan in Washington at thoman1@bloomberg.net To contact the editor responsible for this story: Christopher Wellisz in Washington at cwellisz@bloomberg.net |
2024-07-15 | Bloomberg | Qatar Shares Fall Most in Two Weeks on Bank Earnings, Fed Economic Outlook | Qatar shares declined the most in almost two weeks after Qatar Islamic Bank said second-quarter earnings fell 35 percent and the U.S. Federal Reserve trimmed the growth forecast for the world’s biggest economy. Qatar’s QE Index slipped 0.9 percent to 6,956.3, the most since July 4, at 11:40 a.m. in Doha, trimming its gain for the week to 0.6 percent. Qatar Islamic Bank , the Gulf state’s biggest lender complying with Muslim banking rules, retreated 3.5 percent as earnings fell short of analyst estimates. Commercial Bank of Qatar, the country’s second biggest bank, slid the most since July 1. The Bloomberg GCC 200 Index lost 0.2 percent. “On the downside, Gulf markets are highly correlated with global markets,” said Vyas Jayabhanu , head of Al Dhafra Financial Brokerage LLC in Abu Dhabi. “Investors are waiting for more second-quarter earnings.” Companies from Gulf Arab nations started releasing earnings this month. Qatar Insurance Co. is expected to announce results today and Masraf Al Rayan, a Qatar based bank, will release earnings next week. Federal Reserve officials at their June 22-23 policy meeting saw no need to boost stimulus to the economy, while trimming their forecasts for growth, meeting minutes released yesterday showed. The MSCI Asia Pacific Index fell 0.9 percent, the most in more than a week, and the Stoxx Europe 600 Index dropped as much as 0.6 percent. Qatar Islamic Bank slumped the most since May 25 to 72.4 riyals. Net income slid to 301 million riyals ($83 million) from 462.4 million riyals a year earlier, according to Bloomberg News calculations based on an e-mailed release of first-half net income of 601 million riyals. The mean estimate of three analysts surveyed by Bloomberg was for a second-quarter profit of 353 million riyals. Commercial Bank of Qatar declined 2.7 percent to 66.2 riyals, the lowest intraday level since July 8. Abu Dhabi’s gauge and Oman’s MSM 30 Index were little changed. The Kuwait SE Price Index lost 0.4 percent while Bahrain’s gauge gained 0.2 percent. Dubai’s DFM General Index advanced 0.9 percent, bringing its increase for the week to 1.2 percent. Saudi Arabia’s market was closed for the weekend. To contact the reporter on this story: Zahra Hankir in Dubai at zhankir@bloomberg.net |
2024-06-15 | Bloomberg | Budget Cuts for Consumer Bureau, IRS Proposed by Republicans | U.S. House Republicans proposed limiting the funding for the new Consumer Financial Protection Bureau and placing the agency under the congressional appropriations process by 2013. The House Appropriations Subcommittee on Financial Services released the measure today, which would limit to $200 million the amount the Federal Reserve can transfer to the new agency in fiscal 2012. The Dodd-Frank Act, enacted in July, created the consumer bureau and called for it to be funded by a percentage of the Fed’s budget, as much as $500 million per year, with the bureau’s director deciding how much is needed. The Republican bill includes the requirement that, effective Oct. 1, 2012, appropriations would be made by Congress. “This bill exemplifies the commitment of the Republican majority to reduce spending, dig our nation out of record deficits and rein in unnecessary agency regulation and interference that obstructs economic growth,” Representative Hal Rogers of Kentucky , the chairman of the Appropriations panel, said today in a statement. Republicans, who almost unanimously opposed the Dodd-Frank Act, have sparred with Democrats over the new agency’s funding and mission. The party took power in the House in January and has pledged budget cuts for federal agencies. $19.9 Billion The appropriations measure includes $19.9 billion in funding for agencies under the panel’s jurisdiction, including the Treasury Department, the Securities and Exchange Commission and General Services Administration. That is 9 percent less than last year and almost $6 billion less than the request of President Barack Obama. The Republican-led House Financial Services Committee has approved a package of bills to change the structure of the agency, which the lawmakers said will wield too much power in the financial markets. Senate Republicans have pledged to block any nominees to run the bureau unless structural changes are made. Congressional Democrats and the White House have defended the agency, which is being set up by Elizabeth Warren , the Harvard University professor appointed as an adviser to the White House and Treasury Department. Warren has said in congressional testimony that Congress followed “more than a century of precedent” in keeping independent bank supervisors outside the appropriations process. Obama has not nominated anyone to be the director of the consumer bureau, which is scheduled to officially begin its work July 21. IRS Cuts The subcommittee also proposed that the Internal Revenue Service receive $11.5 billion for next year’s budget, or 5 percent below this year’s funding level. The agency would receive 13.3 percent less than requested for the year. IRS Commissioner Douglas Shulman has warned that budget cuts would harm his agency’s ability to go after tax cheats. The bill would prohibit the IRS from spending any money to enforce the individual mandate to purchase health insurance that was included in the health care law in 2010. Republicans included similar language in their 2011 spending bill. Democrats objected and the language was removed before the measure became law. Representative Jo Ann Emerson of Missouri , the chairwoman of the subcommittee, said the panel will consider the legislation tomorrow. Republican House leaders have scheduled the measure for consideration by the full House in mid-July. The Democrat-controlled Senate and White House would have to approve the measure for it to become law, which is unlikely. Overseas Deposits The bill also includes a requirement that the Treasury Department report every 30 days on the status of regulations proposed in January that would require U.S. banks to identify overseas depositors to the IRS. Lawmakers and banks such as BAC Florida Bank have objected to the regulation, because they think the rule would cause them to lose deposits. The bill would provide $1.2 billion for the Securities and Exchange Commission, which would be equal to the fiscal 2011 level and $222 million below the request made by the White House. SEC Chairman Mary Schapiro has pushed lawmakers for an increase in the agency’s budget to help with dozens of rulemakings and studies required by last year’s financial regulation overhaul. “After our financial system came dangerously close to collapse, Republicans stood with banks and fought tooth-and-nail to prevent any reform of Wall Street ,” Representative Norm Dicks of Washington , the senior Democrat on the Appropriations Committee, said in a statement. “This bill is a continuation of the Majority’s effort to obstruct the reform that was enacted last year.” To contact the reporter on this story: Phil Mattingly in Washington at pmattingly@bloomberg.net ; Richard Rubin in Washington at rrubin12@bloomberg.net. To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net |
2024-04-05 | Bloomberg | China Raises Interest Rates to Counter Inflation Pressure | China raised interest rates for the fourth time since the end of the global financial crisis to restrain inflation and limit the risk of asset bubbles in the fastest-growing major economy. The benchmark one-year lending rate will increase to 6.31 percent from 6.06 percent, effective tomorrow, the People’s Bank of China said on its website at the end of a national holiday. The one-year deposit rate rises to 3.25 percent from 3 percent. The move comes as a surprise to some, after Credit Suisse Group AG, Morgan Stanley and Bank of America-Merrill Lynch said officials may pause in tightening. While Japan ’s disaster and Europe ’s debt woes are clouding the global outlook, Premier Wen Jiabao ’s government is more focused on the estimated 5 percent jump in consumer prices last month, said analyst Shen Jianguang. It’s “very significant” that China raised rates before the March inflation data has even been announced, said Shen, a Hong Kong-based economist at Mizuho Securities Asia Ltd. who formerly worked for the International Monetary Fund and the European Central Bank. “This is a good preemptive move.” Crude extended its decline. Oil for May delivery on the New York Mercantile Exchange dropped as much as 97 cents to $107.50 a barrel and was at $107.95 at 12:45 p.m. London time. ‘Hot Money’ Concern Chinese officials may be on guard against increased inflows of “hot money,” or speculative capital, as today’s move widens the differential with rates in developed economies. In the U.S., the Federal Reserve has kept its benchmark near zero since December 2008. Qu Hongbin, chief economist for China at HSBC Holdings Plc in Hong Kong, said a policy of “gradual” yuan appreciation likely remains intact. The Chinese currency, described by the U.S. as “substantially undervalued,” gained 4 percent against the dollar in the past year and touched 6.5452 on April 1, the strongest level since 1993. Premier Wen last month described inflation as “a tiger” that once set free will be difficult to cage, and also as a potential threat to social stability. “Exorbitant” house price increases in some cities are a top public concern, he said. China’s inflation accelerated to 5.2 percent last month, the fastest pace since July 2008, according to the median estimate in a Bloomberg News survey of nine economists. Consumer prices jumped 4.9 percent in February from a year earlier, topping the government’s full-year target of 4 percent. ‘Not Too Worried’ Today’s announcement contrasted with central bank Deputy Governor Yi Gang saying March 23 that interest rates were at a “comfortable” level and that he was “not too worried” by inflation because price increases will slow in the second half of the year. The interest-rate move may signal the government’s confidence in the strength of an economy forecast by the World Bank to expand 9 percent this year. A purchasing managers’ index released April 1 indicated that the world’s second-biggest economy is “growing smoothly, with a very moderate slowdown,” Bank of America-Merrill Lynch economist Lu Ting said that day. Rising oil and commodity costs and sustained economic growth may encourage Asian nations to keep boosting borrowing costs even as Japan faces an economic contraction in the aftermath of a record earthquake last month. Vietnam , Taiwan, India , South Korea and Thailand raised benchmark rates in March or April and Chinese officials have also drained cash from their economy by raising bank reserve requirements. Economists’ Forecasts China’s key lending rate will rise to 6.56 percent by year- end, with the deposit rate climbing to 3.5 percent, according to the median forecast in a Bloomberg News survey of economists on March 22. That suggests another 0.25 percentage point increase in each. Besides monetary tools, the government has deployed subsidies, state food reserves and the threat of price controls to counter inflation. Unilever, the world’s second-largest consumer-goods maker, has postponed planned price increases at the government’s request. The benchmark one-year deposit rate has lagged behind the pace of consumer-price gains, an incentive for households to switch savings to asset markets, increasing the risk of bubbles within the real-estate market. --Marco Lui in Hong Kong , Zheng Lifei in Beijing. With assistance from Ed Lococo, Jay Wang and Sandy Hendry. Editors: Paul Panckhurst, Kevin Costelloe. To contact Bloomberg News staff for this story: Lifei Zheng in Beijing at +86-10-6649-7560 or lzheng32@bloomberg.net To contact the editor responsible for this story: Paul Panckhurst in Hong Kong at ppanckhurst@bloomberg.net |
2024-05-30 | Bloomberg | Sony Leads Japan Inc. Eyeing Deals With $2.4 Trillion: Real M&A | After hoarding $2.4 trillion in cash, corporate Japan is pursuing overseas takeovers like never before to boost returns. Sony Corp. (6758) and Fujifilm Holdings Corp. (4901) are among the companies with the biggest incentive to chase deals. More than $25 billion of cross-border acquisitions have been struck by Japanese companies this year, on pace to exceed the record amount of deals announced in 2006, according to data compiled by Bloomberg. The buying spree comes as Japan’s currency climbed to its highest level since World War II versus the dollar and the world’s third-largest economy fell into its third recession in a decade after being rocked by the nation’s biggest earthquake on record. Japanese companies are using their buying power on foreign takeovers after slumping demand at home destroyed almost half their equity value in the past five years. Tokyo-based Sony, mired in its worst earnings slump in more than 50 years, and Fujifilm, with five straight years of declining sales at its film and digital camera unit, are among 13 companies with the largest reserves and the lowest returns on equity, the data show. That makes them candidates to profit most from acquisitions, Capstone Global Markets LLC and Harris Associates LP said. “Corporate Japan collectively has not been an efficient user of free cash on the balance sheet,” said David Herro, Morningstar Inc.’s international stock fund manager of the decade and chief investment officer of international equities at Harris Associates, which oversees about $70 billion in Chicago. “Given the strength of the yen, doing overseas M&A does become a legitimate option.” Record Cash Privately owned non-financial companies in Japan amassed 197 trillion yen ($2.4 trillion) in currency and deposits at the end of last year, according to data compiled by the Bank of Japan. In dollar terms, the amount was higher than any fiscal year end since the data began in 1979. While companies in Japan saved a record amount of cash at near-zero interest rates , shareholders lost money. The Topix index, the benchmark gauge for Japanese common equity, has fallen 49 percent since May 2006. Including dividends, managers of corporate Japan have rewarded owners with a 45 percent loss. Now, with Japanese companies using more of their money on acquisitions, foreign takeovers are on pace to top $60 billion this year, which would surpass the record $37 billion announced in 2006, data compiled by Bloomberg show. ‘Go Hunting’ Takeda Pharmaceutical Co. of Osaka , Japan, and Tokyo-based Toshiba Corp. spent $16 billion on cross-borders takeovers this month. Takeda’s $13.7 billion deal for Nycomed in Zurich was the largest ever by a Japanese drugmaker, while Toshiba’s $2.3 billion purchase of Zug, Switzerland-based electronic-metering company Landis+Gyr AG was its biggest in five years. The push overseas gained more impetus as the Cabinet Office said May 19 that the nation’s economy shrank an annualized 3.7 percent in the first quarter, after the magnitude-9 earthquake and tsunami on March 11 disrupted production and prompted consumers to cut back spending. Japan may expand by 1.4 percent over the full year, less than half the rate of economic growth globally , according to the Washington-based International Monetary Fund. “Japanese companies have been struggling with a very weak domestic economy,” said Kevin Caron, a market strategist in Florham Park , New Jersey , at Stifel Nicolaus & Co., which has $110 billion in client assets. “It’s a good time for Japanese companies to go hunting abroad.” Company List There are currently 13 non-financial companies in Japan with market values of more than $5 billion that have increased their net cash in the past five years to at least $1 billion and had a lower average return on equity versus the median company in the Topix over that period, data compiled by Bloomberg show. Sony had the most cash, with $8.3 billion more in reserves than borrowings as of March, the data show. That’s a sevenfold increase in five years. Japan’s largest exporter of consumer electronics had an average return on equity, which measures how much a company earns for each dollar invested, of 0.2 percent in that span, versus an 8.3 percent return in the Topix. Since Howard Stringer, 69, was named Sony’s first non- Japanese chief executive officer in March 2005, the company has lost about $9 billion in market value, the data show. From its high four years ago, Sony’s equity has decreased by $33 billion. Sony, which posted three straight years of losses for the first time since listing its shares in 1958, on May 26 forecast net income this fiscal year that fell short of analysts’ estimates by 31 percent, data compiled by Bloomberg show. Value Destruction The company’s PlayStation video-game network and Qriocity online service were also breached by cyber hackers last month, exposing more than 100 million customer accounts, which included billing addresses and login passwords. “It’s hard for me to believe that these guys have destroyed that much value in such a short time,” said Sachin Shah , a merger arbitrage strategist at Capstone Global. “Stringer really has to do something to revitalize the company. For Sony to continue to compete, they’re going to have to start doing deals.” Imax Corp. (IMAX) , the operator of large-screen movie theaters, and Netflix Inc. (NFLX) , the Los Gatos , California-based mail-order and online movie-rental service, are two companies that Sony should consider acquiring, according to Shah. Imax advanced 4.5 percent on Dec. 31 in its busiest trading day since the Mississauga, Ontario-based company went public in 1994, after the Daily Mail said Sony may be preparing a bid. Imax, Netflix Both Imax, which is valued at $2.4 billion, and Netflix, with a market capitalization of $13.9 billion, will increase per-share earnings by at least 46 percent next year, according to analysts’ estimates compiled by Bloomberg. Sony has “a lot of cash on their balance sheet to put to work if they wanted to,” Shah said. “They could do multiple deals and it could start becoming exciting for shareholders.” Mami Imada, a spokeswoman at Sony, said the company isn’t currently working on any acquisitions. Ann Sommerlath, a spokeswoman at Imax, declined to comment on “rumors or speculation,” as did Netflix’s Steve Swasey. Fujifilm almost doubled its net cash to $1.8 billion after a return on equity of just 1.8 percent over the past five years, data compiled by Bloomberg show. Sales at the Tokyo-based company’s imaging unit have decreased in every year during the same period as more consumers used smartphones to take pictures. Last fiscal year, Fujifilm had 325.8 billion yen in revenue at the unit, a more than 50 percent decline from 2006. ‘Dying Business’ Fujifilm’s cash was “built over the years in its film business, which is of course a dying business,” said Harris Associates’ Herro. “For them, it would make sense” to use more of it on acquisitions, he said. In February, the company agreed to purchase two units from Whitehouse Station , New Jersey-based Merck & Co. that make biopharmaceuticals as it targets growth in health care to make up for the slump in sales of film and cameras. The purchase was its fifth in the past year, including its agreement to acquire Japan Tissue Engineering Co. in August. “We’ve been interested in acquiring firms, especially in the medical and life science fields,” said Takao Aoki, a spokesman at Fujifilm. “M&A is part of our business expansion. Buying firms can help us save time and expand business segments. We budget as much as 100 billion yen a year for acquisitions.” With record amounts to spend, Japanese companies must avoid repeating the mistakes of the 1980s, when they overpaid to acquire prized assets around the world, according to James Dunigan, chief investment officer in Philadelphia for PNC Wealth Management, which oversees $110 billion. Cautionary Tale During that time, Japanese buyers snapped up everything from Rockefeller Center in Manhattan to California ’s Pebble Beach golf course and Vincent Van Gogh’s Sunflowers painting as the Nikkei 225 (NKY) Stock Average reached a record 38,915.87 at the end of the decade. Many of the investments were sold at a fraction of their cost as the country’s asset bubble burst. Tokyo-based Mitsubishi Estate Co., which invested $1.4 billion in Rockefeller Center in 1989 and 1990, lost it seven years later after defaulting on the mortgage. Pebble Beach, the site of last year’s U.S. Open , was acquired by golf magnate Minoru Isutani in 1990 for $841 million. It was sold less than two years later at two-thirds the price as Isutani’s company went bankrupt. “It’s not like you want to throw your money around,” said Dunigan. “The buying spree that they went on the 1980s in the real estate market didn’t work out that well. They were out buying in some cases trophy real estate properties, like Rockefeller Center. You have to make smart purchases and you have to do your homework.” To contact the reporters on this story: Tara Lachapelle in New York at tlachapelle@bloomberg.net ; Rita Nazareth in New York at rnazareth@bloomberg.net. To contact the editors responsible for this story: Daniel Hauck at dhauck1@bloomberg.net ; Katherine Snyder at ksnyder@bloomberg.net . |
2024-01-09 | Bloomberg | Beazley Advances as Analysts Favor Insurer’s Stock: London Mover | Beazley Plc (BEZ) , a Lloyd’s of London insurer, rose to a record as it gained for a fifth day in six after analysts at Westhouse Securities and Canaccord Genuity recommended that investors buy the stock. The shares advanced 1.1 percent to 187.4 pence at 11 a.m., the highest since Beazley began trading in 2002. The Dublin- based company has surged 32 percent in six months, making it the best performer among the nine companies in the FTSE 350 Nonlife Insurance Index, which returned 13 percent over the period. “We expect Beazley to continue to deliver strong profits through 2012-2014,” Joanna Parsons, an analyst at Westhouse, said in a note to clients. The company is “especially well- positioned to benefit from the slowly improving U.S. rating climate.” Insurers such as Beazley, Catlin Group Ltd. (CGL) and Novae Group Plc (NVA) have risen in the last two months as forecast losses from Hurricane Sandy are within their reserves. The disaster will cost insurers $20 billion to $25 billion, according to Risk Management Solutions, a catastrophe modelling firm. Beazley said in December it expects to pay $90 million in claims related to the hurricane that flooded parts of New York, New Jersey and Connecticut in October. The firm expects to pay out 90 cents to 95 cents in claims for every $1 it took in premiums in 2012. Hurricane Sandy was the only major natural disaster last year, helping insurers recover from 2011, when earthquakes in Japan and New Zealand , windstorms in the U.S. and flooding in Thailand cost the industry $105 billion, the most on record for a single year. Higher Premiums Beazley’s premiums will rise an estimated 6 percent this year, with the main benefit seen in 2014 pretax profit, said Parsons, who predicted the shares will rise to 220 pence in 12 months as she initiated coverage with a buy recommendation. That’s the highest price target among the 10 analysts covering the stock tracked by Bloomberg. The average target is 195 pence, implying a potential return of about 4 percent. Beazley is Westhouse’s top pick among non-life insurers because of expected returns on equity and a prospective special dividend this year, Parsons said. She also recommended that investors add to holdings in Amlin Plc (AML) and Lancashire Holdings Ltd. (LRE) Ben Cohen , an analyst at Canaccord, raised his rating on Beazley yesterday to buy from hold and increased his 12-month price target to 205 pence. To contact the reporter on this story: Peter Woodifield in Edinburgh at pwoodifield@bloomberg.net. To contact the editor responsible for this story: Douglas Lytle at dlytle@bloomberg.net |
2024-12-20 | Bloomberg | Everest Re Leads Insurers Announcing $745 Million Sandy Losses | Everest Re Group Ltd. (RE) led insurers that announced more than $700 million in potential losses today from superstorm Sandy, which lashed the U.S. East Coast and flooded portions of New York and New Jersey. Everest Re’s losses from the storm may be $220 million after taxes, the Bermuda-based insurer said today in a statement. Aspen Insurance Holdings Ltd. (AHL) , also based in Bermuda , said losses from Sandy may be $175 million by the same measure. Sandy battered the U.S. Northeast, flooding homes and shuttering businesses, after making landfall in New Jersey in October. It may cost the insurance industry as much as $25 billion, catastrophe modeler Risk Management Solutions Inc. has said. American International Group Inc. (AIG) , the insurer that repaid a U.S. bailout, said Sandy will cost about $1.3 billion after taxes, the highest sum disclosed by a U.S. insurer. “ Hurricane Sandy passed with devastating effects,” analysts at JPMorgan Chase & Co. including Arun Kumar wrote in a Dec. 4 research note. “The devastation was wide and the scale of the insured losses is expected to be high.” RenaissanceRe Holdings Ltd. (RNR) said Sandy losses may reduce fourth-quarter earnings by about $130 million. Allied World Assurance Co. Holdings AG said Sandy losses are about $165 million before taxes. At Argo Group International Holdings Ltd. (AGII) , Sandy may cost $45 million to $55 million. To contact the reporter on this story: Zachary Tracer in New York at ztracer1@bloomberg.net To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-03-31 | Bloomberg | Fed Releases Discount-Window Loan Records During Crisis Under Court Order | The Federal Reserve released thousands of pages of secret loan documents under court order, almost three years after Bloomberg LP first requested details of the central bank’s unprecedented support to banks during the financial crisis. The records reveal for the first time the names of financial institutions that borrowed directly from the central bank through the so-called discount window. The Fed provided the documents after the U.S. Supreme Court this month rejected a banking industry group’s attempt to shield them from public view. “This is an enormous breakthrough in the public interest,” said Walker Todd, a former Cleveland Fed attorney who has written research on the Fed lending facility. “They have long wanted to keep the discount window confidential. They have always felt strongly about this. They don’t want to tell the public who they are lending to.” The central bank has never revealed identities of borrowers since the discount window began lending in 1914. The Dodd-Frank law exempted the facility last year when it required the Fed to release details of emergency programs that extended $3.3 trillion to financial institutions to stem the credit crisis. While Congress mandated disclosure of discount-window loans made after July 21, 2010 with a two-year delay, the records released today represent the only public source of details on discount- window lending during the crisis. Protecting Its Reputation “It is in the interest of a central bank to put a premium on protecting its reputation, and, in the modern world, that means it should do everything to be as transparent as possible,” said Marvin Goodfriend , an economist at Carnegie Mellon University in Pittsburgh who has been researching central bank disclosure since the 1980s. “I see no reason why a central bank should not be willing to release with a lag most of what it is doing,” said Goodfriend, who is a former policy adviser at the Richmond Fed. Bloomberg News reporters received two CD-ROMs, each containing an identical set of 894 PDF files, from Fed attorney Yvonne Mizusawa at about 9:45 a.m. in the lobby of the Martin Building in Washington. The documents show the central bank providing credit to borrowers large and small. A page described as “Primary Credit Originations, February 5, 2008” lists the New York branch of Deutsche Bank AG with a loan of $455 million from the New York Fed. On the same day, Macon Bank is listed with a $1,000 loan from the Richmond Fed. First Tool The discount window was the first tool Fed Chairman Ben S. Bernanke reached for when panic over subprime mortgage defaults caused banks to tighten lending in money markets in 2007. The Fed cut the discount rate it charged banks for direct loans to 5.75 percent on Aug. 17, 2007, and it continued to reduce the rate to 0.5 percent by the end of 2008. The rate stands at 0.75 percent today. Lending through the discount window soared to a peak of $111 billion on Oct. 29, 2008, as credit markets nearly froze in the wake of the bankruptcy on Sept. 15, 2008, of Lehman Brothers Holdings Inc. While the loans provided banks with backstop cash, the public has never known which banks borrowed or why. Fed officials say all the loans made through the program during the crisis have been repaid with interest. The Fed was forced to make the disclosures after the U.S. Supreme Court rejected an appeal by the Clearing House Association LLC, a group of the nation’s largest commercial banks. Lower Court The justices left intact lower court orders that said the Fed must reveal documents requested by Bloomberg related to borrowers in April and May 2008, along with loan amounts. The late Bloomberg News reporter Mark Pittman asked for the records under the Freedom of Information Act, which allows citizens access to government papers. News Corp.’s Fox News Network LLC filed FOIA requests for similar information on loans made from August 2007 to March 2010. Former Fed officials, lawyers representing the central bank, and even some Fed watchers have expressed concern that revealing the names of discount-window borrowers could keep banks away from the facility in the future. “I am concerned that in the next crisis it will be more difficult for the Federal Reserve to play the traditional role of lender of last resort,” said Donald Kohn , former Fed vice chairman and senior fellow at the Brookings Institution in Washington. “Having these names made public, or the threat of having them made public, could well impair the efficacy of a key central bank function in a crisis -- to provide liquidity to avoid fire sales of assets -- because banks will be reluctant to borrow.” Won’t Use Window “I think it will make it harder for people to use the discount window in the future,” Jamie Dimon , chairman and chief executive of New York-based JPMorgan Chase & Co. (JPM) , the second- biggest U.S. bank by assets, told reporters yesterday after a speech in Washington. “We never intend to use the discount window.” With little more than a phone call to one of 12 Federal Reserve banks, a bank anywhere in the country can ask for cash from the discount window. Banks typically have already given the Fed a list of unencumbered collateral that they use to pledge against the loans. The Fed gives the banks less than 100 cents on each dollar of collateral to protect itself from credit risk. Discount-window lending was not the largest source of the Fed’s backstop aid during the crisis. Bernanke also devised programs to loan to U.S. government bond dealers, and to support the short-term debt financing of U.S. corporations. To contact the reporter on this story: Craig Torres in Washington at ctorres3@bloomberg.net. To contact the editor responsible for this story: Christopher Wellisz at |
2024-04-05 | Bloomberg | Asian Currencies Snap Five-Day Rally on Concern Central Banks to Intervene | Asian currencies declined, led by South Korea ’s won and the Philippine peso, on concern central banks will intervene to slow appreciation that might threaten export growth. The won retreated from its strongest level since September 2008 and Indonesia’s rupiah dropped from an almost four-year high. Regional currencies snapped a five-day rally as the Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, rose the most in more than a week after Federal Reserve Chairman Ben S. Bernanke said policy makers need to monitor inflation expectations “extremely closely.” The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-traded currencies, dropped 0.1 percent to 117.62 as of 4:10 p.m. in Hong Kong. The won slid 0.3 percent to 1,090.15 per dollar, according to data compiled by Bloomberg. The peso declined 0.1 percent to 43.36, according to prices from inter-dealer broker Tullett Prebon Plc. “There is concern some Asian central banks will intervene, halting recent gains,” said Hideki Hayashi , a global economist at Mizuho Securities Co. in Tokyo. “The dollar gets support from Bernanke’s comment, leading to a correction in Asian currencies.” Converting Dividends The won slid for the first time in six days after crude-oil futures in New York rose to the highest level in more than 30 months yesterday. “Traders are being cautious on concerns that the authorities may step in to curb the won from rising,” said Ko Kyu Youn, a currency dealer at Korea Exchange Bank in Seoul. “Foreign stock investors may buy dollars to repatriate their dividend earnings, while oil prices are rising and global stocks are mixed.” The peso declined as inflation in March was less than analysts estimated, reducing the need for another increase in the policy rate. Consumer prices rose 4.3 percent from a year earlier, matching the gain in February, the National Statistics Office said today. The median forecast of 16 economists in a Bloomberg News survey was for an increase of 4.6 percent. “The need to raise rates by a significant amount may not be there,” said Rafael Algarra, executive vice president and treasurer at Security Bank Corp. in Manila. “The feeling that there won’t be much pressure for higher interest rates will be negative for the peso.” Short-Term Inflows The Philippine central bank raised the rate paid to lenders for overnight deposits by a quarter of a percentage point to 4.25 percent on March 24, the first increase since August 2008. The ringgit retreated from near a 13-year high. So-called hot-money, or short-term, inflows could undermine the economic recovery and have an adverse impact on price stability and growth, Malaysia’s central bank said in its annual report on March 23. The currency traded at 3.0265 per dollar from 3.0255 yesterday, according to data compiled by Bloomberg. “We are going to see the ringgit sticking to current levels for a while,” said Nik M. Khairul, a treasury dealer at Asian Finance Bank Bhd. in Kuala Lumpur. “While the ringgit appreciation trend is still intact, authorities don’t want to see too much hot money.” Elsewhere, the Singapore dollar and the rupiah were both little changed against the greenback at S$1.2608 and 8,664, respectively. The baht gained 0.1 percent to 30.21. Onshore financial markets were closed in China , Taiwan and Hong Kong for a holiday. To contact the reporter on this story: Yumi Teso in Bangkok at yteso1@bloomberg.net To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net |
2024-05-05 | Bloomberg | NETHERLANDS DAYBOOK: Corio, ING Groep, Pharming, SBM Offshore | ING Groep NV (INGA) , the biggest Dutch financial-services company, reported a 12 percent increase in first-quarter profit that beat analysts’ estimates as earnings at the insurance UNIT almost quadrupled. Net income rose to 1.38 billion euros ($2.05 billion) from 1.23 billion euros in the first three months of 2010. Profit beat the 1.25 billion-euro average projection of eight analysts surveyed by Bloomberg. Year-earlier figures were restated because of a change in accounting policy related to the U.S. insurance operations. WATCH TO WATCH: *Pharming (PHARM NA) is amending a late-stage clinical trial with its Rhucin drug. *SBM Offshore (SBMO NA) 1Q sales $683m. EARNINGS: Preliminary ests, when available, all times CET *Corio (CORA) 5.40 p.m., 1Q net EU75.7m. CONFERENCES/CORPORATE EVENTS: *AGM: SBMO NA MARKETS: *The Amsterdam Exchanges Index (AEX) fell 1.3 percent to 355.91. *The Stoxx Europe 600 Index (SXXP) lost 1.4 percent to 278.52. *The Euro was at $1.4865 at 7:46 a.m. To contact the reporter on this story: Maaike Noordhuis in Amsterdam mnoordhuis@bloomberg.net To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net |
2024-10-10 | Bloomberg | Dexia Breakup Gathers Pace as Belgium Will Buy Local Consumer Lending Unit | Dexia SA (DEXB) is being broken up as Belgium agreed to buy the local consumer-lending unit, ending a 15-year cross-border experiment with France after Europe’s debt crisis deepened. The Belgian federal government will pay 4 billion euros ($5.4 billion) for the division and guarantee 60 percent of a so-called bad bank to be set up for Dexia’s troubled assets, Finance Minister Didier Reynders said at a press conference in Brussels today after a weekend of talks. Dexia will sell assets, including its Luxembourg unit and its French municipal lending arm, to give the bad bank capital to absorb future losses. The dismantling of Dexia, once the world’s leading lender to municipalities, became inevitable after concern over European sovereign debt holdings caused its short-term funding to evaporate. Dexia’s bailout, three months after it passed European Union regulators’ stress tests, brings the region’s banking crisis from the continent’s periphery to its center. “Dexia is not an isolated problem,” said Cor Kluis, an Utrecht, Netherlands-based analyst at Rabobank International who rates Dexia “reduce.” “The question for all investors in Europe is how politicians are going to handle this, and what they want to see is a coordinated and professional solution. That would be a good opportunity to restore calm.” Dexia fell as much as 36 percent in Brussels trading and closed down 4 cents, or 4.7 percent, to 80.5 cents, on concern the restructuring will leave shareholders with little of value. The stock resumed trading this afternoon after being suspended since Oct. 6. Not ‘Comfortable Spot’ “Investors in Dexia shares will be left with a “bad bank,’” said Jean-Pierre Lambert, an analyst at Keefe, Bruyette & Woods in London. “The proceeds of the sale of healthy assets will help Dexia Holding absorb the losses on the so-called ‘toxic’ assets. This is not a comfortable spot for Dexia shareholders.” The governments will guarantee as much as 90 billion euros of interbank and bond funding for 10 years for Dexia and its Dexia Credit Local unit. Belgium will provide about 61 percent, France about 37 percent and Luxembourg 3 percent of the backing. For Belgium, the guarantee equals about 15 percent of gross domestic product, “The three governments confirm they will take all the necessary measures to ensure the depositors’ and creditors’ safety,” according to an e-mailed statement from Belgian Prime Minister Yves Leterme ’s office following a meeting yesterday in Brussels with French Prime Minister Francois Fillon and Luxembourg’s Finance Minister Luc Frieden. Luxembourg Sale Dexia is in talks to sell Dexia Banque Internationale a Luxembourg to a group backed by Qatar’s royal family, Frieden told reporters today, while the government of Luxembourg will take a minority stake. The unit is valued at about 1.7 billion euros, according to KBW’s Lambert. Dexia’s board instructed Chief Executive Officer Pierre Mariani to enter into exclusive talks with Caisse des Depots et Consignations and La Banque Postale for an agreement on the financing of French local authorities and support for Dexia Municipal Agency from CDC, the bank said in its statement. The Belgian sale will cut Dexia’s short-term funding needs by more than 14 billion euros, the lender said in a statement. Selling the Dexia Municipal Agency would reduce short-term funding requirements by almost 10 billion euros. There will be no merger for what remains of Dexia, Mariani told reporters in Brussels today. He said the bank had tried for the past three years to reduce its reliance on short-term funding, adding that the drying up of interbank lending markets had triggered the bailout, the bank’s second since 2008. Banking Contagion Rescuing Dexia has become critical to preventing contagion in the region’s banking industry. Dexia’s balance sheet, with total assets of about 518 billion euros at the end of June, is about the size of the entire banking system in Greece and larger than the combined assets of financial institutions bailed out in Ireland in the last 2 1/2 years. Angela Merkel and Nicolas Sarkozy , racing to stamp out the euro debt crisis threatening to engulf the financial system, gave themselves three weeks to devise a plan to recapitalize banks, get Greece on the right track and fix Europe’s economic governance. “By the end of the month, we will have responded to the crisis issue and to the vision issue,” the French president said in Berlin yesterday at a joint briefing with the German chancellor before they dined at her office. 1996 Merger Dexia emerged from the 1996 merger of Credit Local de France SA and Credit Communal de Belgique SA, the biggest municipal lenders in their respective countries. Unlike Credit Local, which relied exclusively on wholesale funding for its lending, the Belgian unit also operated a local retail bank. Over the past decade, the Franco-Belgian bank sought to combine with another consumer lender in France and elsewhere in Europe to reduce its reliance on market funding. It failed to merge with Italian lender Sanpaolo IMI SpA in 2004. “Dexia accumulated the worst errors,” said Francois Chaulet , who helps manage 250 million euros at Montsegur Finance in Paris, and doesn’t own Dexia shares. “They were the experts of municipal lending. By getting late into businesses they weren’t able to handle, like securitization and bond insurance in the U.S., they bought all that others didn’t want to buy.” Dexia’s 18-member board, equally split between France and Belgium, met to review the breakup plan yesterday, its third gathering in less than a month. ‘More Complex’ Among sticking points for Belgium and France were which assets to put in the bad bank and what share of borrowings each government should guarantee. Both countries tried to support Dexia without endangering their credit ratings. France is one of six countries in the euro-zone with a AAA rating. “The situation is more complex than one where you have one bank, one country, one regulator,” said Kluis. Further asset sales are likely, including Denizbank AS (DENIZ) of Turkey and Dexia’s fund-management division. Standard & Poor’s on Oct. 6 downgraded the credit ratings on three units, Dexia Credit Local, Dexia Bank and Dexia Banque Internationale a Luxembourg, citing the group’s limited access to wholesale funding markets. The ratings are on credit watch with “developing implications,” S&P said. In 2008, after injecting 6 billion euros, France and Belgium gave Dexia guarantees of as much as 150 billion euros. Belgium covered 60.5 percent of the guarantees, France 36.5 percent and Luxembourg 3 percent. Moody’s Review Belgium’s Aa1 local- and foreign-currency ratings were placed under review for a downgrade by Moody’s Investors Service on Oct. 7 because of rising funding risks for euro-area nations with high levels of debt and additional bank support measures that are likely to be needed. Separately, KBC Groep NV, Belgium’s biggest bank and insurer by market value, agreed to sell its private banking unit to Qatari-backed Precision Capital for 1.05 billion euros. The sale, announced today, will increase KBC’s capital by about 700 million euros, the bank said. A large chunk of Dexia’s troubled assets are on the balance sheet of Dexia Credit Local, a French unit. Dexia Credit Local carries most of the bank’s 95 billion-euro bond portfolio, which includes 21 billion euros of Greek, Italian, Portuguese, Spanish and Irish sovereign debt. Dexia’s municipal lending units in Italy and Spain , which it agreed to dispose of to win European Commission approval for its 2008 bailout, are also on the French unit’s balance sheet. In France, state-owned CDC and La Banque Postale may join with Dexia to create a new company to take over the French municipal lending arm, according to a statement on Oct. 6 from a postal union, whose representatives attended a board meeting where the plan was presented. CDC and La Banque Postale said today they are forming a joint venture to finance local governments, to be majority owned by La Banque Postale. To contact the reporter on this story: Rebecca Christie in Brussels at rchristie4@bloomberg.net Fabio Benedetti-Valentini at fabiobv@bloomberg.net To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net |
2024-09-20 | Bloomberg | Reliance Communications, ITC Gain as India's Sensitive Index Extends Rally | India’s benchmark stock index rose, extending last week’s biggest rally in 10 months, as the nation’s economic growth lured foreign investors to increase their holdings. Reliance Communications Ltd. , the nation’s second-largest mobile-phone operator, soared 5.3 percent. Foreign funds bought more local shares than they sold for the past three weeks, increasing their holdings this year by 57 percent from a year earlier, a report from the regulator showed. ITC Ltd. , the biggest cigarette company, climbed to a 19-year high. The Bombay Stock Exchange’s Sensitive Index, or Sensex , gained 311.35, or 1.6 percent, to 19,906.10, its highest close since January 2008 after climbing 4.2 percent last week. The S&P CNX Nifty Index on the National Stock Exchange rose 1.6 percent to 5,980.45. The BSE 200 Index increased 1.3 percent to 2,527.22. “It’s a liquidity-driven rally,” said Sudhakar Shanbhag , who manages $1.7 billion in assets as chief investment officer at Kotak Mahindra Old Mutual Life Insurance Ltd. in Mumbai. “India’s growth is a compelling story for global investors. We are fully invested.” Shanbhag said he’s investing in shares of automakers, drugmakers, large machinery makers, technology, engineering and media companies, without identifying any. Fund Flows Reliance Communications advanced 5.3 percent to 175.65 rupees, extending its 5.4 percent climb on Sept. 17. ITC rose 4.9 percent to 176.65 rupees, its highest close since at least January 1991. Global funds bought a net 11.4 billion rupees ($247 million) of Indian equities on Sept. 16, taking total investments in the stocks this year to 718.2 billion rupees, according to the nation’s market regulator. Inflows from overseas reached a record 834.2 billion rupees in 2009, exceeding the high set two years ago in local currency terms, as the biggest advance in 18 years lured foreign funds. They sold a record 529.9 billion rupees of shares in 2008, triggering a record annual decline. “At this pace” foreign inflows may cross last year’s record, helping the Sensex cross the record of 20,873.33 reached on Jan. 8, 2008, by December, said Kotak’s Shanbhag. India’s gross domestic product expanded 8.8 percent last quarter from a year earlier, the most among major economies after China and Brazil. Rupee Gains The rupee climbed to a three-month high on speculation accelerating capital flows into the local stock market will offset the nation’s record current-account deficit. The currency appreciated in each of the last three weeks as foreigners bought $2.6 billion more Indian equities than they sold this month, exceeding the $2.4 billion the stock exchange recorded for the whole of August. “Capital inflows may surprise on the upside as India’s economic prospects remain positive,” said Priyanka Chakravarty , a Mumbai-based foreign-exchange strategist at Standard Chartered Plc. “The rupee is poised to extend recent gains as sustained portfolio investments may overwhelm trade deficit concerns.” Voltas Ltd. , the Tata group engineering company, surged 4.3 percent to 236.3 rupees after it was rated “buy” in new coverage at Nomura Holdings Inc., which said the company will likely be a “key beneficiary” of increasing infrastructure and industrial capital expenditure in India, the Middle East and Southeast Asia. The brokerage has a share-price estimate of 270 rupees, according to a report by Harmendra Gandhi. IndusInd Bank Ltd. gained 1.1 percent to 265.65 rupees after being raised to “overweight” from “equal-weight” at Morgan Stanley, which cited a “stronger” margin outlook. The brokerage raised its share-price estimate to 325 rupees from 195 rupees, according to analysts led by Mihir Sheth. To contact the reporter on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net . |
2024-02-02 | Bloomberg | Abercrombie, Teen Chains Halting Monthly Sales Reports | Teen retailers Abercrombie & Fitch Co., Aeropostale Inc. and American Eagle Outfitters Inc. will stop reporting monthly sales after tomorrow, which may make it harder for investors to evaluate the companies. “The more information the better,” said Michael Baron, an analyst for Baron Capital Inc. in New York. “More information helps us determine the true value of the company.” Many retail executives say reporting sales from stores open at least a year puts too much focus on short-term results, said Brian Sozzi , an analyst for Wall Street Strategies Inc. in New York. In addition, many retailers don’t include sales generated on the Web or on mobile devices, he said. Because the three teen retailers are stopping at once, “it makes it easier for others to follow,” said Sozzi, who in an interview called monthly reporting “archaic.” “The shift enables American Eagle to align its reporting schedule with the company’s long-term strategic focus,” Jani Strand, a spokeswoman for American Eagle, said in an e-mail. Abercrombie & Fitch and Aeropostale declined to comment on the decision to halt the practice. While investors consider same-store sales a key growth indicator because new and closed stores are excluded, retail chains aren’t required to post them each month and can stop or start releasing them when they want. The key figure is called comparable-store sales and each retailer has its own definition for which locations are included. In general, most companies use stores open at least a year, eliminating new and closed stores. Declining Sales Since 2008 chains including AnnTaylor Stores Corp ., Chico’s FAS Inc. and Pacific Sunwear of California Inc. have stopped reporting monthly same store sales. In some cases, the halt coincides with declining sales. Wal-Mart Stores Inc. stopped reporting monthly sales in May of 2009. Sales at Wal-Mart’s namesake U.S. stores open at least a year have fallen for six consecutive quarters. Reporting same-store sales each month is “good for investors if it’s a growth company because it can support the stock,” said Walter “Bucky” Hellwig, who oversees $17 billion at BB&T Wealth Management in Birmingham, Alabama. “For mature companies, it reflects noise and may hurt the stock price in the short run.” Aeropostale, which is based in New York, has posted three straight declines in same-store sales. Pittsburgh-based American Eagle’s dropped 11 percent in December, while New Albany , Ohio- based Abercrombie & Fitch increased sales 15 percent. Abercrombie fell $1.60, or 3.2 percent, to $49.13 at 4:01 p.m. in New York Stock Exchange composite trading. Aeropostale dropped 7 cents to $23.92, while American Eagle fell 21 cents to $14.46. Heavy Snowfall Same-store sales at U.S. retailers in January may have increased 2.6 percent for a 17th straight gain, according to analysts’ estimates for more than 30 chains compiled by Retail Metrics Inc. Heavy snowfall in the northeast may have weighed on results, said Amy Noblin, an analyst for Weeden & Co. in Greenbrae, California. “I don’t think it’s going to move the needle much,” Noblin said. January makes up about 20 percent of the quarter’s revenue and “November and December were good enough,” she said. Editors: Robin Ajello, James Callan To contact the reporter on this story: Matt Townsend in New York at mtownsend9@bloomberg.net To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net |
2024-04-04 | Bloomberg | Stocks, Commodities Drop on Fed Minutes, Spanish Auction | Stocks and commodities slid for a second day as weaker demand at a Spanish debt auction and the U.S. Federal Reserve’s reluctance to add more monetary stimulus fueled concern the global economic recovery will slow. The euro fell and Spanish, Italian and Portuguese bond yields surged. The Standard & Poor’s 500 Index lost 1 percent as of 4 p.m. in New York, its second-worst drop of the year, and the Dow (INDU) Jones Industrial Average slid 124.8 points to 13,074.75. The Stoxx Europe 600 Index tumbled 2.1 percent. The euro depreciated against 12 of 16 major peers, while 10-year Treasury yields fell seven basis points to 2.23 percent. Spanish 10-year yields surged 24 basis points to 5.69 percent. Silver and gold plunged more than 3 percent and oil extended losses after U.S. supplies grew by the most since 2008. The S&P 500 has tumbled 1.4 percent from an almost four- year high of 1,419.04 on April 2 following a 12 percent rally in the first three months of the year, the best first-quarter gain in 14 years. The Fed will refrain from increasing monetary accommodation unless the economic expansion falters or prices rise at a rate slower than its 2 percent target, minutes of a March 13 policy meeting released yesterday showed. “I can’t remember a time where knowing where you are in the trading cycle is as almost important as the news that’s coming,” Wayne Wilbanks, chief investment officer at Wilbanks, Smith & Thomas Asset Management LLC in Norfolk, Virginia , which oversees about $2 billion, said in a telephone interview. “When you are at the top of a trading range between 1,100 and 1,400, it will take very little bad news -- and maybe some news about quantitative easing, which is not bad news -- for the market to go down.” Economic Data U.S. stocks retreated even after an ADP Employer Services report showed companies expanded payrolls by 209,000 following a revised 230,000 gain in February. The median estimate in the Bloomberg News survey called for a 206,000 increase. Economists project a government report in two days will show private employers added 215,000 jobs and total payrolls, including government positions, increased by 205,000. Service industries in the U.S. expanded less than forecast in March as orders grew at the slowest pace in three months. The Institute for Supply Management’s non-manufacturing index dropped to 56 from a one-year high of 57.3 in February. Readings above 50 signal expansion, and economists surveyed by Bloomberg News projected 56.8 for the gauge, according to the median estimate. SanDisk Tumbles Losses in U.S. stocks today were led by financial, technology and commodity companies, with gauges of each group dropping at least 1.2 percent as nine of the 10 main industry groups in the S&P 500 retreated. Bank of America Corp., Alcoa Inc. and Microsoft Corp. lost more than 2 percent for the biggest declines in the Dow. SanDisk Corp. slid 11 percent, the most since January, after the biggest maker of flash-memory cards cut its forecast for first-quarter sales and profitability, citing weaker-than- expected pricing and demand for components that store data in mobile phones. General Electric Co. fell 1.1 percent after its debt rating was cut by Moody’s Investors Service because of “heightened risk” from its finance unit, whose own grade was cut below the parent company’s for the first time in two decades. U.S. equities retreated yesterday as the Fed minutes showed less urgency to add stimulus. Policy makers last month affirmed the plan, first announced in January, to hold interest rates near zero through late 2014 on concern the economy may fail to grow fast enough to continue bringing down unemployment. ‘Welcome Change’ “There’s no justification for the Fed to ease monetary policy further,” Vasu Menon, vice president for wealth management at Oversea-Chinese Banking Corp., said in a Bloomberg Television interview from Singapore. “The market has run up at a very heavy pace, so I think a breather or a correction would be a welcome change for now.” Almost 50 shares fell for each that advanced in the Stoxx 600. Automakers slumped after U.S. sales of cars and light trucks in March missed the average estimate in a Bloomberg survey of analysts. PSA Peugeot Citroen (UG) slid 5.8 percent and Volkswagen AG fell 2.7 percent. Petropavlovsk Plc, a producer of gold in Russia , sank 6.5 percent as the precious metal retreated for a second day. Germany ’s DAX Index slumped 2.8 percent and Sweden’s OMX Stockholm 30 Index tumbled 3.6 percent to lead losses among major European national indexes. German factory orders increased in February less than economists had forecast. Orders, adjusted for seasonal swings and inflation, increased 0.3 percent from January, the Economy Ministry in Berlin said. Economists had predicted a gain of 1.5 percent, according to the median of 35 estimates in a Bloomberg News survey. Euro Weakens The euro weakened 0.7 percent to $1.3142, falling for a third straight day and reaching the weakest level since March 16. Yields on Italian and Portuguese 10-year bonds surged 21 basis points each. The cost of insuring sovereign debt rose, with the Markit iTraxx SovX Western Europe Index of credit-default swaps linked to 15 governments climbing 6.1 basis points to 271. Swaps on Spain jumped 22 basis points to 461, the highest since November, according to CMA. Spain sold 2.59 billion euros ($3.41 billion) of bonds due between January 2015 and October 2020, compared with a planned maximum of 3.5 billion euros. ECB Holds Rates Steady European Central Bank officials meeting in Frankfurt today kept the benchmark interest rate at a record low of 1 percent, as predicted by all 57 economists in a Bloomberg News survey. ECB President Mario Draghi said while a moderate economic recovery is expected this year, the outlook is subject to “downside risks” as the debt crisis damps momentum. Draghi also said any talk of an exit strategy from stimulus measures is premature for now. Oil tumbled 2.4 percent to $101.47 a barrel, extending losses after the U.S. Energy Department said stockpiles rose 9.01 barrels to 362.4 million. Gold plunged 3.5 percent to $1,614.10 an ounce, the lowest since January, silver sank 6.7 percent and copper dropped 3.3 percent to $3.7905 a pound as 21 of 24 commodities tracked by the S&P GSCI Index retreated, sending the gauge down 2 percent for its biggest drop of the year. Emerging Markets Markets in China and Taiwan were shut for holidays. The MSCI Emerging Markets Index (MXEF) fell 1.7 percent, halting a three- day, 2.2 percent climb. The Micex Index (MICEX) fell 2.4 percent in Moscow and the FTSE/JSE Africa All Shares Index (JALSH) slid 2.3 percent in Johannesburg as oil and metals fell. Turkey’s ISE National 100 Index (XU100) retreated 1.3 percent. South Korea’s Kospi Index (HSCEI) slid 1.5 percent, the biggest loss since Dec. 19. China accelerated the opening of its capital markets by more than doubling the amount foreigners can invest in stocks, bonds and bank deposits. The China Securities Regulatory Commission increased quotas for qualified investors to $80 billion from $30 billion, according to a statement yesterday. Offshore investors will also be allowed to pump an extra 50 billion yuan ($7.95 billion) of local currency into the country, up from 20 billion yuan. Australia ’s dollar sank to an 11-week low as data showed the nation had an unexpected trade deficit. The Aussie slid 0.7 percent to $1.0257 after Australia posted a trade deficit for a second month in February, completing the first consecutive shortfalls in two years. To contact the reporters on this story: Michael Shanahan in London at mshanahan3@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 |
2024-03-03 | Bloomberg | Ethanol Falls as Oil, Gasoline Slip on Libyan Mediation Plan | Ethanol futures slipped in Chicago as crude oil and gasoline declined on speculation that mediation proposed for Libya will curb threats to oil supply disruptions, reducing the appeal of biofuels. The grain-based gasoline additive declined 0.3 percent after the Arab League said it’s considering Venezuelan President Hugo Chavez’s offer to help settle Libya’s civil conflict. The unrest has cut Libyan oil output, according to the International Energy Agency. “Ethanol seems stuck between an agriculture and energies headline grab, although the upward trend remains intact,” SCB & Associates LLC of Chicago said in an e-mailed report. Denatured ethanol for March delivery slid 0.7 cent to $2.583 a gallon on the Chicago Board of Trade. Futures are 56 percent higher than a year ago. In cash market trading, ethanol on the West Coast was unchanged at $2.68 a gallon and in the U.S. Gulf the additive increased 2.5 cents, or 1 percent, to $2.665, according to data compiled by Bloomberg. Ethanol in Chicago gained 2 cents, or 0.8 percent, to $2.605 a gallon and in New York rose 0.5 cent to $2.685. Crude for April delivery slid 32 cents to settle at $101.91 a barrel on the New York Mercantile Exchange. Prices have risen 26 percent in the past year. Gasoline for April delivery declined 0.33 cent to $3.0262 a gallon in New York. The contract covers reformulated gasoline, which is made to be blended with ethanol before delivery to filling stations. Corn futures for May delivery advanced 15.25 cents, or 2.1 percent, to close at $7.3675 a bushel in Chicago. One bushel of the grain makes about 2.75 gallons of ethanol. An average ethanol mill in Iowa is break-even after on every gallon produced, while a plant in Illinois is pocketing about 3 cents after losing a penny last week, according to Ag Trader Talk. To contact the reporter on this story: Mario Parker in Chicago at mparker22@bloomberg.net. To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net . |
2024-07-25 | Bloomberg | Senators Propose Bill to Give Fed Flexibility on Insurance | A bipartisan group of U.S. senators is introducing legislation that would give the Federal Reserve more flexibility in regulating systemically important insurance companies such as American International Group Inc. (AIG) The Senate bill, whose sponsors include Ohio Democrat Sherrod Brown and Nebraska Republican Mike Johanns, is meant to establish “capital standards that are properly tailored to the unique characteristics” of the insurance industry, according to a draft of the bill obtained by Bloomberg News. The bill comes as insurance companies facing systemic risk designation by a panel of regulators known as the Financial Stability Oversight Council work to convince the Fed that they shouldn’t face the same capital standards as banks. “We’re looking at what kind of regulations they are handing down and how insurance companies can be governed differently,” Brown said in an interview today. AIG, based in New York, was deemed a systemically important non-bank financial company by the FSOC on July 9. The council, led by Treasury Secretary Jacob J. Lew, is also considering whether to designate Prudential Financial Inc. (PRU) and MetLife Inc. (MET) systemically important, which would subject them to Fed supervision. Fed Governor Daniel Tarullo told the Senate Banking Committee on July 11 that the Dodd-Frank Act puts the central bank “under a constraint” by requiring that “generally applicable capital requirements be applied to all of the holding companies that we supervise.” Minimum Standards The Senate bill would remove insurers from a Dodd-Frank provision that requires bank regulators to establish minimum risk-based capital and leverage standards. It would allow the bank affiliates, including insurance companies, to continue to be subject to capital requirements from their prudential regulators. Insurance companies would be subject to state-based capital standards and any insurer designated a systemic risk would still be subject to the Fed’s standards. “Senator Brown believes that the Fed already has the flexibility to make these changes, which recognize that insurance companies have different business models from banks, under the current law,” Meghan Dubyak, a Brown spokesman, said in an e-mail. “He encourages the Fed to do so.” The Financial Services Roundtable, which represents insurers, said in a statement it supports the bill. “This legislation is important to provide certainty for insurers who may otherwise be caught up in being subject to the same capital standards as banks,” Roundtable President Tim Pawlenty said in the statement. MetLife Alternative MetLife, the largest U.S. life insurer, has proposed to the Fed an alternative that it said is more appropriate for insurers deemed systemically important. No. 2 Prudential has also met with the Fed to discuss capital. “No amount of ‘tailoring’ will ever make bank capital standards fit a life insurer’s balance sheet,” MetLife Chief Executive Officer Steven Kandarian said in a speech in Washington in April. “There is a better way.” Tighter capital rules could lead to higher prices for consumers and put the company at a disadvantage against smaller rivals, Kandarian said in the speech on April 10. Fed oversight could also limit companies’ flexibility in buying back shares, New York-based MetLife has said. To contact the reporters on this story: Ian Katz in Washington at ikatz2@bloomberg.net ; Cheyenne Hopkins in Washington at chopkins19@bloomberg.net To contact the editors responsible for this story: Maura Reynolds at mreynolds34@bloomberg.net ; Chris Wellisz at cwellisz@bloomberg.net |
2024-10-30 | Bloomberg | Who Loses When Fed Keeps Interest Rates Low? | I’m amazed that Federal Reserve Chairman Ben Bernanke has emphasized the beneficiaries of low interest rates and has never bothered to mention the losers. Nor, to my knowledge, have key administration officials or members of Congress. Yet interest rates close to zero are causing considerable distortions and, for many, outright harm. Think about savers who are receiving trivial returns on their bank and money-market accounts. Those returns would be negative if fund managers weren’t waiving fees. Furthermore, free checking accounts are disappearing. Banks and thrifts, facing low interest earnings, have increased the size of the required balance on checking accounts that pay no interest to $723, on average, up 23 percent in the last year. The average fee on non-interest checking accounts jumped 25 percent to $5.48 per month, also a record. The percentage of non-interest checking accounts that are free of charges dropped to 39 percent from 76 percent in 2009. Many savers also are deserting money-market funds for the safety of accounts covered by the Federal Deposit Insurance Corp. This is shown by the collapse in M2 velocity of money. The ratio of M2 to gross domestic product indicates that money is just sitting in accounts, despite returns that are almost zero in nominal terms and distinctly negative returns in real terms. ECB Rate In addition, the European Central Bank announced in July that it would cut its deposit rate for banks to zero and its benchmark lending rate to 0.75 percent. With rates this low, managers of European money-market funds totaling $60 billion have closed their funds to new investors. Many were already offering returns of less than 1 percent. Will Americans be discouraged by low interest-rate returns and save less, or will they save more to reach lifetime goals? I believe the latter, which is one more reason why I expect the household-saving rate to climb back to more than 10 percent. At the same time, low interest returns in conjunction with volatile stock and huge losses on owner-occupied houses are forcing many vastly undersaved baby boomers to work well beyond their expected retirements; another distortion. Sure, better health care for seniors and increasing life spans are also factors, but the percentages of men and women over 65 and in the labor force are rising rapidly. And as senior citizens retain their jobs, there are fewer openings for younger people and less advancement for those in between. The Fed intends to keep short-term interest rates close to zero through 2015, and probably longer as deleveraging keeps the economy subdued and unemployment high. So what can savers do? Hope for deflation, which will push real interest rates from negative to positive? Banks are also suffering because of close-to-zero interest rates, even though financial institutions are paying next to nothing on deposits, which continue to swell as savers stampede for liquidity and safety. One serious problem is the relatively flat yield curve. It is anchored by zero federal funds rates on the short end and pushed down for longer maturities, at which banks normally lend, by declining Treasury yields. Bank yields on assets are in a distinctly downward trend, which will no doubt persist as the Fed continues to keep short rates at zero. U.S. banks also have considerable exposure to the sovereign-debt troubles in Europe. Of their total foreign exposure, 24 percent is in the euro zone ; 44 percent if the U.K. is included. European banks are in considerable danger because of their large holdings of such government debt. Insurers Hit Insurers, too, have been hurt by low interest rates, especially life-insurance companies whose cash-value policy and annuities are basically savings accounts with insurance wrappers. Insurers largely invest in bonds, mortgages and related securities, and declining yields on their portfolios are forcing them to cut benefits, design less generous policies and raise prices where competition allows. These conditions will last for years as maturing, higher-yield securities are replaced by lower-earning obligations. Pension funds, especially vastly underfunded state and local defined-benefit plans, are probably the most severely hurt by chronic low interest rates. Corporations have been shifting to 401(k) and other defined-contribution plans and away from defined-benefit pensions, but the latter are uncomfortably underfunded, especially with low interest rates and muted investment returns in prospect. One study found that 42 companies in the Standard & Poor’s 500 Index may have to contribute at least $250 million each this year to make up for pension-funding shortfalls. Corporate defined-benefit plans estimate their future returns on investments, and the median expected rate of return for S&P 500 company plans has dropped to a still very optimistic 7.8 percent from 9.1 percent a decade ago. Furthermore, factoring in current low interest rates on their bond holdings, their expectations for stock returns are often unrealistic. General Mills Inc. (GIS) ’s pension plan needs a 13.6 percent gain on stocks and alternative investments to meet its 9.5 percent overall target, and Hewlett-Packard Co. (HPQ) requires a 15.6 percent gain to reach the 7.6 percent return target for its plan as a whole. Then there is the discount rate used to determine the present value of future corporate pension benefits. This is based on the yield on corporate bonds over the past two years, which, of course, has been falling. So the rising present value of future liabilities must be offset by even higher investment returns -- which is quite unlikely -- or benefit cuts, which is almost impossible. Otherwise, corporations must contribute more to the plans, cutting into profits. General Electric Co. (GE) reported that its compensation expenses in 2011 rose by $7.4 billion because its discount rate fell to 4.2 percent at the end of 2011, compared with 5.3 percent at the end of 2010. Pension Plans Chronic low interest rates leave defined-benefit pension plans, corporate and public, in the U.S. and elsewhere, with tough choices. They need to reduce asset-return targets and discount rates to more realistic levels, but that means more contributions and/or reduced benefits. Cutting pension benefits is always difficult, especially when employers are restrained by public and private union contracts. The only other alternative is to increase returns, so pension plans have joined the zeal-for-yield crowd. And this often involves increased risks that may not be fully understood by those plan sponsors. The list of alternative-investment classes includes real estate, private equity, developing-country stocks and bonds, hedge funds and commodities. But returns, especially adjusted for risk, may be disappointing. In “The Hedge Fund Mirage: The Illusion of Big Money and Why It’s Too Good to Be True,” Simon Lack writes that if all the money that has ever been invested in hedge funds, now about $1.7 trillion, “had been put in Treasury bills instead, the results would have been twice as good.” I can’t argue with him as 30- year Treasuries have been my favorite investment, since October 1981, when rates were 15 percent and I stated, “We’re entering the bond rally of a lifetime.” Hedge funds initially performed well by taking advantage of arbitrage opportunities and other market disconnects, but most of those holes are now filled, and as Lack observes, hedge funds are finding it hard to find enough good investments to absorb all the investor money that is pouring in. (In Part 4, I’ll look at how the zeal for yield is pushing investors further and further out on the risk spectrum.) (A. Gary Shilling is president of A. Gary Shilling & Co. and author of “The Age of Deleveraging: Investment Strategies for a Decade of Slow Growth and Deflation.” The opinions expressed are his own. This is the third in a five-part series. Read Part 1 and Part 2 .) 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 tax initiatives on California’s ballot and on why you shouldn’t read too much into the jobs report ; Clive Crook on why Obama is the least bad choice for the U.S. ; Peter Orszag on a tax refund that could solve the fiscal-cliff impasse; Part one of Virginia Postrel ’s series on missteps by breast-cancer charities ; Tim Judah on the rise of the far-right party Svoboda in Ukraine. To contact the writer of this article: Gary Shilling at insight@agaryshilling.com To contact the editor responsible for this article: Max Berley at mberley@bloomberg.net |
2024-08-16 | Bloomberg | ACLU Sues Kansas Challenging State’s Ban on Abortion Insurance Coverage | A Kansas law barring insurance companies from including abortion coverage in their comprehensive plans is unconstitutional, the American Civil Liberties Union claimed in a lawsuit. The ACLU of Kansas and Western Missouri today asked for a court order blocking the measure signed by Republican Governor Sam Brownback , which took effect July 1, arguing that it singles out women for deprivation of needed coverage. “The act was passed with the purpose of inhibiting women from accessing and paying for abortion care,” according to the group’s complaint. The measure contains an exception for procedures necessary to save the life of the mother. Thirteen states have enacted laws that prohibit some or all insurance policies from covering abortion care since 2010, according to the civil liberties organization. Today’s suit is the first challenge to one of them, the ACLU said. Claiming violations of a woman’s right to due process and equal protection under the law, the ACLU is seeking a declaration that the law is unconstitutional and an order blocking its enforcement. Jeff Wagaman, a spokesman for Kansas Attorney General Derek Schmidt, didn’t immediately respond to voice and e-mail messages seeking comment on the lawsuit. Planned Parenthood of Kansas and Mid-Missouri earlier challenged a measure rendering it ineligible for federal funding, claiming the legislation was intended to punish it for support of abortion rights. U.S. District Judge J. Thomas Marten in Kansas City , Kansas, on Aug. 1 granted Planned Parenthood an order blocking the defunding measure. The state is seeking reversal of the order at the U.S. appeals court in Denver. The case is American Civil Liberties Union of Kansas and Western Missouri v. Praeger, 2:11-cv-02462, U.S. District Court, District of Kansas (Kansas City). To contact the reporter on this story: Andrew Harris in Chicago at aharris16@bloomberg.net. To contact the editor responsible for this story: Andrew Dunn at adunn8@bloomberg.net . |
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