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2024-11-09 | Bloomberg | South Africa Billionaire Unveiled Selling U.S. Groceries | Four days after Hurricane Sandy slammed into New York City and the surrounding states, billionaire Nathan “Natie” Kirsh ambled through the aisles of a 75,000-square-foot Restaurant Depot warehouse he owns in College Point, Queens. Dressed in a Gore-Tex jacket and loafers, the 80-year-old South African squeezed past dozens of independent restaurant owners picking through heaps of carrots, lobsters and hot dogs. A frenzied bottleneck formed as street vendors and restaurant chefs -- each handling several shopping carts full of goods -- vied for a spot in line to pay. “Chaos,” said Kirsh, who has a net worth of at least $5.1 billion, according to the Bloomberg Billionaires Index. “It’s fantastic -- and profitable.” Through Brooklyn , New York-based Jetro Holdings, Kirsh controls 86 Restaurant Depots and 10 Jetro Cash & Carry stores, a chain that sells wholesale groceries to urban bodega owners. The closely held company generated at least $6.5 billion in revenue and $500 million in earnings before interest, tax, depreciation and amortization in the last 12 months, according to a person familiar with the company’s financial performance. The retailer has a value of at least $5 billion, according to data compiled by Bloomberg, based on the average enterprise value-to-Ebitda and price-to-earnings multiples of two publicly traded peers: Issaquah, Washington-based Costco Wholesale Corp. (COST) and Brampton, Ontario-based Loblaw Companies Ltd (L). One-Time Dividend Jetro’s Ebitda margin is almost double that of Costco, the largest U.S. warehouse-club chain. Kirsh said Jetro generates bigger profits because the company doesn’t deliver or extend credit to customers. It also owns most of the land under its stores and sells more perishable goods. “We are private, we are profitable and we have fun,” the billionaire, who has never appeared on an international wealth ranking, said in an interview at his office in North London in October. “We just don’t scream about what we do.” Kirsh wants to expand his food wholesaling business to new markets and add to his real estate portfolio, which consists of properties on four continents worth hundreds of millions of dollars. He said the company is looking to build Jetro stores in Latin America and Asia, and wants to stock wine and spirits at its Restaurant Depots. He raised $1 billion in a private debt placement in April as yields on U.S. corporate bonds fell, and used the proceeds to repay short-term debt and pay a one-time dividend to Jetro shareholders. Kirsh owns 63 percent of the company, and employees hold another 10 percent. Private equity firms CCMP Capital Advisors LLC and Leonard Green & Partners LP acquired 27 percent of Jetro in 2004. Global Inflation The billionaire is using some of the cash to buy property, which he said is a hedge against global inflation. He controls about 70 percent of the Jetro and Restaurant Depot warehouses, as well as residential and commercial real estate in the U.S., the U.K., South Africa and Australia. “Our business in the U.S. is a big business that throws off cash and we strip that cash,” Kirsh said in London. “I just don’t want that money lying around. We are certain that inflation isn’t going away, so it’s smart to be borrowing cheaply and putting it into real assets.” Kirsh’s empire extends beyond food and real estate. He owns 30 percent stakes in Crest JMT Leather, a U.K.-based tanner, and Holmes Place, an Amsterdam-based fitness chain. He also controls half of Mumbai-based pipe maker, KiTec Industries; 38 percent of Yehud, Israel-based Magal Security Systems Ltd. (MAGS) , a security company he acquired from Israel Aerospace Industries Ltd. in the late 1970s and listed on the Nasdaq in 1993; and 42 percent of Abacus Property Group (ABP) Ltd., the publicly traded Sydney-based real estate investment trust he helped to recapitalize in 2009. Corn Milling Kirsh made his first fortune in Africa. In 1958, he created a corn milling and malt business in Swaziland, a country 250 miles east of Johannesburg. Twelve years later, he acquired a South African wholesale food distribution business and began supplying stores owned by black shopkeepers, which were opening because of the government’s apartheid political structure. The business grew to become the country’s dominant retailer and, by the mid-1980s, included furniture retailing, supermarkets, discount stores, an insurance operation and commercial property developments. In 1983, South Africa-based insurance company Sanlam Ltd. (SLM) acquired 49 percent of his food distribution operation. Not long after, Kirsh learned that a top executive had gone on a building spree, entering into agreements to construct 22 shopping malls when Kirsh had only given him permission to build one. All of the malls were guaranteed by company assets. The commitment eventually cost Kirsh most of his fortune. Entrepreneurial Icarus Two years later, the South African economy began to stumble. Banks stopped lending to companies and countries began levying sanctions in a stance against apartheid. As interest rates soared, Kirsh approached Sanlam, which had minority rights on major financing decisions, about using a rights issue to pay down the mall loans. Sanlam executives instead offered to inject the capital into the company, taking most of the assets in return. In the negotiations, Kirsh won control of Jetro, which then consisted of five stores on the east coast of the U.S. “That was the end of an era,” he said about the episode in Adventures in Businessland, a corporate video he made in 2011 to mark his 51-year career. “Twenty-five years of work was blown away in one day.” Under the headline “The Man Who Fell to Earth,” Kirsh was portrayed on the cover of Financial Mail magazine as an entrepreneurial Icarus, his face recoiling in dismay as he plummeted from the heavens. “I got pulverized,” he told students at the London Business School in a 2011 lecture. “Therefore, one becomes a little bit more cautious to make sure you are not going to get pulverized a second time.” Distribution Systems Defeated, Kirsh moved to New York to run Jetro. He said he saw an opportunity to exploit weakness in the food distribution business in the U.S., which favored national grocery chains over smaller, independent stores. “No one wants to run a huge truck out through Manhattan just to drop off four boxes, it just doesn’t make sense to them,” said Richard Kirschner, president of Jetro Holdings, in a telephone interview. “We were there to pick up the morsels.” Jetro salesmen went from store to store talking up the benefits of shopping at their warehouse. The pitch: bodega owners no longer needed to buy more than they could sell, which would create more retail space in their stores. Without the burden of delivery costs and credit risks, Jetro was able to sell goods 20 percent cheaper than competing suppliers. Restaurants, Bodegas “When we arrived here, everybody just frowned on cash and carry as a meaningless form of distribution,” said Stanley Fleishman, Jetro Holdings CEO, who worked for Kirsh’s wholesale operation in South Africa and has been running the U.S. company since 1986. “The competition just blew us off as those guys selling second-tier product. That was the secret of our success.” By the early 1990s, Jetro had grown to 10 outlets across the U.S. and was generating more than $400 million in revenue. Looking to modernize his management systems and fund expansion, Kirsh sold 80 percent of the business to Metro Holding AG, a Swiss supermarket business that was also a shareholder in Metro AG, one of Germany ’s largest grocery conglomerates. Jetro’s sales growth leveled off. Kirsh noticed that the restaurateurs shopping at his warehouses didn’t like jostling with bodega owners, who would shop less often and enter the checkout lines with ten-times the amount of goods. Buffett Passes He found a solution with Restaurant Depot, which he acquired in 1994, and turned into the company’s growth engine. Metro executives soon sold their interest back to Kirsh. Metro Holding has since been renamed Grospart AG, and is now a closely held investment company in Baar, Switzerland. A company spokesman said executives weren’t available for comment. “I told them they were making a mistake,” Kirsh said. “The company was about to take off. I didn’t want them to come back in a few years telling me they were disappointed.” Looking for capital to expand, Kirsh called on Berkshire Hathaway Inc. (BRK/A) CEO Warren Buffett who, around 2003, passed on the opportunity to invest in Jetro. A year later, Kirsh sold a 27 percent stake to CCMP and Leonard Green. With the 2012 dividend, he said, the new partners have earned back more than their original investment. Buffett did not respond to an e-mail seeking comment. Both private equity firms declined to comment on the financial details of their investments in Jetro. ‘Stupid People’ Real estate, Kirsh said, is the only sector where “stupid people” can make money. In December 2011, he agreed to pay 282.5 million pounds ($455 million) for Tower 42 -- the first skyscraper constructed in the City of London -- and the five buildings that sit on its 2.2-acre plot. He paid cash, and later arranged a 20-year loan that covered about half of the acquisition cost. More U.K. property purchases are likely, according to Philip Lewis, Kirsh’s global head of real estate. His other holdings include stakes in commercial properties in Western Australia, through a 50 percent stake in Jandakot, Australia-based Ascot Capital Ltd., and in San Diego, California , where he invested in a student and residential housing development near the campus of California State University San Marcos. He has seen a 50 percent increase in the value of his stake in Abacus, the Australian REIT that controls two prime office properties in Sydney’s central business district, self storage locations and a shopping center in nearby Drummoyne. Four Trusts In October, Kirsh acquired a white-stucco fronted Georgian building next to London’s Madame Tussauds waxworks tourist attraction near Regents Park. The building will become the new headquarters for the Kirsh Group in June, bringing his disparate portfolio of assets and businesses under one roof for the first time. The octogenarian said he has been thinking about succession, and plans to divide his assets into four trusts, leaving 75 percent of it to his family and the remainder to fund charities, including his favorite cause, helping entrepreneurs. None of his children work in the family business. The operation, he said, will one day be managed by Ron Sandler, the former CEO of the Lloyd’s of London insurance market who was also appointed by the U.K. government as chairman of Northern Rock Plc, which was nationalized in 2008. “We have properties all over the place, we are liquid and we do not have one unsuccessful business,” he said. “All of my businesses are profitable. I am in the best space I have ever been.” To contact the reporters on this story: Robert LaFranco in London at rlafranco@bloomberg.net ; Simon Packard in London at packard@bloomberg.net ; Renee Bonorchis in Johannesburg at rbonorchis@bloomberg.net To contact the editor responsible for this story: Matthew G. Miller at mmiller144@bloomberg.net |
2024-03-29 | Bloomberg | U.K. Should Reject EU Transaction Tax, Lords Lawmakers Say | A U.K. House of Lords panel said the government should reject the European Commission’s proposed financial-transaction tax, as it may pose a “severe threat” to the City of London. The proposal is “wholly impractical and unworkable,” and would have a “disproportionate” impact on the U.K. by hurting London’s financial center, lawmakers from Parliament’s upper chamber said in the report published in London day. “The government should absolutely not agree to the proposals in their current form,” Henry Harrison, the panel’s chairman, said in a statement. “There is huge uncertainty about the impact of any financial-taxation proposal on the U.K.” Britain has led opposition to the tax, which Chancellor George Osborne has called “a bullet aimed at the heart of London.” The plan, backed by France and Germany , would tax stocks, bonds, money-market instruments and derivatives at source, including at banks, hedge funds and insurance companies. As well as having a “disproportionate” impact on the U.K., the tax would harm the European Union economy as a whole, the Lords report said. It also criticized the proposal as “flawed” as it wouldn’t pave the way for the tax being applied globally. Even if the U.K. rejects the tax, its implementation may still cost British-based companies as much as 22 billion euros ($35 billion) a year and cause 4,500 job losses, according to a Feb. 6 report by Ernst & Young LLP’s ITEM Club. “The government needs to assess how we would be affected if the proposals are taken forward by some or all euro-area member states as a matter of urgency so that it can argue with conviction and contribute to the debate,” Harrison said. “This is an issue that we just can’t afford to ignore.” To contact the reporter on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net |
2024-05-09 | Bloomberg | FHA New Foreclosures Jump as Modified Loans Default | The number of Federal Housing Administration-insured home loans entering foreclosure jumped in March after half the mortgages it modified to ease repayment terms were in default again a year or more later. The FHA’s role in lending to first-time buyers with poor credit and limited cash expanded after the 2008 collapse of the mortgage market put it at the center of government efforts to revive housing. The FHA allows down payments as low as 3.5 percent for borrowers with a credit score of 580, below the 640 defined as subprime by the Federal Reserve. “The credit standards are way too loose -- you can get into a house with very little skin in the game, and if home prices drop by a small amount, you’re underwater,” said David Lykken , managing partner at Mortgage Banking Solutions, an Austin, Texas-based consulting firm. “We’ve got to start getting reasonable about standards. What they’ve done so far, some very slight attempts at tightening, doesn’t really count.” An increase in FHA foreclosures may lead to further demands for stricter standards that could shut buyers out of the real estate market as it shows signs of stabilizing after a six-year slump. Mark Calabria, director of financial regulation studies at the Cato Institute in Washington, in a February report called for Congress to tighten the agency’s lending qualifications to protect taxpayers, who insure the loans. First-time homebuyers accounted for 33 percent of real estate sales in March, according to the National Association of Realtors. Treasury Study Borrowers with mortgages for homes bought in 2010, the FHA’s peak lending year, now owe almost 7 percent more than their homes are worth if they used the minimum down payment, according to S&P/Case-Shiller home price index data. That year, the agency insured 1.1 million loans to purchase single-family homes, more than four times the total of 261,165 in 2007. Lenders initiated foreclosures on 36,400 FHA-backed mortgages, twice the number in April 2011, according to Lender Processing Services. The increase for Fannie Mae and Freddie Mac loans was 13 percent, the Jacksonville, Florida-based mortgage- data company said. A Treasury Department study of modified government- guaranteed mortgages in the fourth quarter found that 49 percent were delinquent again after 12 months. The Treasury report analyzed a group of loans that was 80 percent FHA, 15 percent Veterans Administration mortgages and 5 percent Department of Agriculture rural home loans. The rate for Fannie Mae and Freddie Mac was 27 percent. Brian Sullivan , a spokesman for the Department of Housing and Urban Development, which oversees the FHA, declined to comment beyond citing the limited scope of the Treasury’s study covering 60 percent of the mortgage market. Paid on Time The share of government-guaranteed loans being paid on time dropped to 84.2 percent in the fourth quarter from 85.2 percent in the prior three months, the Treasury’s Office of the Comptroller of the Currency said in its March 28 report. It was the third consecutive quarterly decline. The U.S. housing market is showing signs of having hit a bottom after prices fell 35 percent since peaking in 2006. Values in 20 U.S. cities fell 3.5 percent in February, the smallest 12-month drop since February 2011, the S&P/Case-Shiller index showed last month. New homes sold at an annual pace of 328,000 in March, up 7.5 percent from a year earlier, according to the Commerce Department. Applications for mortgages to buy homes rose 3.4 percent last week, the Mortgage Bankers Association said in a report today. Uneven Recovery The recovery is uneven, with the annualized pace of existing home sales falling to 4.48 million in March, the second consecutive decline, according to the National Association of Realtors. Housing starts fell 5.8 percent in March after a 2.8 drop in February, according to Commerce Department data. About 4.4 percent of all U.S. mortgages were in foreclosure in the fourth quarter, according to the Mortgage Bankers Association in Washington. That translates into more than 2 million homes that will have to be sold for the market to return to equilibrium, said Diane Swonk , chief economist of Mesirow Financial Inc. in Chicago. “The main issue is we have a housing market that can’t clear,” said Swonk. “Right now, for a lot of people, the FHA is the only game in town.” About 26 percent of the FHA-insured loans originated in 2007 are seriously delinquent , meaning overdue by 90 days or in foreclosure, according to a March 26 FHA report to Congress. For 2008 mortgages, the share is 24 percent. For 2009, the rate is 11 percent, for loans originated in 2010 it is 4.1 percent, and for last year, it’s 1 percent. In September 2011, 638,000 FHA mortgages were in their second default, the agency said in a November report to Congress. Credit Scores The agency in 2010 began mandating credit scores of at least 580 for borrowers who use its minimum down payment --which was raised to 3.5 percent from 3 percent in 2009. Last year the FHA cut the amount that sellers can give to buyers for down payments to 3 percent from 6 percent. “If prices have hit bottom, or they’re going to bump along in the range we’ve seen recently, it probably won’t destabilize the more recent mortgages,” said Richard Green , director of the Lusk Center for Real Estate at the University of Southern California in Los Angeles. “If prices keep going down, the FHA might require some help from taxpayers.” By law, the FHA must maintain a 2 percent capital ratio, measuring assets against risks. The measure in the FHA’s November report to Congress was 0.24 percent, based on an independent actuarial study by Rockville, Maryland-based IFE Group. A surge of defaults starting in 2008 drained the agency’s funds as it ratcheted up reimbursements to lenders for unpaid balances of defaulted loans and portions of foreclosure costs. Hiked Fees Additions to the FHA’s income in February means the agency won’t need federal funds to meet its insurance obligations, Shaun Donovan , head of HUD, said in Feb. 28 Congressional testimony. The FHA hiked fees to add about $1.25 billion to its income, increasing its upfront insurance fee for most loans to 1.75 percent of the loan amount from 0.75 percent. Also in February, the $25 billion national loan servicer settlement included a payout of about $1 billion for the FHA. Helped by the funds, the agency will meet the mandated capital ratio by 2015, Donovan said. The agency “has acted aggressively to strengthen and protect the mortgage insurance fund and put FHA on a sustainable path for the long term,” Carol Galante, acting FHA commissioner, said in a March 27 blog. “FHA programs remain vital to ensuring more Americans have the opportunity to realize or maintain the economic security of the middle class.” Lax Standards Other FHA guidelines have remained intact. All of the down payment can be funded by relatives or employers. Buyers can cite income from future roommates to qualify for a loan. Cash reserves, required by Fannie Mae and Freddie Mac to show a borrower’s ability to pay a mortgage if a hot water tank bursts or if the roof leaks, aren’t required for many FHA loans. “Certainly the FHA standards are more lax than Fannie Mae or Freddie Mac, but at the moment it’s filling a gap that Fannie and Freddie aren’t,” said Mesirow’s Swonk. “It would be an even more constrained housing market without the agency.” The FHA was created by President Franklin Delano Roosevelt in 1934 during the Great Depression. The agency’s mission was to insure mortgages for low-income and first-time buyers. On its website, it still describes its goal as expanding homeownership for “underserved” communities. “Their book of business is riskier than Fannie and Freddie, which results in a higher foreclosure rate, and that’s likely going to continue until the economy improves,” said Susan Wachter , professor of real estate and finance at the University of Pennsylvania ’s Wharton School in Philadelphia. To contact the reporter on this story: Kathleen M. Howley in Boston at kmhowley@bloomberg.net. To contact the editor responsible for this story: Rob Urban at robprag@bloomberg.net . |
2024-09-23 | Bloomberg | Draghi Says ECB Is Ready to Offer More Long-Term Loans | European Central Bank President Mario Draghi said he’s ready to deploy another long-term refinancing operation to provide funds to Europe’s banking system if needed. “We are ready to use any instrument, including another LTRO if needed, to maintain the short term money markets at the level that is warranted by our assessment of inflation in the medium term,” Draghi said in response to questions from lawmakers in the European Parliament in Brussels today. Euro-area money-market rates rose to a level that Draghi described as “unwarranted” in July after the U.S. Federal Reserve signaled that it would begin to ease stimulus and signs emerged of a recovery in the 17-nation region. While those rates have since declined, excess liquidity in the financial system is approaching the 200 billion-euro ($270 billion) level the ECB has previously signaled as a lower limit. In his opening remarks at the hearing, Draghi said while repayment of central bank credit is “certainly a sign of normalization, the resulting reduction in excess liquidity can reinforce upward pressures on term money market rates.” As the buffer of excess cash held by the financial system falls, the rates that banks charge each other for liquidity can rise as they shoulder more risk. The ECB has also tried to keep money-market rates in check by issuing forward guidance on its official interest rates , saying that they will remain where they are or lower for “an extended period.” ECB Reliance The overnight rate that banks expect to charge each other by the ECB’s September 2014 meeting, as measured by Eonia forward contracts, is at 0.21 percent, having fallen from 0.3 percent on Sept. 5. “Reliance on ECB funding support has been steadily declining,” Draghi said. Europe’s banks will repay 7.91 billion euros of three-year loans this week, data released by the ECB on Sept. 20 showed. That’s the highest level of repayments since May. The ECB introduced two sets of loans of longer maturity than before, beginning in December 2011, as a credit crunch in Europe threatened. The euro weakened after Draghi’s comments and was trading at $1.3493 as of 4:50 p.m. Frankfurt time, down 0.2 percent from yesterday. Draghi Attentive Draghi said the ECB will remain “particularly attentive” to the implications falling excess liquidity could have for monetary policy, echoing language from a Sept. 5 press conference. “We are down from 800 billion euros to 250 billion euros in terms of excess liquidity, and that is all in all good news,” he said then. “I remember some time ago I mentioned a figure of 200 billion euros as the threshold, but in fact it is really context-dependent. It depends on the context; it depends on the degree of fragmentation that we have.” The amount of extra liquidity that the region’s banks have been holding as an insurance against shocks to the financial system has fallen, in part due to returning confidence in the region’s economy and the presence of the ECB’s OMT bond-buying plan that has helped insure against the breakup of the currency union. Excess liquidity stood at 220.5 billion euros as of Sept. 20, and use of the ECB’s overnight deposit facility fell last week to the lowest since August 2011. “Over the past twelve months, confidence in the euro area has returned,” Draghi said today. “As a consequence, fragmentation in euro-area funding markets has been receding. This improvement owes not only to the ECB’s non-standard measures, but also to progress by governments in improving the euro-area governance and in pursuing reform agendas.” To contact the reporter on this story: Jeff Black in Frankfurt at jblack25@bloomberg.net To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net |
2024-06-27 | Bloomberg | Will Angela Merkel Save Europe’s Banks? | Europe ’s leaders have raised hopes that, when they meet Thursday and Friday in Brussels, they will agree on a banking union aimed at severing the link between the health of the euro area’s financial institutions and the solvency of its governments. The plan’s success or failure, as with so much else in the currency union today, will depend on one person: German Chancellor Angela Merkel. The euro area’s banking system has long suffered from a fundamental imbalance. Most countries have large banks whose failure would have repercussions for the entire currency union, yet the responsibility for overseeing the banks, guaranteeing their deposits and bailing them out falls on national governments. The burden can be unbearable given the size of banking assets in some countries -- about two times gross domestic product in Germany , and three times in France and Spain. The current crisis has made the pitfalls painfully evident. Spain’s borrowing costs are soaring, with the 10-year bond yield approaching 7 percent, as investors worry that the government can’t afford the 100 billion euros or more needed to shore up its banks. Depositors are fleeing Greece , Italy , Portugal and Spain amid concern that governments can’t or won’t guarantee repayment in euros. Regulators are afraid to run credible stress tests because it’s not clear how the capital needs they identify would be addressed. Quid Pro Quo The solution -- laid out this week in a proposal by European Union President Herman Van Rompuy -- involves requiring euro-area members to give up some sovereignty in return for centralized support. A European entity, probably the European Central Bank , would take over the power to supervise all banks in the union, possibly with the help of national regulators. A separate entity would gain the authority to dismantle banks forcibly when they get into serious trouble. The quid pro quo would be a collective promise, backed by all euro-area governments, to insure deposits and recapitalize banks anywhere in the union. Speed is crucial. With each passing day, the paralysis of the euro area’s financial sector is taking a toll on Europe’s most vulnerable economies, further worsening the plight of both the banks and the governments. At some point, high borrowing costs and shrinking output will render large governments such as Italy and Spain insolvent. If an agreement in principle on banking union could be reached quickly, Europe could move ahead with the kind of stress tests needed to draw a line under banks’ losses, recapitalize and move on. Problem is, Merkel agrees to only the supervisory part of the banking plan. She rejects any form of risk-sharing, be it collective euro-area backing for banks and their depositors, joint euro bonds, fiscal transfers or direct ECB debt purchases that would reduce the borrowing costs of struggling governments. “I’m concerned that once again the discussion will be far too much about all kinds of ideas for joint liability and far too little about improved oversight,” she said at a conference this week. There are ways to mitigate Merkel’s concerns. Imposing losses on the creditors of troubled banks, making banks pay for deposit insurance and requiring national governments to contribute to any recapitalizations can all reduce perverse incentives and lessen the likelihood that euro-area members will have to pay for one another’s bailouts. We hope some compromise can be reached. Ultimately, the question of joint liability is a political one that goes far beyond banking. No currency union consisting of economies and cultures as different as, say, Germany and Spain can work unless its members agree to share the risks of financial and economic shocks. Refusing to do so is tantamount to rejecting the euro. So what will it be, Frau Merkel? 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 restoring U.S. fisheries ; Caroline Baum on why Washington can’t fix the economy ; Ezra Klein on the tectonic shift in the Republican approach to health care ; Amity Shlaes on women who can have it all ; Brian Barry on why Romney shouldn’t avoid the inequality debate ; Richard J. Carroll on why some tax cuts work and others don’t ; Jane S. Shaw on how Mitch Daniels can shake up higher education. To contact the Bloomberg View editorial board: view@bloomberg.net . |
2024-09-11 | Bloomberg | Deutsche Bank Credit Traders Said to Leave on Cost Cuts | Three Deutsche Bank AG (DBK) credit traders including Brad Visokey and a debt salesman left the firm this week as Europe’s biggest bank by assets pledged to cut costs and review pay practices amid higher capital requirements. Visokey, who traded credit-default swaps tied to lenders and automakers, and Robert Lam, who handled swaps on insurance companies, left the bank’s New York office yesterday, said two people familiar with the matter who asked not to identified because they haven’t been announced. Christopher Park, a vice president in credit trading, and James Bertoni, an associate salesman, also left, people familiar with those moves said. The departures follow at least 11 other exits by Deutsche Bank debt traders in New York since the beginning of 2011 as the lender caps cash bonuses, reduces staff and boosts capital reserves. Nicholas Pappas, the former co-head of flow credit trading in North America , left last week, and Antoine Cornut, who oversaw flow-credit trading in the Americas and Europe, departed in July. Visokey, a director who also traded bank and auto company bonds, and Lam, an associate, declined to comment, as did Renee Calabro , a Deutsche Bank spokeswoman. Deutsche Bank will cut costs by 4.5 billion euros ($5.8 billion) as it aims to increase its after-tax return on equity to at least 12 percent by 2015, it said today in a statement. The Frankfurt-based lender said in July that it will eliminate 1,900 jobs, including 1,500 at the investment bank and support areas, by year-end as Chief Executive Officers Anshu Jain and Juergen Fitschen face declining revenue from the unit. Cutting Assets The lender also said today that it plans to cut about 100 billion euros of risk-weighted assets from its investment bank by 2015 as it tries to comply with the so-called Basel III capital rules established by global regulators. Since the financial crisis of 2008, capital requirements on some credit products have been increased by the regulators. Visokey joined Deutsche Bank in 2004 from Greenwich Capital Markets Inc., according to records maintained by the Financial Industry Regulatory Authority. Lam started in 2008, the records show. To contact the reporters on this story: Lisa Abramowicz in New York at labramowicz@bloomberg.net ; Stephanie Ruhle in New York at sruhle2@bloomberg.net ; Christine Harper in New York at charper@bloomberg.net To contact the editors responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net ; David Scheer at dscheer@bloomberg.net |
2024-02-16 | Bloomberg | Consumer Comfort Rises to Highest Level in Year | Consumer confidence in the U.S. increased for a fourth straight week to reach the highest level in a year as more households believe the economy is improving. The Bloomberg Consumer Comfort Index rose to minus 39.8 in the period ended Feb. 12 from minus 41.7 the previous week. It marked just the third time since April 2008 that the gauge has climbed above minus 40, a reading consistent with recessions or their aftermath. The monthly expectations gauge climbed to minus 7 in February, also a 12-month high. Sentiment among those without a job was the strongest since April 2008, showing news of payroll gains and fewer job cuts is even lifting the spirits of households that have yet to benefit from the recovery. Higher stock prices so far this year may also be giving confidence a boost, helping offset rising fuel prices. “Rising incomes, a slower pace of firings in the economy and a modest wealth effect due to the near bull market in equities likely combined to create the conditions that sent economic pessimism to its lowest reading in over a year,” said Joseph Brusuelas , a senior economist at Bloomberg LP in New York. Claims for jobless benefits last week unexpectedly dropped to the lowest level in four years, showing the job market is on the mend, figures from the Labor Department showed today. Applications for unemployment insurance payments decreased 13,000 in the week ended Feb. 11 to 348,000, less than the lowest forecast of economists surveyed by Bloomberg News and the fewest since March 2008. The median survey estimate projected an increase to 365,000. More Houses Builders began work on more houses in January, and wholesale prices rose less than forecast as food and fuel prices dropped, other reports showed. Stocks advanced as the better news on the economy helped overcome concern about a Greek debt default. The Standard & Poor’s 500 Index gained 0.3 percent to 1,347.8 at 11:04 a.m. in New York. Two components of the weekly consumer comfort index improved, while the third was little changed. The measure of Americans’ views on the state of the economy rose to minus 72.1 last week from minus 76.6. An index of the buying climate increased to minus 47.4 from minus 48.4. The gauge of personal finances was at 0.2 after a reading of zero. In a separate, forward-looking question, 23 percent of Americans said the economy was getting better, the largest share since April. Thirty percent said it was getting worse, bringing the monthly expectations gauge up to minus 7 in February from minus 19. Yearly Averages The weekly Bloomberg comfort index had been stuck below minus 40 since the end of February 2011. The index, which began December 1985, averaged minus 46.8 last year, compared with minus 45.7 for 2010 and minus 47.9 in 2009, the worst full-year reading on record. Breaking out of the “recession zone” in the comfort index marked a “key milestone in its struggle to dig out of its deepest, longest downturn in a generation,” Gary Langer , president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg, said in a statement. Better labor and stock markets helped stoke confidence. Payrolls rose by 243,000 workers last month, the biggest gain since April, and the unemployment rate fell to a three-year low of 8.3 percent, the Labor Department said on Feb. 3. The Standard & Poor’s 500 Index this week climbed to the highest level since July. Job Opportunities The chance of landing a job may now be improving for out- of-work Americans. Sentiment among those not employed rose to minus 46.4 last week. Also, those with less than a high school degree were the most optimistic since December 2010. “We have some decent economic news in the U.S. lately,” Ajaypal Banga, chief executive officer of Mastercard Inc. (MA) said on a Feb. 2 call with analysts. “This comes as consumer balance sheets have improved, following a period of deleveraging, and all this has had a positive impact on consumer spending .” The share of consumers citing a “poor” buying climate fell last week to the lowest level since December 2007. Sales at retailers excluding car dealerships climbed 0.7 percent in January, the biggest gain in 10 months, data from the Commerce Department showed earlier this week. Confidence among households in the West, where Americans are most optimistic, rose 8.6 points to minus 25.4, the highest level since May 2009. Sentiment among men was the strongest since January 2011, while Republicans were the most optimistic since July. Homeowners were the most upbeat since December 2010. Gasoline Prices Increasing fuel costs could restrain further gains in sentiment. A gallon of regular unleaded gasoline climbed to $3.52 as of Feb. 14 from a 10-month low of $3.21 in December, according to AAA, the nation’s largest automobile association. The Bloomberg Consumer Comfort Index is based on responses to telephone interviews with a random sample of 1,000 consumers 18 years old and older. Each week, 250 respondents are asked for their views on the economy, personal finances and buying climate; the percentage of negative responses is subtracted from the share of positive views and divided by three. The most recent reading is based on the average of responses over the previous four weeks. The comfort index can range from 100, indicating every participant in the survey had a positive response to all three components, to minus 100, signaling all views were negative. The margin of error for the headline reading is 3 percentage points. Field work for the index is done by SSRS/Social Science Research Solutions in Media, Pennsylvania. To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net |
2024-08-19 | Bloomberg | Treasury Yields Rise to 2-Year High Before Fed Minutes Release | Treasuries fell, with yields on 10-year notes reaching two-year highs for a third consecutive day, as investors look to the minutes of the Federal Reserve ’s last meeting for clues on the eventual slowing of bond purchases. Yields on the benchmark security rose to the highest since July 2011 as central bankers and policy makers also gather this week in Jackson Hole , Wyoming , to discuss the global economy and monetary policy. The Fed’s first step may be tapering monthly debt purchases in September by $10 billion to a $75 billion pace, according to the median estimate of analysts in a Bloomberg survey concluded last week. The U.S. central bank publishes the minutes of its July 30-31 meeting Aug. 21. “Every little uptick is met with sellers,” said Justin Lederer, an interest-rate strategist at Cantor Fitzgerald LP in New York , one of 21 primary dealers that trade with the central bank. “There’s more of a feeling tapering is going to happen in September.” The benchmark 10-year yield rose six basis points, or 0.06 percentage point, to 2.88 percent at 4:59 p.m. in New York, according to Bloomberg Bond Trader prices. The 2.5 percent benchmark note maturing in August 2023 fell 15/32, or $4.69 per $1,000 face amount, to 96 23/32. The rate earlier reached 2.9 percent, the highest level since July 2011. U.S. 10-year securities yielded 39 basis points more than bonds in an index of G-7 debt, the most since May 2010, according to data compiled by Bloomberg based on closing prices. Volume, Volatility Treasury trading volume at ICAP Plc, the largest inter-dealer broker of U.S. government debt , dropped 22 percent to $246 billion, from $315.5 billion on Aug. 16. The figure is down from a 2013 high of $662.26 billion reached on May 22 and up from a low of $147.8 billion on Aug. 9. This year’s average is $313 billion. Volatility as measured by the Merrill Lynch Option Volatility Estimate MOVE Index rose to 99.48 today, the highest level since July 9. The average for 2013 is 68. Treasuries have lost 3.6 percent this year through Aug. 16, according to Bloomberg World Bond Indexes. German bonds dropped 2.3 percent and gilts slid 4.7 percent. An indicator of momentum used by some dealers signaled that Treasuries are oversold. The 14-day relative-strength index for the 10-year yield has risen above the 70 threshold that indicates it has climbed too much. The last time it exceeded that level was July 5, which was followed by a two-week rally. “The Fed not announcing anything regarding tapering is causing uncertainty and a situation where yields have to drift higher, especially on the long end, until the market knows what they are dealing with,” said Dan Heckman, fixed-income strategist in Kansas City , Missouri , at U.S. Bank Wealth Management, which manages $110 billion. Third Round Fed policy makers led by Chairman Ben S. Bernanke are contemplating how to end a third round of quantitative easing that has swelled the Fed’s balance sheet to a record $3.59 trillion. The central bank will end purchases in mid-2014, according to the median estimate in a Bloomberg survey of 48 economists conducted Aug. 9-13. The Federal Open Market Committee holds its next meeting on Sept. 17-18. “The market continues to be set adrift because people are uncertain as to what the rules of engagement will be,” said Tom Tucci, managing director and head of Treasury trading in New York at CIBC World Markets Corp. “No one wants to commit to the market until they figure out where the Fed is at. There’s been a bit of a psychological change.” Yield Curve Sales of previously-owned U.S. homes rose in July, analysts said before an industry report due on Aug. 21. Purchases rose to a 5.15 million annualized rate, according to the median forecast of economists before the National Association of Realtors publishes the data. The difference between U.S. two- and 10-year yields expanded to as much as 254 basis points today, the widest level since July 2011. Bonds declined last week amid concern former Treasury Secretary Larry Summers will win out over Fed Vice Chairman Janet Yellen as the next head of the central bank, according to Jefferies LLC. Bernanke’s term ends in January. “The growing conviction that Larry Summers as Fed Chairman should be equated with an accelerated rate of tapering has been the primary catalyst to the recent distress in both the bond and stock markets,” Ward McCarthy , the chief financial economist at Jefferies, wrote in a Aug. 16 report. The company is a primary dealer. To contact the reporters on this story: Susanne Walker in New York at swalker33@bloomberg.net ; Cordell Eddings in New York at ceddings@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net |
2024-11-23 | Bloomberg | Berkshire Says Private Data Released for Claimants | Oak River Insurance Co., a subsidiary of Warren Buffett ’s Berkshire Hathaway Inc. (BRK/A) , asked clients to guard against identity theft after an employee released some of their personal information. The data are tied to about 2,700 workers’ compensation claimants who had spinal surgery in Southern California between 2004 and 2011 or had urinalysis testing, diagnostics or other medical treatment performed in the state between 2006 and 2011, the unit of Omaha, Nebraska-based Berkshire said in a Nov. 21 statement posted online. The personal information included medical records, Social Security numbers and health insurance information, the insurer said. Oak River is seeking to protect clients against identity theft by offering them a free one-year subscription to a product that helps detect misuse of personal information. A former employee, while still working at the insurer, disclosed the data between October 2011 and March 2012 to individuals cooperating in an investigation of suppliers of medical services. “We do not believe that access to individuals’ Social Security numbers or other identifying information was the goal of the disclosures,” the insurer said in the statement. Oak River said it was unaware of any identity theft that had occurred as a result of the disclosures. 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 |
2024-02-03 | Bloomberg | Retirement Plans, Milan Probe, EU Cartel Fines: Compliance | The U.S. Treasury Department will help expand the availability of annuities and lifetime income choices in retirement plans, the agency said. The department yesterday proposed two regulations to make it easier for those approaching retirement to buy an annuity through their company-funded pensions or 401(k) savings accounts. U.S. savers held about $2.9 trillion in 401(k) accounts and a total $17 trillion in retirement savings as of Sept. 30, according to the Investment Company Institute, a Washington- based trade group for the mutual-fund industry. Regulators and legislators have been looking at Americans’ retirement security because life expectancies are increasing and savings have shifted from traditional pension plans to defined- contribution plans such as 401(k)s. Participants in 401(k)-type plans increased to 67 million in 2007 from about 11 million in 1975, the Labor Department said at a hearing on lifetime income in September 2010. Employers have been reluctant to adopt annuities in retirement plans they sponsor because of concern that fees are too high and that they would be held liable for their choice of insurers. Americans have resisted buying the insurance because they don’t want to lock up their assets. The Treasury Department’s proposed regulation will make it simpler for traditional pension plans to let workers take part of their balances as lifetime income streams and take the rest as lump sums. The other proposed rule would encourage 401(k) and IRA plans to offer participants the option of dedicating part of their savings to a so-called longevity annuity, which may not begin the guaranteed income payouts until age 80 or 85, the Treasury Department said. The agency said it would grant an exception to required minimum distributions from retirement accounts in certain cases. Asset managers and insurers including BlackRock Inc. (BLK) , State Street Corp. (STT) , Prudential Financial Inc. (PRU) , MetLife Inc. (MET) and ING Groep NV (INGA) have been developing ways to add annuities and lifetime income to 401(k) investment choices. For more, click here. Compliance Policy Europe Zero-Risk Capital Rule Should Be Ended, Lobby Group Says The European Union should close a loophole in bank capital rules that rates sovereign debt as risk-free and allows lenders to escape holding reserves against possible losses, the Finance Watch lobby group said. There are no “risk-free assets” and therefore the “existence of zero-risk weights is fundamentally flawed and misleading,” the group said in the published research. Losses on European sovereign debt have grown since the onset of the Euro area financial crisis that may threaten the survival of the euro. “Risk weights penalize non-rated exposures,” including some corporate and retail investments that have a 100 percent risk-weight attributed to them, Finance Watch said. Geithner Says Systemically Risky Firms to Be Named This Year U.S. Treasury Secretary Timothy F. Geithner said the first nonbank financial companies deemed systemically risky will be named this year, and the department will release more plans for an overhaul of housing finance. Geithner said the plan is to wind down government sponsored enterprises, or GSEs, and reduce the government’s direct role in the housing market. The comments were part of prepared remarks by Geithner in Washington yesterday. The secretary’s comments came as he praised the progress on the 2010 Dodd-Frank act and said regulators are “making considerable progress in implementing reform.” The law has come under attack from Republicans and presidential candidates. CFTC, SEC Release Report on Global Regulations of Swaps Market The Commodity Futures Trading Commission and the U.S. Securities and Exchange Commission issued a joint Report to Congress on Jan. 31. The report, which analyzes efforts to coordinate global regulations on the $708 trillion swaps market is required by the Dodd-Frank law. The report will be “a useful guide to OTC derivatives regulation and markets inside and outside the United States, and a timely comparative tool in the ongoing effort to achieve consistency in regulation,” the commissions said in the report. The 153-page study discusses the process used by the commissions in creating it, the regulatory framework for OTC derivatives in the Americas, European Union and Asia, and the commissions’ analysis of regulatory schemes among the jurisdictions, as well as recommendations “for next steps.” The report includes appendices summarizing approaches in studied jurisdictions and listing international policy initiatives for OTC derivatives regulation. Compliance Action Banks’ U.K. Finance Regulation Fees to Rise on Reform Costs The U.K. finance regulator, while pushing to limit pay and bonuses for London bankers, said it needs more money from firms it regulates to cover spending on information technology and implementing government reforms. The Financial Services Authority’s annual spending for the year starting on April 1 will rise 15.6 percent to 578.4 million pounds ($913.9 million), which will be borne mostly by larger financial firms, the regulator said yesterday. Fees for medium- sized firms will rise proportionately depending on their business, and fees for the smallest firms will stay at a minimum of 1,000 pounds. The funding requirements may be the regulator’s last before a government-imposed split into the Prudential Regulation Authority, which will become a unit of the Bank of England, and the independent Financial Conduct Authority, in 2013. Barclays, UniCredit Bankers Should Face Trial, Prosecutor Says Former UniCredit SpA (UCG) Chief Executive Officer Alessandro Profumo is among 20 UniCredit and Barclays Plc (BARC) executives facing fraud charges in a tax-evasion probe led by a Milan prosecutor, according to court documents. Prosecutor Alfredo Robledo asked a court in the city to put the 20 individuals on trial for fraudulent representation in relation to an international investment plan known as Brontos, he said in a court filing yesterday. A judge will rule on the prosecutor’s request at a later date. UniCredit, Italy’s largest bank, used the tax vehicle to increase the bank’s “economic benefits,” Profumo said at the company’s annual meeting in April 2010. Prosecutors have been investigating Brontos since last year when they seized 246 million euros ($321 million) in bank assets. Profumo, 54, said in a statement yesterday that he welcomes the chance to be heard in court and he is convinced he acted correctly. He stepped down as UniCredit CEO in September 2010. A spokesman for UniCredit declined to comment, as did a spokesman for Barclays in London. Japan’s FSA Told Tokyo Exchange to Find Glitch Cause, Jimi Says Japan’s Financial Services Agency ordered Tokyo Stock Exchange Chief Executive Officer Atsushi Saito to investigate the cause of yesterday’s trading glitch, Financial Services Minister Shozaburo Jimi said. Jimi was speaking at a news conference in Tokyo today, referring to events at the Tokyo Exchange. Japan’s alternative trading platforms missed out on a potential payday yesterday as regulators stopped them from fielding orders when a computer error caused the biggest trading disruption in six years at the Tokyo Stock Exchange. The glitch at TSE disabled trading of 241 companies including Sony Corp. for 2 1/2 hours. The malfunction in a server and its backups was Tokyo’s worst since 2006, a year before alternative venues started in Japan. The disruption came as the Fair Trade Commission reviews the effect on competition of a planned merger between the exchanges in Tokyo and Osaka, where transactions went on as normal. UBS Unauthorized Trading Prompts Swiss, U.K. Enforcement Actions U.K. and Swiss finance regulators have begun formal enforcement actions against UBS AG (UBSN) over a $2.3 billion trading loss allegedly caused by Kweku Adoboli, a former trader at its investment bank. The U.K. Financial Services Authority and the Swiss Financial Market Supervisory Authority, known as Finma, are investigating the risk controls at UBS’s investment bank that didn’t prevent the unauthorized trades, the agencies said in statements today. The regulators hired the accounting firm KPMG in September to handle an independent investigation into events surrounding the losses. The move to a formal enforcement proceeding typically indicates the regulators have found sufficient evidence of financial rule violations. UBS said the regulators told them of their decision and they are cooperating. “Immediately after the unauthorized trading incident, the Group Executive Board thoroughly investigated the incident and implemented measures to better protect our firm from unauthorized activities,” UBS spokeswoman Jenna Ward said in an e-mailed statement. Adoboli, 31, charged with fraud and false accounting, pleaded not guilty on Jan. 30 to fraud and false accounting in connection with the trading loss. He has been in custody since Sept. 15. Adoboli’s request for bail was denied, prosecutor David Williams said after a court hearing today. UBS, Credit Suisse Among Banks in Swiss Libor-Fixing Probe UBS AG and Credit Suisse Group AG (CSGN) are among 12 banks facing a Swiss inquest into possible manipulation of the London interbank offered rate, the latest probe into how the benchmark for $350 trillion of financial products is set. “Collusion between derivative traders might have influenced” Libor and its Japanese equivalent, Tibor, the Swiss competition watchdog, Comco, said in an e-mailed statement today. “Market conditions regarding derivative products based on these reference rates might have been manipulated too.” Comco said it opened the investigation after receiving an application for its “leniency program,” which indicated that traders from various banks might have influenced the rate. Libor is set daily by the British Bankers’ Association based on data from banks, which report how much it would cost them to borrow from each other for various periods of time. Regulators in the U.S., U.K. and European Union have been examining how Libor is set, while Japan’s securities watchdog has probed Tibor. “We are taking these investigations very seriously and are fully cooperating with the authorities,” said Yves Kaufmann, a spokesman for UBS in Zurich. UBS, the biggest Swiss bank, said in July that it was granted conditional immunity from some agencies, including the U.S. Justice Department. A spokesman for Credit Suisse said the bank is “not in the position” to comment at the moment. For more, click here. Courts Dow, DuPont, Denki Lose EU Appeal to Cut Rubber Cartel Fines DuPont Co. (DD) , Dow Chemical Co. (DOW) , and Denki Kagaku Kogyo KK (4061) lost bids to overturn antitrust fines by the European Union for claims they colluded to fix prices in the rubber chemical industry. The European Commission was right in the findings and fines it imposed for the cartel, the EU’s General Court said in three separate rulings for the companies. The EU’s antitrust regulator has “wide discretion as regards the methods of calculating fines” and didn’t err in the amounts or the fines themselves, the Luxembourg-based tribunal said yesterday. Five companies were fined a total of 247.6 million euros ($325 million) in 2007 by the commission, the European Union’s antitrust regulator, for colluding on prices for chloroprene rubber, used to make latex rubber, from at least 1993 to 2002, the commission said. Bayer AG (BAYN) , Germany’s largest drugmaker and another repeat offender, escaped a 201 million euro fine, as it had told the regulator about the cartel. An appeal by Eni SpA (ENI) , which received the heaviest fine, is pending. “DuPont is disappointed with the decision” and is considering whether to appeal, Eduardo Menchaca, a spokesman for the company, said yesterday. Dow will appeal the ruling “as we continue to remain convinced of the correctness of our position,” the company said in an e-mailed statement. Naoshi Fukawa, a spokesman for Denki Kagaku in Tokyo, said the company can’t comment until it has read the ruling. The cases are T-76/08 Pending Case, E.I. du Pont de Nemours and others v Commission; T-77/08 Pending Case, Dow Chemical v Commission; T-83/08 Pending Case, Denki Kagaku Kogyo and Denka Chemicals v Commission. MF Global U.K. to Start Returning Funds as Soon as Next Week MF Global Holding Ltd.’s (MF) U.K. administrators said they planned to start returning money to the failed broker’s clients as early as next week. The interim distribution would be made “only to agreed claims” from customers with protected accounts, Martin Pascoe, a lawyer for the administrators, said at a London court hearing today. KPMG LLP, which was appointed to wind up the broker’s U.K. unit, yesterday said it was planning to make its first payment to clients who had money locked in customer accounts. The interim distribution will return 26 cents for every dollar claimed. The U.S. brokerage case is Securities Investor Protection Corp. v. MF Global Inc., 11-02790, U.S. District Court, Southern District of New York (Manhattan). The parent’s bankruptcy case is MF Global Holdings Ltd., 11-bk-15059, U.S. Bankruptcy Court , Southern District of New York (Manhattan). For more, see Interviews, below. Interviews/Speeches Pitt Sees Criminal Charges After MF Global Inquiry Former Securities and Exchange Commission Chairman Harvey Pitt talked about MF Global Holding Ltd. and the need for commodities investors to be protected by a SIPC-like agency. The Securities Investor Protection Corp. is a nonprofit membership corporation, funded by its members. Pitt, chief executive officer of Kalorama Partners LLC , spoke on Bloomberg Television’s “InBusiness With Margaret Brennan.” For the video, click here. Bafin’s Koenig Doesn’t Expect Basel III to Cut German Lending Elke Koenig, president of German financial regulator Bafin, said she doesn’t expect Basel III capital rules or the European Banking Authority’s initiatives to reduce lending by German banks. Koenig made the remarks to reporters in Frankfurt yesterday. Germany’s banks are set to reach the European Banking Authority’s capital requirements on their “own strength,”, according to Koenig. The EBA’s new capital rules require euro-area banks to achieve a 9 percent core Tier 1 capital ratio by the middle of this year. 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 . |
2024-03-20 | Bloomberg | Fed Board Nominees Back Exit Strategy Ensuring Price Stability | President Barack Obama ’s nominees to the Federal Reserve Board told a Senate panel they would help the Fed withdraw stimulus when necessary in a way that keeps prices stable and doesn’t jar financial markets. Jerome Powell, a former private equity manager and Treasury undersecretary under President George H.W. Bush, told the Senate Banking Committee today he sees “tremendous risk in the exit,” including inflation and asset price bubbles. Jeremy Stein , a Harvard University economist and former adviser to Treasury Secretary Timothy F. Geithner , told the panel the central bank must avoid a “disruptive impact on markets.” Powell and Stein, both with financial market expertise, said they would pursue in a balanced way the Fed’s dual mandate to ensure full employment and price stability. They were nominated by Obama in January to fill vacant Fed board seats. If confirmed, they would fill a void left by Kevin Warsh , a former Morgan Stanley banker and confidante of Chairman Ben S. Bernanke during the financial crisis, said Antulio Bomfim, a former Fed economist. Warsh resigned from the board in April. “I don’t think there’s been anybody with either strong experience or academic credentials in financial markets” since Warsh left, said Bomfim, now a senior managing director with Macroeconomic Advisers LLC in Washington. “Together they bring both.” Powell and Stein need to overcome partisan wrangling in the Senate, which has delayed action on nominations for financial regulatory posts and earlier rejected a Nobel laureate economist, Peter Diamond , for a seat on the Fed. Regulatory Overhaul During testimony the nominees described how they would implement the Dodd-Frank regulatory overhaul and help the Fed unwind its $2.9 trillion balance sheet. They said the central bank needs to eventually communicate how it will raise interest rates from the near zero level that the Fed said it expects through at least late 2014. Scaling back the balance sheet “will be one of the most important tasks,” Stein said in response to a lawmakers’ comments. The central bank’s mandates on prices and employment are “on an equal footing,” he said. “There’s tremendous risk in the exit, and that’s well understood,” Powell said in response to questioning on the balance sheet. “You don’t want to do it too early and snuff out a recovery that’s still weak and you don’t want to do it too late and cause inflation,” he said. Powell, 59, said he can’t specify the timing of the withdrawal of stimulus. “It’s not a date you can pick here today, it’s going to depend on the future path of the economy,” he said. “It has to be weighed under the dual mandate in which both aspects are equal.” Recess Appointment Nominees for positions at the Fed, the Federal Deposit Insurance Corp. and the Comptroller of the Currency have been in limbo since Obama in January used a recess appointment to install Richard Cordray as the first director of the Consumer Financial Protection Bureau without formal Senate approval. The president made the appointment of Cordray after Republicans blocked his confirmation in December. While the Democrats control 53 votes in the 100-member chamber, Senate leaders needed at least 60 senators to advance the nomination. “There’s still certainly some bitterness about Cordray” among Republicans, said Mark Calabria, an economist and the director of financial regulation studies at the Cato Institute and a former senior aide for Republicans on the Senate Banking Committee. “It’s not clear whether Republicans will oppose them,” Calabria said of the Fed nominees. “At minimum there will be a party-line vote that gets them out of the committee,” he said. Committee Approval Gaining committee approval wouldn’t ensure that Powell and Stein later win appointment in a vote by the full Senate. Don Stewart , a spokesman for Senate Minority Leader Mitch McConnell of Kentucky, said the Republican leader hasn’t indicated yet whether he backs either of the Fed nominees. The committee is also considering the nominations of Jeremiah Norton to the board of directors of the Federal Deposit Insurance Corp.; Richard Berner as director of the Treasury Department’s Office of Financial Research; and Christy Romero as special inspector general for the Troubled Asset Relief Program. The Standard & Poor’s 500 Index fell 0.3 percent to 1,405.52 at 4:30 p.m. in New York. The yield on the 10-year Treasury note dropped two basis points to 2.36 percent. The Fed’s board currently consists of Bernanke and Vice Chairman Janet Yellen , both economists; Daniel Tarullo , a former professor at the Georgetown University Law Center ; Sarah Bloom Raskin , a former top bank regulator for Maryland; and Elizabeth Duke , who had been a community banker. ‘Private Economy’ “I’d like to see some folks on the board who have some more understanding of the private economy,” said Stephen Stanley , chief economist at Pierpont Securities LLC in Stamford, Connecticut. Both Fed nominees underscored their experience with capital markets , with Powell highlighting his work as an investor and investment banker and Stein discussing his research on the 1987 stock-market crash and the impact of monetary policy on the banking system, according the text of their remarks. Stein, 51, said that studying the crisis made him “humble and honest about the limitations of our understanding” as economists. “Too often in economics, theories have been used in a rigid fashion, making us less, not more, open to learning from what happens in the real world,” he said. “This is when things have gone badly off the rails for economists, and for those who rely on us for policy advice.” Obama Adviser Stein served in the Obama administration from February to July 2009 as a senior adviser to the Treasury secretary and on the staff of the National Economic Council, according to Harvard’s website. He was also a senior staff economist on the Council of Economic Advisers from September 1989 to June 1990, leaving just before Powell was nominated to a Treasury post. Stein rejoined Harvard as an economics professor in 2000 and has served on the New York Fed’s Financial Advisory Roundtable since 2006. He has focused his research on topics including debt markets, corporate investment and stock market efficiency. Powell is a visiting scholar at the Bipartisan Policy Center in Washington. He was a partner at the private equity firm the Carlyle Group LP from 1997 through 2005, where he led the industrial group within the U.S. buyout fund, according to a biography from the Bipartisan Policy Center. To contact the reporter on this story: Joshua Zumbrun in Washington at jzumbrun@bloomberg.net ; Jeff Kearns in Washington at jkearns3@bloomberg.net To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net |
2024-07-06 | Bloomberg | BB&T Capital Markets Loses Eight in Fixed-Income Trading to Smaller Firms | Eight BB&T Corp. fixed-income traders and salesmen have quit since May to join smaller firms building bond-trading units, said Bill Hardy , who became the bank’s head of debt capital markets when his predecessor, Ted Luse , departed last month. Those who left BB&T, the second-largest North Carolina bank, include Doug Bretz and Daniel Cardani , who headed fixed- income trading and sales, respectively. Luse, Bretz and Cardani joined Cortlandt Capital Holdings , a New York-based investment firm, two people briefed on the matter said last week. “They were approached and were made an offer too good to turn down,” Hardy said in an interview July 1. “We’ve grown aggressively over the last few years and while we’ve had some defections, we continue to build,” said Hardy, who joined the Winston-Salem-based lender in 1999 and was named to his new post on June 17. BB&T is trying to expand its corporate and capital markets business to supplement a community-banking unit that makes up about 58 percent of revenue, Chief Executive Officer Kelly King , 61, said at a UBS AG investment conference in May. Financial services, including asset management, retail brokerage and capital markets, make up about 9.2 percent of revenue. “BB&T has a mentality with its employees that we love you, but if you don’t want to stay, then get out and we’ll find somebody else,” said Chris Marinac , an analyst at FIG Partners LLC in Atlanta. “They have a very good ability to backfill and stay the course.” Bretz declined to comment. Telephone calls to Cortlandt partner Brad Bodine , Luse and Cardani weren’t returned. Sterne Agee, Cortlandt The employees who left in the past two months were based in BB&T’s office in Richmond, Virginia, a focus of the bank’s capital markets and investment advisory business since it bought local brokerages Scott & Stringfellow and Craigie Inc. Robert Jackson, who ran investment-grade products, was among five BB&T salesmen, traders and analysts who joined Sterne Agee & Leach , a Birmingham, Alabama-based firm that opened a Richmond office in May, the firm said on May 18. Sterne Agee, Stifel Nicolaus and Jeffries Group Inc. are among companies that expanded their fixed-income businesses during the past two years by hiring from larger firms, said Daniel Arbeeny , managing principal at CMF Partners LLC, a New York-based recruitment firm. “There’s been a ton of growth by smaller shops,” Arbeeny said. “The question is how many of these firms are going to stick with it over the longer term.” Ryan Specialty Group , a start-up brokerage founded by former Aon Corp. CEO Pat Ryan , hired about 120 BB&T commercial- insurance employees in several states since January, according to Ed McCormack, a managing director at the Chicago-based brokerage. To contact the reporter on this story: David Mildenberg in Charlotte at dmildenberg@bloomberg.net. BB&T Corp. CEO Kelly King. Photographer: Brendan Hoffman/Bloomberg //<![CDATA[ $(document).ready(function () { $(".view_story #story_content .attachments img.small_img").each(function(){ var self = $(this); if (self.width() != 190){ self.width(190); } }); }); //]]> |
2024-06-24 | Bloomberg | Company Bond Risk Rises in Europe for Third Day, Credit-Default Swaps Show | The cost of insuring against losses on European corporate bonds rose, reversing an earlier decline, according to traders of credit-default swaps. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings climbed 8.5 basis points to 556, according to JPMorgan Chase & Co. prices at 9:30 a.m. in London. The debt insurance contracts had declined to 542 in earlier trading. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings increased 2 basis points to 128, JPMorgan prices show. The cost of protecting bank bonds from default also rose, with the Markit iTraxx Financial Index tied to the senior debt of 25 banks and insurers up 2.5 at 166.5 and the subordinated index 3 higher at 252. A basis point on a credit-default swap contract protecting 10 million euros ($12.3 million) of debt from default for five years is equivalent to 1,000 euros a year. Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. An increase signals deterioration in perceptions of credit quality To contact the reporter on this story: Abigail Moses in London at Amoses5@bloomberg.net |
2024-11-05 | Bloomberg | Lapse of U.S. Unemployment Benefits May Cool Spending | Sharron Tetrault and her family have already decided to forego exchanging gifts this holiday season. The expiration of her jobless benefits may force her to stop paying her utility bills or even rent. Tetrault is among the about 1.2 million unemployed Americans the National Employment Labor Project in Washington says will lose their emergency and extended jobless insurance benefits by the end of the year with the scheduled expiration of the programs on Nov. 30. The resulting reduction in incomes may hurt consumer spending at the height of the holiday shopping period and restrain economic growth. “If people are let off the rolls in November, it could impact holiday spending,” said Zach Pandl , an economist at Nomura Securities International Inc. in New York. Pandl projects economic growth would be reduced by as much as 0.4 percentage point from December through February should the benefits end. The wave of voter discontent that will put Republicans in control of the House of Representatives next year may mean that debate over issues like extending the Bush-era tax cuts will take precedence in coming months, said economists at Goldman Sachs Group Inc. Additionally, the lame-duck session of Congress is not scheduled to reconvene until Nov. 15 and legislators may take time off for Thanksgiving later in the month, making approval of any jobless-benefit extension difficult. Tetrault, a 46 year-old from Mount Vernon, New York, has been without work since January, when she lost her job as an event planner at a non-profit group. She has just over a month left before the program that gives her $405 a week in unemployment insurance payments runs out. While an extension would make her eligible for additional funds, she’s bracing for the worst. No Phone “What I see happening is my phone getting shut off,” Tetrault said in an interview. “If I have no income how do I pay for my phone and how do employers contact me?” The federal government currently funds the emergency and extended benefits that keep the unemployed receiving checks should recipients not find jobs by the time the 26 weeks of initial state-paid assistance runs out. The supplemental programs may reach up to 99 weeks in some states. About 5.01 million Americans received emergency and extended benefits as of the week ended Oct. 16, according to Labor Department data. Another 4.34 million were getting the initial state-funded relief in the week ended Oct. 23. Figures today showed the economy created 151,000 jobs in October, while the unemployment rate held at 9.6 percent. Four Tiers The emergency programs are divided into four tiers starting with an additional 20 weeks that kick in after the state funds are used up. If an extension isn’t passed by the end of the month, beneficiaries would stop receiving checks when they reach the end of whatever group they’re in. Republican gains in Congress have dimmed the outlook for passage of an extension, according to Tom Porcelli , head of U.S. market economics at RBC Capital Markets in New York. “Republicans would be hard-pressed to have one of their first endorsed bills be a piece of legislation that calls for more spending,” said Porcelli. He estimates a total 2.5 million people would lose their benefits by the end of the first quarter of 2011 should the program end. That would shave about 0.3 percentage point off consumer spending from January through March, he said. Over the year, purchases would be cut by about 0.5 percentage point, or $50 billion, said Porcelli. Effect on Retailers The last two months of the year are typically the biggest U.S. shopping season and retailers including Toys R Us Inc. have forecast some improvement this year compared with the previous two. In the aftermath of past recessions, lawmakers haven’t let emergency funding expire until the unemployment rate dropped to around 7.5 percent, according to Heather Boushey , a senior economist at the Center for American Progress, a research organization whose views generally align with those of Democrats. Economists surveyed by Bloomberg News forecast joblessness, which stood at 9.6 percent in September, will exceed that level through at least 2012. “The economy, while it has improved, is not creating jobs fast enough,” Boushey said. “You could see a dip” in spending. In May, the last time the unemployment aid extension was due to lapse, a renewal wasn’t approved until two months later as legislators debated how to pay for the program. This time, Congress may delay approval or let the benefits lapse because Republicans are pushing to cut the deficit. Goldman Sachs’s Alec Phillips and BNP Paribas’s Julia Coronado are among economists saying Congress will probably let the emergency unemployment assistance expire. “In order to get previous extensions done, there has been a requirement to get costs offset,” Phillips said. Republicans “would be more inclined to keep that requirement.” Goldman Sachs has not issued estimates on what a lapse in the emergency benefits alone would do to spending at the end of the year. BNP Paribas projects an end to the assistance would cut income growth by one or two tenths of a point and result in “slowing consumption growth,” Coronado said. To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net |
2024-02-08 | Bloomberg | Biggest China Deal Brokered by Ma as HSBC Sold Ping An | HSBC Holdings Plc ’s $9.4 billion sale of its stake in Ping An Insurance (Group) Co. to Thai billionaire Dhanin Chearavanont was initiated by the insurer’s chairman, the official who was approached to buy the stake said. The disclosure is the first confirmation of the Chinese insurer’s role in brokering the transaction and highlights Ping An Chairman Peter Ma ’s determination to find his own partner as HSBC looked to exit a decade-long investment. Ma approached Tse Ping , vice chairman of Charoen Pokphand Group Co., about buying the stake, the Thai company executive said. Both are members of an advisory body to China’s legislature. Dhanin’s CP Group completed the deal, the largest sale of a Chinese company to a foreign buyer, on Feb. 6. “Mr. Ma wanted a long-term investor so that Ping An’s share price doesn’t fluctuate too much,” Tse said in a Feb. 7 interview in Hong Kong. “Ping An is a good company --we like its culture and business model. That’s why we are willing to pay a good price for it.” Ma’s role illustrates the influence exerted by Chinese executives over their investors and the importance of personal connections in closing a transaction that allowed London-based HSBC to reap a $2.6 billion profit. The deal survived a last- minute withdrawal of funding by China Development Bank Corp. and scrutiny by regulators in Beijing. HSBC’s Search HSBC spent months searching for potential buyers until Ma approached CP Group, whose main business is agriculture, Tse said, declining to elaborate on the discussions with Ma. Among those approached was Singapore’s Temasek Holdings Pte , Tse said. Tan Yong Meng , a spokesman for Temasek, declined to comment, as did officials at Ping An and HSBC. The deal has already yielded a $1.3 billion paper profit for Dhanin, who is Thailand’s second richest man with an estimated net worth of $6.6 billion, according to the Bloomberg Billionaires Index. About 55 percent of his fortune is from overseas private companies. Questions about funding fueled concerns about the deal’s survival at times. Ping An shares fell the most in more than five months on Jan. 8, when Chinese magazine Caixin reported CDB had pulled financing after learning of the involvement of Xiao Jianhua, a Chinese financier, in the deal. In an earlier report, Caixin said Xiao channeled funds from three municipal commercial banks that he reportedly controls to help CP Group purchase the Ping An shares. Xiao denied any involvement in the transaction in a Dec. 23 statement via his lawyer, Caixin reported. Regulator’s Request Tse said CDB didn’t give an explanation for withdrawing the funding. “We’ve known CDB for many years,” he said. “If they decide not to do something, they must have their reason.” China Development Bank Spokesman Xu Fei wasn’t available to comment and CDB’s press office in Beijing didn’t immediately respond to a question about why CDB withheld funding for CP’s purchase of the Ping An shares. Two days after Caixin’s January report, China’s insurance regulator asked Ping An to provide additional information on the transaction. The watchdog didn’t say what kind of information it requested. The China Insurance Regulatory Commission approved the sale on Feb. 1, just hours ahead of a deadline. CP Group bought HSBC’s 15.6 percent stake for HK$59 a share. The stock closed yesterday at HK$67.40. Honorary Title Xiao was previously chairman of a CP Group unit called Chia Tai Worldwide Investment Co., according to Tse, who described the role as ceremonial rather than operational. Though Xiao had expressed interest in joining CP Group’s bid for the Ping An stake, the Thai company decided to do the deal without him, Tse said. “Mr. Xiao worked with us on a few projects so he was using that chairman title,” said Tse. “He is no longer holding the position.” Tse didn’t say when Xiao relinquished the title. Xiao didn’t respond to an interview request made through his assistant. Xiao was identified as chairman of Chia Tai Worldwide, or Zhengda Huanqiu in Chinese, as recently as July 2012 in pages that have subsequently been deleted from CP Group’s Chinese- language website. The web pages were located by Bloomberg News in December, before their deletion. Stock exchange filings made by Ping An last year indicate CP Group began investing in the insurer while Xiao still held the title of Chia Tai Worldwide chairman. Shanghai Stake Like many large Chinese companies, Ping An has shares traded in both Hong Kong and Shanghai. The HSBC stake consists of Hong Kong-listed stock, also known as H shares. In May, Ping An said Chia Tai Worldwide unit Linzhi Zhengda Global Investment Co. accumulated a 38 percent holding in Gongbujiangda Jiangnan Industrial Development Co., which owned 2.9 percent of the insurer’s Shanghai-traded shares. In December, Ping An said Linzhi Zhengda held 63 percent of Jiangnan Industrial. Ping An in May said former board member Wang Liping had transferred part of the Jiangnan Industrial stake to Linzhi Zhengda. Jiangnan Industrial also held Ping An shares on behalf of top managers including Ma, according to the insurer’s interim earnings report. CP Group will have three seats on Ping An’s board, Tse said. One of those will be taken by Soopakij Chearavanont, Dhanin’s son and the chairman of CP Lotus Corp., he said. Ping An has 16 board members, according its latest corporate filing. The Thai conglomerate financed the Ping An deal itself, Tse said. HSBC used its own bankers for the sale, while UBS AG advised CP Group. “Many large international banks offered to finance the deal but we decided to do it on our own,” he said. To contact Bloomberg News staff for this story: Zijing Wu in Hong Kong at zwu17@bloomberg.net ; Michael Forsythe in Beijing at mforsythe@bloomberg.net ; Jonathan Browning in Hong Kong at jbrowning9@bloomberg.net To contact the editor responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net |
2024-10-12 | Bloomberg | Republicans Prove Unpopular With Voters Against Obama in Poll | Republican attacks on President Barack Obama ’s policies are resonating with voters, even as many Americans give a thumbs-down to the party and some of its specific ideas, a Bloomberg National Poll shows. Three weeks before the midterm elections, Republicans maintain a position of strength due to the commitment of their supporters and the likelihood they will vote. The general Republican message of less spending, lower taxes and repeal of the health-care overhaul is connecting. Pluralities of those polled support overturning the health-care measure -- Obama’s signature legislative accomplishment -- and back the “Pledge to America” that offers a road map for how Republicans would govern if they win congressional majorities. Still, the poll suggests voters aren’t embracing Republicans as much as they are rejecting Democrats. Poll participant Carol Wortham, 62, a retired state and federal government worker in Bayou Vista, Texas, who considers herself an independent voter, said she plans to support Republicans this year, though she isn’t excited to do so. “They are the lesser of two evils,” she said. The poll finds Republicans in an anomalous position -- poised to make political gains while the party and its policies are unpopular. That stands in contrast to midterm elections in 1994 and 2006, when the insurgent party gained congressional control after polls showed voter attitudes tilting toward them. Unfavorable View In the Bloomberg Poll, almost half of likely voters -- 49 percent -- said they had an unfavorable view of the Republicans. Democrats have a narrow advantage on favorability, 47 percent to 45 percent. In October 1994, the month before Republicans won enough seats to gain control of both the U.S. House and Senate, their party had a 7 percentage point advantage in positive ratings among registered voters, according to the NBC News/Wall Street Journal poll. In October 2006, before Democrats retook control of both chambers, a NBC/Journal poll showed their party with a sizable popularity advantage over Republicans. “People are insecure,” said J. Ann Selzer , president of Selzer & Co., a Des Moines, Iowa-based firm that conducted the nationwide survey on Oct. 7-10. “Their own money is tight and the current administration has not convinced them the nation will not go broke from big spending programs. That insecurity does not translate into trust for Republicans, however.” Economic Challenges Obama, 49, inherited an economy in crisis. Joblessness, which reached a 26-year high of 10.1 percent in October 2009, stood at 9.6 percent nationwide last month. Gross domestic product, which recorded a 5.0 percent annual growth rate in last year’s final quarter, slowed to 1.7 percent during 2010’s second quarter. The Standard & Poor’s 500 Index is up more than 44 percent since Obama took office in January 2009, though it’s risen only 4.5 percent this year. Much of Obama’s focus in his first year was on passing the health-care overhaul that aims to insure tens of millions of Americans, cut costs and bar insurers from rejecting customers with pre-existing medical conditions. In the new Bloomberg poll, the measure’s repeal is favored by 47 percent of likely voters, while 42 percent say it should be left alone. Still, the poll found strong backing for most of the law’s provisions. Three-quarters favor its ban on insurance companies denying coverage due to pre-existing conditions; 67 percent support allowing children up to age 26 to stay on their parents’ policies. Also, 73 percent want to keep the addition of more prescription-drug benefits for those on Medicare. Eight Provisions Among eight of the law’s provisions on which the poll sought opinions, repeal was backed by a majority of likely voters for just two: requiring everyone to have health insurance and taxing companies that offer especially generous coverage. Democrats have generally shied away from campaigning on the bill because of its overall unpopularity. The Republican “Pledge to America” is viewed as a good idea by 48 percent of likely voters, compared with 39 percent who term it a bad idea. Also, more than half agreed with a statement that the federal budget deficit is “dangerously out of control and threatens our economic future.” The Republican pledge is short on specific proposals. Keeping the promise to cut an estimated $100 billion from the federal budget next year, though, implicitly would slash spending for education, cancer research and aid to local police and firefighters, among other items. Deficit Reduction Most likely voters are opposed or lukewarm to sacrifices often mentioned in debates on reducing the deficit. At least half said that among 12 ideas that are commonly broached, a third should be taken off the table. These include raising the age of eligibility for Medicare, privatizing Social Security and reducing federal funding for disease research. Almost half of likely voters say the idea of cutting federal spending on roads, bridges and public transportation shouldn’t be considered, and there’s a comparable level of opposition to raising the age for Social Security benefits. On whether to renew tax-rate reductions enacted under President George W. Bush that are to expire at year’s end -- an issue that is dividing the parties -- likely voters are closer to Obama’s position. A plurality of them -- 43 percent -- support his goal of continuing the lower rates for individual income up to $200,000 and up to $250,000 for couples filing jointly, which accounts for about 97 percent of taxpayers, according to Internal Revenue Service data. Support for the Republican push to extend the cuts for all tax brackets was at 34 percent, while 20 percent backed letting all the reductions expire to help cut the deficit. Independent Voters The Republican advantage as the Nov. 2 election approaches is assisted by the party’s support from independent voters, a critical bloc that can make or break a candidate. The poll shows independents favoring Republican congressional candidates over Democrats, 35 percent to 29 percent. The most motivated voters -- those who say they will definitely vote and are extremely interested in the election -- lean Republican over Democrat, 51 percent to 37 percent. Also, 55 percent of Republicans say the election is “exceptionally important,” compared with 35 percent of Democrats and 41 percent of independents. “A smaller election favors Republicans,” Selzer said. “Democrats have moved into overdrive -- maybe too late -- to boost turnout, which will work to their advantage.” The Bloomberg Poll included interviews with 721 likely voters and has a margin of error of plus or minus 3.7 percentage points. ‘Other’ Choice Neither party cracks the 50 percent mark on the generic trial heat for Congress. Respondents were offered a choice of Republicans, Democrats or an “other” category. Democrats received support from 42 percent, while Republicans claimed 40 percent. The remaining 18 percent picked “other” or weren’t sure. For a House majority, Republicans need a net gain of 39 seats; to win the Senate, they need a net gain of 10. At least half of likely voters surveyed predicted that should Republicans win control of Congress, improvements would result for the economy, banks, small businesses, large corporations and the wealthy. By 46 percent to 40 percent, the likely voters think a Republican Congress would be better instead of worse for the middle class. Forty-one percent said they would personally benefit from a Republican takeover, while 29 percent say they would be harmed and 27 percent say there would be no change for them, with little variation by age or gender. Wrong Direction Almost two-thirds of likely voters say they believe the nation is headed in the wrong direction. Poll participant Nancy Watkins, 57, who considers herself an independent voter and lives in Eagle Point, Oregon, said she would like to see Republicans win congressional majorities to help “balance things out” between the legislative and executive branches of government. “They’re trying to say no on spending more money,” said Watkins, an area manager for a refuse company. “We are going to go bankrupt if we continue down the road of borrowing money.” Watkins said she thinks another advantage to Republicans taking control would be the removal of Nancy Pelosi as House speaker. “We have to get rid of Pelosi,” she said. “I hate that lady.” More than half of likely voters -- 52 percent -- have an unfavorable view of the California Democrat, while a third have a positive view of her. House Minority Leader John Boehner , an Ohio Republican in line to become speaker if his party wins the chamber, remains unknown to many likely voters, with 39 percent saying they aren’t sure of their opinion of him. Among those with a view, 29 percent said they had a favorable opinion of him, while 32 percent viewed him negatively. Missy Coombs, 52, a self-employed furniture refinisher who considers herself an independent voter, said she dislikes much of what she sees in American politics, including what she considers unrealistic expectations for economic recovery. “I think that we need to be a little more patient,” said Coombs, who lives in Holladay, Utah. “I think people are knee- jerking a little too much. To expect instant results is crazy.” To contact the reporter on this story: John McCormick in Washington at jmccormick16@bloomberg.net To contact the editor responsible for this story: Mark Silva in Washington at msilva34@bloomberg.net |
2024-10-08 | Bloomberg | California Obamacare Sign-Ups Exceed 28,000 in First Week | California said 28,699 people were signed up in the state’s health-insurance exchange in the first week, while New York had more than 40,000 sign up. The numbers for California, the largest U.S. state by population, were for the Oct. 1 to Oct. 5 period and exceeded expectations, Peter V. Lee, executive director of Covered California, said at a news conference today in Sacramento. New York, the third most-populous state, said in a statement that its pace of sign-ups shows the exchange is “working smoothly.” The Oct. 1 rollout of the Affordable Care Act exchanges has faced technical issues, with consumers unable to access parts of the U.S. government’s website that serves people in 36 states. California, one of 14 states running its own website , has fared better. Success is critical in California, where the Obama administration has sent almost $1 billion in exchange grants. “Looking back at this one week, the response has been nothing short of phenomenal,” Lee said. “We anticipated we’d have very low enrollment in the first week.” Open enrollment ends March 31, and Lee estimated that 500,000 to 700,000 Californians would enroll with subsidies by then. About 5.3 million Californians will have access to coverage through the exchange or on their own, with about half eligible for financial assistance by next year, according to the state’s website. An additional 1.4 million will be newly eligible for the state’s Medicaid program. New York Almost 2.7 million New Yorkers don’t have health insurance and more than 1 million will get coverage through the exchange, the state said on its website. The 40,000 figure reported is for people who completed the full application process and were found eligible for an insurance plan. The insurance exchanges are a core part of the 2010 law that seeks to provide health coverage for most of the 48 million uninsured Americans. People using the exchanges can select from health plans sold by private insurers and, depending on income, may be eligible to have their premium costs subsidized with federal tax credits. Some people also may be eligible for coverage under an expansion of Medicaid, the joint state-federal plan for the poor. The health law championed by President Barack Obama has been the focal point of the partisan budget dispute in Congress that led to the current government shutdown. To contact the reporter on this story: Alison Vekshin in San Francisco at avekshin@bloomberg.net To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net ; Reg Gale at rgale5@bloomberg.net |
2024-11-09 | Bloomberg | Osborne Says U.K. Finance Companies Outpacing U.S. Competitors in China | Chancellor of the Exchequer George Osborne said British banks and financial services companies are outpacing U.S. counterparts in China and that London is more hospitable toward Chinese investors. The comments came as Prime Minister David Cameron gained preferential access for U.K. companies to China’s securities markets when two of Britain’s leading financial institutions signed agreements to expand their business in Beijing. “They find it easier to do business with the U.K. than with the U.S.,” Osborne said in an interview in Beijing. “I don’t think there are some of the issues they find in the U.S. around what is sometimes presented as national security and sovereignty concerns.” The accord signed today comes as Royal Bank of Scotland Group Plc teamed with Guolian Securities Co. to underwrite bonds and shares and Aberdeen Asset Management Plc won approval for a $200 million-a-year investment fund. Standard Life Plc is also seeking approval for an insurance joint venture in China. “China and the U.K. agree to renew and expand their unrivaled program of bilateral technical cooperation and joint research on financial-sector reform and development,” the two nations said in a statement released in Beijing. Cameron and Osborne are in China with the largest-ever U.K. business delegation. The coalition administration has vowed to make trade the cornerstone of its foreign policy. Opening Doors The U.K. Treasury said Britain’s work with China on regulatory issues has opened doors for its companies. “I want to connect Britain up with the fastest-growing countries and the fastest-growing parts of the world,” Cameron told Sky News television after meeting with 400 entrepreneurs in Beijing. “We have brought a really big trade delegation here, bigger even than the one we took to India, some of Britain’s best-known companies and best-known names, coming here to deepen and expand our trading and economic relationship with China.” The two governments agreed to work together to improve financing for small companies. British companies will help build corporate and government bond markets, develop alternative investment vehicles and create an offshore market for the Chinese yuan. Both nations also agreed to push ahead with plans to allow some Chinese companies to list in London and to improve transaction technology, clearing systems and data management. To contact the reporters on this story: Gonzalo Vina in Beijing on gvina@bloomberg.net ; Robert Hutton in Beijing on rhutton1@bloomberg.net To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net . |
2024-04-05 | Bloomberg | Republicans to Unveil Budget Plan With Sweeping Changes | Republicans are set to propose a budget plan calling for fundamental changes in the U.S. government’s tax and spending policies, including overhauling the Medicare health-insurance program for the elderly. House Budget Committee Chairman Paul Ryan is scheduled today to release a plan that would cut more than $6 trillion from President Barack Obama’s budget over 10 years, phase out traditional Medicare and call for a revamp of the tax code. “This is a serious proposal,” Representative Tom Cole, an Oklahoma Republican, said in an interview. “We’re headed towards a big debate.” The plan carries political risk for Republicans because Democrats are sure to use proposals to cut some of the most popular federal programs as a cudgel before next year’s elections. “We are giving them a political weapon,” Ryan, a Wisconsin Republican, acknowledged on “Fox News Sunday.” The plan coincides with a separate fight over spending levels for the rest of this fiscal year. A partial government shutdown looms if lawmakers don’t agree on a plan by April 8. Public opinion polls show Americans want Congress to bring down the federal deficit, though without harming entitlements such as Medicare and Social Security or many discretionary spending programs. Yet it’s the expanding entitlement programs that pose the biggest threat to the government’s long-term fiscal standing, according to the Congressional Budget Office. Phasing Out Medicare Ryan’s proposal to end traditional Medicare calls for new beneficiaries, starting in 2022, to instead be provided subsidies to buy private health insurance. It would cap spending on Medicaid, the health-insurance plan for the poor, and give states more discretion over how to run the joint federal-state program. Ryan’s plan would also roll back so-called discretionary spending to below 2008 levels and freeze it there for five years. Even as Democrats denounce the changes, some of Ryan’s Republican colleagues want even bigger savings. Representative Mick Mulvaney said he wants Ryan’s budget to cut the annual deficit from $1.4 trillion this year to less than $1 trillion in 2012, which would mean finding more than $400 billion in savings in a single year. “That’s important for us to send a strong message that we have a dramatic reduction off of this year’s deficit,” the South Carolina lawmaker said in an interview. “We have pushed Chairman Ryan harder than he’s ever been pushed before.” ‘Pledge to America’ Many Republicans, pointing to their 2010 campaign “ Pledge to America ” to put the government on a path to a balanced budget, want Ryan’s plan to erase the deficit within 10 years. Debt-cutting proposals last year by the leaders of Obama’s deficit commission and by a group of independent budget experts would take more than 25 years to balance the federal budget. Obama’s budget request, announced in February, would reduce the deficit to $750 billion in 2015 though it would rise again after that, according to CBO. None of that is ambitious enough for Representative Joe Walsh, a freshman Republican from Illinois who said he will have a “real hard time” voting for Ryan’s budget if it doesn’t erase the deficit. “It would be hard to go back home and take to my people back home a plan that will balance the budget in 20 or 25 years,” Walsh said. “I couldn’t do that with a straight face. I think a lot of us couldn’t.” ‘Ideological Agenda’ He said the Republican Study Committee, a bloc of fiscal conservatives in the House, will produce an alternative budget plan that achieves balance in the next decade. Ryan hasn’t said how quickly his plan would bring down the deficit, whether it would balance the budget at some point or where he intends to find his savings. He won’t be able to depend on Democratic votes to pass his budget, as Republicans did last month with the stopgap measure currently funding the government. Ryan’s plan “is the same old ideological agenda, except this time on steroids,” Representative Chris Van Hollen of Maryland , the ranking Democrat on the Budget Committee, said in an interview on Bloomberg Television. Ryan’s budget began in a big hole because of his party’s unwillingness to raise taxes. Obama’s budget proposal would reduce the deficit in part by relying on more than $1 trillion in tax increases, including by allowing President George W. Bush ’s tax cuts for households earning more than $250,000 to expire at the end of 2012. Republicans will have to replace that with equivalent spending cuts to show the same amount of deficit reduction. Ryan’s budget proposes to set the top individual and corporate income tax rates at 25 percent. Reshaping Medicare Ryan’s plan to convert Medicare into what he calls a “premium support” program wouldn’t take effect until 2022 to allow current beneficiaries and those nearing retirement to remain in the current system. That means it won’t yield big savings any time soon. The Pentagon’s $700 billion budget, one of the government’s single-biggest expenses, has grown by 75 percent over the past decade, not including war costs. Yet Defense Secretary Robert Gates has signaled his opposition to cuts larger than Obama proposed. “I don’t intend to be a lot to the left of a Democratic president on defense,” said Cole of Oklahoma. A Bloomberg National Poll conducted March 4-7 showed that Americans consider the widening deficit and debt second only to unemployment as the most pressing issues confronting the U.S. On Medicare, just 22 percent of respondents said benefits should be reduced. The poll also showed the public doesn’t support the Republicans’ deep cuts to social and scientific programs. To contact the reporter on this story: Brian Faler in Washington at bfaler@bloomberg.net To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net |
2024-07-06 | Bloomberg | Hanover Insurance Says Catastrophes Cost Up to $160 Million | Hanover Insurance Group Inc. (THG) , the Massachusetts-based carrier that sells business and personal coverage, said second-quarter natural disasters, including a tornado in Joplin Missouri, cost the company $145 million to $160 million. Losses were $2.08 to $2.30 per share, after tax, the Worcester-based insurer said today in a statement distributed by PR Newswire. To contact the reporter on this story: Brooke Sutherland in New York at bsutherland5@bloomberg.net To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-05-09 | Bloomberg | Singapore Stocks, Currency Gain as Ruling Party Retains Power in Elections | Singapore stocks posted Asia’s second- biggest gain and the currency gained the most in a week as the ruling party retained power with 81 out of 87 parliamentary seats after facing the biggest electoral battle. Prime Minister Lee Hsien Loong won by a record-low 60.1 percent margin, down from 66.6 percent in 2006 and 75.3 percent in the 2001 polls. While the May 7 election led to the defeat of Foreign Affairs Minister George Yeo, it was better than the Straits Times newspaper’s worst-case scenario of the possible loss of 14 seats from three multiple-seat group districts. “There has been concern among investors that if you have a big opposition win, there might be some policy discontinuity and that could be bad for the market,” Tham Mun Hon, Hong Kong- based regional strategist at Daiwa Securities Group Inc., said in an interview on Bloomberg Television. “Now you don’t have that issue, the market should be biased to the upside.” The benchmark Straits Times Index (FSSTI) climbed 1.2 percent to close at 3,136.94 in Singapore, rebounding from a 2.5 percent loss in the week leading to the weekend polls. The Singapore dollar rose 0.2 percent to S$1.2329, the biggest advance since April 29, after falling 0.8 percent last week. The opposition, which tripled its seats, has called for more limits on the influx of foreign workers and urged steps to contain record home prices. The city’s success has fueled wider income inequality , with the world’s highest share of dollar- millionaire households adding to pressure on consumer prices. The Workers’ Party ’s victory included the opposition’s first- ever group constituency of five candidates. Property Stocks Rebound Property stocks including CapitaLand Ltd. (CAPL) and City Developments Ltd. (CIT) led declines in the run-up to the election amid concern there will be increased pressure to rein in home prices. CapitaLand, the nation’s biggest developer, dropped 3.5 percent last week, while rival City Developments Ltd. lost 5.1 percent, both posting their biggest weekly losses since the five days ended March 18. CapitaLand gained 0.3 percent to S$3.23, and City Developments increased 2.7 percent to S$11.54, the biggest gain since March 25. Singapore in January raised down payment requirements for second mortgages and extended the period homeowners must hold properties to avoid a sales tax as it intensified efforts to curb speculation after prices rose to a record. The government has been attempting to rein in home prices since 2009 when it barred interest-only loans for some housing projects. ‘Fundamental Rethinking’ “There could be a fundamental rethinking of government policies, with the opposition gaining influence,” said Chua Hak Bin, a Singapore-based economist at Bank of America Merrill Lynch. “In the past decade, the government has been very pro- business, opting to cut costs for companies rather than supporting individuals during times of crisis.” The ruling party’s loss of its first multiple-seat district in Aljunied meant the departure of Yeo. Opposition groups contested a record 82 of 87 seats. The five-seat constituency of Lee Kuan Yew , 87, the Cambridge University-trained lawyer who led the island from British rule and became its first premier, was the only one not contested. “Investors will be comforted that even though the opposition has more seats, the PAP is still in charge and that many of the government’s policies will continue,” said Vasu Menon, vice-president of wealth management at Oversea-Chinese Banking Corp., Singapore’s second-largest lender. “But clearly, they now have to listen to the people and tweak some of their policies accordingly.” Drive for Growth Singapore’s drive for growth in the past decade has included the opening of two casino-resorts and bringing the Formula One race to the island to boost tourism. More than a third of Singapore’s 5.1 million population is made up of foreigners and permanent residents, whose growing numbers have led to increased competition for housing, jobs and education. Smaller than New York City and without natural resources, Singapore’s gross domestic product was about S$285 billion ($231 billion) last year, compared with S$6.9 billion in 1960. GDP surged 14.5 percent last year, the most in Asia. Singapore is the only Asian country with AAA ratings from Moody’s Investors Service, Standard & Poor’s and Fitch Ratings. “Your votes tell the world that Singapore is not just an economic success to you,” Low Thia Khiang, who led the Workers’ Party with a record of six opposition seats in Parliament, said in his victory speech yesterday. “You want a more caring political leadership that truly listens to every Singaporean.” Growth ‘Dividend’ The government said it hasn’t neglected its citizens for the sake of growth. In this year’s budget, the government plans to spend S$6.6 billion on benefits to ease the burden of inflation, and is distributing cash to all adult citizens as a “dividend” from record growth. “Generally people should feel that their wealth increased, but people may still feel poor if they cannot afford housing,” said Gabriel Yap, executive chairman of GCP Global Pte, an investment management firm, who was a stockbroker in the city- state for more than a decade. “Even if they can afford their homes, people essentially spend a lifetime paying off their mortgage. So where is the quality of life?” Singapore stocks and the currency were also be lifted by stronger-than-forecast growth in jobs in the U.S., bolstering confidence in the world’s largest economy and Singapore’s second-biggest export market. The Standard & Poor’s 500 Index climbed 0.4 percent on May 6 after the data. S&P 500 Futures gained as much as 0.8 percent today. “It’s a relief to the market,” said Craig Chan, a Singapore-based Asia foreign-exchange strategist at Nomura Holdings Inc. “The PAP still holds a massive majority, more than what the opposition was hoping for.” To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net. To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net ; Lars Klemming at lklemming@bloomberg.net |
2024-07-15 | Bloomberg | ICBC's Plan to Invest in Cathay Venture in Shanghai May Fail, Daily Says | Industrial & Commercial Bank of China Ltd.’s plan to invest in Cathay Life Insurance Co.’s venture in Shanghai may fail because Cathay wants to retain a controlling stake, the Economic Daily News reported, without saying where it got the information. To contact the reporter on this story: Weiyi Lim in Taipei at wlim26@bloomberg.net |
2024-06-28 | Bloomberg | U.S. Stocks Pare Losses on Bets Europe Nearing Debt Pact | U.S. stocks pared losses in the final hour of trading amid speculation European leaders were nearing an agreement to halt contagion from the debt crisis. After the market close, European Union President Herman Van Rompuysaid leaders agreed to spend 120 billion euros ($149 billion) to stimulate growth. JPMorgan Chase & Co. (JPM) tumbled 2.5 percent after the New York Times said trading losses from credit derivatives may total as much as $9 billion, exceeding the firm’s initial estimate. Health-care (S5HLTH) stocks in the Standard & Poor’s 500 Index fell 0.3 percent as the Supreme Court upheld the core of President Barack Obama’s industry overhaul. The S&P 500 dropped 0.2 percent to 1,329.04 at 4 p.m. New York time, paring a loss of as much as 1.4 percent. The Dow Jones Industrial Average slid 24.75 points, or 0.2 percent, to 12,602.26. Volume for exchange-listed stocks in the U.S. was 6.8 billion shares, about in line with the three-month average. European leaders began a two-day summit in Brussels today intended to chart a path out of their financial crisis. Stocks pared losses as German Chancellor Angela Merkel canceled a press briefing and her spokesman said talks on a growth accord were ongoing. “Europe has been the driver of this market,” said Walter “Bucky” Hellwig, who helps manage $17 billion at BB&T Wealth Management in Birmingham, Alabama. “The postponement of a conference call was a signal for traders to put on more risk. Another ‘kick the can’ would be viewed as favorable.” Economic Data Equities tumbled earlier today as the number of applications for unemployment benefits hovered last week near the highest of the year, showing little improvement in the labor market. The U.S. economy grew 1.9 percent in the first quarter, reflecting a gain in consumer spending that now shows signs of cooling as the labor market weakens. Concern about a worsening of Europe’s debt crisis and a global slowdown has taken the S&P 500 (SPX) down 5.6 percent this quarter. Technology and financial shares have had the biggest losses in the period, tumbling at least 9.6 percent. Financial shares in the S&P 500 dropped 0.2 percent, paring a loss of as much as 1.9 percent. Barclays Plc’s record $451 million fines for interest rate manipulation sent bank shares plunging as U.S. and U.K. authorities pursue sanctions in a global investigation of more than a dozen lenders. JPMorgan slumped 2.5 percent to $35.88. The New York Times reported that the lender’s losses have increased in recent weeks as it sought to exit its holdings, citing unidentified former traders and executives at the bank. ‘Major Loss’ JPMorgan won’t have a “major loss” in 2012 following the lender’s disclosure of losses from credit derivatives that could amount to more than $2 billion this quarter, Richard Bove said. “We’re not expecting JPM to run a major loss,” Bove, an analyst with Rochdale Securities LLC, said today in a Bloomberg Television interview with Tom Keene. “I don’t believe that there’s any likelihood that the liquidity of the company is going to be affected by this.” Citigroup Inc. (C) dropped 2.6 percent to $26.39, trimming a decline of as much as 5.4 percent. The bank is not one of the lenders being investigated by the U.K.’s Financial Services Authority for attempting to manipulate the London interbank offered rate, the company said in an emailed statement today. Tenet Healthcare Corp. (THC) led hospitals and Medicaid insurers higher while commercial health plans led by WellPoint Inc. (WLP) fell after the U.S. Supreme Court upheld most of President Barack Obama’s health-care overhaul. Tenet Rallies Tenet, the third-biggest hospital chain, rose 5.4 percent to $5.25, while Medicaid plan Molina Healthcare Inc. (MOH) climbed 8.6 percent to $23.16. Indianapolis-based WellPoint, the second- largest U.S. health insurer, declined 5.2 percent to $65.90. Cisco Systems Inc. (CSCO) , the largest maker of computer- networking gear, slipped 1.5 percent to $16.48 after Lazard Ltd. said in a note today that the company may be seeing weaker-than- expected demand trends. Family Dollar Stores Inc. (FDO) slumped 2.8 percent to $67.20. The owner of more than 7,200 discount shops in the U.S. narrowed its fiscal 2012 profit forecast. Rival Dollar Tree Inc. (DLTR) retreated 2.4 percent to $52.18, while Dollar General Corp. (DG) declined 0.5 percent to $53.73. News Corp. (NWSA) dropped 1.4 percent to $21.99, after climbing 11 percent over the previous two days. It announced plans to split into two publicly traded entities focused on publishing and entertainment after shareholder pressure prompted the biggest reorganization since Rupert Murdoch built the media empire. In Talks Genworth Financial Inc. rallied 11 percent to $5.43. The life insurer and mortgage guarantor surged as hedge fund Highfields Capital Management LP said it is in talks with management about increasing the value of its stake. U.S. executives are tapping into their record pile of cash for the first time in four years as they drive spending on plants and equipment to an all-time high. Cash held by S&P 500 companies, excluding financial institutions and utilities, fell 1.4 percent to $1.01 trillion in the first quarter, according to data compiled by Howard Silverblatt , a New York-based senior index analyst at S&P. Capital spending, based on 12-month trailing data compiled by Bloomberg for the entire index, rose 3.3 percent during the same period and reached a record $66.6 billion last month. While record-low interest rates may have prompted companies to build more factories, concern over the European debt crisis and expiration of Bush-era tax cuts will make executives reluctant to keep increasing spending, said David Sowerby, a money manager at Boston-based Loomis Sayles & Co. ‘Great Concern’ “It will only persist to the extent that companies remain reasonably confident in the business outlook,” Sowerby, whose firm oversees about $170 billion, said in a telephone interview. “With the great concern in Europe as well as the pending expiration of the tax cuts, you could see a return to rebuilding cash and less capital expenditure.” Companies amassed $1.03 trillion in cash at the end of last year after beating analysts’ earnings estimates for 12 straight quarters, data compiled by S&P and Bloomberg show. Combined profits by S&P 500 stocks rose 9.9 percent to a record $92.09 a share in 2011, Bloomberg data show. Executives are seeking ways to give back money to shareholders. While share buybacks fell by 6.2 percent to $84.3 billion in the first quarter from a year earlier, dividends increased by 14 percent to $64.1 billion, S&P data show. To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net ; Julia Leite in New York at jleite3@bloomberg.net To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net |
2024-07-08 | Bloomberg | U.S. Said to Plan Separate Leverage Ratios for Bank Firms | U.S. regulators may set two separate capital standards for the largest banks, one for parent companies and another for their government-backed lending units, said a person with knowledge of the matter. One leverage ratio would set capital at 6 percent of assets and the other would be 5 percent under the joint proposal scheduled to be published tomorrow by the Federal Reserve , the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency, the person said. The person, who asked for anonymity because the information hasn’t been made public, didn’t specify which levels would apply to the parent or lending unit. The global standard is 3 percent. Regulators are raising ratios for the eight largest U.S. banks as part of an international effort to prevent another crisis like the one in 2008 that almost destroyed the financial system. The leverage ratio represents a firm’s cushion against losses when loans and other investments sour. The FDIC plans to vote on the thresholds tomorrow in Washington. Spokesmen for the three banking regulators declined to comment or didn’t respond to inquiries. Letting holding companies meet a lower leverage requirement than their lending units could help New York-based Morgan Stanley (MS) , owner of the world’s largest brokerage, which keeps most of its derivatives contracts at the parent company. Other institutions hold almost all their contracts at banking units insured by the FDIC. Bank Impact Five of the six largest U.S. lenders, including No. 1-ranked JPMorgan Chase & Co. (JPM) , would fall under a 6 percent level at the holding company level, according to estimates by Keefe, Bruyette & Woods Inc. last month. KBW hasn’t calculated how they would fare under a separate ratio for the banking units. KBW had estimated Morgan Stanley’s holding company leverage ratio to be 3.8 percent under new global rules. The international standard was set at 3 percent in 2010 by the Basel Committee on Banking Supervision. The group of central bankers and regulators also compelled banks to count some off-balance-sheet assets that previously were left out, a change that drives up the amount of capital needed. Unlike the system that now prevails, the new leverage ratio doesn’t give banks a break for less-risky holdings. Some of the largest banks have been allowed to provide their own estimates of how perilous their holdings were, a system known as risk-weighting. As doubts arose about the accuracy of those calculations, U.S. regulators came under pressure to go beyond the Basel minimum. To contact the reporter on this story: Yalman Onaran in New York at yonaran@bloomberg.net To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net ; Christine Harper at charper@bloomberg.net |
2024-05-13 | Bloomberg | Partnership CEO Sees IPO Valuing Firm at More Than $1.5 Billion | Partnership Assurance Group Plc, a U.K. annuity provider, may be valued at “significantly” more than 1 billion pounds ($1.5 billion) when it goes public next month, Chief Executive Steve Groves said. The insurer, which offers annuities to people with medical conditions, will to raise 120 million pounds in the initial public offering to pay down debt, the firm said in a statement today. Cinven, the private-equity firm that acquired Partnership for about 200 million euros ($259 million) in 2008, will also sell a stake, leaving a free-float of at least 25 percent. “I would see us positioned within the growth stocks in the insurance space,” Groves said in a telephone interview today. That would suggest a valuation of “significantly above” 1 billion pounds, he said. The insurer is going public after motor insurer Esure Group Plc (ESUR) raised 604 million pounds in an IPO in March and Royal Bank of Scotland Group Plc (RBS) raised about 1.3 billion pounds by selling stakes in Direct Line Group Plc, Britain’s biggest home and motor insurer. Companies in Europe , the Middle East and Africa have raised $6.7 billion in IPOs this year, 70 percent up on the year-earlier period, according to data compiled by Bloomberg. Partnership controls about 26 percent of the U.K.’s so-called enhanced annuity market, which sells guaranteed lifetime incomes to pensioners with pre-existing medical conditions and has grown by about 33 percent annually since 2006, Groves said. The firm has an advantage over competitors because it has the oldest proprietary data in market, stretching back to 1995, after purchasing the information from Pension Annuity Friendly Society in 2005, Groves said. “With high-quality data you’re able to price more accurately,” he said. “We use that data to give our customers, who are people with a medical condition, better incomes than they could get elsewhere.” Operating profit rose 42 percent to 112 million pounds in 2012, the insurer said. To contact the reporter on this story: Kevin Crowley in London at kcrowley1@bloomberg.net To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net |
2024-02-01 | Bloomberg | U.S. Cattle Herd Slumping to 61-Year Low Means Longer Beef Rally | The cattle herd in the U.S., the world’s largest beef producer, probably shrank to the smallest in 61 years as drought ravages pastures from Texas to Nebraska and boosts feed costs. Ranchers held 88.92 million head of cattle as of Jan. 1, according to the average estimate of eight analysts surveyed by Bloomberg News. That’s down 2 percent from a year earlier and is the fewest for that date since 1952. The U.S. Department of Agriculture is scheduled to release its semiannual inventory report at 3 p.m. in Washington. The worst U.S. drought since the 1930s cut Midwest corn harvests for a third straight year, sending prices to a record in August. Crop-insurance claims for 2012 surged as payouts reached a record $13 billion. Higher feed costs discouraged herd expansions, even as retail-beef prices surged to a record. Dry weather has spread over a wider area since 2011, when parched fields led to $3.23 billion of losses on livestock in Texas , the biggest cattle-producing state. “Drought in the southern plains in 2011 expanding to the Corn Belt and other northern areas last year is instrumental in numbers being down,” Tim Petry, a livestock economist at North Dakota State University in Fargo, said in a telephone interview. “With lower production, I fully expect consumers to pay higher prices for beef.” Cattle futures advanced 8.9 percent last year on the Chicago Mercantile Exchange, the fourth straight annual gain. Prices rose 0.4 percent in January to $1.328 a pound yesterday, capping the fourth monthly gain. Beef Rally The price of all-fresh retail beef climbed to record $4.797 a pound in November, USDA data show. While costs eased to $4.766 in December, prices still were 4.7 percent higher than a year earlier. Consumers may pay as much as 4 percent more for beef this year, after prices rose 6.4 percent last year, according to the USDA. That was the biggest expected increase of any food item tracked by the agency and more than double the 2.6 percent rise forecast in overall food costs. Restaurants from steakhouses to hamburger joints are projecting accelerating beef costs. On average, profit for U.S. cow-calf operations dropped to $57 per head last year from $87 in 2011, said Ron Plain , a livestock economist at the University of Missouri in Columbia, citing the Livestock Marketing Information Center, a researcher funded by the industry and government. Producers are ready to expand “as soon as the weather cooperates,” he said. Dry Weather More than 57 percent of the U.S. was in drought as of the week ended Jan. 29, compared to 36 percent a year earlier, according to the U.S. Drought Monitor. About 27 percent of the High Plains is in “exceptional” drought, compared to less than 0.1 percent in that category a year earlier, according to the Monitor in Lincoln, Nebraska. Drought conditions are expected to persist through the Great Plains and spread across most of Texas, according to a three-month U.S. outlook by the Climate Prediction Center that’s valid through April 30. The number of young, female cattle held back for breeding probably rose 0.5 percent to 5.24 million head, according to the Bloomberg survey. An increase that small will just maintain the cow herd rather than signal an expansion, said Lane Broadbent , a KIS Futures Inc. vice president in Oklahoma City. “The thing that’s holding them back is dry weather,” Broadbent, who has been a commodity broker for more than two decades, said in a telephone interview. “If we were to have any kind of rain, it’s not going to grow by big amounts, but it’s going to grow some.” Slow Process Going from herd liquidation to an expansion is a slow process, according to Plain, who has studied the industry for three decades. Calves have nine-month gestation periods and take 20 months to reach slaughter weight, he said. Animals typically are fattened on corn until they weigh about 1,200 pounds (544 kilograms), when they are sold to meatpackers. The calf crop on Jan. 1 probably slid to 34.63 million head, down 1.9 percent from a year earlier, the Bloomberg survey showed. That would be the 18th straight decline, according to Sterling Marketing Inc., an agricultural economic researcher and adviser in Vale , Oregon. U.S. beef production will total 11.273 million metric tons (24.9 billion pounds) this year, the lowest since 2004 and down 3.7 percent from a year earlier, according to the USDA. Beef Costs Wendy’s Co. (WEN) , the Dublin, Ohio-based fast-food chain, expects most of its commodity inflation to come from beef, Stephen Hare, the chief financial officer, said during a presentation on Jan. 16. At Ruth’s Hospitality Group Inc. (RUTH) , the Heathrow, Florida- based owner of upscale steakhouses, beef costs may climb 10 percent to 15 percent or more, after rising 14 percent last year, Michael O’Donnell, the chief executive officer, said during a presentation on Jan. 16. “The herds are low,” Kelly Wiesbrock, who helps manage $1.3 billion of assets for Harvest Capital Strategies, a San Francisco-based hedge fund, said in a telephone interview. “The folks that I talk to, restaurant companies and grocery stores, everyone is continuing to see higher beef prices, and they think they’re going to go even higher.” To contact the reporter on this story: Elizabeth Campbell in Chicago at ecampbell14@bloomberg.net To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net |
2024-09-07 | Bloomberg | Obama Said to Seek More Than $300 Billion Package to Boost Jobs | President Barack Obama plans to propose sparking job growth by injecting more than $300 billion into the economy next year, mostly through tax cuts, infrastructure spending and direct aid to state and local governments. Obama will call on Congress to offset the cost of the short-term jobs measures by raising tax revenue in later years. This would be part of a long-term deficit reduction package, including spending and entitlement cuts as well as revenue increases, that he will present next week to the congressional panel charged with finding ways to reduce the nation’s debt. Almost half the stimulus would come from tax cuts, which include an extension of a two-percentage-point reduction in the payroll tax paid by workers due to expire Dec. 31 and a new decrease in the portion of the tax paid by employers. Obama is set to lay out his plans in an address to Congress tomorrow as unemployment remains at 9.1 percent more than two years after the official end of the worst recession since the Great Depression. Payroll growth stalled last month. The unemployment rate and the sluggish recovery will be central issues as Obama runs for re-election next year. Former Massachusetts Governor Mitt Romney , a leading Republican seeking the party’s nomination to face Obama in November 2012, yesterday offered his own 59-point economic plan, including tax cuts for those making $200,000 or less a year. He and seven other Republican candidates are scheduled to debate tonight in California. Plan Previewed The main components of Obama’s jobs plan, though not its scale, have been largely telegraphed by the administration. For weeks, people familiar with deliberations have said the White House is considering tax incentives, infrastructure and assistance to local governments. Obama has stressed construction and tax cuts in recent public speeches Obama has pressed Congress throughout the year to renew the payroll tax holiday along with extended unemployment benefits , which also expire Dec. 31. Backing for a reduction in the employer contribution to the payroll tax has been under consideration since at least June. Obama’s jobs plan follows the contours of his $830 billion 2009 economic stimulus package, which also stressed tax cuts, infrastructure spending and assistance to local governments. Still, tax cuts would account for a larger portion of the proposal he will lay out this week. ’New Proposals’ White House press secretary Jay Carney refused to give details of what the president will offer, saying at a briefing yesterday that it would include “some new proposals that you have not heard us talk about.” Much of Obama’s plan may have trouble passing the U.S. House, where leaders of the Republican majority have signaled opposition to new spending that would add to the federal budget deficit. House Speaker John Boehner of Ohio and Majority Leader Eric Cantor of Virginia released a letter to Obama yesterday saying their objections to the 2009 stimulus, which they called a “large, deficit-financed, government spending bill,” have been validated by continued high unemployment. Obama said in a Sept. 5 speech in Detroit that he would challenge Republicans to support tax cuts, which a person familiar with administration discussions said would be targeted toward middle-class Americans to spur consumer spending. Local Government Aid “You say you’re the party of tax cuts?” Obama said before the annual Metro Detroit Central Labor Council rally. “Well then, prove you’ll fight just as hard for tax cuts for middle- class families as you do for oil companies and the most affluent Americans.” The direct aid to local governments would focus on halting layoffs of teachers and first responders. Education will be a theme in Obama’s address, and he will also propose as part of his infrastructure program money for school construction. Some of the infrastructure spending would go toward roads, bridges and other surface transportation projects. White House officials say they anticipate congressional Republicans may go along with some of the tax cuts Obama is seeking, including the extension of the payroll tax cut. Still, they expect to meet Republican resistance to much of the package. Job Training To address the problem of long-term unemployment, Obama will likely propose a national program, modeled after a Georgia initiative that allows workers who receive unemployment insurance to train for jobs at businesses at no cost to the employer. Obama, at a town-hall meeting in Atkinson, Illinois , last month, called the Georgia Works initiative a “a smart program.” Obama also plans to propose measures to make it easier for homeowners to refinance mortgages. Obama will unveil a framework for the deficit reductions next week, including changes to Medicare and Medicaid, in addition to other cuts in contributions to military pensions and farm subsidies. After a partisan fight over the deficit and raising the government’s debt limit took the country to the brink of default, Standard & Poor’s lowered the U.S.’s credit rating to AA+ from AAA on Aug. 5. The rating firm said the government is becoming “less stable, less effective and less predictable.” Even so, the government’s borrowing costs fell to record lows as Treasuries rallied. The yield on the benchmark 10-year Treasury note fell from 2.56 percent on Aug. 5 to 1.97 percent yesterday. The note added seven basis points to 2.05 percent today. Top Rankings Moody’s Investors Service and Fitch Ratings affirmed their top rankings on the U.S. Concern over the economy has increased as growth weakened during the first half of the year to its slowest pace of the recovery and market pessimism has risen over the ramifications of the European debt crisis. Still, stocks rebounded from a four-day global slump that drove valuations to the lowest level since 2009 following news of Obama’s plans. The MSCI All-Country World Index surged 2.1 percent at 10:21 a.m. in New York and the Standard & Poor’s 500 Index jumped 1.7 percent. Recent signs of economic weakness have led private economists to raise forecasts for the unemployment rate next year. The median forecast for unemployment during next year’s fourth quarter, when the presidential election will be held, is 8.5 percent, according to 51 economists surveyed by Bloomberg News Aug. 2 through Aug. 10. Since World War II, no U.S. president has won re-election with a jobless rate above 6 percent, with the exception of Ronald Reagan , who faced 7.2 percent unemployment on Election Day in 1984. The jobless rate under Reagan had come down more than 3 percentage points during the prior two years. To contact the reporter on this story: Albert Hunt in Washington at ahunt1@bloomberg.net To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net . |
2024-07-26 | Bloomberg | Gift From Fed Stops as Profits Shrink at Banks Led by JPMorgan | The Federal Reserve’s policy of keeping interest rates persistently low, which has helped boost bank earnings over the last six quarters, is beginning to make it harder for the biggest U.S. lenders to make money. Firms including JPMorgan Chase & Co. and Bank of America Corp. , which have benefited from record low costs of funding mortgages and other assets, face a squeeze on their net interest margins -- the difference between what they pay to borrow money and what they get for loans and on securities. Analysts say the margins may have peaked in the first half and that banks will struggle to replace high-yielding assets as they pay off. The Fed’s near-zero target rate for interbank overnight lending that has buoyed profits for so long will have an opposite effect in coming quarters, said Christopher Whalen , a Federal Reserve Bank of New York analyst in the 1980s and co- founder of Institutional Risk Analytics in Torrance, California. “That’s the gift from the Fed,” Whalen said of the rate. “But at the same time, the cash flow on your assets eventually starts to re-price and match the low-rate environment. The zero- rate environment is eventually bad for everybody.” Net interest margins fell by 26 basis points to 3.06 percent at New York-based JPMorgan from the first to second quarters, 17 basis points at Citigroup Inc. to 3.15 percent and 16 basis points at Bank of America to 2.77 percent, according to company reports. A basis point is 0.01 percentage point. ‘Massive Issue’ The reduced margins, along with lower lending volumes, translated to a drop in net interest income of $1.02 billion at JPMorgan, the second-largest U.S. bank by assets and the largest by market value. Net interest income fell $849 million at Bank of America , the biggest lender by assets, and $522 million at New York-based Citigroup, which is third. “It’s a massive issue for the industry, impacting banks at different timing,” said Matt O’Connor , an analyst at Deutsche Bank AG in New York. “The universal banks -- Bank of America, Citi and JPMorgan -- are feeling the pressure now and will continue to feel pressure for the foreseeable future.” Brian Moynihan , 50, chief executive officer of Charlotte, North Carolina-based Bank of America, told analysts on a July 16 conference call that the “sustained low-rate environment” was hitting revenue and earnings and will continue to affect margins. JPMorgan CEO Jamie Dimon , 54, told analysts the day before that the bank’s net interest margin will continue “coming down a bit as we reposition the portfolio.” Wells Fargo Wells Fargo & Co. , the fourth-biggest bank, reported that net interest margin increased by 11 basis points to 4.38 percent in the second quarter, which the bank said was the result of higher-than-expected income from soured mortgage loans. By lowering its target rate to almost zero in 2008, the Fed helped save many banks from collapse. The move reduced the industry’s average cost of funding mortgages and other interest- earning assets to 1.03 percent in the first quarter of this year, the lowest rate on record according to the Federal Deposit Insurance Corp. , from 3.58 percent in the third quarter of 2007. While it also depressed the yield banks earn on their investments and loans to 4.86 percent from 6.93 percent over the same time period, the net interest margin hit a seven-year high of 3.83 percent in the first quarter, according to the most recent FDIC data available. Fed Signals The Fed has signaled that slowing inflation and a sluggish economy will push any interest-rate increase into 2011. It said in a June 23 policy statement that “underlying inflation has trended lower” and repeated a pledge to keep the benchmark interest rate near zero for “for an extended period.” The language led most economists polled by Bloomberg to predict the Fed won’t raise rates until the second quarter of next year. Futures traded on the CME Group Inc. exchange showed a 37.6 percent likelihood yesterday that the benchmark lending rate will be raised in April 2011. That likelihood was 55 percent a month ago. “Once you get into this low-rate environment for 12 to 18 to 24 months, somewhere in there assets start re-pricing to the lower interest-rate environment,” said Marty Mosby , a Memphis, Tennessee-based analyst with Guggenheim Partners LLC. Banks, reluctant or unable to lend, are shrinking their balance sheets. That’s starting to eat into cash flow at the biggest lenders. ‘No Loan Demand’ JPMorgan’s balance sheet was reduced by $121.8 billion in the second quarter to $2.01 trillion, which is also down from a peak of $2.25 trillion in the third quarter of 2008. Citigroup’s total assets fell by $64.6 billion in the second quarter to $1.94 trillion. Wells Fargo’s total assets , which were up $2.2 billion from the first quarter to $1.23 trillion in the second, have fallen from a peak of $1.31 trillion in December 2008. “There’s no loan demand, and long-term rates have declined so much,” Deutsche Bank’s O’Connor said. “So as you look out over the next few quarters, it’s a potentially very dire situation for the overall industry.” Loans generate some of the highest yields for banks, said Jason Goldberg , an analyst at Barclays Capital in New York. “In an environment where loan growth is tough to come by, it’s a tough challenge,” Goldberg said in an interview. “When your highest-yielding asset isn’t there to put on the balance sheet, it’s tough.” Goldberg said banks are getting squeezed as the yield curve, which charts the difference between rates on short- and long-term debt, flattens out. The spread between yields on three-month Treasury bills and 30-year Treasury bonds fell to 387 basis points July 23, down from 471 basis points January 11, the highest level in at least a decade, according to data compiled by Bloomberg. Regional Banks Because most banks tend to fund their long-term investments such as 30-year mortgages with short-term debt, they benefit when short-term rates are lower and make less money when short- and long-term rates come closer together. “Generally, the steeper the curve, the better,” Goldberg said. “It’s steep by historical standards, but it’s not as steep as it was earlier this year.” Regional banks won’t start feeling the pain until later this year or early next year, partly because their reliance on deposits for funding has insulated them from broader market shifts, O’Connor and other analysts said. The average rate paid on checking-account deposits was 0.53 percent on July 13, the lowest level since February 2005, according to Bankrate.com. ‘Hit the Floor’ “We’ve hit the floor in deposits, you can’t go any lower, and your asset yields are declining,” said Nancy Bush , a bank analyst and co-founder of NAB Research LLC, an Annandale, New Jersey-based independent research firm. “So there’s only one way to go for the margin, and that’s down.” PNC Financial Services Group Inc. said its cost of deposits in the second quarter fell to 71 basis points from 81 basis points in the first quarter and 125 basis points a year ago. Those lower funding costs won’t be enough to offset the yields the Pittsburgh-based bank is earning from securities, mortgages and credit cards, Chief Financial Officer Richard Johnson told analysts on a July 22 conference call. “This downward trend reflects the continuing migration of the portfolio to lower-risk asset classes, such as U.S. Treasury and U.S. agency mortgage-backed securities, along with the impact of the lower-rate environment,” Johnson said. “Yields on securities will continue to decline as we replace maturities and prepayments with lower-risk securities.” Johnson said the bank, the sixth-largest by deposits in the U.S., will generate lower yields and profit margins in the second half of the year. “When banks can’t find yielding assets and their book is shrinking, the cash flow on their book is shrinking,” said Whalen of Institutional Risk Analytics. “Everybody’s starving to death.” To contact the reporters on this story: Dawn Kopecki in New York at dkopecki@bloomberg.com ; Dakin Campbell in San Francisco at dcampbell27@bloomberg.net Bank of America Corp. president and chief executive officer Brian T. Moynihan. Photographer: Jonathan Fickies/Bloomberg July 16 (Bloomberg) -- Brian Moynihan, chief executive officer of Bank of America Corp., discusses the company's second-quarter profit reported today. The largest U.S. lender said net income dropped to $3.2 billion, or 28 cents a share before preferred dividends, from $3.22 billion, or 33 cents, in the same period a year earlier. Moynihan, speaking from Charlotte, North Carolina, talks with Erik Schatzker on Bloomberg Television's "InsideTrack." (Source: Bloomberg) //<![CDATA[ $(document).ready(function () { $(".view_story #story_content .attachments img.small_img").each(function(){ var self = $(this); if (self.width() != 190){ self.width(190); } }); }); //]]> |
2024-01-25 | Bloomberg | United Technologies Sees Asset Sales Curbing New Stock Needed for Goodrich | United Technologies Corp. (UTX) plans to sell assets to help minimize the amount of stock it needs to offer to pay for the $16.5 billion purchase of Goodrich Corp. (GR) , Chief Financial Officer Greg Hayes said. The maker of Sikorsky helicopters will raise funds on the debt and equity markets about a month before the acquisition closes at midyear, Hayes said today in an interview. He wouldn’t detail any assets to be sold beyond calling them “non-core.” United Technologies has projected raising about $4 billion of equity, Hayes said. The Hartford, Connecticut-based company will identify the assets to be sold by March 15 and is working with Standard & Poor’s and Moody’s Investors Service to keep its debt rating intact, he said. “We’re working hard to reduce the amount of equity we’re going to issue,” he said. “As the CFO of the company I would tell you what I really hate would be to lose my credit rating with S&P and Moody’s.” United Technologies agreed to buy Goodrich in September, adding the world’s biggest maker of aircraft landing gear to an aerospace portfolio that includes Sikorsky, Pratt & Whitney jet engines and Hamilton Sundstrand aviation equipment. Sikorsky is a “core” asset and isn’t being considered for disposal, Hayes said on a conference call. United Technologies has an A2 rating and a stable outlook from Moody’s and an A grade with a negative outlook from S&P. To contact the reporter on this story: Thomas Black in Dallas at tblack@bloomberg.net To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net |
2024-06-18 | Bloomberg | Unemployment Prompts Online Training Challenging Colleges: Jobs | Acupuncturist Courtney Wallace was struggling to pay off $60,000 in student debt. Seeking more lucrative work through tapping skills she’d learned as a kid building websites, she went to TrainSignal Inc., which provides web-based computer training for $49 a month. A month later, she was hired as a systems specialist at a consulting company in Chicago. “It’s becoming less and less about formal education,” said Wallace, 25, who moved to Washington in the middle of last year for a higher-level tech support specialist job at The Public Health Institute. “People just want to know that you can do the job.” While online courses have been around since the early days of the Internet, job training has remained the purview of community colleges and vocational schools, requiring students to spend thousands of dollars to learn word processing, financial spreadsheets and web development. With unemployment hovering at 7.6 percent, companies like TrainSignal and Lynda.com Inc. are pitching what they call a more efficient and affordable route for people who need retraining on their own schedule. They’re part of a revival in web education startups. Venture capitalists poured $632.3 million into the market in 2012, up 41 percent from the previous year, and the most since the dot-com bubble’s peak in 2000, according to the National Venture Capital Association. Lynda, based in Carpinteria, California , raised $103 million in January led by Spectrum Equity and Accel Partners , the largest venture funding on record for an education company, based on NVCA data. Momentum Building For job training, momentum for online education is building. Richard Gallanti, a vocational counselor at Rehabilitation Perspectives Inc. in Burke, Virginia , offers Lynda.com to every client, mostly professionals, like police officers and firefighters, who were injured on the job and need skills for office work. Clients using Lynda can learn Microsoft Corp.’s Word, Excel and PowerPoint programs and Autodesk Inc.’s (ADSK) AutoCAD software for architects, and typically find jobs in about half the time that it takes for those who stick with traditional classroom training, Gallanti said. Follow Progress Subscriptions start at $25 a month per person. A single course at a local community college on basic Word or Excel would be more expensive and may be available only at a particular time and place, he said. He can also follow clients’ progress to make sure they’re doing the necessary assignments. “Cost is one thing, but it’s not the only thing -- it’s availability,” Gallanti said. “I need it now. I can’t wait for the next semester or the next class.” Requiring Americans who are receiving unemployment insurance to enroll in classes, including online courses, would save the government money, James Sherk, a senior policy analyst at the Washington-based Heritage Foundation , wrote in a Feb. 26 report. Improving skills would make the jobless more employable, he wrote. And because online progress can be easily tracked, it would encourage the 5 percent to 10 percent of people on assistance he estimates who are abusing the system by not seeking work to take a job. Had the program been in place this year, it would have saved $1.5 billion to $3 billion, he said. Ridding Fraud “It’s a conservative lower-bound estimate that comes just by getting rid of fraud,” Sherk said in an interview. He derived his estimate of the number of people abusing the system and money saved based on various state studies, including in Maryland and Utah , that show more-stringent training or job-search requirements to remain on unemployment insurance reduced the number of those receiving benefits or shortened the duration of assistance. The Heritage Foundation, a nonprofit headed by former Republican Senator Jim DeMint of South Carolina , advocates for smaller government. “We haven’t seen a lot of this implemented on a large scale,” Sherk said. “Part of the reason we put out the report was to try and encourage policy makers to think about this as an option.” Retraining is a growing niche for Lynda, which gets most of its business selling subscriptions to universities and corporations. Lynda has more than 2 million users, and is finding increasing traction with job seekers, said co-founder Lynda Weinman. “In a super-competitive job market like today, it’s not as simple as you go to school and get certification,” Weinman said. “The personalized aspect of online is incredibly powerful and efficient, because nobody has the time and a lot of people don’t have the money.” New Marketplaces Lynda and Schaumburg, Illinois-based TrainSignal have both been around for more than a decade, and have recently moved from mailing out instructional DVDs to offering on-demand services on the Web. Startups like Skillshare Inc. and Curious.com Inc. have established new marketplaces, allowing experts in subjects such as photography, basic car repair and computer programming to put low-cost courses online for anyone to take. Online programs alone can’t solve the training needs of the jobless. At the Henry Street Settlement in New York , a 120-year-old social service center, some 5,000 job seekers from the city’s Lower East Side neighborhood come through every year. Many don’t own a computer and lack any Internet proficiency, said David Garza, the executive director. He offers the example of a building superintendent who lost his job after 20 years and needed to first learn how to launch a browser. Lack Skillset “People don’t necessarily have the skillset or ability to focus on the tools to navigate through some of these online courses,” Garza said. A big part of the curriculum is providing training so clients can apply for restaurant and retail jobs online, he said. Henry Street has a computer lab, sponsored by Microsoft, which provides the software for free. Community colleges “do a tremendous amount of online training themselves,” said David Baime, senior vice president for government relations for the American Association of Community Colleges in Washington. “There is something about being in a classroom that some people like,” he said. “It really depends on the individual.” For Ina Lee, Internet-based education proved to be the transition she needed after losing her job of 12 years as a graphic designer in 2009. While doing some freelance work, Lee heard about Lynda from a friend who persuaded her to register. She took courses on Adobe Systems Inc.’s (ADBE) Dreamweaver for website development and Apple Inc.’s Final Cut Pro for video editing. New Skills That gave her the skills to get hired last year as director of creative services at the Elizabeth House Family Life Center Inc., a nonprofit in Wilmington, Delaware. “It helped me greatly,” said Lee, 49. “Dreamweaver really gave me the power to talk to Web developers with confidence,” she said. Yet Lee isn’t convinced that classrooms are a thing of the past. While unemployed, she also took a two-week course at a community college, gaining some basic web development skills. In addition to the benefits of an in-person instructor, she made some connections that could prove beneficial in the future. “I love meeting people face to face,” she said. On TrainSignal, novices who come to the site with no background in computers can be ready for an entry-level job in three months from the training they get in hardware, operating systems and networks, said Chief Executive Officer Scott Skinger. TrainSignal offers the classes and a third party administers the certification. Promote Services TrainSignal has chosen not to raise venture money. The company expects to almost double this year to $12 million in sales and jump to $20 million next year, according to Skinger. The growth will better enable the company to promote its services to employment agencies, Skinger said. “It’s a matter of when, not if,” he said. “We need more time to reach out and make people aware of it. It’s a logical fit.” As Wallace, the former acupuncturist, was looking to change careers, she chose TrainSignal because she could get basic training for computer maintenance and then learn more as she was ready to advance. Wallace’s improved skills landed her a higher-level job, moving her to Washington from Chicago, and almost doubling her pay to $55,000 a year. Since starting at the Public Health Institute a year ago, she’s taken TrainSignal classes on VMware Inc. (VMW) virtualization technology and is looking into getting certified on using Cisco Systems Inc.’s routers and switches. “I see myself moving towards being an I.T. director, moving up through the ranks,” said Wallace. “The more skills I have the more marketable I become.” To contact the reporter on this story: Ari Levy in San Francisco at alevy5@bloomberg.net To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net |
2024-06-26 | Bloomberg | Court Ruling Fuels Fear Among Hispanics in Arizona | Erika Ovalle joined several dozen activists in the Phoenix heat outside the Immigration and Customs Enforcement office to protest the U.S. Supreme Court decision they say opens the door to racial profiling in Arizona. “People are living in fear,” said Ovalle, 32, a U.S. citizen who volunteers with Puente Movement, an immigrant-rights group in a state that has become the epicenter of the nationwide battle over illegal migration. “It is criminalizing brown skin.” As police prepare to begin enforcing the sole provision of Arizona’s first-of-its-kind immigration law to withstand the high court’s scrutiny, supporters and opponents agreed on one thing: The statute will face more legal challenges, especially if concerns over profiling or prolonged detentions materialize. The justices in Washington struck down three provisions of the Arizona law that created state-level immigration crimes, in a ruling that reaffirmed the federal government’s exclusive role in setting policy. They left intact the most contentious provision -- known as “show me your papers” -- that requires local police to check the immigration status of anyone they suspect is in the country illegally during stops, arrests or detentions. The justices said the implementation had to respect constitutional protections. Constitutional Challenge The close scrutiny of how the law is enforced will likely shape how police in Arizona, and in four other states that have similar provisions in their laws, proceed. “Officers will have to do it very, very carefully,” said Steven Schwinn, an associate professor at the John Marshall Law School in Chicago. “If they start racially discriminating or holding people longer than they should be, then that kind of enforcement would be subject to a constitutional challenge.” The ruling gives President Barack Obama ’s administration most of what it sought when it sued to block the Arizona law. Supporters of the law said the federal government isn’t doing enough to crack down on what officials have estimated are the 11.5 million people in the country illegally. The decision may undercut parts of similar laws in the other states and will have repercussions for the November presidential election as Obama and Republican candidate Mitt Romney vie for Hispanic votes. Arizona, where officials say the 370-mile border with Mexico is the crossing point for half the nation’s illegal aliens, became the first state to enact such a law, in 2010. Since then, Alabama , South Carolina , Georgia , Utah and Indiana have passed their own measures aimed at illegal immigration. All are facing court fights. Brewer ‘Vindicated’ Arizona Governor Jan Brewer declared that the court ruling “vindicated” her state’s efforts to fight illegal immigration, even as she said additional legal challenges were likely. “The eyes of the world will be upon us,” she said at a press conference. Earlier this month, Brewer, a Republican, ordered police agencies to review a training DVD in preparation for the ruling. Police, she said, “have been trained so that they can enforce this law efficiently, effectively and in harmony with the Constitution.” Maricopa County Sheriff Joe Arpaio, who has become the face of local immigration enforcement and drawn nationwide scrutiny for staging what he calls “crime-suppression” sweeps in Latino communities, said after the ruling that he’ll do nothing different. Civil rights groups said they were already building cases. Anthony Romero, executive director of the American Civil Liberties Union , said the group and its allies have amassed an $8.7 million war chest to fight state immigration enforcement. ACLU Ready “If it takes millions of dollars to restore this nation of immigrants, so be it,” he said at a press conference with other groups in Washington. The ACLU has joined in several other suits challenging the laws in Arizona and other states, most of which were put on hold pending the high court ruling. “We will bring these lawsuits wherever and whenever they come.” In the 5-3 ruling, the court said states can help the federal government enforce its immigration laws yet suggested they can’t enact their own penalties for immigration-related violations. The remaining provision of the Arizona law envisions police officers performing status checks by contacting U.S. Immigration and Customs Enforcement, the federal agency that maintains a database of immigration records. Congress “has encouraged the sharing of information about possible immigration violations,” Justice Anthony Kennedy wrote for the majority. Raising Issues Kennedy suggested that the upheld provision would be invalid if it caused police to hold people longer than they otherwise would. “Detaining individuals solely to verify their immigration status would raise constitutional concerns,” he wrote in the opinion, in which he was joined by Chief Justice John Roberts and Justices Ruth Bader Ginsburg, Stephen Breyer and Sonia Sotomayor. Kennedy left the door open for other lawsuits, saying the ruling “does not foreclose other pre-emption and constitutional challenges to the law as interpreted and applied after it goes into effect.” What is left, if implemented in the narrow way the court seemed to lay out in its opinion, almost mirrors existing federal policy, said Adam Cox, a professor at New York University School of law. ‘Near-Complete Victory’ “This is a near-complete victory for the federal government, and I don’t think the majority opinion confers additional authority on the states to implement immigration laws,” Cox said. He said the U.S. Department of Homeland Security already requires the immigration status of those arrested to be checked -- and much effort beyond that in implementing the approved part of the law could lead the court to strike down the measure in the future. While the Arizona law had been blocked by a lower court, a similar provision had been allowed to go forward in Alabama. Mary Bauer, legal director for the Southern Poverty Law Center in Montgomery, which challenged Alabama’s law, said she expects further challenges based on civil-rights violations for detainees. Her office has already seen evidence that immigrants are being detained longer than necessary and that the enforcement is being done in a racially discriminatory way, she said. The center has heard from individuals who were detained even after ICE verified their legal status, Bauer said. “It was like the sheriffs didn’t want to believe it,” she said. Limited Response In Arizona, although ICE will verify the immigration status of people stopped by police, it doesn’t have a big enough staff to respond in person to every call, two senior administration officials told reporters on a conference call, officials said. The agency will focus its efforts on people who are priorities for deportation, such as national security threats, convicted criminals or recent border crossers, said the officials, who described the department’s policy on the condition that they not be named. That means people stopped by Arizona police and who don’t fall into the priority categories won’t be deported -- a point that Arizona’s lawyer, Paul Clement , made during oral arguments to the court. Federal immigration officials are needed to interview, detain and remove illegal immigrants. Maricopa County’s Arpaio, who learned about the court’s ruling while waiting to appear on ABC News, said he was disappointed that the part of the Arizona law that would have allowed local police to detain illegal immigrants on state law violations was struck down. “The question is when we stop someone and don’t have a charge against them but they are here illegally, what do I do with that person?” asked Arpaio, whose county is the largest in Arizona. He said he’s concerned the federal government will let most illegal immigrants he arrests go free. “What do I do with the person? Do I dump them on the streets and say ‘Welcome to the United States of America ?’” To contact the reporter on this story: Amanda Crawford in Phoenix at acrawford24@bloomberg.net To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg. |
2024-05-23 | Bloomberg | Insurers Must Improve Benefits for New Health Exchanges | Half the people who buy their own health insurance, rather than depend on an employer, are in plans that have fewer benefits than what the U.S. health-care law will require beginning in 2014, a study found. UnitedHealth Group Inc. (UNH) , WellPoint Inc. (WLP) and other companies that participate in the insurance exchanges mandated by the law will have to improve benefits in some plans to meet requirements that they cover at least 60 percent of the cost of a person’s care, according to a study published today in Health Affairs. The research was paid for by the Commonwealth Fund , a New York- based nonprofit group that supports expanded insurance coverage. About 51 percent of people with individual coverage have average deductibles of $3,881, the study showed, five times the amount for employer group plans. In addition, coverage sold to single people today may exclude pre-existing conditions, and most individual policies don’t include maternity care without costly riders, said Jon Gabel, the researcher who led the study. “Deductibles will have to be lowered,” said Gabel, a researcher at NORC in Bethesda, Maryland , in a telephone interview. “The out-of-pocket limits may have to be lower. They will have to offer maternity benefits” as well as coverage for mental-health and substance-abuse treatment. About 62 percent of people who now try to buy insurance for themselves in the so-called individual market report that they can’t find an affordable policy, said Sara Collins , vice president for affordable health insurance at Commonwealth. Those who do “often end up with coverage that’s really not adequate,” she said in a telephone interview. Bronze, Silver, Gold Health insurance to be sold in the government-run exchanges will be called bronze, silver, gold or platinum, depending on how much of the cost of care is covered. The law also caps annual out-of-pocket costs and eliminates limits on lifetime benefits. The exchanges are supposed to start in 2014. The health law caps out-of-pocket costs for exchange plans. If the exchanges had been running in 2010, the limit would have been $5,950 for a single person or $11,900 for a family, according to the study. Improving current plans to meet the health law’s requirements will probably raise consumer’s up-front premiums, Gabel said. “Other things held constant, the cost of the plan will go up,” he said. The health law forbids insurers from cherry- picking only healthy customers, and adding sick people to insurance pools will also raise costs, he said. Price Competition People with policies today that don’t meet the health law’s requirements will have to “buy up” in 2014, said Robert Zirkelbach , a spokesman for America’s Health Insurance Plans, the industry’s lobby group in Washington , in an e-mail. “Any time new benefits are added to a policy that adds to the cost of coverage.” Premium increases may be mitigated by other changes, Gabel said. The exchanges should reduce administrative costs for insurers and “make for more price competition” among plans, he said. The health law also limits, to 20 percent of premium revenue, the amount insurers can keep for administrative costs and profit, and creates subsidies to reduce the cost of insurance for low- and middle-income people. “Presumably a lot of people on these really crummy plans in the study could potentially be eligible for premium subsidies,” Collins said. “It’s really going to be important that other provisions of the law address the premium growth issue.” Researchers from the benefits consulting firm Towers Watson (TW) also participated in the study, which examined insurance plans in five states: California , Florida , Michigan , Pennsylvania and Utah. Those states account for about 31 percent of customers in U.S. individual insurance markets, according to the study. NORC is a research organization affiliated with the University of Chicago. 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 |
2024-04-27 | Bloomberg | Bank of China First-Quarter Profit Rises 41% on Loans, Beating Estimates | Bank of China Ltd., the nation’s third-largest lender by market value, said first-quarter profit rose 41 percent, aided by rising demand for loans and fee-based services. Net income climbed to 26.23 billion yuan ($3.8 billion), or 0.10 yuan a share, from 18.57 billion yuan, or 0.07 yuan a year earlier, Beijing-based Bank of China said in a statement today. Profit beat the 25 billion yuan average estimate of six analysts surveyed by Bloomberg. Bank of China and larger rivals Industrial & Commercial Bank of China Ltd. and China Construction Bank Corp. benefited from an economy that grew 11.9 percent last quarter, driving demand for everything from mortgages to trade finance. Still, government moves to crack down on asset bubbles fueled by record credit may cause an increase in bad debts, said Tang Yayun, an analyst at Northeast Securities Co. “Without any policy shock, Chinese banks can report very stable profit growth till 2012,” Tang said before the earnings announcement. “But the tide was shifting fast over the past two weeks with all those tightening measures hitting hard on the property market and eventually the banks and probably the economy.” China’s government raised down-payment requirements and mortgage rates on second home purchases on April 15, after the nation’s economy expanded at the fastest pace in three years in the first quarter and property prices jumped a record 11.7 percent in March. Banks were told to stop lending to people who are purchasing their third home or more. Bank Earnings Shares of Bank of China, led by Chairman Xiao Gang, have dropped 3.8 percent in Hong Kong this year, compared with a 2.8 percent slide in the city’s benchmark Hang Seng Index. The stock fell 1 percent to HK$4.04 today before the release. Bank of China isn’t alone in reporting earnings that topped analyst estimates. Deutsche Bank AG, Germany’s biggest bank, today reported a bigger-than-anticipated 48 percent increase in first-quarter profit as improved earnings at the investment bank outweighed a loss from asset and wealth management. U.S. rivals Bank of America Corp., JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co., beneficiaries of $140 billion in taxpayer funds, posted combined first-quarter profits of $13.4 billion, the most since the second quarter of 2007 before the credit crisis began, as their investment-banking arms capitalized on fixed-income trading. Limiting Credit China’s policy makers aim to avert asset bubbles and restrain inflation by limiting new credit at 7.5 trillion yuan in 2010, and have required banks to set aside more deposits as reserves twice this year. Chinese lenders awarded a record 9.59 trillion yuan in credit last year, powering a government plan to stimulate the economy. Bank of China advanced 402 billion yuan of new loans in the first three months, taking the amount outstanding to 5.31 trillion yuan. The bank’s capital adequacy ratio, a key measure of financial strength, fell to 11.09 percent as of March 31, from 11.14 percent three months earlier as loan growth ate into financial buffers. The China Banking Regulatory Commission requires a minimum 11.5 percent capital ratio for large state-owned banks. In a separate statement, BOC Hong Kong (Holdings) Ltd., the Hong Kong unit of Bank of China, said net operating income before impairment allowances climbed to HK$6.41 billion ($826 million) in the quarter from HK$5.96 billion a year earlier. Shareholder Mandate Bank of China last month won approval from shareholders to raise as much as 40 billion yuan selling convertible bonds. Investors also granted the lender a mandate to sell as much as 20 percent of its outstanding stock in Hong Kong or Shanghai or in both markets. The Chinese lender has hired five banks including Credit Suisse Group AG and Merrill Lynch & Co. to help arrange a Hong Kong share sale, people familiar with the plan said on April 13. Bank of China’s net interest income, the difference between revenue from lending and deposit costs, rose 21 percent to 44.5 billion yuan in the first quarter even as its net interest margin narrowed to 2.04 percent. Net fee and commission income increased to 15.67 billion yuan. Bank of China lost more on overseas mortgage investments than all other Chinese lenders combined as the U.S. collapse sparked a credit seizure in 2007 and 2008. As of March 31, Bank of China held $3.87 billion of investments in subprime mortgage-related securities, securities backed by so-called Alt-A home loans and other “non-agency” mortgage investments. The lender wrote back 968 million yuan of earlier charges on those holdings in the first quarter. Bank of China said it reduced holdings of debt securities issued by Portugal, Ireland, Italy, Greece and Spain in the first quarter by 2.26 billion yuan, to 4.76 billion yuan. For Related News and Information: Top financial stories: FTOP <GO> Stories on China Banks: TNI CHINA BNK <GO> Banking industry debt and equity monitor: BANK <GO> Relative value comparison: 3988 HK <Equity> RVC <GO> |
2024-02-09 | Bloomberg | AIG Has $4.1 Billion Cost on Inadequate Reserves at Property-Casualty Unit | American International Group Inc. said higher-than-forecast claims costs cut fourth-quarter profit by $4.1 billion, and $2 billion previously designated to repay its bailout will be used to bolster the property-casualty unit. The insurer reached an agreement with the U.S. Treasury Department permitting the company to keep $2 billion of proceeds from the sale of Star Life Insurance Co. and Edison Life Insurance Co., New York-based AIG said today in a statement. Funds will be used by the Chartis property-casualty unit for losses tied to coverage including workers’ compensation and asbestos liability. AIG is adding to reserves, a sign that it underestimated the cost of claims, while rivals including Travelers Cos. have been taking profits after determining they had set aside more funds than necessary. AIG Chief Executive Officer Robert Benmosche , seeking private capital to replace government funds, needs to reassure investors the company has adequate resources for policyholders after competitors said the company undercharged to retain business after its 2008 bailout. The reserve strengthening is “another indication that previous management teams at AIG were aggressive” in their assumptions about how profitable coverage would be, said Jonathan Hatcher, a Jefferies Group Inc. analyst in New York. “The current management wants to go on the road expressing reserve conservatism.” AIG had to strengthen reserves by about $2.3 billion in the fourth quarter of 2009. Workers’ claims sometimes surface years after a policy is sold as employees report back and neck injuries. Asbestos claims may be submitted by commercial clients as lawsuits emerge. ‘Adverse Development’ AIG dropped $1.04, or 2.5 percent, to $41.33 at 9:52 a.m. in New York Stock Exchange composite trading. The insurer has dropped about 14 percent this year. “The strengthening to Chartis loss reserves reflects adverse development on prior accident years,” AIG said in the statement. AIG has previously had to retain funds from asset sales to prop up its insurance units rather than immediately repay the government. AIG retained about $2.4 billion for Chartis in 2009 under pressure from regulators and ratings firms that monitor the insurer’s ability to pay policyholder claims, Mark Herr, a company spokesman, said at the time. The $2.4 billion came from selling a U.S. auto insurer and a stake in a reinsurer. Bailed Out The insurer was bailed out in 2008 in a rescue that swelled to $182.3 billion after losses on bets tied to subprime mortgages. Regulators including Federal Reserve Chairman Ben S. Bernanke said the company’s insurance operations were stable. Chubb Corp. CEO John Finnegan has said insurer bailouts punished the best-run companies and impeded the functioning of markets. “The opportunities for financially strong companies to absorb the business of weakened competitors were initially compelling,” Finnegan said in the Warren, New Jersey-based insurer’s annual letter to shareholders in March. “This is as it should be in a free market unimpeded by federal intervention. But the willingness of the federal government to prop up weakened competitors by artificially injecting capital is troubling.” AIG is appealing to private investors to replace government capital that accounts for 92 percent of its stock. The firm, which has sold assets including non-U.S. life insurance units and a consumer lender, plans to keep a plane-leasing subsidiary, the Chartis property-casualty insurer, a mortgage guarantor, and the SunAmerica Financial Group life business, Benmosche, 66, has said. Star, Edison AIG completed a deal this month to sell Star and Edison to Prudential Financial Inc. for about $4.8 billion, including $600 million in assumed debt. While AIG will retain $2 billion, other cash proceeds will be given to the Treasury, according to the agreement with the department. The transfer will be the first repayment of the Treasury since the department exchanged its $49 billion preferred stake for common shares last month. Mark Paustenbach , a spokesman for the Treasury Department, declined to comment. To contact the reporter on this story: Andrew Frye in New York at afrye@bloomberg.net. To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-10-13 | Bloomberg | Consumer Comfort Hovered Near Low Last Week | Consumer confidence hovered last week near a record low as Americans turned more pessimistic about the state of the U.S. economy. The Bloomberg Consumer Comfort Index fell to minus 50.8 in the week ended Oct. 9 from 50.2 the prior period. It was the fourth consecutive reading lower than minus 50, something that has happened just three previous times in its 26-year history. The outlook for spending may dim as the economic recovery fails to generate enough jobs to reduce unemployment and wage gains trail inflation. Policy makers face growing discontent as political independents, homeowners, full-time workers and even the highest earners are among groups whose views are souring. “Inflation-adjusted income gains are not sufficient to support real spending even at the current relatively restrained pace,” said Joseph Brusuelas , a senior economist at Bloomberg LP in New York. “The process of paring down debt, while attempting to maintain a living standard that is slipping for millions of consumers, has damaged overall consumer confidence.” The index was minus 54 in November 2008, the lowest level since records began in 1985. The gauge has seen four-week stretches of readings lower than minus 50 just once in late 2008 and twice in 2009. The gauge has averaged minus 46 so far this year, less than 2010’s minus 45.7. Jobless Claims Another report today showed the number of Americans filing claims for jobless benefits was little changed last week, showing the labor market is making scant progress. Applications for unemployment insurance payments decreased 1,000 in the week ended Oct. 8 to 404,000, the Labor Department said. The number of people on unemployment benefit rolls dropped to the lowest level in six months. The U.S. trade deficit was little changed in August at a four-month low of $45.6 billion as exports held close to an all- time high, Commerce Department figures showed today. Stocks declined after JPMorgan Chase & Co.’s earnings declined and the European Central Bank said forcing investors to take losses in bailouts is a risk to financial stability. The Standard & Poor’s 500 Index dropped 0.7 percent to 1,199.39 at 9:35 a.m. in New York. Among the comfort index’s three components, the measure of the state of the economy dropped to minus 87.1 last week from minus 84.3. The share of households rating the economy as poor, 58 percent, was the highest since April 2009, in the midst of the recession. Personal Finances The gauge of personal finances decreased to minus 11.5 last week from minus 9.1. The buying climate index climbed to minus 53.7 from minus 57.3. It reached a three-year low of minus 61 in late September. Levi Strauss & Co. is among companies bracing for tepid consumer spending this holiday season after back-to-school shoppers balked at paying higher prices for its namesake jeans and Dockers pants. “It is hard to imagine a very robust holiday season compared to last year,” Chief Financial Officer Blake Jorgensen said in a telephone interview this week from San Francisco , where closely held Levi is based. “Until you see real job growth, you’re not going to see real economic momentum,” Jorgensen said. “The U.S. has a long- term issue with unemployment that for the average consumer is going to remain challenging.” Employers added 103,000 workers to payrolls in September, and the jobless rate was at 9.1 percent for a third consecutive month, according to Labor Department figures issued last week. Jobless Rate Unemployment has exceeded 8 percent since February 2009, the longest stretch of such elevated joblessness since monthly records began in 1948. Through September, the economy had recovered about 2.09 million of the 8.75 million jobs lost as a result of the 18-month recession that ended in June 2009. Sentiment among respondents who own their homes and among registered independents dropped last week to the lowest level in data going back to 1990. Confidence for households earning more than $50,000 a year fell to the second-lowest in the data. “Given their status as key swing voters, discontent among independents signals serious danger for political incumbents,” Gary Langer , president of Langer Research Associates LLC in New York, which compiles the comfort index for Bloomberg, said in a statement. “Incumbents are not alone in the danger zone,” he said, “also consider retailers.” Political squabbling is among reasons consumers are losing confidence. The Senate derailed President Barack Obama ’s effort to enact a $447 billion jobs plan this week, falling short of the 60 votes needed to advance the program. Federal Reserve Federal Reserve policy makers last month announced more unconventional measures to stimulate growth. In a bid to bring down longer-term lending rates, the central bank said it would use the proceeds from the sale of shorter-term debt to buy securities with maturities from six to 30 years. The central bank said some officials last month wanted to keep further asset purchases as an option to boost the economy as they saw “considerable uncertainty” that growth will pick up, according to minutes of the meeting released yesterday. The Bloomberg Consumer Comfort Index is based on responses to telephone interviews with a random sample of 1,000 consumers aged 18 and over. Each week, 250 respondents are asked for their views on the economy, personal finances and buying climate; the percentage of negative responses is subtracted from the share of positive views and divided by three. The most recent reading is based on the average of responses over the previous four weeks. The comfort index can range from 100, indicating every participant in the survey had a positive response to all three components, to minus 100, signaling all views were negative. The margin of error for the headline reading is 3 percentage points. Field work for the index is done by SSRS/Social Science Research Solutions in Media, Pennsylvania. To contact the reporter on this story: Carlos Torres in Washington at schandra1@bloomberg.net To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net |
2024-06-15 | Bloomberg | Japan's Notes Rise for Second Day as Greek Downgrade Boosts Safety Demand | Japan’s five-year notes rose for a second day after Moody’s Investors Service cut Greece’s credit rating, spurring demand for the relative safety of the Asian nation’s debt. Five-year yields fell from near the highest this month after Moody’s yesterday cut Greece’s ranking four steps to junk, citing “substantial” risks to economic growth due to financial austerity measures. The Bank of Japan will hold its key interest rate at 0.1 percent at the end of a two-day policy meeting today, according to all 14 economists surveyed by Bloomberg News. “Markets remain sensitive to developments in Europe as there’s no consensus yet about how austerity measures will affect nations in the region and their economies,” said Junko Nishioka , chief economist at RBS Securities Japan Ltd. in Tokyo. “The unclear outlook continues to prompt investors to seek safer assets, keeping a lid on Japan’s bond yields.” The yield on the 0.4 percent note due June 2015 fell one basis point to 0.405 percent as of 10:51 a.m. in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The price rose 0.049 yen to 99.975 yen. Five-year yields climbed to 0.425 yesterday, matching the highest since May 31. Ten-year bond futures for September delivery gained 0.09 to 140.45 at the Tokyo Stock Exchange. Ten-year yields were unchanged at 1.23 percent. Ten-year yields may fall to 1.20 percent by the end of September, RBS’s Nishioka said. Should her forecast prove accurate, investors who buy the securities today would make a 0.6 percent return. Bank of Japan Moody’s said its lower rating for Greece “incorporates a greater, albeit, low risk of default.” The Greek government agreed to cut spending, raise taxes and trim wages to qualify for a 110 billion-euro ($134 billion) aid package from the European Union and the International Monetary Fund. The gain in Japanese notes was tempered before reports that economists said will show the global recovery remains on track. The Federal Reserve Bank of New York’s general economic index rose to 20 in June from 19.1 the previous month, according to a Bloomberg survey before today’s report. Japan’s tertiary industry index advanced 2.5 percent in April, according to another Bloomberg survey before the data is released tomorrow. “Risk-on sentiment is still intact and bonds can be sold anytime,” said Tadashi Matsukawa , a manager of the fixed-income division at PineBridge Investments Japan Co., which manages the equivalent of $69 billion. “Ten-year yields around 1.20 percent are too low and not attractive to investors.” The Ministry of Finance will sell 1.1 trillion yen ($12 billion) of 20-year bonds tomorrow. Primary dealers, which are required to bid at government debt sales, often reduce debt holdings before auctions in case prices decline before they can pass on the new securities to investors. Twenty-year yields rose half a basis point to 1.97 percent. To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net . |
2024-10-17 | Bloomberg | S&P 500 Surges to Record on Fed Bets After Debt Deal | U.S. stocks rose, sending the Standard & Poor’s 500 Index to a record, as speculation grew that the Federal Reserve will maintain the pace of stimulus after Congress ended the budget standoff. American Express Co. rallied the most in nearly two years after reporting third-quarter profit that beat analysts’ estimates. Newmont Mining Corp., the second-largest gold miner, jumped 4.6 percent as the price of the precious metal surged. International Business Machines Corp. sank 6.4 percent after posting its sixth consecutive drop in quarterly sales. Goldman Sachs Group Inc. dropped 2.4 percent as the bank reported a 20 percent drop in revenue. The S&P 500 rose 0.7 percent to 1,733.15 at 4 p.m. in New York, surpassing the previous record of 1,725.52 from Sept. 18. The Dow Jones Industrial Average fell 2.18 points to 15,371.65, held down by IBM and Goldman Sachs. About 6.6 billion shares changed hands on U.S. exchanges, 12 percent above the three-month average. “The taper seems a little bit further out, certainly than anybody expected eight weeks ago and maybe even just a couple of weeks ago,” Walter Todd , chief investment officer at Greenwood Capital Inc., said in a phone interview from Greenwood, South Carolina. He helps manage $950 million. “It keeps a lid on rates and provides more liquidity for risk assets like stocks. People are back to focusing on the individual company dynamics that occur during earnings season.” The S&P 500 gained 2.4 percent during the 16-day government closure that ended yesterday after President Barack Obama signed a bill to fund the government through Jan. 15 and extend the borrowing authority through Feb. 7. Shutdown Effects Investors will now weigh the shutdown’s effects on corporate earnings and economic growth as the impasse fueled bets that the Fed will delay reducing its $85 billion in monthly bond purchases. Pacific Investment Management Co. said the central bank will postpone tapering. The Fed “may now have no choice but to stay longer in its intense policy experimental mode –- due both to the likelihood of weaker data and to a perceived need to take out insurance for the economy against future political dysfunction,” said Pimco Chief Executive Officer Mohamed El-Erian in a CNBC blog posting. The “fiscal shenanigans” undermined the case for tapering, Dallas Fed President Richard Fisher, an opponent to increasing stimulus, said today. Kansas City Fed President Esther George, who has voted this year against expanding stimulus, said the Fed has enough data to assess the economy’s strength and should taper even amid fiscal “uncertainty.” The central bank next convenes Oct. 29-30. Broad Rally The Fed stimulus has helped the equity gauge surge 156 percent from its March 2009 low. The index has jumped 22 percent this year and climbed to its previous intraday record of 1,729.86 on Sept. 19, a day after the Fed unexpectedly delayed tapering at its last policy meeting. The rally in stocks this year has pushed valuations to a three-year high and is the broadest since at least 1990. The S&P 500 trades at 16.5 times reported operating profit, a 17 percent increase from the beginning of 2013, according to data compiled by Bloomberg. Some 445 stocks in the gauge have posted year-to-date gains through yesterday, data show. The second-broadest advance in the period was in 1995, when 434 stocks in the benchmark gained through Oct. 16. Equities could come under pressure as companies from Knoll Inc. to NCI Inc. have said they expect the shutdown to affect revenue in the last three months of the year. Revenue Slowdown “We are going to see a lower equity market and a longer period of lower rates” if corporate earnings start to deteriorate in the fourth quarter, BlackRock Inc. Chief Executive Officer Laurence D. Fink, who as head of the world’s biggest money manager oversees $4.1 trillion in assets, said today on “Market Makers” with Erik Schatzker and Stephanie Ruhle. Knoll, an officer furniture maker, estimates about $10 million of government business to be pushed into next year, CEO Andrew Cogan said. Stanley Black & Decker Inc. ’s shares yesterday dropped 14 percent, the most since 1992, after the toolmaker reduced its full-year profit forecast in part because of the shutdown. Campbell Soup Co. has seen consumers pull back after a year that included higher payroll taxes, along with the impasse in Washington, CEO Denise Morrison said. Growth Impact Profits for S&P 500 companies probably grew 8.8 percent in the fourth quarter, according to analysts’ estimates compiled by Bloomberg as of Oct. 11. S&P Ratings Services yesterday said the shutdown has shaved at least 0.6 percent off of fourth-quarter 2013 gross domestic product growth, or taken $24 billion out of the economy. IHS Inc. of Lexington, Massachusetts, reduced its GDP growth estimate for the period to 1.6 percent, from 2.2 percent in September. The U.S. economy will expand by 1.6 percent this year, according to economists surveyed by Bloomberg. That would be the slowest rate of annual growth since 2009. Data today indicated that more Americans than forecast filed applications for unemployment benefits last week. California continued to work through a backlog, indicating it will take time to gauge the impact of the federal shutdown. The Labor Department will release on Oct. 22 its September employment report, delayed by the shutdown from the scheduled date of Oct. 4. Data on consumer prices for last month will be released Oct. 30. Consumer Pessimism A report today showed Americans in October were the most pessimistic about the nation’s economic prospects in almost two years as concern mounted that continued political gridlock will hurt the expansion. The monthly Bloomberg Consumer Comfort Index expectations gauge plunged to minus 31, the lowest level since November 2011. “So far, we think earnings will be resilient, even to what happened in Washington,” Andres Garcia-Amaya , global market strategist at JPMorgan Chase & Co.’s mutual funds unit, said in a phone interview today. His firm oversees $400 billion. “Short term, you might still have the sour taste of what happened the last couple of weeks. Fundamentally, the economy still has plenty of pent-up demand. The balance sheets of the consumer are actually in decent shape.” The Chicago Board Options Exchange Volatility Index , the gauge of S&P 500 options prices known as the VIX, sank 8.4 percent, after falling yesterday by the most in more than two years. The index has retreated 25 percent this year. Third-Quarter Profits Profits for companies in the S&P 500 probably increased 1.4 percent during the third quarter as sales rose 2 percent, according to analysts’ estimates compiled by Bloomberg. Some 24 companies in the index reported results today. Google Inc. jumped 5.9 percent to $941.06 at 4:31 p.m. in New York after posting sales that topped estimates as advertisers boosted spending on mobile and video promotions. The stock fell 1 percent to $888.79 during the regular session. Nine of 10 main groups in the S&P 500 advanced today. Phone, utility and materials stocks rallied at least 1.3 percent to pace gains. Verizon Communications Inc. increased 3.5 percent to $48.90, the highest since August. The second-largest U.S. phone company reported profit that exceeded projections as its mobile-phone business fueled gains in sales and profit, validating its decision last month to pay $130 billion for Vodafone Group Plc’s share of the joint venture. Gold, Coal Newmont Mining jumped 4.6 percent to $27.06. Gold rallied the most in four weeks on speculation the Fed will postpone slowing stimulus. The metal is set for the first annual drop in 13 years as some investors lost faith in the metal as a store of value and on earlier speculation the Fed would slow debt purchases this year. Peabody Energy Corp. surged 3.9 percent to $18.58. The largest U.S. coal producer posted a surprise third-quarter profit after a recovery in domestic prices for coal used to generate electricity and a reduction in mining costs. American Express Co. rallied 5.1 percent, the most since November 2011, to a record $80.23. The biggest credit-card issuer by customer purchases, said worldwide card spending, or billed business, rose 7.3 percent to $236.2 billion. SanDisk Corp. climbed 8.8 percent to $68.50 for the biggest gain the S&P 500. The company posted third-quarter adjusted earnings of $1.59 a share, exceeding the $1.33 median forecast of analysts surveyed by Bloomberg. Sales came in at $1.63 billion, compared with the $1.56 billion projected by analysts. Dow Weighting IBM plunged 6.4 percent to $174.83 for the biggest drop in the Dow. Third-quarter revenue fell 4 percent to $23.7 billion, $1 billion less than analysts had forecast in a Bloomberg survey. Goldman Sachs fell 2.4 percent to $158.32. The world’s most profitable securities firm before the financial crisis said earnings were little changed as the bank cut costs in response to a 20 percent drop in revenue. The firm increased its dividend 10 percent. IBM and Goldman are the second and third-biggest weightings, respectively, in the price-weighted Dow. Goldman was added to the gauge last month. The difference between today’s move in the Dow and S&P 500 was the biggest since April, according to data compiled by Bloomberg. EBay Inc. slipped 4 percent to $51.38, the lowest since Sept. 3, after saying fourth-quarter sales will be $4.5 billion to $4.6 billion amid “dramatically decelerating U.S. e-commerce growth.” Analysts on average were projecting revenue of $4.64 billion, according to data compiled by Bloomberg. The largest online marketplace also issued a profit forecast that missed analyst estimates. To contact the reporter on this story: Nick Taborek in New York at ntaborek@bloomberg.net To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net |
2024-02-25 | Bloomberg | Gillard Slips in Australia Poll as Tax Damages Credibility | Prime Minister Julia Gillard slipped behind opposition rival Tony Abbott as Australia’s preferred leader for the first time since August after her credibility was dented when a mining tax she helped design brought in less revenue than forecast. On the question of who would make the better prime minister, Gillard fell 5 percentage points to 36 percent, while Abbott rose 1 point to 40 percent, according to a Newspoll survey published in the Australian newspaper today. The ruling Labor party rose 1 point to 45 percent on a two-party preferred basis, with the Liberal-National opposition down 1 point to 55 percent, it showed. Gillard is struggling to build momentum ahead of elections due Sept. 14, amid opposition claims the shortfall in revenue from the tax on iron ore and coal profits is an example of her government’s economic incompetence. Australia’s first female prime minister has also been confronted with scandals involving former Labor lawmakers and the resignation of two senior ministers, leading to speculation predecessor Kevin Rudd may make another challenge to her leadership. “Gillard’s position is looking extremely difficult,” said Paul Strangio, a senior lecturer in politics at Monash University in Melbourne. “Governments have come back from similar positions and this one needs to make sure it works hard to get its message out and is not distracted by any leadership speculation.” Rudd’s Support In today’s poll, 24 percent of respondents said they were more likely to vote for Labor if Rudd was restored as party leader, with 13 percent saying they were less likely to and 62 percent saying it would make no difference. The Feb. 22-24 telephone survey of 1,143 people had a margin of error of plus or minus three percentage points. The previous poll was held Feb. 1-3. The two-party preferred measure is designed to gauge which major party is likely to win the seats required to form a government. Gillard’s minority Labor government on Feb. 8 announced that the mining tax raised A$126 million ($129 million) in its first six months, less than 10 percent of the A$2 billion the Treasury forecast for the year to June 30. Abbott, 55, who has vowed to rescind the mining levy and a tax on carbon emissions , says the revenue shortfall is an example of the government’s failure to manage the A$1.45 trillion economy. “There’s very little wrong with our country that a change of government wouldn’t fix,” Abbott told an audience of business leaders in Sydney on Feb. 15. Mining Critics The Minerals Resource Rent Tax, which puts a 30 percent levy on iron ore and coal profits, was designed by Treasurer Wayne Swan and Gillard after she ousted Rudd as party leader and prime minister in June 2010. Rudd’s popularity with voters had plunged in part due to an advertising campaign conducted by the mining industry against his proposed levy on resource profits. Rudd, who failed in a challenge for Gillard’s leadership a year ago, said in a Feb. 12 interview on Sky News that changing the tax was a matter that should be addressed by Gillard and Swan as it “has not collected any real revenue of any significance.” The shortfall was due to “global instability, commodity price volatility and a high dollar,” Swan said Feb. 8. Shadow Treasurer Joe Hockey called on Swan to resign, saying the tax was fundamentally flawed when designed and that Labor could no longer rely on revenue from the levy to fund promised education and welfare programs. State Royalties Under an agreement Gillard negotiated with BHP Billiton Ltd. (BHP) , Rio Tinto (RIO) Group and Xstrata Plc, mining companies can claim depreciation allowances on their iron ore and coal projects. Any royalties paid to state governments on iron ore and coal can also be deducted. Western Australia , the nation’s biggest iron ore producer, said in May 2011 it would increase its royalty rate from 5.625 percent to 7.5 percent by July 1, 2013, for every ton of the steel-making ingredient mined in the state, effectively cutting the revenue Gillard’s government could reap. Rio Tinto said Feb. 14 it had booked a deferred tax asset from the mining tax of $1.13 billion in the second half. “Swan admitting that the revenue raised from the tax was minimal was bad enough, but then Rio Tinto coming out and basically saying that Australian taxpayers now owe the company money was devastating for Labor,” said Andrew Hughes , who conducts political-marketing research at the Australian National University in Canberra. “The government is rapidly losing whatever trust the voters still had in it.” Getting Nervous Labor backbenchers in marginal seats will be getting nervous and may ask Rudd to re-contest the leadership, Hughes said. Rudd told Channel 7 television on Feb. 15 that a challenge to Gillard was “not happening.” Gillard’s bid to focus on policies including increased education spending and a national disability insurance program has been hampered by scandals involving Labor politicians. Craig Thomson , a former national secretary of the Health Services Union and former Labor party lawmaker, faces charges that he misused a union credit card to pay for prostitutes, air travel and cash advances between 2002 and 2007. The alleged misconduct occurred before he entered parliament. In New South Wales, the nation’s most-populous state, an anti-corruption inquiry has been hearing allegations that former Labor lawmaker Eddie Obeid earned millions of dollars from illegal property deals. Gillard was forced to reshuffle her ministry this month after Attorney General Nicola Roxon and party Senate leader Chris Evans resigned from cabinet. To contact the reporter on this story: Jason Scott in Canberra at jscott14@bloomberg.net To contact the editors responsible for this story: Edward Johnson at ejohnson28@bloomberg.net ; Peter Hirschberg at phirschberg@bloomberg.net |
2024-08-02 | Bloomberg | Somali Pirate Attacks Sink Premiums as Insurers Leap Aboard | Kidnap and ransom premiums paid to insure against Somali piracy have slumped since the BBC Trinidad was hijacked in the Gulf of Aden in August 2008 as escalating attacks spurred more companies to offer coverage. Buying $5 million of coverage now costs as little as $15,000 per voyage, half the peak rate in 2008, said William Miller, divisional director of Willis Group Holding Plc ’s Kidnap and Ransom, or K&R, unit in London. “Piracy is a peak risk with a relatively low probability of happening, but with an immensely high damage potential,” said Niels Stolberg, head of Bremen, Germany-based Beluga Shipping GmbH, the Trinidad’s owner. The company now buys kidnap and ransom coverage for every ship crossing “this dangerous passage,” after paying a $1.1 million ransom to release the vessel and its 13 crew from the pirate haven of Eyl, he said. Kidnap and ransom premiums climbed to $100 million last year as pirate attacks on the 25,000 ships passing through the Gulf of Aden rose 70 percent. That prompted more insurers, including Aspen Insurance Holdings Ltd., Ascot Underwriting Ltd. and Chubb Corp. , to offer marine K&R coverage, a policy first developed to address kidnapping in South America. The insurance covers the ransom of the ship and its crew, including negotiations with pirates and hiring ex-special forces teams to deliver the money. With Somali pirates usually returning hijacked vessels undamaged, kidnap and ransom plugs a gap in war-risk insurance that only covers damage to a ship and its cargo, said Stolberg. Ransoms Increase The average ransom has almost doubled to between $3.5 million and $4 million since Chubb entered the market 22 months ago, said K&R Manager Greg Bangs, adding that the company expects to expand its piracy business further. “At first the rates were a little higher than they should have been and then over time insurers realized they could reduce their rates and still make money,” said Bangs. The decline in rates has deterred Ascot from writing any policies since being authorized to offer kidnap and ransom coverage last November, said Andrew Moulton, a marine underwriter at the Lloyd’s of London arm of American International Group Inc. “Traditional carriers have been cutting each other so much to get the premium in that the price has fallen off the end of a cliff,” said Moulton, adding that in the current economic climate, most ship owners won’t buy kidnap and ransom insurance as they view it as “icing on the cake” rather than core coverage. ‘Big Problem’ Pirates are currently holding 18 ships and 379 hostages, up from 11 ships and 261 hostages at the beginning of the year, according to the International Maritime Bureau. When the summer monsoon in the Indian Ocean ends this month, attacks may rise as pirates venture from lairs such as Garacad, Hobyo and Harardhere on the Somali coast, said bureau Director Pottengal Mukundan. “It’s a big problem,” said Per Gullestrup , chief executive officer of Clipper Ferries. He arranged for a $1.7 million cash ransom to be parachuted to pirates that used AK-47s and rocket-propelled grenades to hijack the CEC Future in November 2008. “The Somali pirates have shown they are quite good at adapting to the situation.” Pirates are being encouraged by the ransoms and the ease with which they capture ships, said Sven Gerhard, global product leader of marine hull & liabilities at Allianz SE ’s corporate and specialty unit. Ship owners must also pay as much as $2.5 million to negotiators and security firms that fly the ransom to a drop-off point, he said. ‘Taking More Risks’ While the presence of the Combined Maritime Forces in the Gulf of Aden cut attacks by 18 percent to 196 in the first half of this year, incidents in the surrounding Somali basin and Indian Ocean rose 14 percent to 51 as the pirates used larger mother ships to widen their range toward the Maldives and as far south as the Mozambique Channel, according to the maritime bureau. Attacks have been reported as far as 1,000 miles from shore. “They’re going further and they’re taking more risks than before,” said Guillaume Bonnissent at Hiscox Ltd. in London, the world’s largest underwriter for piracy coverage. Premiums depend on the ship’s speed, height of its deck above sea level and measures taken to protect the vessel, said Sean Woollerson, a partner at Jardine Lloyd Thompson Group Plc , the U.K.’s biggest publicly traded insurance broker. While most insurers advise ship owners to deploy razor wire and train sailors how to legally fend off attacks, Woollerson also aims to raise funds for a fleet of escort ships to shepherd vessels through the Gulf of Aden. That may push rates down further, he said. ‘Private Navy’ “We are working on a unique concept to create a legitimate private navy for the shipping industry to complement the existing naval forces to stop this kind of piracy escalating,” said Woollerson, who estimates start-up costs of $15 million. “This is the only way we’re ever going to stem these attacks.” For the moment, Beluga Shipping deploys high-pressure hoses and cardboard dummies called “soldiers” to deter boarders, after the Trinidad was captured by nine pirates using two speedboats, said Stolberg. “Sending armed teams aboard is a last resort,” said Mark Hankey, a spokesman for Maritime & Underwater Security Consultants , which gives shipping lines transit advice from its basement control center opposite London’s Royal Courts of Justice. Using arms involves the risk of “massive escalation,” he said. When the company does employ guards on cargo vessels it stations three to four former British Royal Marines or Royal Navy personnel to escort ships through pirate waters, said Hankey. No Guarantees The naval task force is no longer effective after the pirates expanded the scope of their operations, said Jan-Thiess Heitmann, head of the legal department at the German Ship Owners’ Association. While the association is against arming crew members or hiring armed security guards, it’s in talks with the German government on installing soldiers on merchant ships. “The number of forces is never going to be enough to guarantee protection,” a spokesman for the 24-nation Combined Maritime Forces said in an e-mailed statement. “Pirates are opportunists who will seek the easiest target available.” The naval force deploys as many as 25 vessels in counter- piracy operations along a recommended transit corridor that runs from close to the Bab-el-Mandeb at the southern end of the Red Sea through the Gulf of Aden to a point north of the Yemeni island of Socotra. The corridor carries about a fifth of the world’s trade. Gullestrup says a set of best practices, introduced by the naval task force, have helped keep the rest of Clipper’s fleet safe. Still, he says the only long-term solution to piracy is to help Somalia, a country that has lacked a central government since the overthrow of former dictator Mohamed Siad Barre in 1991, develop its own security and coastguard infrastructure. “All the money would be much better spent in assisting the Somalis in capacity building,” he said. To contact the reporter on this story: Kevin Crowley in London at kcrowley1@bloomberg.net ; Carolyn Bandel in Zurich at 4104 or cbandel@bloomberg.net Aug. 3 (Bloomberg) -- Kidnap and ransom premiums paid to insure against Somali piracy have slumped since the BBC Trinidad was hijacked in the Gulf of Aden in August 2008 as escalating attacks spurred more companies to offer coverage. Bloomberg's Deirdre Bolton reports. (Source: Bloomberg) //<![CDATA[ $(document).ready(function () { $(".view_story #story_content .attachments img.small_img").each(function(){ var self = $(this); if (self.width() != 190){ self.width(190); } }); }); //]]> |
2024-07-18 | Bloomberg | Geithner Says Firms’ Failures Prove Dodd-Frank Need | U.S. Treasury Secretary Timothy F. Geithner said risk-management failures at firms including JPMorgan Chase & Co. (JPM) prove the importance of the Dodd-Frank financial rules overhaul. “We still have unfinished business,” Geithner said in remarks prepared for a meeting of the Financial Stability Oversight Council in Washington today. “Consider the failures of MF Global and Peregrine Financial, the risk-management failures at JPMorgan, the abuses surrounding Libor, or the financial threats from Europe.” Geithner is the chairman of the council, which was created by Dodd-Frank to prevent another financial crisis. The panel also includes Federal Reserve Chairman Ben S. Bernanke, and the chairmen of the Securities and Exchange Commission and the Federal Deposit Insurance Corp. Geithner said the council, in a closed session earlier today, designated eight so-called financial market utilities, such as clearinghouses and exchanges, as systemically important to the financial system. To contact the reporter on this story: Ian Katz in Washington at ikatz2@bloomberg.net To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net |
2024-08-01 | Bloomberg | Danske Bank Gains as Loan Loss Improvement Drives Profit | Danske Bank A/S (DANSKE) said profit rose 46 percent last quarter after loan losses at Denmark ’s biggest bank dropped as the economies of its main markets picked up. Danske shares rose as much as 8.2 percent, the biggest gain in more than six months, to 111.80 kroner and traded at that level at 11:40 a.m. in Copenhagen. The bank said net income rose to 2.18 billion kroner ($388 million), beating a 1.68 billion-krone average estimate in a Bloomberg survey , after loan losses fell 45 percent to 924 million kroner. Profit last quarter was the highest in five years. The bank will be able to maintain the current level of impairments in coming quarters, Chief Financial Officer Henrik Ramlau-Hansen said in an interview with Bloomberg Television. Danske, which has navigated its way through burst property bubbles in Ireland and Denmark, said loan losses declined to their lowest level since the second quarter of 2008. Denmark is showing signs of emerging from its housing slump as property prices start to rise, while the economies of Norway and Sweden, where Danske also operates, are growing at a faster rate than the rest of Europe. ‘Good Report’ “Danske Bank has published a good report for the second quarter, with especially loan losses surprising positively,” Nordea Private Banking, a unit of Nordea Bank AB (NDA) , said in a note to clients today. The bank’s decision to cut its 2013 outlook as market turbulence hit trading income “was expected,” Nordea said. Danske now sees net income from 6.5 billion kroner to 9 billion kroner for 2013, compared with a previous range of 7.5 billion kroner to 10 billion kroner. Net interest income slipped 3.7 percent to 5.5 billion kroner. Trading income dropped 26 percent to 2.15 billion kroner. “The difficult macroeconomic environment with low interest rate levels combined with the volatility in the financial markets in June have led us to revise our guidance for full-year 2013,” Chief Executive Officer Eivind Kolding said. Danica Pension, Danske’s pension and life insurance unit, reported a loss of 346 million kroner, its first since the third quarter of 2011. Kolding, speaking to reporters after presenting the bank’s earnings, ruled out talk of a sale of Danica. Even after today’s share price gains, Danske has lagged behind its biggest rivals in the Nordic region, delivering a 17 percent increase this year. That compares with a 34 percent surge at Nordea and a 29 percent advance at Svenska Handelsbanken AB of Sweden. Danske hasn’t paid a dividend since 2007, a trend the bank says it will reverse once reserves are big enough. Chief Financial Officer Henrik Ramlau-Hansen has said that the lender plans to pay a dividend for 2013 if the bank meets its targeted results. “As it looks now, with high capital, liquidity, improving results, it might be that we will be able to pay dividends for 2013,” Kolding said in an interview today. “But this is not something that is decided yet. It’s a board decision. We will not make a decision before we know the actual result for this year.” To contact the reporters on this story: Niklas Magnusson in Stockholm at nmagnusson1@bloomberg.net Frances Schwartzkopff in Copenhagen at fschwartzko1@bloomberg.net To contact the editor responsible for this story: Tasneem Brogger at tbrogger@bloomberg.net |
2024-11-20 | Bloomberg | EasyJet Doubles Dividend as Business Travel Boosts Profit | EasyJet Plc (EZJ) doubled its dividend after boosting full-year profit 28 percent through a move into corporate travel that will see the U.K. discount carrier fly to Moscow from Manchester in northern England next spring. EasyJet closed at its highest price in five years after posting a 317 million-pound ($504 million) pretax profit for the 12 months to Sept. 30, versus 248 million pounds the previous year. The carrier will lift its annual dividend to 21.5 pence a share from 10.5 pence, returning 85 million pounds to investors. “You’re getting cost-conscious companies for the first time ever trying a value airline,” Chief Executive Officer Carolyn McCall said in a Bloomberg Television interview. “That’s where we’re benefitting. EasyJet is a structural winner in European short-haul against both legacy and low-cost competition.” McCall has boosted frequencies on key routes while using allocated seating, flexible tickets and corporate agents to grab a bigger slice of the business market. Luton, England-based EasyJet was handed Russia flights by U.K. officials last month, edging out Virgin Atlantic Airways Ltd., and will serve Moscow twice daily from London and four times a week from Manchester. Banks, MoD About one-fifth of passengers are now traveling for work- related reasons, McCall said, with new clients including the U.K. House of Commons travel office and the Ministry of Defence, plus “two or three” high street banks and insurance companies. Shares of Europe ’s second-biggest low-cost airline after Ryanair Holdings Plc (RYA) rose as much as 7.3 percent before closing up 6.1 percent at 692 pence, the highest since Nov. 15, 2007, The stock has advanced 75 percent this year, valuing the company at 2.74 billion pounds. That’s $1.73 billion more than Air France-KLM Group (AF) , Europe’s biggest airline by traffic. Annual pretax profit has more than doubled from 154 million pounds since McCall took over July 2010. Fiscal-year sales rose almost 12 percent to 3.85 billion pounds, with the carrier lifting capacity to 65.9 million seats and carrying 58.4 million people for an 88.7 percent load factor, it said today. Analysts had expected a pretax profit of 314 million pounds. Policy Shift EasyJet’s dividend policy will now be to pay out one-third of profit after tax each year, up from the one-fifth payment introduced last year, McCall said today. Stelios Haji-Ioannou , the carrier’s founder and biggest shareholder, has previously been critical of the level of investor returns. EasyJet is evaluating the upgraded Airbus SAS A320neo and Boeing Co. (BA) 737 Max single-aisle aircraft, together with Bombardier Inc. (BBD/B) ’s all-new CSeries model, with a view to placing an order for delivery after 2017, it said today. The company may also have a requirement for a “bridging period” from 2014. Stelios, who goes by his first name, has also said fleet expansion has been too rapid, given the economic slump. EasyJet currently operates 214 Airbus A319 and A320 aircraft. An order is likely to go before the board next year, Chief Financial Officer Chris Kennedy said on a conference call, and EasyJet may opt to renew its entire fleet over a period of 10 years. The carrier still has options for 42 more of the current A320 series, plus additional purchase rights, and has sufficient clout to guarantee availability of new-generation jets, he said. CityJet While saying that acquisitions are low on EasyJet’s agenda, McCall declined to specify whether the company will look at Air France-KLM’s CityJet arm, which is studying options for a new investor, including the possibility of a trade buyer, according to comments last week from the unit’s CEO Christine Ourmieres. CityJet is the biggest operator at London City airport, a terminal favored by short-haul business travelers to and from the U.K. capital’s financial center. Operations are limited by a runway that couldn’t handle EasyJet’s A319 and A320 aircraft. “I have no idea whether we would or wouldn’t until we know exactly what they’re doing and what the price is,” McCall said. “M&A is not on top of our list. City hasn’t formed part of our planning because it has too-short a runway for our planes.” The company’s strategy of seeking to attract more business travelers was instrumental in EasyJet’s victory in the Moscow application and also aided its selection by Italian authorities to end Alitalia SpA’s monopoly on services from Milan Linate to Rome Fiumicino a day later, McCall has said. Fourth-quarter demand was boosted by a surge in flights from the U.K. to beach holiday destinations such as Malaga in Spain and Faro, Portugal , following the 2012 Olympic Games in London, which caused Britons to defer their travel plans. To contact the reporter on this story: Tom Metcalf in London at tmetcalf7@bloomberg.net To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net |
2024-07-20 | Bloomberg | Swiss Stocks Climb for a Second Day as Banks, Insurers Advance | Swiss stocks climbed for a second day, led by a rally in financial shares, as speculation mounted that U.S. lawmakers will agree to raise the debt ceiling of the world’s largest economy. Credit Suisse Group AG (CSGN) and UBS AG (UBSN) , Switzerland’s largest banks, advanced more than 3 percent in Zurich before tomorrow’s European Union Summit on the region’s debt crisis. Julius Baer Group Ltd. (BAER) and Zurich Financial Services AG (ZURN) also rallied. The Swiss Market Index (SMI) , a measure of the largest and most actively traded companies, climbed 1.2 percent to 5,966.54 at the 5:30 p.m. close in Zurich. The broader Swiss Performance Index also rose 1.2 percent. “News that there was progress being made in raising the U.S. debt ceiling along with some bumper earnings news has helped cheer investor sentiment,” said Ben Critchely, a London- based sales trader at IG Index. Swiss stocks yesterday rose for the first time in four days after Novartis AG reported profit that beat analyst estimates. Roche Holding AG (ROG) , Actelion Ltd. and ABB Ltd. are among companies scheduled to report results tomorrow. Stocks in Europe climbed today after U.S. President Barack Obama praised a bipartisan Senate proposal for a $3.7 trillion debt-cutting plan as lawmakers intensify efforts for a compromise on government spending less than two weeks before a threatened default. Talks in Brussels Separately, European leaders are meeting in Brussels tomorrow to discuss measures to restore confidence in the euro region’s creditworthiness. Officials are considering steps previously rejected by Germany, including the use of precautionary credit lines and enabling the main 440 billion- euro ($624 billion) rescue fund to lend to recapitalize banks, according to a person close to the discussions who declined to be named as the talks are in progress. Credit Suisse, the second-biggest Swiss bank, climbed 3.7 percent to 29.08 francs, the first gain in five days, while UBS, the country’s largest lender, rallied 4.1 percent to 13.87 francs. Julius Baer , the 121 year-old Swiss wealth manager, climbed 4.1 percent to 33.99 francs, Zurich Financial rose 2.3 percent to 196.4 francs and Swiss Reinsurance Co., the world’s second- biggest reinsurer, increased 2.3 percent to 44.96 francs. Logitech International SA (LOGN) , the world’s biggest maker of computer mice, increased 2.9 percent to 8.57 francs, extending yesterday’s 5.8 percent advance. The company said today it has acquired Mirial, a U.K. video-conferencing service for an unspecified sum. To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net |
2024-05-28 | Bloomberg | Emerging-Market Stocks Advance a Third Day as Oil Shares Rally | Emerging-market stocks gained for a third day as higher oil prices boosted energy producers and reports in the U.S. spurred confidence in the global recovery. South Africa’s rand dropped to a four-year low versus the dollar after the economy slowed more than forecast. OAO Gazprom, Russia’s biggest natural-gas producer, and Petroleo Brasileiro SA, Brazil’s state-run oil company, gained more than 0.7 percent. OTP Bank Nyrt., Hungary ’s largest lender, climbed to the highest in almost two years after the central bank cut interest rates for a 10th month. OAO Magnit, Russia’s biggest food retailer, jumped to a record after MSCI Inc. increased its weighting in a benchmark gauge. The Colombian peso slid beyond 1,900 for the first time in 16 months The MSCI Emerging Markets Index climbed 0.2 percent to 1,030.82. The gauge is down 0.8 percent this month following last week’s 1.8 percent slide. U.S. home prices rose in March by the most in seven years and confidence among American consumers climbed in May to the highest level in more than five years, data showed today. “Markets are recovering from weakness last week,” Maarten-Jan Bakkum, an emerging-market strategist at ING Investment Management in The Hague, said by e-mail. “Positive drivers remain,” including expectations for monetary easing in emerging markets and a recovery in the global economy, he said. The main indexes in Russia, Hungary, China, Mexico, Indonesia and Thailand rose more than 1 percent and Brazil ’s Ibovespa lost 0.6 percent. Gauges of energy and health care companies in MSCI’s developing-nation index rose at least 0.6 percent, the most among 10 industry groups, while technology shares lost 0.6 percent, the biggest decline. Emerging ETF The iShares MSCI Emerging Markets Index exchange-traded fund rallied 0.6 percent to $42.50. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, slumped 6.1 percent to 20.16. Gazprom advanced 1.3 percent and Petrobras added 0.7 percent. Polskie Gornictwo Naftowe i Gazownictwo SA , Poland’s biggest gas distributor, rose 0.8 percent. Oil climbed 0.9 percent, rising for the first time in five days. The Ibovespa dropped as Brookfield Incorporacoes SA slumped 5.3 percent, leading homebuilders’ losses on concern higher borrowing costs in Brazil will curb the economic recovery. Oil company OGX Petroleo & Gas Participacoes SA declined 5.1 percent, the most on the emerging markets gauge. The Colombian peso fell to as low as 1,902.97, the weakest since Jan. 4, 2012. Colombia needs to do more to weaken peso to its “equilibrium rate” of about 1,950 and should continue its dollar purchases, Finance Minister Mauricio Cardenas said in a May 23 interview. OTP added 3 percent. Hungary’s central bank cut the main interest rate to a record after the inflation rate plunged and as policy makers seek to boost lending and growth. The forint strengthened 0.7 percent against the euro. The rand declined against all 31 major emerging and developed-market currencies tracked by Bloomberg, losing 1.8 percent to 9.7847 versus the dollar, the biggest slump since April 15 and the weakest level since March 2009 on a closing basis. Economic growth in Africa’s biggest economy slowed in the first quarter to an annualized 0.9 percent, less than the 1.6 percent median estimate of economists in a Bloomberg survey. Fund Inflows Magnit jumped 5.1 percent in Moscow and its global depositary receipts rallied 3.7 percent. The increased weighting may boost inflows into the GDRs from funds that track the MSCI gauge by $331 million, VTB Capital wrote in a report today. The emerging-markets index has dropped 2.3 percent this year, compared with a 12 percent gain in the MSCI World Index. The developing-nation index trades at 10.9 times projected 12-month earnings, compared with the MSCI World’s 14.6 times, data compiled by Bloomberg show. The Hang Seng China Enterprises Index (HSCEI) of mainland companies listed in Hong Kong jumped 1.6 percent, the most in a month. The Jakarta Composite Index surged 1.8 percent, the biggest increase since Sept. 14. Taiwan’s Taiex Index lost 0.2 percent. Chinese Premier Li Keqiang said yesterday his country is confronted by “huge challenges” as it opens up the economy and reforms will be accompanied by tapered-off levels of growth. China Gas China Gas Holdings Ltd. (384) jumped 6.1 percent after saying it expects a “significant” increase in full-year net income, citing better-than-expected operating performance. China Taiping Insurance Holdings (966) Co., the first overseas-listed Chinese insurer, jumped 15 percent in Hong Kong, the biggest gain since October 2008, after saying it would buy 10.6 billion yuan ($1.7 billion) of assets from its parent. PT Astra International (ASII) , Indonesia’s biggest automotive retailer, rallied 6.4 percent in Jakarta, on speculation the government will introduce measures to encourage purchases of alternative-energy vehicles. SapuraKencana Petroleum Bhd. (SAKP) , Malaysia’s biggest oil and gas services company, jumped 5.1 percent to a record in Kuala Lumpur after saying its unit won a contract. Taiwan Semiconductor Manufacturing Co. (2330) declined 2.2 percent, leading exporters lower as the yen weakened, hurting their competitiveness against Japanese rivals. The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose five basis points, or 0.05 percentage point, to 287 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index. To contact the reporters on this story: Anuchit Nguyen in Bangkok at anguyen@bloomberg.net ; Lyubov Pronina in London at lpronina@bloomberg.net To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net |
2024-03-24 | Bloomberg | Ex-Goldman Board Member Gupta Took Fifth Amendment, Judge Told | Former Goldman Sachs Group Inc. (GS) board member Rajat Gupta invoked his Fifth Amendment right not to incriminate himself when the U.S. Securities and Exchange Commission sought to question him, a prosecutor said. Shortly before the start of proceedings yesterday in the insider-trading trial of Galleon Group LLC co-founder Raj Rajaratnam, Assistant U.S. Attorney Reed Brodsky asked whether the defense intended to introduce into evidence a submission that Gupta made to the SEC. Defense attorney John Dowd said he didn’t plan on telling jurors about the so-called Wells submission. “In that Wells submission, Mr. Gupta took the Fifth Amendment when he spoke to the SEC,” Brodsky told U.S. District Judge Richard Holwell. Gupta “wasn’t deposed when the SEC asked for his deposition,” Brodsky said. Gupta’s name has been mentioned almost daily at Rajaratnam’s federal court trial in Manhattan. Yesterday, Goldman Sachs Chief Executive Officer Lloyd Blankfein testified that he presented confidential information at board meetings attended by Gupta. Prosecutors claim Gupta leaked some of that information to Rajaratnam. Rajaratnam, 53, is on trial in the largest crackdown on hedge-fund insider trading in U.S. history. The Sri Lankan-born money manager is accused of making $45 million from tips leaked by corporate insiders including Gupta. He denies wrongdoing, saying he based trades on research. Buffett’s Investment Blankfein testified yesterday that Gupta had confidential information about Warren Buffett ’s $5 billion investment in Goldman Sachs in October 2008, Goldman’s earnings projections for that quarter and strategic discussions the firm had about acquiring a commercial bank or insurance company in late June 2008. Prosecutors allege that Gupta passed the tips to Rajaratnam, allowing him to make about $1 million for Galleon in September 2008 and avoid millions in losses the next month. “We are a public company,” Blankfein said. “We don’t want information about our company to get outside before the time is appropriate. There is a process and a protocol for speaking to the outside world.” For a second time in the trial, which began March 8, jurors heard a July 29, 2008, telephone call, secretly recorded by the FBI, in which Gupta told Rajaratnam that the Goldman board had discussed acquiring a commercial bank or an insurance company. “Have you heard anything along that line?” Rajaratnam asked Gupta during the call. “Yeah,” Gupta replied, “This was a big discussion at the board meeting.” ‘Important Contributions’ On cross-examination that lasted about an hour, John Dowd , Rajaratnam’s lawyer, questioned Blankfein about a Goldman Sachs press release announcing that Gupta wouldn’t stand for re- election as a board member in March 2010. Dowd asked Blankfein to read the announcement aloud to the jury. In the release, Blankfein praised Gupta’s “important contributions to Goldman Sachs as a board member.” Dowd asked whether, at the time he issued the statement, he was aware of the government’s allegations against Gupta. “I had an awareness of some -- I want to say I had an inkling, subsequently I had more awareness,” he testified. “I knew there were questions about Rajat’s behavior, that’s how I would say it.” At a sidebar conference in court, Dowd said that Blankfein “had a conversation with Gupta when this matter broke in the press” about a year ago “and asked him about it.” Gupta’s Response “I wouldn’t have had anything to do with that,” Gupta replied, according to Dowd. There is no additional detail in court records about Gupta’s decision to invoke his Fifth Amendment rights under the U.S. Constitution, including when the SEC wanted to question him. Gupta’s lawyer, Gary Naftalis , has said in court papers that he made a Wells submission last month urging the agency not to file a lawsuit against his client. “We repeatedly advised the SEC that Mr. Gupta was prepared to testify fully as soon as the Rajaratnam trial concluded,” Naftalis said yesterday in an e-mailed statement. “Regrettably, the SEC was unwilling to wait this brief period of time in order to have a full and fair factual record.” On March 1, the SEC filed an administrative proceeding against Gupta, who hasn’t been criminally charged. On March 18, Gupta sued the SEC in federal court in Manhattan, denying the regulator’s allegations and asking a judge to block the administrative action and grant him a jury trial. Hearsay Evidence In such an SEC proceeding, the judge is allowed to consider hearsay, or evidence that may only be indirect or speculative. Brenda Murray, the SEC’s chief administrative law judge, declined to stay the commission’s action, Naftalis told U.S. District Judge Jed Rakoff in New York at a March 22 hearing. Rakoff is presiding over Gupta’s lawsuit. Murray scheduled a July 18 administrative trial for Gupta, Naftalis said, according to a court transcript of the hearing. Naftalis told Rakoff that regulators should have sued in federal court instead of bringing the administrative action. Gupta, who prosecutors have called Rajaratnam’s co-conspirator, denied giving tips to the Galleon founder. “By our count, 27 individual defendants have been sued in Galleon-related matters, every single one of them in federal court in New York,” Naftalis said, according to the transcript. “So the only person who’s being singled out for disparate treatment, to his obvious detriment, is our client,” Naftalis said. “There is real discriminatory prejudice to us.” Dodd-Frank Act Naftalis said Gupta was entitled to a trial before a federal judge and jury, where the rules of evidence would allow him to receive evidence from the SEC. He also argued, referring to federal financial reform legislation passed last July, that the alleged insider trading cited by the SEC took place in June 2008 to January 2009, “at least 1 1/2 to 2 years before Dodd- Frank.” Richard Humes, a lawyer with the SEC, told Rakoff he wasn’t sure that the judge had jurisdiction in the case. Any appeal by Gupta of the SEC action would go before a federal appeals court and not before a district court judge, Humes said. “Even if he gets the ruling he is asking for, it doesn’t stop the rest of the proceedings,” Humes said. Rakoff asked for lawyers on both sides to submit legal papers regarding his jurisdiction in the SEC matter, as well as whether the commission improperly brought the action. “There seems to be an issue as to whether the relevant provisions of Dodd-Frank can be applied retroactively, when the effect arguably would be to deprive the plaintiff of the constitutional jury right they would otherwise enjoy,” Rakoff said, the transcript shows. Equal Protection “The legal issue is if you have -- what is it -- 24 defendants who are basically charged with wrongfully disclosing inside information in connection with same underlying case, 23 of them are charged in federal court where they have the right to a jury trial,” Rakoff said. “And one of them is not and is charged only in an administrative proceeding,” Rakoff continued. “Does that implicate the equal protection clause of the Constitution as well as a jury trial clause of the Constitution?” The criminal case is U.S. v. Rajaratnam, 1:09-cr-01184, U.S. District Court, Southern District of New York (Manhattan). Gupta’s case is Rajat Gupta v. SEC, 11-CV-1900, U.S. District Court, Southern District of New York (Manhattan). To contact the reporters on this story: David Glovin in Manhattan federal court at glovin@bloomberg.net ; Patricia Hurtado in Manhattan federal court at phurtado@bloomberg.net ; Bob Van Voris in Manhattan federal court at rvanvoris@bloomberg.net To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net |
2024-03-30 | Bloomberg | Canada Jan. Gross Domestic Product Report (Text) | The following is the text of the Jan. GDP report released by Statistics Canada. Real gross domestic product edged up 0.1% in January after increasing 0.5% in December 2011. Gains in manufacturing were partly offset by a decline in oil and gas extraction in January. Real gross domestic product edges up in January Increases were also posted in the finance and insurance sector, utilities, wholesale trade, some tourism-related industries and the public sector (education, health and public administration combined). Decreases were recorded in forestry and logging, arts, entertainment and recreation as well as in construction. Manufacturing output continues to rise Manufacturing increased for a fifth consecutive month in January, up 0.7%. Durable goods production grew 0.8% mainly because of increased output in fabricated metal products, transportation equipment and wood products. There was a decline in primary metal manufacturing, partly the result of a labour dispute at an aluminum smelter in Quebec. Non-durable goods manufacturing advanced 0.6% on the strength of chemical and food production. Paper and tobacco manufacturing decreased. Manufacturing output continues to increase Oil and gas extraction falls Oil and gas extraction declined 0.9% as a notable decrease in natural gas extraction outweighed the gain in crude petroleum production. Storage of natural gas increased significantly in December and January. Support activities for mining and oil and gas extraction rose 1.8% on the strength of rigging services. Mining excluding oil and gas extraction grew 0.4% mostly as a result of increased output at coal mines. The finance and insurance sector is up The finance and insurance sector rose 0.4%, mainly as a result of an increase in management activity for mutual funds, residential mortgages and business loans. The output of insurance carriers was also up. Wholesale trade increases while retail trade is flat Wholesale trade increased 0.3% on the strength of the wholesaling of petroleum products, motor vehicles and farm products. Retail trade was unchanged in January. Gains at motor vehicles and parts dealers as well as general merchandise stores (which include department stores) were offset by declines in building materials stores, food and beverage stores, and electronics and appliances stores. Excluding new car dealers, retail trade declined 0.5%. Construction and home resale market down Construction edged down 0.1% as the decline in residential building construction more than offset the gain in non- residential building construction. Most types of residential building construction declined in January. In non-residential building construction, gains in industrial and commercial buildings outweighed a decline in institutional buildings. Engineering and repair work was unchanged in January as the increase in engineering construction was offset by a decline in repair work. After four consecutive monthly increases, the output of real estate agents and brokers declined 3.1% in January as activity in the home resale market decreased. Other industries The utilities sector was up 1.1% as the demand for electricity increased, following three consecutive monthly declines mostly due to unseasonably warm weather. Some tourism-related industries, such as accommodation and food services as well as air transportation, grew in January, in parallel with an increase in the number of overnight travellers to Canada. The public sector (education, health and public administration combined) edged up 0.1%. In contrast, forestry and logging as well as the arts, entertainment and recreation sector declined. Note to readers The monthly gross domestic product (GDP) by industry data at basic prices are chained volume estimates with 2002 as the reference year. This means that the data for each industry and each aggregate are obtained from a chained volume index multiplied by the industry’s value added in 2002. For the 1997 to 2008 period, the monthly data are benchmarked to annually chained Fisher volume indexes of GDP obtained from the constant- price input-output tables. For the period starting with January 2009, the data are derived by chaining a fixed-weight Laspeyres volume index to the prior period. The fixed weights are 2008 industry prices. This approach makes the monthly GDP by industry data more comparable with the expenditure-based GDP data, chained quarterly. Revisions With this release of monthly GDP by industry, revisions have been made back to January 2011. For more information about monthly GDP by industry, see the National economic accounts module on our website. 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 |
2024-07-17 | Bloomberg | Asian Stocks Rise for Second Week, as DBS Group Climbs on Singapore GDP | Asian stocks rose for a second week as record sales at Intel Corp. and unprecedented economic growth in Singapore overshadowed weak U.S. factory reports and a slowdown in China. LG Corp. , the largest shareholder in the world’s third- biggest maker of mobile phones, surged 12 percent to 73,700 won as Intel’s second quarter sales beat estimates. DBS Group advanced 3.9 percent in Singapore after the city-state announced its economy expanded at a record 18.1 percent pace in the first half of 2010. Li & Fung Ltd. , the biggest supplier to retailers including Wal-Mart Stores Inc. and Target Corp., dropped 3.4 percent in Hong Kong as Federal Reserve officials downgraded their outlook for the U.S. economy and retail sales slowed. The MSCI Asia Pacific Index climbed 0.05 point, or less than 0.1 percent, this week to 116.23, its smallest weekly advance since October 2005. A late surge by Indian shares pulled the index into positive territory after declining U.S. factory output and weaker-than-expected earnings at Google Inc. had seen the Asian gauge erase gains from earlier in the week. “Expectations for the economic recovery were strong but the momentum is weakening,” said Kenji Sekiguchi , general manager of strategic research and investment at Mitsubishi UFJ Asset Management Co., which oversees $73 billion in assets. “It seems spending by both companies and households has leveled off. We can’t be very optimistic about the economic prospects yet.” LG Corp. Rises Japan’s Nikkei 225 Stock Average declined 1.9 percent this week, led by banks after the ruling party lost control of the upper house in elections. China’s Shanghai Composite Index lost 1.9 percent as China’s expansion slowed. Hong Kong’s Hang Seng Index declined 0.6 percent. Australia’s S&P/ASX 200 Index rose 0.6 percent. South Korea’s Kospi Index rose 0.9 percent. Singapore’s Straits Times Index climbed 1.4 percent after its economy grew at a record pace. Tata Consultancy Services Ltd. climbed 5.3 percent to 833.65 rupees, giving it a market value of $34.9 billion and making it Asia’s most valuable software developer. Tata Consultancy’s shares lead gains on the Bombay Stock Exchange’s benchmark Sensitive Index , or Sensex, which finished the week 0.7 percent higher. Intel had record second-quarter revenue and predicts third- quarter sales will be $11.6 billion, plus or minus $400 million, the Santa Clara, California-based company said today in a statement. Analysts had estimated $10.9 billion on average, according to a Bloomberg survey. Singapore’s Record Growth Gains by technology stocks were pared after Google, owner of the world’s most popular search engine, reported profit was $6.45 a share in the second quarter. Analysts had estimated $6.52, according to a Bloomberg survey. DBS climbed 3.9 percent to S$14.80. City Developments Ltd., Singapore’s second-biggest home builder, added 3.1 percent to S$11.34. Capitaland Ltd. , Southeast Asia’s largest developer, increased 3 percent to S$3.79. Singapore’s gross domestic product expanded at a 26 percent annualized pace in the second quarter from the previous three months, after a revised 45.9 percent gain in January to March, the trade ministry said July 14. Growth in the first half was the fastest since records began in 1975, prompting the government to predict GDP will rise 13 percent to 15 percent in 2010. U.S. Economic Data In Hong Kong, Li & Fung Ltd. dropped 3.4 percent to HK$36.50. Esprit Holdings Ltd. , a global fashion retailer, declined 1.7 percent to HK$43.45. Stocks also fell after China’s economic expansion eased to 10.3 percent in the second quarter from 11.9 percent gain the previous quarter. In the U.S., factory output fell the most in a year last month, according to a Federal Reserve report. Sales at U.S. retailers dropped 0.5 percent in June, more than projected, Commerce Department figures showed on July 14. Separately, minutes of a June meeting of Federal Reserve officials showed that the U.S. central bank’s economic outlook assessment “softened,” and that policy makers saw no need to boost economic stimulus even as they trimmed growth forecasts. The MSCI Asia Pacific Index has slumped about 10 percent from its high this year on April 15 as Europe’s debt crisis and Chinese steps to curb property prices spurred concerns the global economy may slow. The retreat drove down the average price of shares in the gauge to 14 times estimated earnings. ‘Sense of Caution’ Nintendo Ltd., maker of Wii game consoles, tumbled 6.8 percent to 24,350 yen this week in Osaka, Japan, after U.S. sales of its DS handheld game player fell by a third in June. Panasonic Corp. , the world’s biggest maker of home electronics and which earns almost half its sales overseas, dropped 5.4 percent to 1,119 yen in Tokyo. “A sense of caution is increasing that a slowdown in consumer spending in the U.S. may spread to manufacturing,” said Toshiyuki Kanayama , a market analyst at Tokyo-based Monex Inc. “Stocks that rely on profits from the country will likely decline.” China’s economic expansion eased to 10.3 percent in the second quarter and industrial production cooled more than forecast in June, signaling a deeper second-half slowdown that may add to risks for the global economy. China Life Insurance Co. , the nation’s biggest insurer, fell 5.3 percent to HK$33.40 in Hong Kong. It was the biggest single drag on the Asia Pacific Index for the week. China’s data “could be a signal for a slowdown in economic growth and corporate earnings for the second half of the year,” said Peter So , head of research at CCB International Securities Ltd. Agricultural Bank IPO Poly Real Estate Group Co. , China’s second-largest developer, slumped 1.4 percent to 11.26 yuan in Shanghai after China said it will “strictly” enforce policies preventing speculative real-estate investment. Country Garden Holdings Co., a mainland developer, slipped 0.4 percent. Agricultural Bank of China , China’s largest bank by customers, began trading this week. It rose to HK$3.27 from the initial public offering price of HK$3.20 in Hong Kong on July 16. In Shanghai, It declined 0.4 percent to 2.69 yuan from the IPO price of 2.68 yuan in the two days it traded. The lender, also known as AgriBank, raised $19.2 billion in the IPO. To contact the reporters for this story: Kana Nishizawa in Tokyo at knishizawa5@bloomberg.net ; Akiko Ikeda in Tokyo at iakiko@bloomberg.net . |
2024-09-29 | Bloomberg | Drug-Evading Tuberculosis Shows Rising Superbug Threat in China | Almost half of tuberculosis patients with a strain resistant to two or more drugs hadn’t had the disease before, according to a study at a Chinese hospital. Of 100 multidrug-resistant TB cases studied at Shandong Provincial Tuberculosis Hospital, 45 weren’t previously treated for the lung infection, doctors at the Chinese Center for Disease Control and Prevention found. The finding, published in the October edition of Emerging Infectious Diseases journal, indicates “substantial” transmission of the deadly superbug, the authors said. Many of the affected had the so-called Beijing genotype, which is prevalent in China and has spread to the rest of Asia, the former Soviet republic and South Africa. An estimated 120,000 people catch multidrug-resistant TB each year in China, which has the most cases globally after India. “The largest amount of people with tuberculosis in the world are in China and India by a long, long way,” said Warwick Britton, professor of immunology at the University of Sydney. “And so to really control TB in the world you’ve got to control TB in China.” Most of the patients in the study were previously treated, lacked health insurance, or less educated, according to the study. Drug-resistant tuberculosis is spreading in Europe at an “alarming rate,” the World Health Organization said Sept. 15. To contact the reporter on this story: Natasha Khan in Hong Kong at nkhan51@bloomberg.net To contact the editor responsible for this story: Jason Gale at j.gale@bloomberg.net |
2024-07-12 | Bloomberg | Co-Op Group Names Former Ombudsman Kelly to Lead Capital Review | Co-Operative Bank Plc hired the former chairman of the U.K.’s Financial Ombudsman Service, Christopher Kelly, to lead a study into its need for 1.5 billion pounds ($2.3 billion) of new capital. Kelly will investigate the decision to merge the lender with Britannia Building Society in 2009 and the proposed acquisition of 632 branches from Lloyds Banking Group Plc (LLOY) , Manchester, England-based Co-Op Bank said in an e-mailed statement today. He will start in September and report his findings in May. The Co-Op Bank said last month it will swap some debt for equity and trade on the London Stock Exchange to raise money. The customer-owned lender is seeking to raise 1 billion pounds by asking existing bondholders to exchange subordinated debt for new equity and senior debt, with 500 million pounds more gained through the sale of insurance assets. “As we move forward with implementing the detail of this plan, it is important to learn from the past,” Co-Op Group Chief Executive Officer Euan Sutherland said in the statement. Co-Op Bank didn’t specify Kelly’s compensation for the review. The bank today said it won’t pay interest due July 31 on its 13 percent perpetual subordinated bonds after failing to get permission from the Prudential Regulation Authority. Payment of the coupon will be deferred until after bank completes the capital plan, expected in November, it said in a statement. Separately, a group of bond investors hired investment bank Moelis & Co. to advise them on Co-Op’s capital increase, the Wall Street Journal reported today, citing two people it didn’t identify. -- Editors: Jon Menon, Simone Meier 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 |
2024-04-01 | Bloomberg | AT&T’s $140 Million Among Top U.S. Retiree Health Payments | Eight U.S. companies that earned more than $10 billion last year, led by AT&T Inc. (T) , were among recipients of a government program that paid $1.8 billion toward elderly retirees’ health-care costs, a report shows. The program created by last year’s health overhaul sets aside $5 billion to help companies pay health insurance for workers who retire early and aren’t yet eligible for Medicare, the U.S. program for the elderly and disabled. The Detroit-based United Auto Workers union received the most, at $207 million, followed by Dallas-based AT&T, at $140 million, and New York- based Verizon Communications Inc. (VZ) , with $92 million, according to the report the government released yesterday. President Barack Obama’s administration defended payments from the fund as evidence of a health system in peril, saying the money helped retain insurance coverage for tens of thousands who may otherwise lose it as firms drop retiree plans. “The overwhelming response to this program demonstrates exactly how broken the current health system has been, and exactly why we needed reform in the first place,” Steve Larsen, director of the Health and Human Services Department office implementing the law, said yesterday in a conference call. Obama has said that helping people maintain their health coverage and allowing businesses to continue coverage for workers are among the law’s priorities. Business groups led by the Washington-based U.S. Chamber of Commerce have been critical of the overhaul, saying it contains costly new mandates their members can’t afford. AT&T’s Profit Representative Cliff Stearns, a Florida Republican, peppered Larsen with questions about the program at a U.S. House hearing today, repeatedly interrupting Larsen’s responses. “Why in the flip are you giving out so much money from taxpayers so freely and so overwhelmingly to companies that are so profitable?” Sterns asked. Larsen said of the companies at one point that “the program allows them, positions them to continue to offer this critical benefit to early retirees.” AT&T’s net income in 2010 was $19.9 billion, according to Bloomberg data. Mark Siegel , a spokesman for the company, declined to comment in an e-mail. Eight of the 17 U.S. companies that had more than $10 billion in profit last year received money from the retiree fund, according to the report and Bloomberg data. Citigroup, IBM The list includes Citigroup Inc. (C) , which received $1.8 million; JPMorgan Chase & Co. (JPM) , at $2.9 million; International Business Machines Corp. (IBM) , at $13 million; Johnson & Johnson (JNJ) , at $2.5 million; General Electric Co. (GE) , at $37 million; Intel Corp. (INTC) , at $950,000; and Procter & Gamble Co. (PG) , at $6.6 million. Larsen said yesterday the government didn’t limit which employers were eligible to apply for the fund. “This program helps all companies to continue the retiree coverage they’re offering today,” he said. Richard Popper, who directs insurance programs for Larsen’s office, said 80 percent of payments from the fund were less than $1 million. Democratic sponsors of the health-care overhaul said the retiree fund is intended as a stop-gap measure to prevent more Americans from becoming uninsured before subsidized coverage is expanded to about 32 million people beginning in 2014. Among firms with 200 workers or more, only 28 percent offered early retiree health coverage in 2010, according to the Kaiser Family Foundation , a Menlo Park , California , research institute. That’s down from 66 percent in 1998. Retiree Program Under the retiree program, the government pays as much as 80 percent of early retirees’ health-care expenses, amounting to $15,000 to $90,000 for each person. The administration had approved 5,850 applications as of March 17. So far, 1,300 organizations have received money to cover more than 100,000 early retirees, according to the report. At least 44 groups received more than $5 million. Some of the biggest recipients were unions and states. In addition to the UAW, the state of New Jersey received $39 million, the California Public Employees Retirement System, or Calpers, got $58 million, and the Georgia Department of Community Health also received $58 million, according to the report. Also among the groups were General Motors Co. (GM) and Boeing Co. (BA) , which each received $19 million, and Alcatel-Lucent SA, with a payment of $13 million. Republicans in the U.S. House of Representatives estimated in a report last week that the retiree health fund would run out of money as soon as this year. Melissa Nitti, an HHS spokeswoman, said the fund would be closed to new applications as of May 5. To contact the reporters on this story: Alex Wayne in Washington at awayne3@bloomberg.net ; Drew Armstrong in Washington at darmstrong17@bloomberg.net ; To contact the editors responsible for this story: Adriel Bettelheim at abettelheim@bloomberg.net ; Reg Gale in New York at rgale5@bloomberg.net |
2024-12-24 | Bloomberg | Stanford's Lawyers Say They Need Two More Years to Prepare for Fraud Trial | Lawyers for R. Allen Stanford , the Texas financier accused of a $7 billion Ponzi scheme, asked to delay a trial set to begin Jan. 24 for at least two years so they can prepare their defense. Stanford’s trial preparation suffered during the first nine months of this year because his previous lawyer “focused on attempting to obtain funds from the insurance provider” more than on the financier’s defense,” the lawyers, Ali Fazel and Richard Scardino, said yesterday in a court filing. “During this period of time, the accused determined that little progress was made toward actual trial preparation.” Fazel and Scardino were appointed as Stanford’s attorneys in October, after U.S. District Judge David Hittner in Houston declared the former billionaire indigent. They told Hittner in October that they would try to be ready for a January trial, which was then about 90 days away. In requesting a delay yesterday, the lawyers said they won’t have enough time to properly analyze more than 5 million documents and dozens of potential witnesses before the current trial date. Stanford, 60, has been detained as a flight risk since June 2009 on charges he swindled investors through the sale of bogus certificates of deposit by Antigua-based Stanford International Bank Ltd. His lawyers also have asked that Stanford be released on bond, claiming he is too heavily medicated in prison to participate in his defense. Mental Fitness Stanford’s personal doctor declared him incompetent to stand trial in court papers this month, and his lawyers have asked for a hearing to gauge the financier’s mental fitness, according to court records. Prosecutors received court approval to conduct their own psychiatric evaluation of Stanford, according to court records. Fazel said in yesterday’s filing that the government, while it doesn’t oppose a delay, “wishes to be heard on the length of the continuance.” Laura Sweeney , a Justice Department spokeswoman, declined to comment. Stanford, who denies all wrongdoing, is on his fifth team of criminal defense lawyers after losing a court fight over access to $100 million in legal defense insurance coverage through his Stanford Financial Group of companies. Stanford fired two successive criminal-defense lawyers in 2009 after each experienced what they described as personality and strategic conflicts with the jailed financier. Stanford was also briefly represented by the Houston Federal Public Defender’s Office and by two lawyers who were allowed to withdraw from the case after Stanford lost his insurance coverage in September. Jets, Yachts, Island Stanford was ranked by Forbes magazine as one of the world’s richest men in 2008, with an estimated net worth of more than $2 billion including a fleet of jets, yachts and a private Caribbean island. All of his corporate and personal assets were frozen by court order when the U.S. Securities and Exchange Commission accused him of running a “massive” Ponzi scheme in February 2009. The criminal case is U.S. v. Stanford, 09-cr-00342, U.S. District Court, Southern District of Texas (Houston). The SEC case is Securities and Exchange Commission v. Stanford International Bank, 09-cv-00298, U.S. District Court, Northern District of Texas (Dallas). To contact the reporter on this story: Laurel Brubaker Calkins in Houston at laurel@calkins.us.com. To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net . |
2024-08-27 | Bloomberg | Romney’s Shifts Leave Doubts About Which Mitt Voters Would Get | When Governor Mitt Romney set out to fix the dysfunctional health-care system in Massachusetts , one of his first moves was to embrace a political nemesis. Romney had faulted John Sasso, a Democratic operative, for his 1994 election loss to Senator Edward Kennedy , yet now he needed Sasso’s political ties and instincts to deal with a Democratic legislature and achieve a signature goal. “He said, ‘Look, you want me to be visible promoting the bill, I’ll be visible. You want me to disappear, I’ll disappear. All I want is to get this legislation on my desk,’” Sasso, who was then the lead lobbyist for the state’s largest hospitals and insurer, recalled in an interview. Read More: Bloomberg Insider It’s a consensus-seeking style starkly at odds with Romney’s approach to the last two presidential campaigns, when he has courted the Republican base on issues from immigration to abortion rights. His shift has been so complete that even some close allies now wonder which Romney will show up if he wins the election. The answer would define his presidency, since he’d face immediate demands to curb the national debt while averting a fiscal crisis. Agonizing Choice For Romney, it would be an agonizing choice: If he follows his pragmatic impulses and strikes a debt accord with Democrats, he’ll be branded a traitor to his party as was President George H.W. Bush in 1990 when he bowed to pressure to raise taxes. If he chooses partisanship -- keeping his hardline campaign pledges yet failing to resolve the nation’s biggest financial challenge -- he’ll risk shaking the confidence of global markets. Since his first run for the White House in 2008, Romney has almost never taken on Republican Party conservatives. Once a backer of abortion rights and an assault weapons ban, candidate Romney -- who now calls himself “severely conservative” -- opposes both. He dropped his support for a bipartisan immigration compromise giving undocumented workers a path to citizenship, something he now denounces as “amnesty.” On fiscal issues, Romney, who battled through a divisive Republican primary to claim this year’s nomination, vows that no tax increases would be used to pay down the debt. That would rule out any agreement with Democrats, with ramifications for the U.S. economy and the world financial system. Economists, analysts and many politicians say a broad agreement is essential to solving the fiscal woes. ‘Be Bipartisan’ “It has to be bipartisan,” said former Senate Budget Committee Chairman Judd Gregg , a Republican who is now an adviser at Goldman Sachs Group Inc. (GS) “You can’t do these big issues -- tax reform , Medicare, Social Security -- unless people think the package is fair.” Many other Republicans, including those elected in the Tea Party wave of 2010, say incorporating tax increases in any agreement is a bad idea economically and politically. Congressman Tim Huelskamp, a Kansas Republican, said it’s inconceivable that Romney would do that: “It’s a principle of the House, and it’s been a principle of the Romney campaign that we’re not going to raise revenue except by growing the economy, so I just don’t see him going there,” Huelskamp said. Romney’s selection of Paul Ryan as his running mate reinforces the notion that he would take a partisan route. As House Budget Committee chairman, Ryan has taken any revenue increases off the table. He has pushed through partisan budgets, and, as a member of President Barack Obama ’s deficit-reduction panel, voted against a bipartisan plan. Easier Sell At the same time, if Romney decides to make a deal that reaches out to Democrats and includes tax increases, it would be easier to sell to his own party’s right wing with a Vice President Ryan leading the way. Some of Romney’s confidants and former colleagues say they lie awake at night puzzling over whether his nature or Tea Party pressure will drive him. “I just don’t know that answer,” says Tom Trimarco, who was secretary of administration and finance under Governor Romney and helped negotiate the health-care legislation. “His motives are terrific -- all the right reasons -- but his party is now controlled by a lot of uncompromising, unyielding people,” said Trimarco, now a registered independent backing Romney. The Romney that Trimarco, Sasso and others who have worked with him in the past describe -- a onetime corporate-turnaround artist who specializes in data-driven solutions and is willing to bridge partisan divides -- would strike a comprehensive bargain that called for most budget savings to come from spending cuts while including some tax increases. Little Backing Yet the former private-equity executive has positioned himself to force through tax and spending reductions with little Democratic backing. He proposes a plan that would lower individual income, investment and corporate, taxes -- at a cost of about $5 trillion over 10 years, according to the Committee for a Responsible Federal Budget -- by limiting deductions and exemptions. Though there’s support for base-broadening along those lines, those steps don’t begin to cover the cost of Romney’s tax cuts, and he won’t say which expenditures he’d limit to do so. A Tax Policy Center analysis showed that for Romney’s math to work, he’d have to reduce tax expenditures by 30 percent in 2015, virtually guaranteeing the curtailment of popular deductions such as those for mortgage interest and health insurance. Tax Breaks Lanhee Chen , his domestic policy adviser, said Romney doesn’t want to cut homeownership and health-care and tax breaks, especially for middle-income people. He declined to provide specifics. “This silly idea that, I’ve got to tell you exactly -- I’m going to presume and presuppose these are the things that we’re going to curb and these are the things we’re going to change --I think, represents an unrealistic view of how this works,” Chen said. One thing Romney has said is he has no intention of using revenue generated by tax changes to reduce the deficit. He has been vague about what spending reductions he would pursue to reach his goal of cutting $500 billion from the budget by 2016, in line with his promise to cap expenditures at 20 percent of gross domestic product. He would increase defense spending by some $2 trillion over 10 years, according to one estimate , meaning deeper decreases in social programs. Medicare Overhaul He has outlined a Medicare overhaul that would give future retirees a subsidy to buy private insurance rather than have all their health needs covered by the government. Romney’s vision is close to the one Ryan pushed through the House. They’ve had so many discussions about how to steer a plan through Congress that even before Ryan was chosen to run with Romney, Chen was calling him by his first name. “He’ll do whatever it takes to save the country from the debt crisis,” Ryan said of Romney, and Republicans could only hope for “a handful” of Democrats to join them. Democrats will retain enough Senate seats to block any initiative, unless Republicans use reconciliation, a parliamentary tool that allows the majority party to fast-track budget bills. That’s how Senate Democrats passed Obama’s health- care law in 2010, and it sparked criticism from Republicans. Whatever happens, the poisonous atmosphere in Congress will be a challenge for Romney. Impatient, Frustrated In Massachusetts, he was known as impatient, frustrated with the slow rhythms of politics. Rather than seeing the expansion of health coverage as a matter of social justice, he approached the issue like a consultant. He instructed his staff to conduct a survey to determine who lacked insurance , crafting solutions for each segment of the population. Romney reveled in the data, sometimes shooing young aides out of their chairs to tinker with the Excel spreadsheets. He set a few principles: There could be no tax to finance the measure; no burden on employers; and, to ensure personal responsibility, every individual would be required to have insurance. Aside from those, he was eager to deal. There was a sense that Romney had been “elected for certain things,” said Tim Murphy , his point-man in the negotiations. And “there was an ability to negotiate within those guiding principles.” Romney badgered his staff for status updates and seemed mystified by how politics could hinder progress. Exasperated Romney When a Democratic leader rejected a compromise on how to fund the bill, holding out for a tax on employers that he knew the governor opposed, an exasperated Romney wondered how an accord would ever be reached. “He said, ‘That’s the problem, you know? How are you going to deal?’” recounted Trimarco. In the end, Democrats got their way, with a wink and a nod from Romney. He signed the legislation in 2006, quietly vetoing the provision assessing a small tax on businesses, knowing the legislature would override him. Both sides could claim victory. That could be a blueprint for how Romney would bring the two parties together to resolve the fiscal crisis. Five years later, however, he rarely mentions it. “My gut? The man is bipartisan -- that’s where he wants to be,” Trimarco said. “Will the system allow him to be that? I don’t know.” To contact the reporters on this story: Julie Hirschfeld Davis in Washington at jdavis159@bloomberg.net ; Lisa Lerer in Washington at llerer@bloomberg.net To contact the editor responsible for this story: Jeanne Cummings at jcummings21@bloomberg.net |
2024-02-22 | Bloomberg | Fannie-Freddie Plan, Sweden FSA, Trader Suspects: Compliance | With no plan from Congress or the Obama administration to shutter Fannie Mae and Freddie Mac , the companies’ regulator told Congress yesterday it will expand its oversight with a strategic plan to develop new systems and standards for home loans. The companies, which own or guarantee most of the nation’s mortgages, exist in an extended policy limbo that poses new risks to taxpayers and the housing market, said Edward J. DeMarco, acting director of the Federal Housing Finance Agency. The mandate to protect taxpayers must be balanced with the need to invest in staff and infrastructure, he said. Conservatorship, an emergency, short-term fix established by the Housing and Economic Recovery Act, has evolved into a long-term government operation. In a strategic plan sent to Congress yesterday, DeMarco said he will begin building a single system for securitizing home loans and set standards for how those loans are managed. Washington lawmakers began last year with sweeping plans to wind down Fannie Mae and Freddie Mac. Treasury Secretary Timothy F. Geithner offered three options for reducing the government’s footprint and has promised a more detailed plan in the coming months. The House and Senate so far have failed to reach consensus on any legislation. Fannie Mae and Freddie Mac have survived on taxpayer aid since September 2008, when catastrophic losses from failing home loans forced them into government conservatorship. Since then, the companies have drawn more than $180 billion from a U.S. Treasury Department lifeline. For more, click here. Compliance Policy EU Ministers Adopt Curbs on Naked CDSs in Short-Selling Law European Union finance ministers adopted a short-selling law that includes an optional ban on naked credit-default swaps tied to sovereign debt. The legislation, which would also curb so-called naked short-selling of stocks and government bonds , was approved at a meeting in Brussels today. The decision marks the final stage in the adoption of the law, which was also approved in November by lawmakers in the European Parliament. Investors buy CDSs as insurance to protect themselves from losses if a bond issuer defaults. A sovereign CDS trade becomes naked when an investor buys the swap without being at risk of suffering such losses. The short-selling and naked-CDS curbs will come into effect on Nov. 1, according to a copy of the law published on the EU’s website. Banker Pay on Agenda for Barnier Meetings With U.S. Regulators Michel Barnier , the European Union’s financial services chief, will discuss banker bonuses with U.S. regulators during a visit to the country this week. The talks may also cover the implementation of bank capital rules agreed to by the Basel Committee on Banking Supervision, and regulation of financial derivatives, the European Commission said in an e-mailed statement. The Commission has said that it’s weighing tougher rules on banker pay in response to awards which Barnier has said lack “all reason, common sense and morality.” High-Frequency Trading No Threat to Stability, Sweden’s FSA Says High-frequency trading, under scrutiny from securities regulators globally, has had a minimal negative impact on the Swedish market and poses little threat to stability, the nation’s financial services watchdog said. “The investigation shows that the negative effects related to high frequency and algorithmic trading are limited,” the Swedish Financial Supervisory Authority said yesterday. “It is apparent that trading has undergone a transformation, and to some extent a deterioration, but most parties believe that this is due to multiple factors and not just faster, more computerized trading techniques.” The role of high-frequency firms in periods of market swings has come under scrutiny since the May 6, 2010, crash that briefly erased $862 billion from the value of U.S. shares. Traders and other professional investors were said to have withdrawn bids as the selloff worsened, according to a September 2010 report from U.S agencies. Regulators and exchanges later installed curbs to limit the disruption to markets. In Europe , Financial Services Commissioner Michel Barnier last year proposed rules covering high-frequency trading as part of a wider overhaul of European Union market regulations, known as Mifid. A U.K. government study in September concluded that computerized trading isn’t spurring broad increases in market volatility even though it sometimes creates “instability” that may lead to crashes. Still, the Swedish regulator yesterday said it will remain vigilant because investors said market abuse has become harder to spot and more widespread. Traders and investors “must focus on expanding their systems that monitor trading in real time and improving co-ordination between themselves to identify any market abuse,” Sweden’s FSA said. For more, click here. Compliance Action Cordray Announces U.S. Inquiry Into Bank Overdraft Policies The U.S. Consumer Financial Protection Bureau is starting an inquiry into bank checking account overdraft policies, director Richard Cordray announced today. Banks and credit unions were set to charge customers about $38 billion from overdraft fees in 2011, according to a Sept. 15 estimate by Moebs Services, a Lake Bluff, Illinois-based economic research firm. Overdrafts occur when consumers spend or withdraw more money than is available in their checking accounts. Banks typically charge a fee when balances go below zero, and treat the amount of the overdraft as an interest- bearing loan. The bureau will request data from banks, and input from the public on how the ordering of transactions affects how much consumers pay, the agency said in the statement. Banks have sometimes debited customers’ accounts not in the order of the transactions, but with the highest amount first, so as to overdraw the account as quickly as possible and incur fees and interest. The agency will also examine the quality of information consumers receive on overdraft programs, bank marketing campaigns on overdrafts, and how young and low-income persons are affected by overdrafts, the bureau said. The bureau is seeking feedback on ways to make overdraft fees easier to understand on account statements. In the past, other regulators including the Federal Reserve and the Federal Deposit Insurance Corporation have imposed rules limiting the application of overdraft programs. U.K. Insider-Trading Suspects Said to Face FSA Charging Decision Seven people arrested by Britain’s financial regulator as part of its highest-profile insider-trading investigation may learn next month whether they’ll be charged, two people familiar with the probe said. The suspects were arrested almost two years ago by Britain’s Financial Services Authority and included employees who worked for Deutsche Bank AG (DBK) , Exane BNP Paribas and Moore Capital Management LLC. The suspects must report to police stations in London on March 26 to discover if they’re being prosecuted, said the people, who declined to be identified because they weren’t authorized to discuss the case. The investigation is codenamed Tabernula, Latin for little tavern, and is probing whether the men engaged in the front- running of block trades. Investigators are seeking to determine if the suspects profited by using knowledge of upcoming securities sales, generally on behalf of a corporate client. Not all of the suspects will necessarily be charged next month and some final decisions may be delayed, according to one of the people. The FSA arrested an eighth suspect last year, and last week a ninth -- a trader at insurer Legal & General Group Plc (LGEN) ’s investment-management arm. Ex-Mizuho Credit Executive Rekeda May Face SEC Lawsuit Over CDO U.S. regulators, as part of a broad probe of how Wall Street firms bundled mortgage-linked financial products as the housing crisis worsened, notified a former Mizuho Financial Group Inc. (MFG) executive he may be sued for his role in structuring the securities. Alexander Rekeda, who was previously head of structured credit in the Americas at Mizuho, received a so-called Wells notice in October informing him that Securities and Exchange Commission staff intends to recommend an enforcement action against him for allegedly making misrepresentations about a collateralized debt obligation, according to his public broker filings. Rekeda was part of a group of about 10 traders who left Calyon, the investment-banking unit of Credit Agricole SA (ACA) , in 2006 to join Mizuho, helping the Japanese lender ramp up its activity in U.S. mortgage-backed securities just as the housing market began its steep decline. As defaults on subprime home loans climbed, Mizuho struggled to find buyers for its CDOs and, as their values plummeted, had to absorb billions of dollars in losses. Over the past three years, the SEC has targeted a range of firms and individuals for their role in creating and selling products linked to risky mortgages. An e-mail to Masako Shiono, a spokesman for Mizuho Financial Group Inc. (8411) , wasn’t immediately answered. Steven Kobre, a lawyer representing Rekeda, declined to comment. The Wells notice was reported earlier by the Wall Street Journal. Courts Ex-Credit Agricole Banker Uses Whistle-Blower Rule in Suit A senior investment banker at Credit Agricole SA (CRARY) sued the French lender for millions of pounds, claiming he missed out on bonuses and was dismissed for reporting colleagues under whistle-blowing rules. Edward Willems, former deputy head of fixed income markets at Credit Agricole’s corporate and investment banking unit, was “subjected to detriment as a result of making protected disclosure,” his lawyer Tom Croxford told a London employment tribunal yesterday. Willems’ bonuses in 2010 and 2011 were “inappropriately low” because of the whistle blowing, Croxford said, without describing the conduct he reported. Willems “is seeking millions of pounds,” Credit Agricole’s lawyer Nicholas Randall said at the hearing yesterday. While most wrongful dismissal damages are capped at about 72,000 pounds ($114,000), employment tribunals can award unlimited amounts in whistle-blower cases. Employees are protected by U.K. law from being fired or punished if they reveal malpractice in the public interest. Most cases settle before trial, said Samantha Mangwana, an employment lawyer at Russell Jones & Walker who isn’t involved in the case. Meriel Schindler, one of Willems’ lawyers, didn’t respond to an e-mail requesting comment. An e-mail to Credit Agricole’s press office wasn’t immediately answered. U.S. Seeks to Drop First Foreign-Bribery Sting Case The U.S. asked a court to dismiss the biggest prosecution of individuals accused of foreign bribery after two trials in the case ended with acquittals and hung juries. The U.S. Justice Department yesterday requested that a federal judge in Washington dismiss the indictment, which originally accused 22 security-industry officials of planning to make payments to a federal agent posing as a representative of the West African country of Gabon to secure a stake in a fake $15 million weapons deal. It was the first time the government used a sting operation involving undercover techniques to charge violations of the Foreign Corrupt Practices Act. In its filing, the government said it “carefully considered” the outcomes of the first two trials of 10 defendants and the impact of rulings in those cases on future trials of the remaining defendants, as well as the resources needed to continue with “another four or more” trials. “Continued prosecution of this case is not warranted under the circumstances,” according to the filing. The government asked that the case be dismissed with prejudice, meaning it couldn’t try to charge the defendants again for the same crimes. Laura Sweeney , a Justice Department spokeswoman, declined to comment beyond yesterday’s filing. The case is U.S. v. Goncalves, 09-cr-00335, U.S. District Court, District of Columbia (Washington). Keydata Founder Seeks Probe Ban on FSA Staff Who Saw E-Mails Keydata Investment Services Ltd.’s founder told a judge the Financial Services Authority should exclude from its probe of the company anyone who saw protected attorney-client e-mails improperly obtained by the U.K. regulator. The FSA, which lost a ruling over the e-mails in October, should also hand over communications with other agencies to which it sent the material, including the Serious Fraud Office and the Insolvency Service in Britain and financial watchdogs in Luxembourg and the Cayman Islands, lawyers for Stewart Ford said at a hearing in London yesterday. Keydata administered 2.8 billion pounds ($4.42 billion) of assets when the FSA asked a court to place it into administration in 2009. The watchdog had started investigating the company two years earlier, examining whether it targeted investors with potentially misleading advertisements, and for tax irregularities. The e-mails sent by Ford and other directors to legal advisers were covered by the attorney-client privilege and improperly obtained by the FSA, Judge Ian Burnett ruled in October. The so-called judicial review prompted the regulator to suspend its four-year-old investigation into Keydata. The FSA’s lawyer declined to comment during a break in the hearing. Andrea Kinnear, a spokeswoman for the regulator, didn’t immediately have a comment when reached by phone. The privileged material included a lawyer’s advice to Ford on how to deal with the FSA and an instruction that the regulator should never see the communications, said Hodge Malek, one of Ford’s lawyers. Interviews/Speeches McNerney Says Export-Import Bank Reauthorization Vital for U.S. Boeing Co. (BA) Chief Executive Officer James McNerney urged Congress to reauthorize the U.S. Export-Import Bank and raise the limit for its lending to aid domestic companies. Loans made by the bank helped create 290,000 direct and indirect jobs at more than 3,600 U.S. companies, McNerney, also Boeing’s chairman, said yesterday during a conference at the State Department in Washington. The bank’s current authorization expires May 31. Barofsky Says Volcker Rule Good for Financial Stability William Cohan, author of “Money and Power: How Goldman Sachs Came to Rule the World” and a Bloomberg View columnist, and Neil Barofsky, former special inspector for the U.S. Treasury’s Troubled Asset Relief Program and a Bloomberg Television contributing editor, talked about the proposed Volcker rule. Former Federal Reserve chairman Paul Volcker met in person with U.S. Securities and Exchange Commission Chairman Mary Schapiro last week to discuss the proposed ban on proprietary trading named for him, according to a person familiar with the meeting. Cohan, speaking with Erik Schatzker on Bloomberg Television’s “InsideTrack,” also discussed the departure of Lucas van Praag as Goldman Sachs Group Inc. (GS) ’s chief spokesman. (Cohan is a Bloomberg View columnist. The opinions expressed are his own.) For the video, click here. Stumm Says Currency Markets Should Be More Transparent Michael Stumm, president and chief executive officer of Oanda Corp., discussed currency markets and explained why he thinks more transparency in the Forex market is called for and how to accomplish it. He talked with Andrea Catherwood on Bloomberg Television’s “Last Word.” For the video, click here. BOE’s Bean Says Greek Deal Doesn’t Eliminate Crisis Risks Bank of England Deputy Governor Charlie Bean said agreement on a second bailout for Greece may not be enough to end the debt crisis and countries in the euro-area periphery must reduce debt and improve competitiveness. While the agreement “between the Greek government and the euro-area authorities is certainly welcome, there still remains a possibility that events could unfold in a disorderly and damaging fashion at some stage in the future,” Bean said in a speech yesterday in Glasgow, Scotland. The euro crisis “represents the biggest downside risk” to the U.K. The Bank of England expanded its bond-purchase target by 50 billion pounds ($79 billion) to 325 billion pounds this month in response to a recovery weakened by a squeeze on consumers and Europe’s debt turmoil. Bean said that while inflation is easing and some recent business surveys have been encouraging, growth will be “sluggish” in the first half of 2012 and there’s “added incentive” to cement the recovery. The deputy governor said a “disorderly outcome” in the euro area would hit the U.K.’s export and financial links, reduce confidence and lead companies and consumers to “hunker down and postpone spending.” He also said that Greece isn’t the only country in the currency zone facing challenges. For more, click here. 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 . |
2024-11-04 | Bloomberg | Fortiz Plans to List Merchant Bank Ghana, Central Bank Says | Fortiz Private Equity Fund Ltd. will list Merchant Bank Ghana Ltd. on the stock exchange within three years after acquiring a majority stake in the lender, according to Ghana ’s central bank. Fortiz will inject capital to address solvency and liquidity challenges after agreeing to buy the holding from the state pension fund and a unit of SIC Insurance Co., the Bank of Ghana said in a statement on its website without providing further details. Fortiz, a private-equity firm based in Accra, acquired the stake after talks between Merchant Bank and FirstRand Ltd. of South Africa fell through. FirstRand offered to buy 75 percent of Merchant Bank for about 750 million rand ($74 million). Andrew Boye Doe, secretary of the Bank of Ghana, didn’t answer two calls to his office today. The Ghana Stock Exchange Financial Stocks Index, which tracks the performance of banks and insurance companies, advanced for a third day to a record high. The index added 0.2 percent by 2:48 p.m. in Accra, bringing this year’s gain to 69 percent. To contact the reporter on this story: Moses Mozart Dzawu in Accra at mdzawu@bloomberg.net To contact the editor responsible for this story: Andres R. Martinez at amartinez28@bloomberg.net |
2024-03-19 | Bloomberg | Yes, Cyprus Is Different | One lesson from the Cyprus bailout debacle is that it really is different. Not so much because its economic case is unique, but because Cyprus’s fellow European Union members see it as an outlier. This is the EU’s third smallest nation with only 1.1 million people. It joined as recently as 2004, with the help of a little blackmail from its patron Greece, which threatened to block the extension of the bloc to Poland and other ex-Soviet countries unless Cyprus got in too. The others didn’t want Cyprus because it wasn’t ready. It has been a divided island ever since Turkey invaded and occupied the northern half in 1974. A deal was arranged under which the two sides of the island were to vote on a United Nations- brokered reunification deal in 2004 and then join the EU together. The Turkish-controlled North voted yes; the Greek South voted no -- not least because it knew it would get into the EU anyhow. Small EU countries tend to keep a low profile after joining the bloc. (When was the last time you heard a story about Malta deciding an important policy?) Not so with Cyprus, which some other EU states have seen as a lobbyist for various Russian interests. It has also led the blockage of entry negotiations for its old enemy Turkey. Then in 2008, Cyprus joined the euro. As my colleague Jonathan Weil has argued , it wasn’t ready for that either. This wasn’t Cyprus’s fault -- the country's admission shows just how flawed the euro-area’s entry criteria are. Miss an inflation target by 0.1 percentage point and you don’t get to join the euro. But if your economy is an unsustainable eight times smaller than your banking sector, never mind, you can join -- that’s not part of the test. The Cypriots have a genuinely tough hand of cards to play because they face a territorial dispute with a vastly more powerful neighbor in Turkey, which still has troops on the island. So the Cypriots seek out allies wherever they can, and they’ve been remarkably good at it. As already mentioned, Cyprus successfully leveraged its kinship with Greece to get into the EU on its own terms. More recently Cyprus joined with Israel (and therefore gained implicit U.S. backing) to explore for natural gas in waters around the island, despite furious opposition from Turkey. Perhaps most importantly, after the collapse of the former Soviet Union, Cyprus also secured Russia as a firm ally by becoming the offshore center-of-choice for Russian businessmen. This is only in part about money laundering. Cyprus has been improving its regulations against laundering since at least 2000, when the Organization for Economic Cooperation and Development removed the country from its blacklist of truly awful tax havens. Cyprus, which has an English-based legal system and a 10 percent corporate tax rate, is where important Russians incorporate themselves. To take just one example, reported by Bloomberg News today, Arkady Rotenberg, the childhood friend and former judo partner of President Vladimir Putin controls his Russian construction company through a Cyprus-based vehicle, Marc O’Polo Investments Ltd. Rotenberg’s companies have been awarded at least $7.4 billion of contracts for the 2014 Winter Olympics in Sochi. This is the heart of the Kremlin establishment -- no wonder Putin has attacked the euro-area plan to take 9.9 percent of tax Cyprus deposits above 100,000 euro, and 6.75 percent below. And no wonder Cyprus President Nicos Anastasiades refused to tax high-worth Russian depositors more than 10 percent, even at the cost of penalizing Cypriot voters more than he had to and breaching the principle of depositor insurance. So when it came time to put together a bailout for a very small country that only recently joined the EU, is seen in some ways as semi-detached and has managed to irritate most important EU members at one point or another, there was a pre-disposition to treat it differently. There were much more important reasons for the bailout debacle, of course, including German politics and bailout fatigue among creditors. Still with a different partner across the table the euro-area leaders might well have stopped longer to think about the wisdom of penalizing euro-area citizens anywhere for putting their savings in a bank. (Marc Champion is a member of Bloomberg View's editorial board. Follow him on Twitter.) |
2024-04-20 | Bloomberg | Udvar-Hazy ‘Ready’ to Buy Back ILFC After IPO for Air Lease | Steven Udvar-Hazy, who this week staged the jet-leasing industry’s biggest initial public offering, said he’s “absolutely” interested in buying back the company he sold to American International Group Inc. (AIG) in 1990. Udvar-Hazy said he tried “very hard” to repurchase International Lease Finance Corp. from AIG in 2009, when the lessor was strained by the financing woes that spurred the New York-based insurer to seek a federal bailout. “At that point, AIG priorities were focused on repaying the government obligations,” Udvar-Hazy said today in a Bloomberg Television interview in New York. “Once the board of AIG makes the determination of what they want to do with ILFC and the government backs that plan, then I think we’ll certainly be ready to sit down at the table.” AIG said in February it will consider raising funds from Los Angeles-based ILFC, without giving a timetable for a sale. Udvar-Hazy left the leasing company in February 2010 and started Air Lease Corp., whose shares began trading yesterday on the New York Stock Exchange. Mark Herr, a spokesman for AIG, declined to comment. AIG has raised more than $50 billion divesting assets including non- U.S. life insurance divisions since its 2008 bailout. AIG said this week it agreed to sell a rail-car leasing unit to Perella Weinberg Partners LP. ‘Great Company’ “It’s a great company,” Udvar-Hazy said of ILFC. “Hopefully we can work together at some point in the future.” Air Lease’s fleet has 53 aircraft, and will expand to 100 planes by the end of 2011 and 500 within the next five years, said Udvar-Hazy, the chairman and chief executive officer at the Los Angeles-based company. The “primary growth will be organic,” Udvar-Hazy said. Air Lease said yesterday it exercised the full over- allotment option, meaning the company sold 34.8 million shares this week to raise $868 million after deducting IPO expenses. AIG rose 23 cents to $32.35 at 4:15 p.m. in New York Stock Exchange composite trading, its first gain after 10 declines. Air Lease climbed 15 cents to $28.10. Udvar-Hazy’s sale of ILFC to AIG made him a billionaire. When the so-called godfather of jet leasing left ILFC last year, he was managing a fleet of about 1,000 aircraft valued at roughly $44 billion. Now 65, he said he has no plans to retire. “This is an exciting business,” he said. To contact the reporters on this story: Susanna Ray in Seattle at sray7@bloomberg.net ; Laura Lee in New York at llee17@bloomberg.net To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net |
2024-03-21 | Bloomberg | Former Meritor Investor Loses Bid for Share of $276 Million | Meritor Savings Bank current shareholders are the proper recipients of $276 million from the Federal Deposit Insurance Corp. over broken promises that led to the company’s 1992 seizure, a U.S. appeals court ruled today. Former shareholder Steven Roth and Interstate Properties argued that owners of Meritor shares at the time it failed should be given a share of the money. The U.S. Court of Appeals for the Federal Circuit in Washington posted the opinion on its website. Meritor, formerly Philadelphia Savings Fund Society, claimed the government reneged on special accounting treatment after the FDIC in 1982 asked the company to take over the failing Western Savings Fund Society. Meritor was seized a decade later after struggling to absorb Western’s bad loans. Roth sold his shares after the bank’s failure and said were he not given a share of the $276 million, it would “lead to a bizarre outcome in which the shareholders of Meritor who were injured by the government receive no compensation, while post- seizure speculators who were never injured are compensated,” according to the three-judge panel’s opinion. “Roth easily could have avoided this ‘bizarre outcome’ if he had simply held onto his shares,” the court ruled. The case is Slattery v. U.S. 12-5041, U.S. Court of Appeals for the Federal Circuit (Washington). The lower court case is Slattery v. USA, 93cv280, U.S. Court of Federal Claims. To contact the reporter on this story: Susan Decker in Washington at sdecker1@bloomberg.net To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net |
2024-10-17 | Bloomberg | Putin’s Billionaire Ally Buys Half of Tele2 Russia Operator | President Vladimir Putin ’s billionaire ally Yury Kovalchuk is buying half of Tele2 Russia Holding AB with partners, seeking to make the wireless carrier a stronger competitor to the country’s three dominant operators. Kovalchuk’s Bank Rossiya (ROSS) and partners including steelmaking billionaire Alexey Mordashov bought 50 percent of the business from VTB Group (VTBR) , a state-run bank. VTB, which bought the Russian unit of Sweden’s Tele2 AB (TEL2B) for $2.4 billion this year, said in its statement today that the selling price for the stake was “in line with expectations.” With Kovalchuk’s backing, Tele2 Russia will become a more powerful contender in a market benefiting from rising demand for mobile Internet-browsing and video viewing. The Russian wireless market is dominated by billionaire Vladimir Evtushenkov’s OAO Mobile TeleSystems (MBT) , billionaire Alisher Usmanov ’s OAO MegaFon (MFON) and billionaire Mikhail Fridman’s VimpelCom Ltd. (VIP) The next step may be combining Tele2 Russia with the wireless business of state-controlled phone company OAO Rostelecom. The two mobile carriers may be merged, VTB Chairman Andrey Kostin said this month. In the tie-up, which would form the country’s fourth nationwide mobile operator, Tele2 Russia owners would probably have majority control, he said. “Kovalchuk managed to agree with VTB and may become a beneficiary of Russia’s new nationwide operator,” Anna Lepetukhina , an analyst at Sberbank CIB in Moscow, said by phone. “Tele2 Russia is a good asset which has great potential if combined with Rostelecom’s mobile business.” Russian Growth Tele2 Russia and Rostelecom’s mobile unit together would have about 37 million customers, trailing the 57 million to 72 million users at the larger rivals, according to AC&M Consulting. In contrast to Western Europe, the Russian wireless market is expanding as more consumers browse the Web and watch video on smartphones and tablets. Russia’s total mobile revenue climbed 9 percent to 837.4 billion rubles ($26.1 billion) last year, according to AC&M Consulting. Data revenue surged 33 percent to account for 100.7 billion rubles of that amount. Shares of MTS, the wireless-market leader, fell 2.7 percent to 341.92 rubles at 12:47 p.m. in Moscow. MegaFon, the No. 2, dropped 0.7 percent to $36.75 in London. VTB declined 1.1 percent to $2.70. Kovalchuk’s Partners The Tele2 Russia purchase marks an expansion into a new area for Kovalchuk, who owns CTC Media (CTCM) in Russia with Tele2 AB founder Cristina Stenbeck and her family. He is the main shareholder of St. Petersburg-based Bank Rossiya, which owns stakes in National Media Group and insurance company Sogaz and has an indirect interest in Gazprombank. Kovalchuk, 62, had a fortune valued at $1.1 billion by Forbes Russia magazine this year. He has known Putin since the early 1990s, and both are from St. Petersburg. Mordashov, a billionaire owner of Russian steelmaker OAO Severstal, is Kovalchuk’s partner in the bank and in National Media Group. Rostelecom Chief Executive Officer Sergey Kalugin, appointed in March, had previously worked for Kovalchuk’s companies. Gazprombank holds a 7.2 percent stake in Rostelecom, according to the Prime newswire. Rostelecom plans to rely on partners to develop mobile business, spokeswoman Kira Kiryukhina said Oct. 7. President Putin is backing measures that would allow Tele2 Russia to use so-called second-generation frequencies to develop fourth-generation networks for faster data speeds, Vedomosti reported today. To contact the reporter on this story: Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net |
2024-05-31 | Bloomberg | ADP Employer Services Says U.S. Added 133,000 Jobs in May | Companies in the U.S. added fewer workers than forecast in May, a reminder the job market will take time to strengthen, a private report based on payrolls showed. The 133,000 increase in employment followed a revised 113,000 gain the prior month that was smaller than initially estimated, Roseland, New Jersey-based ADP Employer Services said today. The median estimate of 39 economists surveyed by Bloomberg News called for a May advance of 150,000. Businesses may be wary of adding workers until they see more evidence of a pickup in consumer spending , while Europe struggles with recession. A Labor Department report due tomorrow may show that private payrolls rose by 160,000 in May, and unemployment held at 8.1 percent, economists projected. “Businesses are adding workers at a pace that is not very impressive,” said David Sloan , a senior economist at 4Cast Inc. in New York, who projected a gain of 135,000 for the ADP report. “The unemployment rate is not going to fall rapidly. The numbers are consistent with an economy that is growing modestly.” The number of American applying for unemployment insurance payment rose to a five-week high, a sign progress in reducing joblessness may be stalling. First-time claims for jobless benefits increased by 10,000 to 383,000 last week, Labor Department figures showed today. Stock Futures Stock-index futures pared gains after the figures. The contract on the Standard & Poor’s 500 Index expiring in June rose less than 0.1 percent to 1,309 at 8:50 a.m. in New York after gaining as much as 0.6 percent. The yield on the benchmark 10-year note declined to 1.59 percent from 1.62 percent late yesterday. The economy expanded more slowly in the first quarter than previously estimated, reflecting smaller gains in inventories and bigger government cutbacks revised Commerce Department figures showed today. Gross domestic product climbed at a 1.9 percent annual rate from January through March, down from a 2.2 percent prior estimate. Economists’ ADP estimates in the Bloomberg survey ranged from 85,000 to 225,000 after a previously reported April gain of 119,000. Over the previous six reports, ADP’s initial figure was closest to the Labor Department’s first estimate of private payrolls in April, when it understated the increase in jobs by 11,000. The estimate was least accurate in December, when it overstated the employment gain by 113,000. Manufacturing, Construction Goods-producing industries, which include manufacturers and builders, added 1,000 workers in May, today’s figures showed. Employment in construction declined by 1,000, while factories lost 2,000 jobs. Service providers added 132,000 workers. Companies employing more than 499 workers took on 9,000 workers. Medium-sized businesses, with 50 to 499 employees, added 57,000 and small companies increased payrolls by 67,000, ADP said. The Labor Department’s report tomorrow may show overall hiring, which includes government jobs, climbed 150,000 in May after rising 115,000 in April, according to the Bloomberg survey median. The ADP report is based on data from businesses with more than 21 million workers on payrolls. Macroeconomic Advisers LLC in St. Louis produces the data with ADP. United Technologies Some companies are paring their workforce. United Technologies Corp. (UTX) ’s Pratt & Whitney unit said on May 24 that it is cutting 300 salaried jobs, including 200 in its home state of Connecticut. The maker of engines for business and commercial airplanes “continuously assesses staffing levels to ensure they are in line with current business and economic conditions,” Bryan Kidder, a Pratt & Whitney spokesman, said in an e-mailed statement. “These decisions are necessary to carefully manage our cost structure while continuing to invest in our future.” Federal Reserve Bank of New York President William C. Dudley said he would favor additional easing if the labor market falters or risks to growth were to rise substantially. “If the economy were to slow so that we were no longer making material progress toward full employment, the downside risks to growth were to increase sharply, or if deflation risks were to climb materially, then the benefits of further accommodation would increase in my estimation and this could tilt the balance toward additional easing,” Dudley said in a May 24 speech in New York. His comments reinforced the view expressed at the April meeting of the central bank, when several policy makers said a loss of growth momentum or increased risks to their outlook could warrant additional action, according to minutes of the gathering. To contact the reporters on this story: Shobhana Chandra in Washington at Schandra1@bloomberg.net To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net |
2024-09-16 | Bloomberg | Jefferson County’s Major Creditors Agree on Debt Reorganization | Jefferson County’s major creditors signed agreements in principle to reorganize $3.14 billion of sewer debt that has driven the Alabama county to consider what would be the biggest U.S. municipal bankruptcy The signed letters include one from JPMorgan Chase & Co. (JPM) , which arranged most of the debt, said John Young, a court- appointed receiver running negotiations. JPMorgan would provide $750 million of about $1.1 billion in concessions under a proposal the county’s five commissioners plan to vote on at 11 a.m. New York time today, Commissioner Joe Knight said in an interview yesterday. If the settlement is rejected, the county may declare bankruptcy. If the plan is approved, the county and its banks would take another month to turn the terms into a binding agreement, with a deadline of Oct. 15, Young said. Any deal also hinges on the state Legislature taking action on the county’s projected deficit. Jefferson County is facing a $40 million gap in its operating budget that begins Oct. 1 after the Legislature failed to help replace a source of tax revenue that was thrown out by a court. The size of JPMorgan’s offer was confirmed by a second person familiar with the negotiations, who requested anonymity because the talks are continuing. The remaining amount of about $350 million will be split among banks that provided credit lines for the debt, bond insurers and investment funds. Major Holder JPMorgan, which managed the county’s sewer-bond refinancings in 2002 and 2003, holds about $1.2 billion of the county’s $3.1 billion sewer debt, the person said. Justin Perras , a spokesman for New York-based JPMorgan, declined to comment on the settlement proposal in an e-mail. Some commissioners say they aren’t satisfied with terms of the settlement, including the size of sewer-rate increases customers would pay over the next three years. “The numbers are not quite there yet,” commission Finance Chairman Jimmie Stephens said today. He said he wouldn’t vote for a settlement if that doesn’t change. “I’m going to listen to what the bankruptcy attorneys say to understand the pros and cons of a settlement and bankruptcy,” Stephens said. “At that time, we will come back, and I will make up my mind.” Rate Increases Under the proposed deal, the county would refinance $2.05 billion to repay old debt, contingent on an additional $30 million in concessions from creditors. Sewer customers would face three yearly sewer-rate increases of 8.2 percent starting as soon as Nov. 1, followed by projected annual growth of no more than 3.25 percent, according to a term sheet obtained by Bloomberg News. The rate increases may be reduced if the county chooses to purchase as much as $1 billion in bond insurance from Assured Guaranty Ltd. (AGO) , said the person familiar with the negotiations. Commissioner Sandra Little Brown said in an interview today she wanted to see sewer rates closer to 7.8 percent annually. Knight and Brown said those disagreements can be worked out over the next month, before the final deal is signed in October, assuming the commission approves it today. Jefferson’s step toward bankruptcy was brought on by adjustable-rate bond deals arranged by banks led by JPMorgan in 2002 and 2003 that were coupled with interest-rate swaps. The strategy mirrored similar deals engineered for borrowers around the country -- ostensibly to save money -- that wound up costing local governments billions of dollars when the financial crisis rattled Wall Street. Political Corruption The bond deals were also rife with political corruption, which caused the cost of the sewer project to soar as it was built during the 1990s. Former commission president and Birmingham Mayor Larry Langford , a Democrat, was convicted of accepting bribes in connection with the financing. The proposed settlement will mean the Jefferson County debacle will have cost JPMorgan $1.47 billion because it previously agreed to a $722 million settlement with the Securities and Exchange Commission over politically oriented kickbacks paid to land the financings. Two former JPMorgan bankers are fighting SEC charges that they made $8 million in undisclosed payments to friends of commissioners to secure the bank’s role in the deals. The financings arranged by JPMorgan left the county exposed to market turmoil in 2008, when the credit crisis pushed up municipal lending rates. After some bond insurers incurred losses on subprime-related securities and lost their top credit ratings, investors dumped Jefferson debt, forcing the county to pay penalty rates as high as 10 percent. To contact the reporters on this story: Margaret Newkirk in Birmingham, Alabama , at mnewkirk@bloomberg.net Martin Z. Braun in New York at mbraun6@bloomberg.net Kathleen Edwards in Birmingham, Alabama, at. To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net |
2024-07-29 | Bloomberg | Why Are Google Employees So Disloyal? | The perks Google lays on for its employees are the stuff of legend. Free gourmet food all day, the best health insurance plan anywhere, five months' paid maternity leave, kindergartens and gyms at the workplace, the freedom to work on one's own projects 20 percent of the time, even death benefits. No wonder the tech behemoth has topped Fortune Magazine's list of best companies to work for every year since 2007. Why, then, aren't Googlers more loyal to their employer? In one recent ranking of companies with the highest employee turnover rates, the Mountain View, California, company is among the leaders. The median employee tenure at Google is just more than one year, according to the payroll consultancy PayScale. Google declined to comment on the data. Payscale lead economist Katie Bardaro points out that Google has been hiring, so there are lots of new employees with low tenure. Indeed, since 2007 the company's workforce has grown from 9,500 to 28,500 employees worldwide. These employees are young, with a median age of just 29, so they have not worked anywhere very long. Google is known for its rigorous entry testing: Potential new recruits are asked trick questions like "How many golf balls do you think will fit into a school bus?" The upside for the candidates is that, apart from the high salaries and epicurean perks, they get co-workers who are fun to interact with. The resulting environment appears to be a happy one: 84 percent of the Google workforce has a high level of job satisfaction, one of the highest percentages in the Fortune 500. The low median tenure, however, is not just a statistical quirk. Technology companies that hire the smartest young people around all but guarantee themselves a high churn rate. A lack of employer loyalty is a defining feature of Generation Y. No matter how satisfied these highly marketable young minds may be, no matter how much they enjoy the free meals and hybrid car subsidies, they will jump ship as soon as they get bored or get a better offer elsewhere. "It is a hot job market," says Bardaro. Tech companies overall have some of the highest median salaries in the Fortune 500, and some of the lowest employee tenures. Yahoo!, like Google, pays its average employee $107,000, compared to ExxonMobil's $97,700, yet the median employee tenure is 2.4 years at Yahoo! and 6.5 years at ExxonMobil, according to PayScale. The older tech firms, the industry pioneers, boast somewhat longer employee tenures, even though their workers are almost as young as the Internet-age titans'. Microsoft and Intel staff have a median age of 33, and the median tenures for these companies are 4 and 4.3 years, respectively. Like Google and Yahoo!, they pay high salaries and offer competitive perks to keep their employees happy. In short, Google and its peers aren’t necessarily wasting money on Arcadian job environments for intelligent Y-ers who do not stick around. The companies' business performance is proof to the contrary. The very concept of employee loyalty may be growing obsolete. According to the PayScale report, the Fortune 500 company with the highest median employee tenure, 20 years, is Eastman Kodak. More than half of its employees are older than 50. Over the five years through 2012, according to data compiled by Bloomberg, it delivered an average return on assets of negative 12 percent. (Leonid Bershidsky, an editor and novelist, is Moscow correspondent for World View. Follow him on Twitter.) |
2024-03-09 | Bloomberg | Arabtec, Kuwait Finance, Qatar General: Gulf Equity Preview | The following stocks may rise or fall in Persian Gulf markets. Stock symbols are in parentheses and prices are from the last close. The Dubai Financial Market General Index rose 2.7 percent. Saudi Arabia’s Tadawul All Share Index (SASEIDX) gained 2.1 percent. Arabtec Holding Co. (ARTC) : The United Arab Emirates largest construction company posted a net income of 307 million dirhams ($84 million) last year, missing the mean estimate of 12 analysts for a profit of 357 million dirhams. Separately, the board delayed the sale of convertible bonds and raising capital through a rights offer. The shares rose 5.9 percent to 1.26 dirhams. Kuwait Finance House (KFIN) : Kuwait’s largest Islamic lender said its Turkish unit plans to sell $500 million of Islamic bonds by the end of this year. The shares gained 1.8 percent to 1,120 fils. Qatar General Insurance & Reinsurance (QGRI) Co: The insurer operating in Qatar and the United Arab Emirates plans to issue $500 million of five-year bonds in the next two months. The shares were unchanged at 68 riyals. To contact the reporter on this story: Zahra Hankir in Dubai at zhankir@bloomberg.net To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net |
2024-12-11 | Bloomberg | BofA Gives Advisers New Bonuses Tied to Funds-Growth Targets | Bank of America Corp. , the second- biggest U.S. lender, boosted bonuses for Merrill Lynch financial advisers who steer clients to use more of the bank’s products. Advisers who increase the flow of funds by at least 10 percent will be eligible for so-called strategic-growth awards starting next year, John Thiel , head of U.S. wealth management, and John Hogarty, chief operating officer of the unit, said yesterday in a presentation. An increase of at least $5 million to $25 million in funds -- including deposits, investment services, bank loans, mutual-funds and alternative investments - - is needed to qualify for the program, Hogarty said. “We’re creating significant opportunity for advisers aligned to the strategy and focused on growing their practices,” Hogarty said during the presentation. Morgan Stanley (MS) , the brokerage with the most financial advisers, joined an industry push to boost the cross-selling of lending products last week when it disclosed a change in its wealth-management compensation plan. Bank of America, which purchased Merrill Lynch in 2009, has sought to improve profit without angering its brokerage corps by crimping compensation. The first $10 million in funds growth at Merrill Lynch triggers a bonus worth 5 basis points, or 0.05 percent of that sum, Hogarty said. That swells to 10 basis points for $10 million to $50 million in new funds. Anything exceeding $50 million earns 3 basis points. Bank of America previously had offered a so-called asset- gathering bonus tied to total new funds that was capped at $50 million. The Charlotte , North-Carolina-based firm won’t change brokers’ so-called grid payout, usually the largest portion of compensation, Hogarty said. The lender also boosted the cash payout for retiring financial advisers to 100 percent to 160 percent of their annual production over four years, up from 70 percent to 80 percent, he said. Merrill Lynch offers the awards to retiring advisers in an effort to retain their clients. Reuters reported on parts of the plan yesterday. To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net To contact the editor responsible for this story: Rick Green at rgreen18@bloomberg.net |
2024-03-22 | Bloomberg | Rwanda’s Economic Growth Accelerated to 7.5% Last Year | Rwanda ’s economic growth accelerated to 7.5 percent last year, driven by financial services and the electricity, gas and water industries, the National Institute of Statistics of Rwanda said. The rate of growth rose from 6.1 percent in 2009, the institute said on its website today. Finance and insurance expanded 24 percent last year, while utilities grew 15 percent, according to the statement. “2010 was a year of economic recovery worldwide, including Rwanda,” central bank Governor Francois Kanimba said by phone today. Kanimba reiterated the Finance Ministry ’s forecast that economic growth would ease to 7 percent this year, citing the impact of poor rains on agricultural production. To contact the reporter on this story: Heather Murdock in Kigali at hmurdock1@bloomberg.net. To contact the editor responsible for this story: Paul Richardson at pmrichardson@bloomberg.net . |
2024-08-19 | Bloomberg | Lee Steps Up Support for Singaporeans as Economic Revamp Bites | Singapore Prime Minister Lee Hsien Loong pledged to improve housing affordability and revamp its health-care system, increasing support for citizens as the economy adjusts to an aging population and tighter labor supply. In his annual National Day Rally policy address yesterday, Lee also announced changes to the education system and unveiled long-term plans to free up space near the central business district for housing, offices and recreation. The government will provide help to companies struggling as it tightens the intake of foreign labor, he said. Lee, 61, is stepping up measures to help Singaporeans buffeted by infrastructure strains, rising living costs and greater competition for jobs, education and housing. The prime minister said the country, which celebrated its 48th year of independence this month, is at a “turning point” and must make a “strategic shift” in its approach to nation building. The government will “strengthen social safety nets, assure people that whatever happens to you, you can get the essential social services that you need, especially health care,” Lee said. “We will monitor closely how well people can afford housing in Singapore, and over time, as it becomes necessary, we will do more to help the lower- and the middle-income Singaporeans own their homes.” Aging Population Lee is trying to steer the economy through an aging population and a declining overseas-worker supply by prodding companies to produce more with less manpower and hire older Singaporeans, as well as increasing the birth rate. Singapore probably delivered the biggest employment surge among 33 advanced economies in the decade to 2014, according to data compiled by Bloomberg. Annual jobs growth may halve in the coming years from a 2007 peak as the island widens the clampdown on foreign workers, Bank of America Corp. estimates. “The foreign worker issue is complex and government cannot meet all the demands and there’s no perfect solution but we’ll definitely help small and medium-sized enterprises find a way to make it,” Lee said. “We need to control foreign workers, otherwise it will lead to serious consequences.” A jump in population via immigration in recent years has stoked social tensions and public discontent, leading to weakened support for his People’s Action Party in elections held in the past two-and-a-half years. The next general election must be held by 2016. “The groundswell of unhappiness is real, for them to ignore it would cost them significant votes in 2016,” said Terence Lee, an assistant professor of political science at National University of Singapore. “Education, health care and housing are things which of course really matter a lot to Singaporeans.” Expensive Housing Young couples have held back from having children in Asia ’s second-most expensive housing market, where public housing is the only affordable option for many families. With 82 percent of Singaporeans living in apartments built by the state, housing policy has been used to encourage the development of families. The administration will increase public-housing grants for some families to afford bigger homes, and add 20,000 pre-school places over the next five years, the prime minister said. While the government will provide more health-care subsidies, that means medical insurance premiums and contribution rates into the national savings system will have to rise, he said. An insurance program currently known as MediShield will soon be expanded to provide life-long coverage from a current ceiling of 90 years, Lee said. The new plan will be universal and provide better coverage for large hospital bills, and the government will create a package to help the elderly pay for their premiums, he said. More Babies The government is encouraging Singaporeans to have more babies to avoid a shrinking pool of workers and consumers, a deterrent to future investment. Lawmakers from Lee’s party endorsed a set of proposals in February to allow more foreigners through 2030 to boost the workforce, which may raise the island’s population to 6.9 million from 5.3 million. Lee also elaborated on plans to free up 800 hectares of space for homes and offices by moving a military airbase to the eastern part of Singapore. There are also plans to convert a parking lot into shops and an indoor garden at Changi Airport, while a fifth terminal is targeted for completion in the mid-2020s, he said. More land will also be available after 2027 when the lease for ports at Tanjong Pagar near the central business district expire and operations move to the island’s south-west, Lee said. “I think it’s necessary to try and extend the CBD, and try to make way,” said Joey Chew, an economist at Barclays Plc in Singapore. “It’s expensive land, it’s valuable land, so it doesn’t really make sense to have a port in Tanjong Pagar.” The infrastructure changes will take place in the next two decades or so, Lee said. “These are very ambitious, long-term plans, it’s an example of how we need to think and plan for our future,” Lee said. “If we can carry off these plans, we don’t have to worry about running out of space or possibilities for Singapore. We are not at the limit.” To contact the reporter on this story: Sharon Chen in Singapore at schen462@bloomberg.net To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net |
2024-09-08 | Bloomberg | China Puts Showing No Faith in Predictions for Rebound: Options | Options to protect against declines in Chinese stocks are the most expensive in four years as traders lose confidence in forecasts for a rally by Credit Suisse Group AG, Morgan Stanley and Deutsche Bank AG. The price for three-month bearish put contracts to sell the Hang Seng China Enterprises Index rose to 1.41 times the cost of bullish calls on Sept. 1, the most since March 2007 and up from 1.05 in May, according to data compiled by Bloomberg. Puts that pay owners should the gauge fall 10 percent cost 1.34 times bullish contracts as of yesterday. Investors are seeking insurance from declines after the index of Chinese companies available to foreign investors fell 12 percent last month, the most since October 2008, leaving the stocks with the lowest price-earnings ratio in almost three years. Strategists say the equities are too cheap to pass up, with Credit Suisse forecasting a 23 percent rally in the index by year-end, while Deutsche Bank and Morgan Stanley recommend investors “overweight” the shares. “People are more bearish because they remember the dramatic moves in the market” after the collapse of Lehman Brothers Holdings Inc. in September 2008, Winner Lee, the Hong Kong-based head of Asia derivatives strategy BNP Paribas SA, said in a Sept. 5 telephone interview. BNP was ranked as the top equity derivatives firm by Euromoney magazine in 2010. “You have people who are anticipating a crisis.” Twice as Much The Hang Seng China Enterprises has lost 17 percent this year, almost twice as much as the MSCI All-Country World Index, amid speculation the Chinese government will maintain policies to curb inflation as global growth slows. The central bank has raised interest rates five times in the past year and boosted lenders’ reserve requirements on nine occasions. Gross domestic product growth is forecast to slow to 8.75 percent in 2012 from 9.3 percent this year, according to the median projections in a Bloomberg survey of economists. A report tomorrow may show China’s consumer prices rose 6.2 percent in August from last year, according to the median estimate in a Bloomberg survey. A gauge of non-manufacturing industries in China dropped to 57.6 last month from 59.6 in July, the China Federation of Logistics and Purchasing reported on Sept. 3. A reading above 50 indicates expansion. “Investors are focusing more on the bad news, on the risk, rather than the valuations, which are very cheap at the moment,” Edward Chan , who oversees about $1 billion at Royal London Asset Management in London, said in a telephone interview yesterday. Falling Valuations The Hang Seng China Enterprises is valued at 9 times reported profit and reached the lowest level since November 2008 last month, according to data compiled by Bloomberg. The current valuation is 26 percent below that of the MSCI All-Country World Index, which tracks shares in 45 developed and emerging markets. The relative expense of bearish options to bullish ones, known to traders as skew, has surged across Asia. Three-month puts on South Korea ’s Kospi 200 Index jumped to 1.74 times the cost of calls on Aug. 24, the highest since November 2007, according to data compiled by Bloomberg. Skew on Hong Kong’s Hang Seng Index (HSI) jumped to 1.47 on Aug. 30, the most since May 2010, while it reached 1.53 for Taiwan ’s Taiex Index on Aug. 31, its highest level since April. While Deutsche Bank’s Ajay Kapur cut his weighting on China equities to a “modest overweight” last month, he’s bullish on banks and real-estate stocks. Financial companies in the MSCI China Index trade at 7.8 times reported profit, the cheapest since October 2008, according to data compiled by Bloomberg. ‘Classic Panic’ “This looks like a classic panic, not the start of a bear market ,” Kapur wrote in an Aug. 29 note. “While recession risks have risen, most leading indicators we track are not signaling one yet.” Vincent Chan at Credit Suisse predicted a rebound in Chinese shares in a Sept. 1 report, citing valuations at “distressed levels.” He cut his year-end forecast for the Hang Seng China Enterprises to 13,000 from 15,000. It closed at 10,544.86 yesterday. Morgan Stanley raised its allocation to emerging-market equities to the highest since April 2009 because of valuations and forecasts that the global economy will avert a recession, according to an Aug. 15 note. China-linked options had signaled traders were increasingly bullish earlier this year. The cost of iShares FTSE China 25 Index puts versus calls fell close to a two-year low on July 25 on speculation higher interest rates wouldn’t slow the world’s second-largest economy. The U.S. exchange-traded fund that tracks companies such as China Mobile Ltd. and Bank of China Ltd. then slid 17 percent to the lowest level since May 2009. Volatility Index Hong Kong’s HSI Volatility Index fell 2.9 percent to 31.38 as of 2:14 p.m. local time, for a third day of losses. The gauge, which measures the cost of using options as insurance against declines in the Hang Seng Index, has jumped 73 percent this year. The VIX, as the Chicago Board Options Exchange Volatility Index is known, is up 88 percent in 2011, and the VStoxx Index that tracks Euro Stoxx 50 Index options has jumped 82 percent year-to-date. “The fear is out there and in some ways it can become a self-fulfilling prophecy,” Katherine Schapiro, a San Francisco- based manager at Sentinel Asset Management Inc., which oversees about $20 billion, said in a telephone interview on Sept. 6. “The driver of growth has been China, and now the question that a lot of people have been asking is how much is China slowing down.” To contact the reporters on this story: Lynn Thomasson in Hong Kong at lthomasson@bloomberg.net ; Cecile Vannucci in Amsterdam at cvannucci1@bloomberg.net To contact the editors responsible for this story: Nick Baker at nbaker7@bloomberg.net ; Nick Gentle at ngentle2@bloomberg.net ; Andrew Rummer at arummer@bloomberg.net |
2024-09-14 | Bloomberg | Insurers Dumping Foreign Bonds Bolsters Government Auctions: Japan Credit | The slide in overseas interest rates is spurring Japanese insurers to dump foreign debt in favor of domestic fixed-income securities, supporting demand at the nation’s bond auctions. Germany’s 20-year bonds yield 69 basis points more than similar-maturity Japanese debt sold yesterday, near the lowest in at least 17 years. The rate advantage of 10-year Treasuries shrank to 91 basis points on Sept. 9, the narrowest in two years. Japanese life insurers sold a net 550.6 billion yen ($7.16 billion) of foreign debt last month, the most since December 2008, Ministry of Finance data showed. The lower yield advantage of overseas bonds has coincided with heightened volatility in currency markets , with the euro falling to a decade low against the yen. That’s spurred domestic financial companies to funnel more funds into Japanese government bonds , helping the world’s most indebted nation borrow at the second-lowest rates globally after Switzerland. “High yields are what make foreign bonds attractive, so the narrowing yield differences diminish their allure,” said Shinichi Horikawa, general manager at the accounting and investment department of Mitsui Sumitomo Kirameki Life Insurance Co. in Tokyo., which manages $16 billion. “In relative terms, Japan’s government bonds have become more attractive.” Yesterday’s 1 trillion yen sale of 20-year Japanese bonds drew bids valued at 3.39 times the amount on offer, the highest since the offering in May. Twenty-year yields slid 2.5 basis points to 1.740 percent after the auction, and the advantage they offered over five-year notes declined to 139 basis points, or 1.39 percentage point, the least since Sept. 29, 2010 ‘Good’ Auction “The auction results were pretty good,” said Tetsuya Miura , chief market analyst at Mizuho Securities Co., one of the 25 primary dealers obliged to bid at government debt sales. “The bullish trend for longer-term bonds is likely to last for a while.” Germany’s 20-year bonds yield 2.44 percent, compared with 1.75 percent for Japan’s, and the gap between the two narrowed to 66 basis points on Sept. 12, the least in Bloomberg data going back to December 1993. The rate on Switzerland’s 20-year security is lower at 1.44 percent. Sumitomo Mitsui’s Horikawa said his company’s holdings of Japanese debt are centered on maturities from 10 and 30 years. Life insurance companies typically try to match the maturities of their assets and liabilities to minimize the effects of interest-rate fluctuations. Insurer Holdings Insurance companies owned 20.2 percent of Japan ’s outstanding debt as of March 2011, the second-biggest holders after banks with 44.8 percent), according to the latest data from the Ministry of Finance. Japanese government debt due in 10 years or longer has handed investors a 3.16 percent return this year, compared with a 0.27 percent gain for bonds maturing between one and three years, according to indexes compiled by Bank of America Corp. “Short-term notes offer too little income,” said Mitsui Sumitomo’s Horikawa. “To gain sufficient income, investors have to buy longer-maturity bonds.” The yen climbed to a postwar high of 75.95 per dollar on Aug. 19, even as the nation sold 4.51 trillion yen that month to weaken the currency, the biggest foreign-exchange intervention on a monthly basis since 2004. The yen reached 103.90 per euro Sept. 12, the strongest since June 2001. Currency-Hedged Yields Treasuries have returned a 0.63 percent in the past three months to investors who converted proceeds into yen, compared with 4.94 percent in dollar terms, a Bank of America index showed. The comparable returns for German debt were negative 1.86 percent and positive 7.57 percent, the indexes showed. Currency-hedged yields on 10-year U.S. Treasuries stood at 1.83 percent today, down from 3.18 percent at the end of last year. The fees to borrow the U.S. currency to cover dollar investments are based on the difference between the London interbank offered rates for three-month dollar and yen loans. Currency-hedged yields on Germany ’s 10-year debt were 0.46 percent. Japan’s 10-year government bond yield stood at 0.995 percent today. The dollar Libor rate climbed to 0.347 percent yesterday, a level unseen since August 2010, according to the British Bankers’ Association. “Because of rising dollar Libor, currency hedge costs are increasing,” said Makoto Noji, a senior debt and foreign- exchange strategist at SMBC Nikko Securities Inc. in Tokyo, another primary dealer. “Japan’s government bonds are relatively more attractive than overseas debt, and they are even more attractive if hedging costs are taken into account.” CDS Prices Credit-default swaps insuring Japan’s sovereign debt for five years reached 123 basis points on Sept. 13, the highest level since CMA started gathering prices in 2004. That compared with 85.5 basis points to protect German debt and 52.2 for U.S. bonds, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market. The contracts 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. To contact the reporters on this story: Monami Yui in Tokyo at myui1@bloomberg.net ; Hiroko Komiya in Tokyo at hkomiya1@bloomberg.net ; Masaki Kondo in Singapore at mkondo3@bloomberg.net To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net |
2024-04-26 | Bloomberg | Bridgestone Says Yuan Policy Won't Affect `Aggressive' China Sales Growth | Bridgestone Corp., the world’s largest tiremaker, expects sales volumes in China to increase “aggressively” this year even if the nation allows its currency to appreciate against the dollar. Sales of tires for trucks and buses in China will probably exceed the 2008 level by more than 10 percent, Director Yujiro Kanahara said in an interview. Car and sports-utility tire sales will also grow, he said. The Tokyo-based company doesn’t disclose specific figures. China’s car sales jumped 76 percent to 3.52 million units in the first quarter as government stimulus policies helped boost demand in the world’s biggest vehicle market. A yuan revaluation could make tire imports cheaper and lower the cost of raw material purchases, boosting competition among producers. China may allow its currency to appreciate by June 30 to curb inflation, a Bloomberg survey of analysts showed this month. “We don’t expect China to increase tire imports, even if it allows the yuan’s appreciation, as the government protects the domestic market by tariffs,” Kanahara said in an interview in Tokyo. “A stronger Chinese currency would cut purchasing costs” for rubber from abroad, intensifying price competition among tiremakers, he said. Bridgestone operates four tire plants in China, selling most of the products made there in the domestic market. The company plans to boost production in the country by 43 percent from last year to 100,000 metric tons this year. It also exports tires to China from Japan, where the company’s output is expected to rise by 16 percent to 510,000 tons this year. Record Price Growth in Chinese demand and a seasonal drop in supply from Thailand, the world’s largest exporter, has sent cash rubber prices surging. The free-on-board price, which excludes freight and insurance, of Thai RSS-3 grade rubber for May-delivery rose to a record 128.55 baht ($4.0) per kilogram on April 23, according to the Rubber Institute of Thailand. “It is an abnormal, unbelievable price,” Kanahara said. The rally may have been caused by “not only fundamentals but speculative moves as well,” Kaoru Tomizawa, Bridgestone’s public relations manager, said in the same interview on April 23. “We have routes to secure the raw material without making deals in the market,” Tomizawa said. The company uses short- term and longer-term hedging to control the effect of price changes, he said, without elaborating. Rubber represents about 50 percent of the volume of each tire, Tomizawa said. Half of the rubber used in tires is natural, and the rest is synthetic made from petroleum. Rubber Substitution Soaring prices of natural rubber may be spurring tire makers to increase the use of synthetic rubber as an alternative, Tomizawa said. Isoprene rubber can be used, although “there is a limitation on substitution,” he said. Sales of passenger car tires in China will rise as demand for new models is growing, he said. Volkswagen AG, the biggest foreign carmaker in China, will invest 4.4 billion euros ($5.9 billion) in plants and new models by 2012, while Nissan Motor Co. aims to boost capacity almost 70 percent, the companies said on April 23 at the Beijing Auto Show. To contact the reporters on this story: Aya Takada in Tokyo at atakada2@bloomberg.net ; Yasumasa Song in Tokyo at ysong9@bloomberg.net. A worker polishes a tire in the Bridgestone Corp. booth at the Beijing Auto Show in Beijing on April 24, 2010. Photographer: Tomohiro Ohsumi/Bloomberg //<![CDATA[ $(document).ready(function () { $(".view_story #story_content .attachments img.small_img").each(function(){ var self = $(this); if (self.width() != 190){ self.width(190); } }); }); //]]> |
2024-02-22 | Bloomberg | AIG’s Ascot Said Among Insurers of Stolen Diamonds | Lloyd’s of London insurers including a carrier backed by American International Group Inc. (AIG) are facing claims on the theft of $50 million in diamonds from a Brussels airport, said people with knowledge of the policies. AIG’s Ascot was the lead insurer on the policy bought by Brink’s Co. (BCO) , which was robbed on Feb. 18, and Willis Group Holdings Plc (WSH) was the broker, said the people, who asked not to be named because policy details are confidential. Ascot and Willis have sent loss adjusters to Belgium to probe the heist, said the people who declined to be named. “We self-insure up to an amount we deem appropriate, and then we use third-party insurers,” said Ed Cunningham, a Brink’s spokesman who declined to identify the companies providing coverage or the size of the loss. “The entire incident is under investigation.” The robbers broke through a fence and flashed guns at the pilots of a Swiss International Air Lines Ltd. plane and took packets of gems, including rough and unpolished stones. Nobody was injured. Brink’s has repaid all of its customers for their losses, according to Cunningham, who said the company has coverage via the Lloyd’s market. Matt Gallagher, an AIG spokesman, declined to comment yesterday on the heist. AIG, the insurer that repaid a U.S. bailout last year, takes on Lloyd’s risks through its Ascot Corporate Name Ltd., according to a person familiar with the company’s operations. Policies are sold through Ascot Underwriting Ltd., which is majority-owned by an employee trust, with New York-based AIG having a stake as well, the person said. AIG dropped 0.8 percent to $37.28 a share yesterday in New York trading, valuing the firm at about $55 billion. ‘Significant Impact’ The robbery will have a “significant impact” on first- quarter earnings, Richmond, Virginia-based Brink’s said in a Feb. 20 statement, without providing a specific figure. The company said it was shipping a “portion” of the diamonds. Ascot was joined by other London insurers in underwriting the Brink’s policy, the people said. Lloyd’s declined to comment. Ascot spokeswoman Jenny Love declined to comment as did Nathan Hambrook-Skinner of London-based Willis. “It’s a significant claim especially coming so soon after the unprecedented specie losses from superstorm Sandy,” said Mike Burle an underwriter of terrorism, fine arts and specie, which refers to valuable property, risks at Liberty Mutual Holding Co.’s Liberty Syndicates in London. “Increased rates and thus premiums will be seen in many if not all sectors of the specie market.” The owners of some of the diamonds may have had separate policies, Burle said. London’s Loss “Either way, the majority of the losses are likely to fall in London,” he said. Claiming compensation may not be straightforward because questions could be raised about the airport’s security and the valuation of the diamonds, the people said. Rough diamonds are typically more difficult to value than polished stones. Claims would probably be valid even if the robbery was found to be aided by an employee of a firm involved in transporting the diamonds, according to Philip Turner, the London-based specie practice leader for Marsh Inc., the insurance broker owned by Marsh & McLennan Cos. (MMC) Policies typically only exclude losses from land war and nuclear conflict, he said. Brink’s probably is responsible for the first several million dollars of losses, with the rest borne by multiple carriers, said Etti Baranoff, an associate professor of risk, insurance and finance at Virginia Commonwealth University. “There are many layers” of insurance coverage, she said. “The only loss for them will probably be the self-insurance part.” Lloyd’s, the world’s oldest insurance market, oversees a syndicate system where insurers join to provide businesses with coverage against catastrophes, lawsuits, accidents, and theft. The market’s specie fine art division receives about $700 million of premiums each year, according to Liberty’s Burle. To contact the reporter on this story: Kevin Crowley in London at kcrowley1@bloomberg.net ; Zachary Tracer in New York at ztracer1@bloomberg.net To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net ; |
2024-02-28 | Bloomberg | U.S. January Personal Income and Spending (Text) | Following is the text of the U.S. personal income and spending report for Jan. released by the Commerce Department. Personal income increased $133.2 billion, or 1.0 percent, and disposable personal income (DPI) increased $78.3 billion, or 0.7 percent, in January, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $23.7 billion, or 0.2 percent. In December, personal income increased $56.6 billion, or 0.4 percent, DPI increased $48.5 billion, or 0.4 percent, and PCE increased $56.5 billion, or 0.5 percent, based on revised estimates. Real disposable income increased 0.4 percent in January, compared with an increase of 0.1 percent in December. Real PCE decreased 0.1 percent, in contrast to an increase of 0.3 percent. 2010 2011 Sept. Oct. Nov. Dec. Jan. (Percent change from preceding month) Personal income, current dollars 0.0 0.5 0.3 0.4 1.0 Disposable personal income: Current dollars -0.1 0.4 0.3 0.4 0.7 Chained (2005) dollars -0.1 0.2 0.2 0.1 0.4 Personal consumption expenditures: Current dollars 0.3 0.7 0.3 0.5 0.2 Chained (2005) dollars 0.2 0.5 0.2 0.3 -0.1 The January change in disposable personal income (DPI) was affected by two large special factors. Reduced employee contributions for government social insurance, which reflected provisions of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, boosted personal income in January by reducing the employee social security contribution rates (employee contributions for government social insurance are a subtraction in the calculation of personal income). The January change in DPI was affected by the expiration of the Making Work Pay provisions of the American Recovery and Reinvestment Act of 2009, which boosted personal current taxes and reduced DPI (personal current taxes are a subtraction in the calculation of DPI). Excluding these two special factors, which are discussed more fully below, DPI increased $11.4 billion, or 0.1 percent, in January, following an increase of $48.5 billion, or 0.4 percent, in December. Wages and salaries Private wage and salary disbursements increased $14.8 billion in January, compared with an increase of $20.8 billion in December. Goods-producing industries' payrolls increased $10.0 billion, compared with an increase of $2.5 billion; manufacturing payrolls increased $7.0 billion, compared with an increase of $2.6 billion. Services-producing industries' payrolls increased $4.8 billion, compared with an increase of $18.2 billion. Government wage and salary disbursements increased $1.9 billion, compared with an increase of $1.0 billion. Other personal income Employer contributions for employee pension and insurance funds increased $3.4 billion in January, compared with an increase of $2.7 billion in December. Employer contributions for government social insurance increased $8.6 billion in January, compared with an increase of $1.1 billion in December. The January increase was boosted by $7.5 billion reflecting an increase in the tax rates paid by employers to state unemployment funds. (Changes in employer contributions for government social insurance do not affect personal income, because employer contributions for government social insurance are also included in total contributions for government social insurance, which is a subtraction in the calculation of personal income.) Proprietors' income increased $3.9 billion in January, compared with an increase of $8.2 billion in December. Farm proprietors' income increased $1.6 billion, compared with an increase of $1.5 billion. Nonfarm proprietors' income increased $2.3 billion, compared with an increase of $6.6 billion. Rental income of persons increased $6.5 billion in January, compared with an increase of $1.9 billion in December. Personal income receipts on assets (personal interest income plus personal dividend income) increased $10.3 billion, compared with an increase of $21.1 billion. Personal current transfer receipts decreased $11.2 billion, in contrast to an increase of $2.4 billion. The January decrease in personal current transfer receipts reflected a decrease of $8.9 billion to the Earned Income Credit based on federal budget projections. Contributions for government social insurance -- a subtraction in calculating personal income -- decreased $94.9 billion in January, in contrast to an increase of $2.5 billion in December. The January decrease reflected decreases in personal contributions for government social insurance and increases in employer contributions. The January decrease in personal contributions for government social insurance reflected the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, which temporarily decreased the social security contribution rate for employees and self-employed workers by 2.0 percentage points for 2011, or $105.4 billion at an annual rate. As noted above, employer contributions were boosted $7.5 billion in January by increases in the unemployment-insurance rate. Personal current taxes and disposable personal income Personal current taxes increased $55.0 billion in January, compared with an increase of $8.0 billion in December. Expiration of the Making Work Pay Credit provision of the American Recovery and Reinvestment Act of 2009 boosted federal withheld income taxes by $38.6 billion in January. Federal net nonwithheld income taxes (payments of estimated taxes plus final settlements less refunds) boosted the January change by $11.3 billion, based on the Office of Tax Analysis projections of higher final settlement and refunds for 2010. Disposable personal income (DPI) -- personal income less personal current taxes -- increased $78.3 billion, or 0.7 percent, in January, compared with an increase of $48.5 billion, or 0.4 percent in December. Personal outlays and personal saving Personal outlays -- PCE, personal interest payments, and personal current transfer payments -- increased $22.1 billion in January, compared with an increase of $54.4 billion in December. PCE increased $23.7 billion, compared with an increase of $56.5 billion. Personal saving -- DPI less personal outlays -- was $677.1 billion in January, compared with $620.9 billion in December. Personal saving as a percentage of disposable personal income was 5.8 percent in January, compared with 5.4 percent in December. For a comparison of personal saving in BEA's national income and product accounts with personal saving in the Federal Reserve Board's flow of funds accounts and data on changes in net worth, go to http://www.bea.gov/national/nipaweb/Nipa-Frb.asp Real DPI, real PCE and price index Real DPI -- DPI adjusted to remove price changes -- increased 0.4 percent in January, compared with an increase of 0.1 percent in December. Real PCE -- PCE adjusted to remove price changes -- decreased 0.1 percent in January, in contrast to an increase of 0.3 percent in December. Purchases of durable goods increased 0.3 percent, compared with an increase of 1.2 percent. Purchases of motor vehicles and parts accounted for most of the increase in durable goods in January and in December. Purchases of nondurable goods decreased 0.2 percent in January, in contrast to an increase of 0.1 percent in December. Purchases of services decreased 0.1 percent, in contrast to an increase of 0.2 percent. PCE price index -- The price index for PCE increased 0.3 percent in January, the same increase as in December. The PCE price index , excluding food and energy in January, increased 0.1 percent, compared with an increase of less than 0.1 percent in December. 2010 Personal Income and Outlays Personal income increased 3.0 percent in 2010 (that is, from the 2009 annual level to the 2010 annual level), in contrast to a decrease of 1.7 percent in 2009. DPI increased 3.1 percent, compared with an increase of 0.7 percent. PCE increased 3.5 percent, in contrast to a decrease of 1.0 percent. Real DPI increased 1.4 percent in 2010, compared with an increase of 0.6 percent in 2009. Real PCE increased 1.8 percent, in contrast to a decrease of 1.2 percent. Revisions Estimates for personal income and DPI have been revised for July through December; estimates for PCE have been revised for October through December. Changes in personal income, current-dollar and chained (2005) dollar DPI, and current-dollar and chained (2005) dollar PCE for November and December -- revised and as published in last month's release -- are shown below. For July through September, the revisions to wages and salaries reflect the incorporation of newly available BLS tabulations of third-quarter private wages and salaries from the quarterly census of employment and wages. Change from preceding month November Previous Revised Previous Revised (Billions of dollars) (Percent) Personal Income: Current dollars 44.9 33.0 0.4 0.3 Disposable personal income: Current dollars 39.0 28.9 0.3 0.3 Chained (2005) dollars 24.9 17.4 0.2 0.2 Personal consumption expenditures: Current dollars 35.4 34.4 0.3 0.3 Chained (2005) dollars 22.6 23.1 0.2 0.2 December Previous Revised Previous Revised (Billions of dollars) (Percent) Personal Income: Current dollars 54.5 56.6 0.4 0.4 Disposable personal income: Current dollars 47.3 48.5 0.4 0.4 Chained (2005) dollars 10.4 15.3 0.1 0.1 Personal consumption expenditures: Current dollars 69.5 56.5 0.7 0.5 Chained (2005) dollars 33.0 25.0 0.4 0.3 This news release also presents revised estimates of wages and salaries, personal taxes, and contributions for government social insurance for July through September 2010 (third quarter). These estimates reflect newly available third-quarter wage and salary tabulations from the quarterly census of employment and wages from the Bureau of Labor Statistics. Next release March 28, 2011 at 8:30 A.M. EDT for Personal Income and Outlays for February. SOURCE: U.S. Commerce Department. http://www.bea.gov To contact the reporter on this story: Alex Tanzi in Washington at atanzi@bloomberg.net To contact the editor responsible for this story: Marco Babic at mbabic@bloomberg.net |
2024-10-15 | Bloomberg | Gupta’s Admirers Urge Mercy as Insider Sentence Nears | Microsoft Corp. (MSFT) Chairman Bill Gates and former United Nations Secretary-General Kofi Annan were among supporters of ex- Goldman Sachs Group Inc. (GS) director Rajat Gupta who urged mercy at his sentencing next week for his part in the biggest hedge fund insider trading scheme in U.S. history. Gupta is to be sentenced Oct. 24 for leaking stock tips to Galleon Group LLC co-founder Raj Rajaratnam , who masterminded the conspiracy. In letters to U.S. District Judge Jed Rakoff in Manhattan , Gates, Annan and at least 200 others wrote on behalf of Gupta, who faces as many as 20 years in prison on the most serious of the four counts of which he was convicted. “I urge you to recognize Rajat for the good that he has done in this world, to give him the credit that he deserves for helping others, and to take into account his effort to improve the lives of millions of people,” Annan said of Gupta’s work to reform the UN’s management. Gates wrote “I wanted to add my voice to those of other friends and colleagues of Rajat Gupta who are writing to you in order to round out Rajat’s profile,” noting his service as chairman of an organization fighting AIDS, tuberculosis and malaria. Gupta is the most prominent of the 69 people convicted since a nationwide insider trading crackdown by U.S. prosecutors and the FBI began in 2009. Besides his tenure at New York-based Goldman Sachs, Gupta served as managing partner of McKinsey & Co. from 1994 to 2003 and on the boards of Procter & Gamble Co. (PG) , the Rockefeller Foundation and the Bill & Melinda Gates Foundation. Found Guilty Gupta, 63, was found guilty in June of three counts of securities fraud and one count of conspiracy. Securities fraud carries a maximum prison term of 20 years, though Gupta will probably be sentenced to fewer years under federal guidelines. After a four-week trial, a federal jury in Manhattan said Gupta tipped Rajaratnam, 55, about dealings at New York-based Goldman Sachs, including information about a $5 billion investment by Warren Buffett ’s Berkshire Hathaway Inc. (BRK/B) on Sept. 23, 2008, and a tip on a quarterly loss. Rajaratnam is serving 11 years in prison for trading on tips from Gupta and others. Writers of the letters on Gupta’s behalf, made public Oct. 12, included Gupta’s family and former associates in the worlds of academia, business and charity. Among them were Kushal Pal Singh, the billionaire chairman of DLF Ltd., India ’s largest developer; Leonard Lauder, the chairman emeritus of Estee Lauder Cos. (EL) ; and Mukesh Ambani , India’s richest man and the chairman of Mumbai-based Reliance Industries Ltd. (RIL) , the world’s largest refining complex. ‘The Prison Fence’ Singh credited the Kolkata-born Gupta with bringing Microsoft’s Gates to India and with helping DLF create an urban development initiative there. Because of the prosecution, Gupta’s charitable works in India have been at a “standstill,” he said. “We as a society need more visionaries like Rajat Gupta,” Singh wrote. “Rajat Gupta is no threat to anyone inside or outside the prison fence.” Other writers included Ajit Jain, Berkshire’s reinsurance chief; Judith Rodin, president of the Rockefeller Foundation; Amartya Sen, a Harvard University professor; and author Deepak Chopra. Chopra called Gupta “compassionate, caring, selfless and dedicated” and cited his work helping found the Indian School of Business in Hyderabad. “I think Rajat has tremendously contributed to humanity,” Chopra said. ‘Leverage Information’ Jain, who testified at the trial as a defense witness, talked about his long friendship with Gupta and family. Jain said Gupta has already “been disgraced personally and professionally.” Jain said Gupta “customarily chided me during our social meetings to become more active in philanthropic causes” and said he never saw Gupta abuse “his many positions of trust for personal gain.” “On no occasion of our meetings did Rajat ever seek to inappropriately obtain or leverage information or opportunity by speaking with me, and I would have considered even a mild effort in that regard to be completely foreign to his character,” Jain wrote. Gupta’s wife, Anita, wrote an account of meeting her husband in 1968 at the Indian Institute of Technology, where she was the only girl in a class of 250 and he was “a big man on campus.” ‘Devastating’ Case “I have never forgotten his kindness to the very shy, quiet, small-town girl who felt so out of place,” she said. She told the judge the case has been “devastating” for her family. “Never in my wildest dreams” did she imagine she would be “separated from my husband in this way.” She recounted how Goldman Sachs Chief Executive Officer Lloyd Blankfein “loudly gave Rajat an ultimatum that he had to choose between Goldman and KKR,” citing a 2008 offer he received to join KKR & Co. (KKR) as an adviser. Gupta, who joined Goldman Sachs’s board in 2006, opted for KKR, then agreed to a request by Goldman Sachs that he return when the financial crisis hit, she said. “I tried very hard to counsel Rajat against it because I felt he had been treated unfairly by Goldman Sachs,” she wrote. “He felt he owed Goldman Sachs his loyalty.” Michael DuVally , a spokesman for Goldman Sachs, declined to comment on Anita Gupta’s letter. Gupta left Goldman Sachs’s board in 2010. 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 Manhattan federal court at pathurtado@bloomberg.net ; David Glovin in Manhattan federal court at dglovin@bloomberg.net. To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net |
2024-01-02 | Bloomberg | Antitrust’s Baer, Kirkland, Weil Gotshal: Business of Law | William Baer , a Washington antitrust lawyer and former Federal Trade Commission official, was confirmed to head the U.S. Justice Department’s antitrust division. Baer’s nomination as assistant attorney general, which had been stalled in Congress for most of the past year, was confirmed Dec. 30 by a Senate vote of 64-26. Baer, a partner at Arnold & Porter LLP, 62, will become the first fully confirmed head of the antitrust division since former chief Christine Varney left in August 2011. Since then, the division has been run by acting chiefs, including Sharis Pozen, Joseph Wayland and Renata Hesse. Baer, named one of the “Decade’s Most Influential Lawyers” by the National Law Journal in 2010, is a former director of the Federal Trade Commission’s competition bureau and has represented corporate clients including General Electric Co. (GE) , Intel Corp. (INTC) and Cisco Systems Inc. (CSCO) in private practice. While at the FTC he also brought an antitrust action against chipmaker Intel and oversaw challenges to Time Warner Inc. (TWX) ’s acquisition of Turner Broadcasting System, the merger between Ciba-Geigy AG and Sandoz AG to create Novartis AG (NOVN) and the exclusionary tactics of Toys ’R’ US. For more, click here. News Yahoo Hires Mexican Firm to Handle $2.7 Billion Lawsuit Yahoo! Inc. hired Mexican law firm Quijano Cortina y de la Torre to defend it from a $2.7 billion non-final judgment related to a failed telephone directory partnership, according to a report from Business Insider. Francisco Xavier Cortina Cortina, a partner at the law firm, confirmed to the paper that it had been hired to represent Yahoo. The Sunnyvale, California-based company was sued in the 49th Civil Court of the Federal District of Mexico City by Worldwide Directories, which claimed Yahoo had breached its contract with the Mexican company to publish and print online telephone directories in Mexico. The court ruled that Yahoo had wrongly terminated its agreement, finding that it had resulted in an actual loss of business and also potential gains in other countries causing the judgment to reach the billions, according to the publication. Yahoo said in a Nov. 30 statement that the “claims are without merit” and it “will vigorously pursue all appeals,” of the non-final award. Quijano Cortina y de la Torre is a small five-person law firm based out of Mexico City that specializes in commercial and civil litigation, the Business Insider reported. LodgeNet to File Bankruptcy, Weil Gotshal Restructuring Counsel LodgeNet Interactive Corp. (LNET) , a provider of on-demand movies to hotel rooms, said it will seek bankruptcy protection with an agreement for affiliates of Colony Capital LLC to invest $60 million. The company hired Weil, Gotshal & Manges LLP as restructuring counsel and Leonard, Street and Deinard as corporate counsel, according to a Dec. 31 statement. The Colony affiliates will become the Sioux Falls , South Dakota-based company’s controlling shareholder under the restructuring. Los Angeles-based Colony will receive new common stock representing full ownership, according to the statement. LodgeNet hasn’t posted an annual profit since 2006. Last year, 95 percent of its revenue came from the hotel industry, with Hilton Worldwide and Marriott International Inc. accounting for about a third of sales, according to the company’s filings. LodgeNet said it expects unsecured creditors will be paid in full at the end of the Chapter 11 process. A steering committee of lenders holding the company’s debt will support a five-year extension of its $346 million secured credit facility, according to the statement. Akin, Gump, Strauss, Hauer & Feld LLP and CDG Group LLC were advisers to the agent for the lenders, according to the statement. Colony, with $38 billion in assets under management, also has invested in Fairmont Raffles Hotels International, hotel operator Accor SA and Amanresorts International Pte, according to LodgeNet’s statement. Liner Grode Stein Yankelevitz Sunshine Regenstreif & Taylor LLP and Sullivan & Cromwell LLP provided legal counsel to Colony. For more, click here. Deals Kirkland & Ellis , Wachtell Lipton Advise on Duff & Phelps Deal Kirkland & Ellis LLP is providing legal counsel to Duff & Phelps Corp. (DUF) in a deal to sell the investment-banking firm to a group of buyers including Carlyle Group LP for $665.5 million. The buyers, also including Swiss bank Pictet & Cie, Stone Point Capital LLC and Geneva-based Edmond de Rothschild Group, are being advised by the law firm of Wachtell, Lipton, Rosen & Katz. The buyers will pay $15.55 a share, 19 percent more than Duff & Phelps’s closing price on Dec. 28. The transaction is expected to be completed in the first half, the companies said in a Dec. 30 statement. The group of buyers will help New York-based Duff & Phelps continue its international expansion, according to the statement. Revenue at the 80-year-old firm, which also provides financial-advisory services, is predicted to rise 17 percent this year to $465.8 million, the average of analysts’ estimates compiled by Bloomberg. The Duff & Phelps merger agreement provides for a “go- shop” period ending on Feb. 8, during which the company can solicit and receive alternative proposals. Duff & Phelps would pay a break-up fee of about $6.65 million if it gets a higher bid and ends the agreement before March 8. Duff & Phelps, started in 1932 to provide investment research, was a financial adviser to the examiner in the Lehman Brothers Holdings Inc. bankruptcy in 2009 and an administrator for the Rangers Football Club Plc in the largest soccer club insolvency in U.K. history, according to its website. Willkie Farr Representing Warburg Pincus in JHP Acquisition Willkie Farr & Gallagher LLP is acting as legal adviser to New York-based private-equity firm Warburg Pincus LLC in its deal to buy a majority of specialty-drug company JHP Pharmaceuticals LLC. Wachtell, Lipton, Rosen & Katz was hired as the legal adviser to the special committee of the Board of Directors of JHP Holdings LLC. Warburg is buying a majority of the company from Morgan Stanley (MS) Principal Investments for about $195 million. The acquisition was made on a “debt-free, cash-free basis,” JHP, a 5-year-old firm based in Parsippany, New Jersey, said in a Dec. 31 statement. JHP co-founder and Chief Executive Officer Stuart Hinchen and other managers retained ownership interests. Additional terms weren’t disclosed. JHP, which develops and makes aseptic injectable drugs, was created by Hinchen and Peter Jenkins in 2007 with Morgan Stanley’s backing. Warburg Pincus, a buyout sponsor and venture-capital firm started by the late Lionel Pincus in 1966, has more than $30 billion in managed assets. It closed its latest flagship investment fund, a $15 billion vehicle, in 2007. For more, click here. Firm News Midwest Law firm Spencer Fane Announces Management Change Spencer Fane Britt and Browne LLP , a Midwest law firm with offices in five cities across Kansas, Missouri and Nebraska, announced in a Dec. 31 statement that Patrick J. Whalen would take over as the firm’s new chairman. Whalen, who has degrees in economics, business and law, succeeds Michael F. Saunders, who led the firm for 15 years. “I am proud of what Spencer Fane has accomplished over the past 15 years. Pat Whalen is a superb choice to handle the next stage in the law firm’s direction and growth,” Saunders said in the statement. The company also announced on Dec. 31 that Thomas W. Hayde, an associate with the firm since 2006, was promoted to the partnership. He focuses on commercial disputes, insurance coverage, product liability and toxic tort litigation. Hayde received a Juris Doctorate from Washington University in St. Louis. “His election will strengthen the firm’s St. Louis-based litigation practice,” Whalen said of Hayde in a statement. Moves American Equity Appoints William R. Kunkel as General Counsel American Equity Investment Life Holding Company, an underwriter of index and fixed-rate annuities, appointed William R. Kunkel as its general counsel, according to a company statement. “We are delighted to announce Bill’s appointment as general counsel. The depth and breadth of his professional experience, strong leadership abilities, and knowledge of American Equity’s business having represented us for more than 15 years make him a natural fit,” Executive Chairman, David J. Noble, and Chief Executive Officer John M. Matovina, said in the statement. Kunkel was a partner at the Chicago offices of law firm Skadden, Arps, Slate, Meagher & Flom LLP, where he joined in 1984, before retiring in June. His practice focused on mergers and acquisitions, corporate finance, and other corporate governance and securities matter, according to the Dec. 31 statement. Kunkel is a graduate of Harvard Law School and Creighton University. “I am excited to join the American Equity family and management team at this important time in the company’s development,” said Kunkel on the appointment. “I look forward to using my talents and experience to help the company achieve even greater success in the years that follow.” Maryland Governor O’Malley Names New Appellate Judge Maryland Governor Martin O’Malley named Douglas R. M. Nazarian, chairman of the state’s Public Services Commission, to the Court of Special Appeals, the state’s intermediate appellate court, according to the Washington Post. Prior to his appointment as the PSC chairman, Nazarian served as the commission’s general counsel. Nazarian was a lawyer in private practice and taught at the University of Maryland Francis King Carey School of Law before joining the commission, according to the Post’s Dec. 29 report. “I am confident that he has the intellect and organizational skills necessary to meet the needs of the Court of Special Appeals and to render well-reasoned decisions,” O’Malley said in a statement. Litigation Knight Capital Group Sued by Investor Over Getco Bid Knight (KCG) Capital Group Inc., the trading firm that closely avoided bankruptcy last year after computer errors, was sued by an investor claiming the stock is undervalued in a $3.75-a-share takeover by Getco LLC. Shareholder Ann Jimenez McMillan, represented by law firm Rigrodsky & Long PA, sued Knight and directors in Delaware Chancery Court arguing they are obligated to seek out the best price for company’s shares and the “locked-up” Getco deal violates those duties, according to the complaint made public Dec. 31. The price is “unfair and grossly inadequate,” and will deny investors “their right to share proportionately and equitably in the true value of the company’s valuable and profitable business, and future growth,” Rigrodsky lawyers said in court papers. Chicago-based Getco agreed to buy Knight, based in Jersey City , New Jersey , in December in a $1.4 billion deal, beating rival suitor Virtu Financial LLC, according to people familiar with the bidding. Knight lost more than $450 million in August when improperly installed software triggered unintended orders. Getco and five other financial firms provided $400 million to help Knight in exchange for convertible securities representing more than 70 percent of its equity. In the lawsuit, McMillan asks for class-action, or group status, on behalf of all outside stockholders, unspecified damages, and an order to stop the deal under its present terms. The case is McMillan v. Knight Capital Group, CA8163, Delaware Chancery Court (Wilmington). To contact the reporter on this story: Michael Bathon in Wilmington, Delaware, at mbathon@bloomberg.net. To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net . |
2024-11-05 | Bloomberg | Codelco Seen Cutting Copper Premiums to Chinese Buyers | Codelco, the world’s largest copper producer, will probably reduce the premium charged to Chinese buyers for a second year as increasing domestic production lowers demand for imports. The fee may drop to $100 a metric ton in 2013 from $110 this year, according to the median of 11 estimates from executives, analysts and traders compiled by Bloomberg. The amount is added to the price of immediate-delivery copper on the London Metal Exchange to cover costs such as shipping and insurance. Codelco cut the fee to $85 from $90 for European clients, said two people with direct knowledge of the matter. Imports by China , the world’s largest user, are set to fall next year as smelting and refining capacity rises, outpacing growth in consumption, according to researcher Beijing Antaike Information Development Co. Goldman Sachs Group Inc. cut its 12- month forecast for copper by 11 percent to $8,000 per ton from $9,000 because of slowing Chinese demand, it said Oct. 15. “There’s no doubt the premium will drop,” said Wang Yuemin, an analyst at data provider SMM Information & Technology Co. “Even if demand recovers a bit as expected, we have a huge inventory, not to speak of new production capacity in the pipeline.” Copper for delivery in three months on the London Metal Exchange dropped 2.7 percent in the past year as the slowest growth in China since 2009 and Europe ’s sovereign debt crisis cut demand. The metal fell 0.7 percent to $7,613.25 at 5:43 p.m. Shanghai time. ‘Comfortable’ Buffer Aurubis AG (NDA) , the second-largest refined producer, cut the premium for buyers in Europe by $4 to $86 a ton in June. The Hamburg-based company will keep the fee at that level next year to support demand, Michaela Hessling, a company spokeswoman, said on Oct. 8. Pan Pacific Copper Co. in Tokyo offered $85 a ton to Chinese clients in 2013, $15 lower than this year. China’s consumption of refined copper is forecast by Antaike to rise to 8.1 million tons in 2013 from 7.68 million tons this year, while output may increase to 6.1 million tons from 5.6 million tons. That leaves a deficit of 2 million tons next year versus 2.08 million tons. “With a comfortable bonded warehouse inventory buffer, we think that it will take attractive pricing to result in similar tonnages being booked,” Barclays Plc said in a report on Oct. 22, referring to Codelco sales. Refined copper purchases by China jumped 50 percent from a year ago to 2.68 million tons in the first nine months, according to customs data. Smelters face oversupply with stockpiles in Shanghai bonded warehouses estimated at 600,000 tons to 700,000 tons, according to Richard Wilson, chairman of metals at Wood Mackenzie. Spot premiums in Shanghai, including insurance and storage costs, have slumped 65 percent to about $45 from the end of 2011, according to Metal Bulletin data. To contact Bloomberg News staff for this story: Helen Sun in Shanghai at hsun30@bloomberg.net To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net |
2024-07-13 | Bloomberg | Crude Futures Advance as Stocks Gain, U.S. Oil Inventories Seen Increasing | Crude oil advanced in New York as rising equity markets and forecasts of declining U.S. inventories signaled growing demand for fuel. European stocks gained for a sixth day, with the Europe Stoxx 600 index rising 1.7 percent. U.S. index futures also rose. The U.S. Energy Department may say tomorrow that crude stockpiles fell last week, and the International Energy Agency predicted higher demand for oil next year. Crude for August delivery rose as much as $1.10, or 1.5 percent, to $76.05 a barrel on the New York Mercantile Exchange and traded at $75.98 as of 12:45 p.m. London time. Yesterday, the contract dropped $1.14 to $74.95, the lowest settlement since July 7. Prices have declined 4.3 percent this year. “U.S. oil inventories are falling,” said Hannes Loacker , an analyst at Raiffeisen Zentralbank Oesterreich in Vienna. “With reduced stockpiles, oil could to $85 or $90 a barrel.” Brent crude for August gained $1.31, or 1.8 percent, to $75.68 a barrel on the London-based ICE Futures Europe exchange. Brent may surpass this year’s high of $89.58 a barrel after prices rebounded against a rising channel formation, according to analysis by Standard Chartered Plc. The August Brent contract fell as low as $73.85 a barrel yesterday, after gaining 5.3 percent last week. The commodity is set to rise toward $83 after declines in the past two months failed to extend below a channel that has bound prices for the past year, indicating a long-term rising trend is still intact, Standard Chartered said in an e-mailed report yesterday. IEA Report Global oil demand will increase 1.6 percent in 2011 on economic growth in emerging markets, the International Energy Agency said, giving its first forecast for next year. Demand will grow faster than refiners can add new plants in the two years to 2011, reducing the current surplus in processing capacity, the Paris-based adviser to oil-consuming nations said. The U.S. Energy Department will release weekly figures on crude oil and product inventories tomorrow. Crude supplies probably fell last week amid expectations refiners will boost output and imports declined, according to a Bloomberg News survey. Oil supplies probably dropped 1.35 million barrels in the seven days ended July 9, according to the median estimate of 10 analysts surveyed by Bloomberg News. The Energy Department is scheduled to release its weekly report at 10:30 a.m. tomorrow in Washington. Company Earnings U.S. stock-index futures rose, indicating the Standard & Poor’s 500 Index may extend the longest winning streak in three months, after Alcoa Inc. reported earnings that topped analysts’ estimates. “The correlation between oil and stock markets is strong at the moment,” Roland Stenzel, a crude and carbon trader at E&T Energie Handelsgesellschaft mbH, said from Vienna. “Company earnings will show us whether the economy is improving and whether oil demand will rise.” Profits for S&P 500 companies are projected to have increased 34 percent in the second quarter, according to analysts’ estimates compiled by Bloomberg. Intel Corp., the biggest maker of semiconductors which reports quarterly results after the close of U.S. exchanges today, is among 23 companies in the index to announce results this week. To contact the reporter on this story: Rachel Graham in London rgraham13@bloomberg.net Ann Koh in Singapore at akoh15@bloomberg.net |
2024-02-27 | Bloomberg | UOB Profit Climbs 25%, Beats Estimates on Non-Interest Income | United Overseas Bank Ltd. (UOB) , Southeast Asia’s third-largest lender by assets, said profit rose for the fourth straight quarter, driven by operations such as capital markets and wealth management. Fourth-quarter net income rose 25 percent to S$696 million ($561 million) from S$558 million a year earlier, the bank said in a statement to the Singapore stock exchange today. That beat the S$614 million average of nine analysts’ estimates compiled by Bloomberg. UOB joins DBS Group Holdings Ltd. and Oversea-Chinese Banking Corp. in boosting profit amid four years of shrinking loan profitability and a 2012 economic expansion that was Singapore’s slowest in three years. Cost control and income from businesses such as credit cards and fund management have helped compensate for the region’s thinnest lending margins. “We expect the momentum in fees and commissions to continue into 2013, specifically in areas such as wealth management,” Ken Ang, a Singapore-based analyst at Phillip Securities Pte, said before the earnings were announced. “The equities outlook for 2013 is also benign, which may add to some positive surprises on trading income.” To contact the reporters on this story: Stephanie Tong in Hong Kong at stong17@bloomberg.net ; Sanat Vallikappen in Singapore at vallikappen@bloomberg.net To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net |
2024-10-11 | Bloomberg | Canadian Dollar Rallies With Commodities as Risk Appetite Rises | The Canadian dollar advanced for the first time in three days against its U.S. counterpart as commodities rallied on positive risk sentiment and Canada ’s trade deficit narrowed. The loonie, as the currency is nicknamed for the image of the waterfowl on the C$1 coin, amid speculation Europe’s debt crisis will ease. lessening the haven appeal of the world’s reserve currency. Government bonds declined as applications for U.S. jobless benefits dropped. “The trade deficit data had a positive slant,” Chris Gaffney, chief investment officer of EverBank Wealth Management Inc., said in a phone interview from St. Louis. “It’s adding to but not driving this market. The Italian bond sale turned the tables in the morning, and the day turned risk-on following that. That’s what we’re trading on more than any specific data out of North America.” Canada’s currency added 0.3 percent to 97.86 cents per U.S. dollar at 5:00 p.m. in Toronto after rising as much as 0.6 percent, the most this week. One Canadian dollar buys $1.0219. The loonie has gained 4.4 percent this year. Italy sold 3.75 billion euros ($4.8 billion) of its benchmark three-year bond to yield 2.86 percent, more than the 2.75 percent at the last auction of the same securities on Sept. 13. Investors bid for 1.67 times the amount offered, up from 1.49 times last month, indicating investors are still willing to invest in the country. Risk On Crude oil, Canada’s largest export, gained 1.2 percent and the Standard & Poor’s GSCI Index (SPX) of 24 raw materials advanced 1.1 percent. The Standard & Poor’s 500 Index added 0.02 percent, snapping a four-day losing streak. “There’s overall positive risk sentiment in the market today that’s pulled the Canadian dollar up with it,” Blake Jespersen, managing director of foreign exchange at Bank of Montreal (BMO) , said in a phone interview from Toronto. “We’ve seen a fair rally in the euro overnight, oil prices are rising, and equity markets are off to a good start.” Canadian government bonds were little changed, with the yield on the benchmark 10-year note rising one basis point, or 0.01 percentage point, to 1.81 percent. The price of the 2.75 percent note maturing in June 2022 fell 12 cents to C$108.33. Trade Deficit The Canadian merchandise trade deficit narrowed in August more than a Bloomberg News survey forecast on the steepest decline in imports in more than three years. The deficit of C$1.32 billion ($1.35 billion) followed a revised shortfall of C$2.53 billion in July, Statistics Canada said today in Ottawa. Economists surveyed by Bloomberg had forecast a C$1.9 billion deficit, based on the median of 21 forecasts. Sluggish exports have helped keep Canada’s economic growth rate below 2 percent in the first two quarters of this year. The Bank of Canada sold C$2.7 billion in three-year bonds yesterday, with an average yield of 1.282 percent. The total bid was C$7.87 billion, for a bid-to-cover ratio of 2.92, measuring the level of bids versus the amount of debt for sale. U.S. jobless claims fell more than forecast by economists to a four-year low last week, reflecting a healing labor market in Canada’s largest trading partner. Applications for jobless benefits dropped 30,000 to 339,000 in the week ended Oct. 6, the fewest since February 2008, Labor Department figures showed today. A Bloomberg survey forecast 370,000 claims. The loonie has gained 2.6 percent this year, the third most among 10 industrial-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar declined 2.2 percent and the yen slipped 4.2 percent, the most among decliners. New Zealand’s dollar rose 3.5 percent to lead gainers. Commodities Pool Brazilian Finance Minister Guido Mantega said the so-called BRICS nations of Brazil , Russia , India, China and South Africa are working to create a pool of reserves to provide a “rearguard” of financial support. “The emerging markets now have something to fall back on,” EverBank’s Gaffney said. “It boosts the commodity-driven currencies and gives some confidence to the market. That’s going to help the currencies that are dependent on the global economic rebound, and Canada is certainly one of them.” The pool will be modeled on the Chiang Mai Initiative for Japan , China, South Korea and 10 Southeast Asian nations, Mantega said. Those countries have $240 billion of emergency liquidity on tap to shield the region from global financial shocks after the funding was doubled this year. To contact the reporter on this story: Katia Dmitrieva in Toronto at edmitrieva1@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net |
2024-09-21 | Bloomberg | Savers Flooding Stable Value Funds May Have Limited Access | Galliard Capital Management Inc.’s stable-value funds, designed to preserve principal in tumultuous times, drew more than four times the usual inflows in August as market volatility increased, said managing partner John Caswell. Investors in retirement plans administered by Wells Fargo & Co. (WFC) moved $850 million into the funds that month, while at Aon Hewitt, a benefits manager, about $1 of every $5 transferred by plan participants was put in a stable-value fund. While the funds recently have outperformed the stock market, investors should realize they’re riskier than money funds, and may contain restrictions on transfers and withdrawals, said Jeff Elvander, chief investment officer for Aliso Viejo , California-based 401(k) Advisors Inc., a consultant to employers that offer defined-contribution retirement plans. “Some of those restrictions may not be clearly communicated until a participant tries to make a transaction, and then they’re prevented from making it,” Elvander said. Stable-value funds are viewed by many investors as a higher yielding alternative to money-market funds, said Pamela Hess, director of retirement research at Aon Hewitt, a unit of Aon Corp. (AON) In August they returned 0.22 percent, compared with the 5.68 percent decline in the Standard & Poor’s 500 Index. They achieve those returns in part by purchasing insurance contracts, which come with restrictions. The funds are riskier than the typical money-market fund, meaning they aren’t really comparable investments, said Donald Stone, president of Chicago-based Plan Sponsor Advisors. No Guarantees “There’s a reason why they call them stable value, not guaranteed,” Stone said. “I don’t think participants understand that. They understand if they put a dollar in they’ll get a dollar back, and some interest.” There was about $540 billion invested in stable value products as of December, according to the Stable Value Investment Association. The funds are more complicated than most investors realize, said Hess. Although they’re often called “funds,” stable-value can refer to funds that pool one or more retirement plan’s assets, and to insurance contracts, in some cases annuities, that are offered within defined-contribution retirement plans such as 401(k)s. The funds generally invest in short- to intermediate- term bonds and buy insurance on their portfolios. The contracts are issued directly to a retirement plan sponsor or to its participants, and offer an interest rate that resets periodically. Smooth Ride By buying insurance on their portfolios, the funds can allow investors to redeem shares at principal plus interest, even though the underlying bonds may be lower or higher in price. The insurance is meant to cover a potential shortfall should a fund have to sell bonds to meet redemptions. “The insurance smoothes out the returns of the underlying portfolio,” said Gina Mitchell, president of the Washington- based Stable Value Investment Association, a membership and trade group for the stable-value industry. The insurance also comes with restrictions. The companies that provide the contracts, including Prudential Financial Inc. (PRU) and JPMorgan Chase & Co. (JPM) , generally limit the circumstances under which they’ll pay out and may also restrict how or when savers may transfer or withdraw their money. “The insurance company is willing to guarantee this book value, but they’re only willing to do that up to a point,” said Stone of Plan Sponsor Advisors. Investors usually can’t move their money to competing investment options such as short- to intermediate-term bond funds for 90 days after withdrawing from a stable-value option, said Caswell of Galliard, which is a subsidiary of Wells Fargo and oversees about $68 billion in stable-value assets. Surrender Charges The insurance contracts can be even more restrictive. Savers in a stable-value annuity issued by TIAA CREF may only withdraw or transfer funds over a set schedule of 10 payments during nine years. Workers who quit a company that uses the product in its retirement plan may take a lump sum within their first 120 days of leaving, during which they would pay a 2.5 percent surrender charge. Retirement-plan administrators such as Boston-based Fidelity Investments said these restrictions are disclosed in investment literature, even if participants don’t always read it. Those limitations allow TIAA CREF to offer a higher interest rate than it would be able to otherwise, said Phil Maffei, director of product management for the New York-based insurance and mutual-fund provider. The TIAA CREF annuity yielded 4 percent in August. Insurance Caveats Insurers also generally stipulate that they won’t be liable under certain circumstances, which can leave savers with losses. Major layoffs, mergers and bankruptcies at the employer usually nullify a portfolio’s insurance. That’s because large outflows from a fund increase the likelihood that an insurer would have to pay out on the contracts they’ve issued. Employees of Chrysler LLC received 89 cents on the dollar, or a loss of 11 percent, when a stable-value fund the company offered in a supplemental savings plan liquidated in January 2009. Insurance on the fund, which was managed by Dwight Asset Management Co. LLC, didn’t cover the shortfall because of restrictions on the insurance contracts. Kristel Garneau, a Dwight spokeswoman, declined to comment on the Chrysler fund citing client confidentiality. Lehman Brothers A stable-value separately managed account offered to Lehman Brothers Holdings Inc. (LEHMQ) employees lost 1.7 percent in its liquidation in December 2008, because the portfolio’s insurance stipulated it wouldn’t pay in a bankruptcy. Lehman Brothers filed for bankruptcy under Chapter 11 on Sept. 15, 2008. After accounting for that drop, the Lehman Brothers fund returned 2.2 percent total during 2008, said Bill Hensel, spokesman for Atlanta-based Invesco Ltd. (IVZ) , which managed the fund. Such losses are rare, said Galliard’s Caswell. Often companies have no need to liquidate a plan in a bankruptcy, and if they do they generally have more time to plan and are able to pay out participants’ assets without losses, he said. “Stable value’s been a safe haven,” said Mitchell of the trade association. “It’s not risk free, but it is one that has continued to perform throughout the financial crisis and even in today’s volatile market.” Bond Funds Stable value is a conservative investment option and participants should think of it as similar in risk to a short- term bond fund, rather than as a cash-equivalent, said Kristi Mitchem, head of global defined contribution for State Street Global Advisors , a unit of State Street Corp. (STT) The funds returned 2.9 percent on average for the 12 months ending in August, compared with the 1.8 percent average return for short-term taxable bond mutual funds, according to data from Hueler Companies Inc. and Morningstar Inc. (MORN) The average stable- value fund yielded 2.55 percent on Aug. 31 compared with the average taxable money-market fund yield of 0.02 percent on Aug. 30, according to data from Hueler and from iMoneyNet, which tracks money-market funds. “Defined-contribution plan participants tend to be a conservative group, often citing preservation of principal as a major factor in fund selection,” said Christopher Rowlins, a consultant to plan providers with Fiduciary Investment Advisors LLC in Windsor, Connecticut. “That is one reason stable-value funds are and remain popular.” Investors, for whom losses in stable value have been rare events, may not have realized that in some cases fund managers were propping up their own products during the financial crisis. Terminating Guarantees State Street voluntarily contributed about $450 million of its own capital to the stable-value funds it managed during the fourth quarter of 2008, and purchased about $2.5 billion of debt securities from the funds, because the investments the funds held had fallen significantly in value, according to its annual report from that year. “During 2008, the liquidity and pricing issues in the fixed-income markets adversely impacted the market value of the securities in these accounts to the point that the third-party guarantors considered terminating their financial guarantees with the accounts,” the report said. The Boston-based company is in the process of exiting the stable-value business, said spokeswoman Alicia Curran Sweeney. Some insurance contracts allow the issuer to terminate for any reason provided the company gives notice, such as 90 days, Stone said. ‘All Bets Off’ “If we went into some kind of world calamity here, it could be all bets off,” Stone said. “You can imagine an instance where the guarantee might be difficult for a company to honor.” After the financial crisis, the cost of the insurance has more than doubled to 15 basis points to 25 basis points of fund assets from 4 basis points to 8 basis points, said Mitchell, of the Stable Value Investment Association. A basis point is 0.01 percentage point. “Insurers had priced this business on the idea that they would never have any claims,” Stone said. During the 2008 to 2009 financial crisis, “they were really staring into the face of having to pony up quite a bit of money.” Those costs reduce fund yields and aren’t generally disclosed to participants, according to Galliard’s Caswell. That may change in 2012 when a U.S. Department of Labor rule requiring comprehensive fee disclosure for 401(k)s takes effect. Management fees, which generally range from 10 basis points to 55 basis points depending on the size of the retirement plan, are disclosed to investors, according to Mitchell. Rising Rates The insurance contracts also depend on the strength of the underlying insurer. Prudential holds an a- long-term rating from A.M. Best Co., which rates the financial strength of insurers. JPMorgan is not rated by A.M. Best and has an Aa3 long-term rating from Moody’s Investors Service and an A+ rating from S&P. Even though the funds generally invest in longer-dated debt than money-market funds, they could lag behind money funds’ yields if interest rates rise rapidly because they generally take longer to adjust to rate changes, Caswell said. “Right or wrong, there are plenty of disclosures that participants receive that nothing is guaranteed,” with stable- value funds, said Jon Upham, principal of Irvine , California- based SageView Advisory Group, a consultant to plan sponsors. “From a practical standpoint, participants think that if they put their money in a money-market fund or a stable-value fund, they think it is guaranteed,” he said. To contact the reporter on this story: Elizabeth Ody in New York eody@bloomberg.net To contact the editor responsible for this story: Rick Levinson at rlevinson2@bloomberg.net . |
2024-07-27 | Bloomberg | Insurance Australia Full-Year Profit Halves After Claims at U.K. Unit Rise | Insurance Australia Group Ltd. , the Sydney-based insurer formed in 1925, said fiscal-year profit halved after rising claims at its loss-making U.K. unit. Net income in the year ended June 30 fell to A$91 million ($82 million) from A$181 million a year ago, Insurance Australia said in a statement today based on preliminary data. The company removed its top U.K. executive, Neil Utley , after he oversaw a A$367 million second-half charge at his division. Insurance Australia fell the most in almost two months in Sydney trading as natural disaster claims also overran internal forecasts and the group set aside more funds to bolster reserves. The company has blamed rising personal injury claims among U.K. drivers and today replaced Utley with Ian Foy , head of the New Zealand unit. “This year’s financial result does not reflect the expectations we held at the outset of the year,” Chief Executive Officer Mike Wilkins said in the statement. “I’m encouraged by the clear and ongoing improvement in the operational performance of our businesses in Australia and New Zealand.” The stock dropped 4.3 percent to A$3.35, the biggest decline since June 2, at the 4:10 p.m. local time close. The shares have fallen 17 percent this year. The insurance profit margin for the year was 7 percent, matching a reduced forecast announced in June. For the fiscal year ending June 2011, the margin will be between 10.5 percent and 12.5 percent, Insurance Australia said. Full results will be released on Aug. 26. To contact the reporter on this story: Angus Whitley in Sydney at awhitley1@bloomberg.net |
2024-07-30 | Bloomberg | Consumer Debt Eroding Canada Banks’ Edge as S&P Cuts Outlook | Canadian banks are underperforming global counterparts by the most in a year as record consumer debt and a housing market that’s vulnerable to a correction weakens their earnings prospects and risks a credit downgrade. Standard & Poor’s cut its outlook to negative from stable on seven Canadian banks July 27, including Toronto-based Royal Bank of Canada and Toronto-Dominion Bank (TD) , citing a prolonged increase in housing prices and consumer indebtedness. The debt of Canadian financial companies is the second-worst performer this month after Japan among 35 global peers, according to Bank of America Merrill Lynch data. “Were house prices to drop materially and over a prolonged period of time, then households would start to de-lever,” Peter Routledge , an analyst in Toronto at National Bank Financial, said in an e-mail yesterday. “We’re not there yet, but that issue is the elephant in the room.” Yields on the debt of Canadian financial companies ended last week at 158 basis points over federal benchmarks, compared with 257 basis points for global financial firms, according to Bank of America data. The differential is the tightest on a weekly closing basis since July 2011, the data show, meaning Canadian financials are underperforming global counterparts. “We’re highlighting the potential risks gathering in intensity,” Tom Connell, lead author of the S&P report, said in an interview yesterday from Toronto. “The Canadian economy is exposed to the global economy. Consumer leverage and housing- price dynamics are really closely linked to prospects for consumer income growth.” Greatest Threat Connell said the rating company is adjusting its systemic view. “We’re not anticipating a broad deterioration,” he said. “In no sense do we see ratings in an ongoing downward slope.” Bank of Canada Governor Mark Carney has said since April that higher borrowing costs may become appropriate, even as global economic conditions deteriorate. He has called Canada’s rising household debt the greatest domestic threat to the country’s financial stability, as the country’s banks cut mortgage rates this year to a record low. Carney has kept the central bank’s benchmark lending rate at 1 percent since September 2010, the longest period without a change since the 1950s. The ratio of household debt to disposable income reached about 154 percent in the first quarter, higher than the U.S. figure of 141 percent. “There is currently growing potential for deterioration of Canadian bank credit profiles associated with scenarios incorporating consumer sector stress,” S&P said in the report. The negative outlook recognizes the potential for deterioration of Canadian banks’ financial performance and capitalization generally, it added. Policy Changes S&P, which said it might lower the ratings on Royal Bank of Canada (RY) and Toronto-Dominion one level, said it “will continue to consider the impact of recent government and regulatory policy initiatives to curtail potential systemic risk arising from the housing sector as well as assess Canada’s relative performance vis-à-vis its global peers.” Royal Bank of Canada and Toronto-Dominion are rated AA- by S&P, the fourth-highest level. Debt of Canadian financial companies returned 0.5 percent in July, Bank of America data shows. Only Japanese banks, at 0.4 percent, returned less among the 35 countries’ lenders measured in the index, which averaged returns of 1.6 percent. Peru was the highest at 3.5 percent. Marginal Exposure S&P would only follow through with ratings downgrades on the Canadian banks “if the economy weakens to such an extent as to trigger job losses and income compression, or if the Bank of Canada carries through with its veiled threat to raise interest rates ,” David Rosenberg , chief economist at Gluskin Sheff & Associates, said in an e-mail yesterday. “Either of these scenarios or both would likely impair debt-servicing capacity on the part of the consumer.” Rosenberg said the former scenario is more likely, although it’s “premature to make that call” about what it might mean to the asset quality on the books of Canada’s banks. He added Canadian banks have marginal exposure to Europe and strong capital cushions, making downgrades less likely. The earnings outlook for Canadian banks is much less cloudy than it is for U.S. banks because regulatory changes will hit harder there, Rosenberg said. Earnings Challenge National Bank’s Routledge added the impact of any credit downgrade would be felt on earnings rather than capitalization. “I do not see the banks’ capitalization in any way threatened by this, owing to their recurring earnings power and the prevalence of mortgage insurance,” he said. The scenario outlined by S&P, “would be an earnings, not a capital, challenge,” he said. Canada’s government 10-year bond yields fell last week to the lowest level since 1950. Home prices have climbed 34 percent since January 2009 to an average of C$369,339 ($362,204), according to the Canadian Real Estate Association. Consumer debt has increased to more than 90 percent of gross domestic product, from 70 percent over the past decade, S&P said. Finance Minister Jim Flaherty tightened mortgage rules at least three times and put the federal housing agency’s books under regulatory oversight, as the nation’s booming housing market drives banks’ profit. In addition to Royal Bank of Canada and Toronto-Dominion Bank, S&P cut to negative its outlook on Bank of Nova Scotia (BNS) , National Bank of Canada (NA) and Laurentian Bank of Canada (LB) , based in Montreal, Vancouver-based Central 1 Credit Union and Home Capital Group Inc. (HCG) of Toronto. It said it was affirming the credit outlooks for Canadian Imperial Bank of Commerce and Bank of Montreal (BMO) , among other banks. Competitive Pressure The company said one of the risks that might lead to downgrades is if risk appetite among banks increases amid growing competitive pressure for loan and deposit market share. “S&P, like the other raters, have become far more proactive in their evaluation of the global banking system,” Adrian Miller , director of global market strategy at GMP Securities, LLC, said in an e-mail yesterday. “A negative outlook does not speak to an imminent downgrade, but just a warning that should the situation continue to deteriorate a downgrade could be coming, perhaps in the next six to 12 months.” RBC clients and investors “can take confidence in the fact that RBC is one of the strongest banks in the world,” Gillian McArdle, spokeswoman for Royal Bank in Toronto, said by e-mail. “This is an industry-related change in outlook and does not reflect an actual ratings downgrade,” Stephen Knight , spokesman for Toronto-Dominion in Toronto, said by e-mail. Actual Downturn Joe Konecny, spokesman at Bank of Nova Scotia, wasn’t immediately able to comment after regular business hours. Claude Breton, spokesman for National Bank and Mary-Claude Tardif, spokeswoman at Laurentian Bank declined to comment. Art Chamberlain , spokesman for Central 1, didn’t return after-hours telephone and e-mail requests for comment. Gerald Soloway, chief executive officer at Toronto-based Home Capital Group Inc. didn’t return a call after normal business hours. “An actual downturn in the housing market -- by which I mean a pronounced and prolonged depreciation in house prices nationwide or in several major markets -- is not yet upon us,” said National Bank’s Routledge. “However the market is already discounting a rising probability of this event occurring.” Ranked Soundest Routledge said the S&P action “ratifies but does not alter” market expectations, and he therefore doesn’t see any major impact on bank valuations in its wake. Canadian banks, ranked the soundest by the World Economic Forum , held four of the top 10 spots in Bloomberg Markets magazine’s annual ranking of the world’s strongest banks, released in May. Canadian Imperial Bank of Commerce placed third, followed by Toronto-Dominion in fourth, National Bank in fifth and Royal Bank in sixth. “These risks have the potential to have an impact over time, but they are known issues,” Robert Sedran , an analyst at CIBC World Markets, said by e-mail. “It’s the outlook for those issues that remains unknown.” To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net To contact the editor responsible for this story: David Scanlan at dscanlan@bloomberg.net |
2024-02-14 | Bloomberg | Euro Falls on Economy; S&P 500 Advances as Heinz Jumps | The euro slid as the region’s recession deepened more than forecast, while the Standard & Poor’s 500 Index rose to a five-year high after a drop in U.S. jobless claims and a $23 billion buyout offer for HJ Heinz Co. Europe’s 17-nation currency depreciated 0.7 percent versus the dollar at 4 p.m. in New York. The S&P 500 increased 0.1 percent to 1,521.38, its highest level since October 2007, while the Stoxx Europe 600 Index slipped 0.2 percent. Treasury 30-year bonds rose for the first time in four days as the highest yields at an auction of the securities since May bolstered demand. Japan’s Nikkei 225 Stock Average rose 0.5 percent, and Hong Kong’s Hang Seng Index climbed 0.9 percent after the market reopened following the Lunar New Year holiday. Gross domestic product in the euro area fell 0.6 percent in the fourth quarter from the previous three months, the worst performance since the first quarter of 2009. Japanese GDP declined for a third straight quarter, stoking speculation Prime Minister Shinzo Abe will step up efforts to end deflation. “They’re pretty awful figures,” said Neil Mellor , a foreign-exchange strategist at Bank of New York Mellon Corp. in London. “It could get a lot worse because the euro has risen a long way since the start of the fourth quarter. While the Japanese are doing what they’re doing, you can’t refute the fact that people will buy the euro on dips.” European Currencies Europe’s shared currency weakened against 15 of 16 major peers. Earlier reports showed Germany’s economy, the largest in Europe, contracted 0.6 percent last quarter, and French GDP dropped 0.3 percent. The currencies of euro-area neighbors also declined, with the Polish zloty, Swedish krona and Norwegian krone sliding versus the dollar. Hungary’s forint snapped five days of gains, dropping 0.6 percent per euro, after data from the statistics office in Budapest showed GDP tumbled the most in three years. Japan’s yen was stronger against 15 of 16 major peers as Russia’s finance minister said Group-of-20 nations should take a stronger stance against currency manipulation. The Group of 20 nations said that it recognizes global economic growth is still weak, that stronger economic and monetary union is needed in the euro area and Japan and the U.S. need to resolve fiscal uncertainties, according to a draft of a statement prepared for a meeting of finance ministers and central bank governors in Moscow this week. In the U.S., fewer Americans than projected filed applications for unemployment benefits last week, Labor Department data showed, while Warren Buffett’s Berkshire Hathaway Inc. and 3G Capital agreed to buy Heinz. Heinz Jumps HJ Heinz surged the most since at least 1980, jumping 20 percent to $72.50. Berkshire and 3G will pay $72.50 a share, compared with yesterday’s closing price of $60.48, according to a statement today. Berkshire will spend about $12 billion to $13 billion on the deal for the maker of condiments and Ore-Ida potato snacks, Buffett told CNBC. The deal will also be financed with cash from 3G affiliates, plus the rollover of existing debt, and is valued at about $28 billion including debt, according to the statement. Berkshire’s Class A shares rose 1 percent to a record $149,240. Cisco Systems Inc. slipped 0.7 percent as the largest maker of computer-networking gear forecast sales this quarter that missed analysts’ most optimistic projections. US Airways Group Inc. fell 4.6 percent after agreeing to an $11 billion merger with AMR Corp.’s American Airlines. ‘Positive’ on M&A Mergers and acquisitions have surged this month with megadeals for iconic companies such as Dell Inc. and H.J. Heinz Co., fueling optimism that more buyers are ready to embrace $10 billion pricetags. Almost $40 billion in deals have been announced today, data compiled by Bloomberg show. Transaction volume has increased by 27 percent so far this year compared with the same period year earlier, signaling buyers are willing to spend again following last year’s mergers slump. “We’re positive on the fact that M&A will continue to move higher,” Jeff Morris , the Boston-based head of U.S. equities for Standard Life Investments, said in a phone interview. His firm oversees $263 billion in assets. “If we can get some clarity in Washington and if the economy continues to grow, I think you’ll see more and more companies use M&A.” Approaching Record The S&P 500 is within 3 percent of its record reached that month. Jobless claims decreased by 27,000, the most in a month, to 341,000 in the week ended Feb. 9, Labor Department figures showed today in Washington. The level of filings was lower than any projection in a Bloomberg survey in which the median forecast was 360,000. Bearish U.S. stock options have fallen to the cheapest level in more than two years on signs the economic recovery is gaining momentum. Puts protecting against a 10 percent decline in the S&P 500 cost 7.88 points more than calls betting on a 10 percent gain, according to three-month options data compiled by Bloomberg. The price relationship known as skew fell to 7.49 on Feb. 1, the lowest since November 2010. The S&P 500 has rallied 6.7 percent this year. U.S. 30-year bonds rose, with the yield six basis points lower at 3.18 percent, as the euro area’s recession supported demand at a $16 billion auction of the securities. Two shares fell for every one that gained in the Stoxx 600 as gauges of chemical and telephone companies led losses. European Movers Nestle SA fell 2.3 percent, the most in four months, after the biggest food company reported the slowest sales growth in three years. Renault SA surged 7.7 percent as France’s second- largest carmaker reported better-than-expected operating profit and eliminated debt in its automotive division. Anheuser-Busch InBev NV jumped 5.9 percent in Brussels after agreeing to sell its brewery in Piedras Negras and grant perpetual rights for the Corona and Modelo brands in the U.S. to Constellation Brands Inc. for $2.9 billion. ABB Ltd., the world’s largest maker of power transformers, advanced 5.6 percent in Zurich after reporting better-than-estimated earnings. The MSCI Emerging Markets Index added 0.1 percent as declines in Europe, the Middle East and Africa offset gains in Asia. Benchmark gauges in Russia, Turkey, Poland, Hungary and the Czech Republic sank at least 0.4 percent. The Hang Seng China Enterprises Index of mainland companies climbed 1.4 percent on the first day of trading this week. People’s Insurance Co., New China Life Insurance Co. and Greentown China Holdings Ltd. rose after MSCI Inc. said it will add the stocks to its China index. India’s Sensex gauge slid 0.6 percent as a report showed the inflation rate dropped to lowest in more than three years. To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net ; Jonathan Burgos in Singapore at jburgos4@bloomberg.net To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net |
2024-04-02 | Bloomberg | U.S. Stocks Advance Amid Factory Orders, Cyprus Deal | U.S. stocks rose, sending the Standard & Poor’s 500 Index to a record close, as concern over Europe’s debt crisis eased and factory orders topped forecasts. Humana Inc. (HUM) jumped 5.5 percent as health-care providers rallied the most among 10 groups in the S&P 500, after medical insurers won an increase in a key Medicare payment rate. Hertz Global Holdings Inc. (HTZ) added 6.9 percent as it forecast earnings above analysts’ estimates. Nasdaq OMX Group Inc. (NDAQ) plunged 13 percent, the most in the S&P 500, after agreeing to buy BGC Partners Inc. (BGCP) ’s bond platform. Hewlett-Packard Co. (HPQ) fell 5.2 percent as Goldman Sachs Group Inc. advised selling the shares. The S&P 500 rose 0.5 percent to 1,570.25 at 4 p.m. in New York. The Dow Jones Industrial Average climbed 89.16 points, or 0.6 percent, to 14,662.01, also reaching a record high. About 5.9 billion shares changed hands on U.S. exchanges, 6.6 percent below the three-month average. “It’s an agonizingly slow economic recovery but it is a recovery,” Tom Mangan, who helps oversee about $4 billion as a money manager at James Investment Research Inc. in Xenia, Ohio , said in a phone interview. “The risk has so far not been that you are in the stock market, the risk is that you’re not in the stock market and that you don’t own enough stocks.” U.S. equities fell yesterday as a report showed American manufacturing expanded less than forecast, after the S&P 500 climbed above its highest closing level reached in October 2007. The index has yet to reach the all-time intraday high of 1,576.09. The S&P 500 rallied 10 percent in the first quarter, extending a recovery that has added more than $10 trillion of value to the world’s largest stock market. The Dow first passed its 2007 record on March 5. Factory Orders U.S. factory orders rose in February, boosted by a pickup in demand for motor vehicles and commercial aircraft. The 3 percent gain in bookings, the biggest in five months, followed a revised 1 percent decline in January, a Commerce Department report showed. The median forecast of 64 economists in a Bloomberg survey called for a 2.9 percent rise. In Europe , the Cypriot government completed talks on the terms for aid with the so-called troika of officials representing the International Monetary Fund, the European Central Bank and the European Union. Cyprus was granted two extra years, to 2018, to implement measures linked to its bailout, government spokesman Christos Stylianides told reporters. The accord will be discussed at a euro working group meeting of finance officials on April 4. ‘Dust-Ups’ “We get these little dust-ups whether it’s Cyprus or negative economic data, but then the market comes back to the thinking that the best game in town is U.S. equities and that’s what is driving stocks,” Dan Veru , chief investment officer at Palisade Capital Management LLC, said over the phone. The Fort Lee, New Jersey-based firm manages about $4 billion. “The U.S economy is growing, and relative to the rest of the world we’re far more stable.” The bull market in equities entered its fifth year last month, with the S&P 500 more than doubling from its bottom in 2009, as corporate earnings topped estimates and the Federal Reserve carried out an unprecedented three rounds of bond purchases to spur the economy. Companies begin releasing their first-quarter earnings next week, with Alcoa Inc. scheduled to announce results on April 8. Earnings among S&P 500 companies are forecast to decline 1.9 percent for the period, for the first retreat since 2009, according to estimates compiled by Bloomberg. In January, analysts forecast earnings growth of 1.2 percent. Profit expanded by 8 percent in the fourth quarter of 2012. Volatility Index The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against claims, fell 5.9 percent to 12.78 today. The gauge , known as the VIX, is down 29 percent for the year. Health-care stocks advanced 1.4 percent as a group. Humana (HUM) , the second-largest private Medicare insurer, climbed 5.5 percent to $79.11 after the government announced a decision to do away with a planned rate reduction. Instead, insurers will receive a 3.3 percent increase in the rate that determines the payments they get for running the government’s Medicare Advantage plans. UnitedHealth Group Inc. advanced 4.7 percent to $61.74 and Aetna Inc. gained 3.7 percent to $54.30 on the decision. Hertz (HTZ) , the Park Ridge, New Jersey-based car rental company, climbed 6.9 percent to $23.41 after giving a 2015 earnings outlook above analyst estimates. The company predicts earnings between $3.10 and $3.30 a share for 2015, compared with the average analyst estimate of $2.39. Urban Outfitters Urban Outfitters Inc. (URBN) added 3.8 percent to $39.87. The retailer said comparative retail net sales have climbed at a high single-digit pace so far during the first quarter. Ford Motor Co. gained 0.9 percent to $13.01 after the Dearborn, Michigan-based automaker announced its best monthly sales in its home market since 2007. Ford delivered 5.7 percent more light vehicles in March than a year earlier, beating estimates. General Motors Co. added 0.5 percent to $27.93, as March sales expanded 6.4 percent. Analysts had estimated a 12 percent climb. Sales of GM’s Cadillac jumped almost 50 percent in the month while Chevrolet sales rose 0.5 percent. Nasdaq OMX (NDAQ) plunged 13 percent, the most since November 2008, to $27.91. The company will buy eSpeed, an electronic trading system for U.S. Treasuries, from BGC Partners for about $750 million in cash. Moody’s Investors Service and Standard & Poor’s warned that Nasdaq ’s debt rating may be lowered. $1.23 Billion The deal gives the second-largest U.S. equity market a foothold in fixed income. Nasdaq will also issue about 15 million common shares over 15 years as part of the acquisition, pushing the potential value of the transaction to $1.23 billion, according to statements by the two companies. BGC Partners jumped 49 percent, its biggest gain since 1999, to $5.72. Hewlett-Packard (HPQ) slipped 5.2 percent to $22.10. Goldman Sachs lowered its recommendation on the shares to sell from neutral. The brokerage said it remained cautious on the market for printers and servers. The Bloomberg U.S. Airlines Index (BUSAIRL) lost 5.7 percent, the biggest drop since June, as Delta Air Lines Inc. (DAL) declined 8.1 percent to $14.94. The carrier’s March passenger revenue per available seat mile missed its estimate, the company said in a filing. Delta expects system capacity to be down by 2 to 3 percent in the latest quarter. To contact the reporters on this story: Lindsey Rupp in New York at lrupp2@bloomberg.net ; Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net |
2024-02-21 | Bloomberg | Margins Widen at U.S. Companies | Companies are improving margins and generating profits as wage growth for the American worker lags behind the prices of goods and services. The year-over-year change in the so-called core consumer price index, which excludes volatile food and fuel, has outpaced hourly earnings for the last four months. In January, average hourly earnings climbed 1.5 percent from a year earlier, while core inflation was up 2.3 percent. “A lot of the outperformance of profits has been due to the fact that margins are expanding,” said Michael Feroli , chief U.S. economist at JPMorgan Chase & Co. in New York. “Firms have been able to keep prices intact even though labor costs have been declining.” While benefiting the bottom line for businesses, the decline in inflation-adjusted wages bodes ill for the sustainability of economic growth as consumers may eventually be forced to cut back, Feroli said. Businesses have also been slow to redeploy their profits into new hiring. “So far what you’ve had is the government has been able to step in and prop up household purchasing power by various cuts in payroll taxes, various increases in social benefits,” said Feroli. “That has sort of kept the whole thing going, but you might worry with real wages being hit spending is going to decline.” Of the 394 companies in the Standard & Poor’s 500 Index that have reported since Jan. 9, earnings for the quarter ended Dec. 31 increased 5.1 percent on average and beat analyst estimates by 3.2 percent. Some 70 percent of the companies have posted better-than-projected results. Stocks Today Stocks erased gains after the S&P 500 failed to hold above its highest close since 2008, as approval of Greece ’s bailout was offset by economic concern with crude oil jumping to a nine- month high. The index added 0.1 percent to 1,362.21 at the close in New York, paring an earlier advance of 0.5 percent. European finance ministers approved 130 billion euros ($173 billion) in aid for Greece by tapping into European Central Bank profits and coaxing investors into providing more debt relief to shield the region from a default. Greece’s debt may still balloon to 160 percent of gross domestic product in a worst-case scenario, analysis by the International Monetary Fund and European officials indicated. Corporate profits in the U.S. reached a record $1.97 trillion in the third quarter of 2011, according to the most recent data from the Commerce Department. That’s up 1.7 percent in the third quarter from the previous three months and 7.5 percent higher than the same period in 2010. Limited Wage Pressure “In regards to labor, we currently do not anticipate significant pressure for 2012 for both wages and salary,” Gregory Levin, chief financial officer at BJ’s Restaurants Inc. (BJRI) , said on a Feb. 16 conference call with analysts. The Huntington Beach, California-based company, which owns and operates restaurants in California , Colorado , Oregon, Arizona , Nevada and Texas , said revenue increased 29 percent in the three months that ended Jan. 3 from the prior year, while net income rose 42 percent. Corporate profits tend to rise early in a business cycle, and get squeezed once growth picks up and workers are able to negotiate wage increases adequate to keep pace with inflation. High unemployment reduces a worker’s bargaining power. The jobless rate fell to 8.3 percent in January, down from 9.1 percent a year earlier and the lowest level in three years. A broader measure of underemployment , including people who have given up searching for work and those employed part-time while seeking full-time work, was 15.1 percent in January. Low-Rate Pledge The Federal Reserve has pledged low interest rates until late 2014, citing in part the weakness of the job market. Fed Chairman Ben S. Bernanke repeated the low-rate pledge after the Labor Department reported the January jobless rate and said the decline in the unemployment rate may mask weakness in the labor market. “It is very important to look not just at the unemployment rate, which reflects only people who are actively seeking work,” Bernanke said in response to a question during testimony in Congress. “There are also a lot of people who are either out of the labor force because they don’t think they can find work” or who have taken part-time jobs. The central bank said in January that it currently estimates maximum employment to be between 5.2 percent and 6 percent. “If you continue to get the unemployment rate down, workers may be able to more readily demand higher wages which will force some of that profit back over to the household sector,” said JPMorgan’s Feroli. Employment growth will put more money into the pockets of consumers, said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. “Once the jobs creation begins again, those new people have paychecks, and that’s what powers the economy forward,” Rupkey said today in an interview with Kathleen Hays on Bloomberg Radio’s “The Hays Advantage.” To contact the reporters on this story: Joshua Zumbrun in Washington at jzumbrun@bloomberg.net To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net |
2024-08-02 | Bloomberg | MetLife Lowers Forecast on Stock Sale for AIG Deal | MetLife Inc. , the insurer buying a non-U.S. unit from American International Group Inc., said earnings per share will be lower than previously forecast after it boosted the size of a stock sale to fund the deal. The acquisition will add 40 cents to 45 cents to next year’s operating earnings per share, New York-based MetLife said today in a regulatory filing. That compares with a projection of 45 cents to 55 cents in March, when the company announced the purchase. MetLife is selling 75 million shares, valued at $3.15 billion as of the company’s July 30 close. That compares with the $2 billion the insurer planned in March. “Based on what we’ve outlined today, we think those will be the effective sources of financing for the deal,” Christopher Breslin , a spokesman for MetLife, said in a telephone interview. Chief Executive Officer Robert Henrikson agreed in March to pay about $15.5 billion for AIG’s American Life Insurance Co. to expand in nations including Japan and Poland. The deal is valued at about $16.1 billion based on the July 30 value of New York- based MetLife securities, the company said in a separate filing. “The integration of certain operations and the differences in operational culture following the acquisition will require the dedication of significant management resources,” MetLife said in the filing today about the share sale. MetLife gained 67 cents, or 1.6 percent, to $42.73 at 4 p.m. in New York Stock Exchange composite trading. That compares with $38.92 on March 5, the last trading day before the deal was announced. AIG jumped $1.57, or 4.1 percent, to $40.04. 20 Million Customers MetLife is adding Alico’s 12,500 employees and 20 million customers to strengthen outside the U.S., where the market is contracting. Net income at the unit in the six months ended May 31 more than tripled to $694 million from $208 million in the year-earlier period. Alico’s equity, a measure of assets minus liabilities, advanced 4 percent in the 6 months ended May 31 to $13.3 billion, according to the filing. “MetLife plans to fund the acquisition prudently, but will be spreading itself a bit thin, at least in the short run, as it stretches to take advantage of what it perceives to be a rare opportunity to expand its global franchise,” wrote Kathleen Shanley , a bond analyst at Gimme Credit LLC, in a note to clients in March. AIG is selling assets to help repay a government bailout valued at $182.3 billion. The unit sale to MetLife is expected to be completed in the fourth quarter, the insurer reiterated today. Bank of America MetLife reiterated today that it plans to sell $3.1 billion of senior debt to help finance the cash portion of the deal. When the deal was announced, the firm said it will also pay AIG with 78.2 million shares of its common stock. The balance of the equity portion was expected to be paid in $2.7 billion of contingent convertible preferred stock and $3 billion of equity units, MetLife said in March. Bank of America Corp., Credit Suisse Group AG, Deutsche Bank AG, HSBC Holdings Plc, UBS AG and Wells Fargo & Co. are managing the share sale, MetLife said. To contact the reporter on this story: Andrew Frye in New York at afrye@bloomberg.net . |
2024-04-08 | Bloomberg | Bank of Japan Errs With a Micro Response to Macro Challenge, Takenaka Says | The Bank of Japan ’s offer of credit to cash-strapped businesses falls short of what’s needed to bolster growth after last month’s record earthquake, according to the former minister who led a clean-up of the nation’s banks. The central bank yesterday offered a 1 trillion yen ($12 billion) one-year loan program to banks designed to get funds to companies hit by the record quake and tsunami March 11. Governor Masaaki Shirakawa left the main policy tools untouched, having boosted an asset-purchase program by 5 trillion yen last month. Shirakawa has eschewed the “insurance policy” approach of the Federal Reserve in responding to risks, with policy stimulus added so far amounting to about one-tenth the U.S. quantitative- easing initiative. As the economy enters a likely contraction this quarter, with a report today showing one gauge of sentiment slumping by a record, lawmakers may prod the BOJ to do more. “The bank will likely continue to do such a micro policy,” Heizo Takenaka, who served in former Prime Minister Junichiro Koizumi ’s cabinet and was credited with forcing debt- laden banks to write off 19 trillion yen in bad loans. “However, the problem is macro monetary policy,” he said, urging the bank to step up purchases of government bonds in the secondary market. BOJ officials have focused on maintaining financial stability in the wake of the magnitude-9 temblor and tsunami, injecting a record 15 trillion yen of one-day funds into the banking system on March 14. The bank “has been responding properly to additional fund demand,” Takenaka said. Shirakawa to Watch Shirakawa said at a press conference following the bank’s meeting yesterday in Tokyo that policy makers will watch how the steps taken so far will affect the economy. The bank downgraded its assessment of growth for the first time since October, seeing “strong downward pressure” after the catastrophe. The Economy Watchers index, a survey of merchants, slid to 27.7 in March from 48.4 in February, the Cabinet Office said, the biggest drop since the survey began in 2000. The Nikkei 225 (NKY) Stock Average was little changed after yesterday’s announcement; it rose 1.9 percent to 9,768.08 at the close today in Tokyo. Stocks fell earlier after a magnitude 7.1 earthquake struck northern Japan last night, knocking out some power at nuclear facilities. The special credit program unveiled yesterday may help avert corporate bankruptcies in a region that’s suffered in excess of 27,000 people killed or missing and more than 200,000 buildings destroyed. Three prefectures -- Miyagi, Iwate and Fukushima, site of the crippled nuclear power plant -- accounted for most of the damage. Bailout Comparison The gross domestic product of the three prefectures amounts to an equivalent of about $243 billion, or more than Ireland or Portugal. Portugal is seeking a European Union rescue package that may be worth as much as 75 billion euros ($107 billion), two European officials with knowledge of the situation said this week. Ireland’s bailout was 85 billion euros. The disaster has affected production and consumer sentiment nationwide. Total retail sales in the world’s third-largest economy may drop as much as 10 percent this year, FamilyMart Co., the country’s No. 3 convenience-store chain, said yesterday. Companies from Toyota Motor Corp. to Sony Corp. have suspended factories. “With the economy in this dire of a situation, the BOJ’s continued passivity means it further loses credibility,” said Hiroshi Miyazaki, chief economist at Shinkin Asset Management Co. in Tokyo. “Right now, the government’s been pretty quiet but soon enough, spurred by public opinion, politicians will start to step up pressure on the BOJ. The BOJ will then have no choice but to play its next card.” Rate Becomes Useless The BOJ has kept the benchmark overnight rate at 0.5 percent or less since 1996, and asset purchases and loan programs have become the BOJ’s main policy tools. The bank yesterday left the rate at a range of zero to 0.1 percent. Damage from the quake and tsunami is estimated by the government to swell to as much as 25 trillion yen. Because the hit to the economy is mostly from production, so-called demand- side stimulus such as quantitative easing may be less effective, according to Azusa Kato, an economist at BNP Paribas SA in Tokyo. “Disruptions to supply chains and power shortage are forcing companies to cut production, fueling concerns over a recession,” said Kato. “The most important measure Japan needs to take right now isn’t further monetary easing. It’s all about measures to counter power shortage.” ‘Repeatedly’ Mistaken Takenaka, 60, now a professor at Keio University in Tokyo and chairman of temporary-staff provider Pasona Group Inc., said the central bank “unfortunately has been pursuing mistaken policy repeatedly” for years, failing to end deflation. Consumer prices haven’t risen at a sustained 1 percent annual pace -- the definition of price stability laid out by BOJ board members -- since the early 1990s. Prices, excluding fresh food, dropped 0.3 percent in February from a year before. Deflation may be poised to end as the yen weakens and commodity prices climb. The currency has retreated 7.4 percent in the past three weeks amid signs U.S. growth is picking up, auguring a widening interest-rate gap between the U.S. and Japan. Crude oil has climbed 27 percent in the past year. A shortage of daily necessities along with rising raw material costs and a weakening yen may prompt companies to pass on costs to consumers, fueling inflationary concerns in the future, Takenaka said. BOJ policy makers could help anchor price expectations at the same time as they inject more stimulus by setting an inflation target, said Takenaka, who was economy and banking minister from 2002 to 2004, then led a project of selling the postal service, aimed at boosting financial competition, from 2004 to 2006. He suggested a range of 1 percent to 3 percent ‘Ridiculous Argument’ Shirakawa yesterday reiterated his opposition to the BOJ underwriting government debt with direct purchases, warning that it would undermine the yen. Some ruling-party and opposition Liberal Democratic Party lawmakers have urged the step, which is allowed in emergency circumstances with approval by the Diet. Takenaka echoed current cabinet members in Prime Minister Naoto Kan ’s government in opposing direct BOJ financing of deficit spending. He also rejected the proposal of some legislators of a temporary tax increase, saying it was “a ridiculous argument” at a time of economic weakness. Kan plans to unveil what he says may be the first of multiple supplementary budgets this month. He has yet to detail how the spending will be paid for. Chief Cabinet Secretary Yukio Edano told reporters yesterday the first budget may be 4 trillion yen. “It’s too early to discuss” the possibility of instructing the BOJ to buy government debt directly, Sadakazu Tanigaki , who served in Koizumi’s cabinet and now heads the LDP, told reporters yesterday. “That needs to be discussed in the process of figuring out how much fiscal spending will be necessary.” 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 |
2024-02-28 | Bloomberg | Germany’s Steffen May Be Named BaFin Head, Handelsblatt Says | Thomas Steffen, a European policy official at the German Finance Ministry, may be named the BaFin financial regulator’s next head, Handelsblatt said, citing people close to Finance Minister Wolfgang Schaeuble it didn’t identify. BaFin President Jochen Sanio may retire this summer, the Dusseldorf-based newspaper reported today, without saying how it got the information. Steffen previously headed BaFin’s insurance oversight divisions, Handelsblatt said. To contact the reporter on this story: Tony Czuczka in Berlin at aczuczka@bloomberg.net ; To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net |
2024-09-29 | Bloomberg | Ambac Sues Bank of America Over Countrywide Bonds | Ambac Assurance Corp. sued Bank of America Corp. over $16.7 billion of mortgage-backed securities, saying the bank’s Countrywide Financial Corp. unit fraudulently induced Ambac to insure bonds backed by improperly made loans. Ambac found that 97 percent of 6,533 loans it reviewed across 12 securitizations sponsored by Countrywide didn’t conform to the lender’s underwriting guidelines, according to the complaint filed yesterday in New York state Supreme Court. Many of the loans were made to borrowers with limited or no ability to meet their payment obligations, Ambac said. The lawsuit follows negotiations between Bank of America, which acquired Countrywide in 2008, and Ambac over mounting losses caused by loans made during the early 2000s as U.S. housing prices soared. Ambac has paid $466 million in claims from more than 35,000 Countrywide home-equity loans that have defaulted or been charged off, according to the lawsuit. “Bank of America probably didn’t settle because they didn’t want to swallow the amount of money that it’s going to take to satisfy Ambac,” said Alan White , a law professor at Valparaiso University who specializes in housing industry issues. “Nobody wants to be left holding the bag.” Shirley Norton, a spokeswoman for the Charlotte, North Carolina-based lender, and Ambac spokesman Pete Poillon , declined to comment on the lawsuit. Repurchase of Billions Repurchases of home loans from buyers and insurers of mortgage securities have already cost the four biggest U.S. lenders $9.8 billion, according to Credit Suisse Group AG. Bank of America has said it faces $11.1 billion of unresolved claims. MBIA Insurance said it paid more than $459 million in claims stemming from losses on Countrywide-sponsored mortgage- backed bonds, according to a 2008 lawsuit in New York State Supreme Court. The Ambac case involves 12 Countrywide-sponsored pools of home loans that were created from 2004 to 2006, including nine involving home equity lines of credit and three that involve fixed-amount second-lien loans. Bank of America should repurchase as much as $20 billion in home loans that were based on wrong or missing information, the Association of Financial Guaranty Insurers said in a Sept. 2 letter to Bank of America Chief Executive Officer Brian Moynihan. More than half of the soured home-equity credit lines and residential mortgages created from 2005 through 2007 that insurers examined were candidates for repurchase, the group said. Countrywide Losses Bank of America has reported $7.6 billion in losses from home-equity loans over the past four quarters, stemming from slumping U.S. home prices. Losses related to Countrywide loans, including repurchase requests, will continue through mid-2012, Moynihan said at a Sept. 14 investor conference. Bank of America in 2008 acquired Countrywide, the largest U.S. home lender at the time. “They’re manageable numbers, not pleasant numbers, but manageable numbers,” Moynihan said. Moynihan and other Bank of America officials have said the bank must review each loan to verify whether it met company guidelines. That process has delayed Ambac’s demands that Bank of America repurchase the loans, causing a breach of contract, according to the lawsuit. Ambac said in its complaints that it’s “entitled to redress for Countrywide’s massive fraud and pervasive and material breaches, including damages sufficient to place Ambac in the same position it would have been in had it never insured the transactions.” The case is Ambac Assurance Corp. v. Countrywide Home Loans Inc., 651612/2010, New York state Supreme Court (Manhattan). To contact the reporters on this story: Karen Freifeld in New York at kfreifeld@bloomberg.net David Mildenberg in Charlotte at dmildenberg@bloomberg.net To contact the editor responsible for this story: David E. Rovella in New York at drovella@bloomberg.net ; Alec McCabe at amccabe@bloomberg.net . |
2024-04-24 | Bloomberg | WellPoint’s Swedish Wins Praise in Public Debut as CEO | WellPoint Inc. (WLP) Chief Executive Officer Joseph R. Swedish won high marks from investors and analysts in his first public appearance since taking over for the ousted Angela Braly. Swedish, 61, speaking today during the Indianapolis-based health insurer’s first-quarter earnings call, announced profits that beat analysts’ estimates and proclaimed himself “optimistic” about the company’s future. The market responded by pushing shares up the most since the day after Braly left last August amid investor complaints. “The old management team liked to overpromise and under- deliver, and that’s a disaster for the stock market,” said Mark Giambrone, a portfolio manager at WellPoint’s biggest shareholder, Dallas-based Barrow, Hanley, Mewhinney & Strauss. “It’s clear to me that his focus is different.” WellPoint, the second-biggest U.S. health insurer, reported first-quarter earnings of $2.94 a share, 56 cents higher than the average of 19 analysts’ estimates compiled by Bloomberg. The company also raised its forecast for full-year profit by 20 cents, to at least $7.80 a share, citing medical costs that grew more slowly than WellPoint anticipated. Swedish, a former hospital executive, took over March 25 and can’t claim much credit for the quarterly earnings report, said Brian Wright, a Monness Crespi Hardt & Co. analyst in New York. Still, on the call, he displayed “a thoughtful process to address the company’s performance issues,” Wright said in a phone interview. “The business seems to be back on solid footing.” Earlier Criticisms Braly resigned Aug. 28 as investors and analysts criticized missed profit estimates, enrollment declines and disappointing stock performance relative to peers. The company traded today at an 18 percent discount to an S&P 500 index of the top six health insurers, compared with a 25 percent discount on April 5. WellPoint closed up 5.8 percent to $73.33 in New York, the largest gain for the company’s shares since the day after Braly’s resignation. Swedish told analysts on the call that he was reviewing WellPoint’s assets and strategies. So far, “the overarching strategic framework seems reasonable,” he said. The company faces major changes next year under President Barack Obama ’s Affordable Care Act, which will open new online insurance markets for small businesses and people who buy their own insurance. WellPoint is the biggest U.S. carrier in both markets. It’s still digesting last year’s $4.9 billion acquisition of Amerigroup Corp. Swedish said he recognizes WellPoint investors want more consistent performance. “I’m going to drive WellPoint forward with an emphasis on performance, transparency and accountability,” he said. “We need to be nimble and proactive.” Conservative Approach Giambrone, the portfolio manager, said Swedish impressed him by lifting the full-year forecast by only 20 cents, taking a “conservative” approach even after the first-quarter numbers. “What I like about him is his consistent message about execution, operating efficiency and expense control,” Giambrone said. “Those are the things WellPoint had been missing, frankly. I think the assets are there. Really, the question is about execution.” Barrow Hanley owned 18.1 million WellPoint shares as of Dec. 31, 6 percent of the total outstanding, according to data compiled by Bloomberg. To contact the reporter on this story: Alex Nussbaum in New York at anussbaum1@bloomberg.net To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net |
2024-06-14 | Bloomberg | Senate's Lincoln Considers Compromise on Swaps-Desk Provision | Senator Blanche Lincoln may modify her proposed rules on derivatives by giving commercial banks two years to push out their swaps trading desks into subsidiaries. The compromise proposal also would allow the Federal Reserve to provide system-wide emergency assistance to swaps dealers, according to a draft obtained by Bloomberg News and confirmed by Lincoln’s office today. The changes are aimed at clarifying questions about the original language and don’t pull back from the purpose of the measure, which is to separate commercial banking from derivatives trading, Courtney Rowe, a spokeswoman for the Arkansas Democrat, said today in an e-mailed statement. The plan “is a strong provision that will protect depositors and get banks back to the business of banking,” Rowe said. “These clarifications will clear up any questions that exist about the intent of the provision without compromising the legislation.” The revised language would give federal banking regulators two years to determine the impact of the measure on mortgage lending, small business lending, jobs and capital formation. The proposal doesn’t provide for any action after the study. “It gives people more time to organize their affairs to react to this provision,” said Ian Cuillerier, a structured finance lawyer at White & Case in New York who has been tracking the legislation. “This is not an easy provision for banks to deal with.” $28 Billion Banking officials said the new proposal would do little to address their concerns. The five largest U.S. swaps dealers -- including JPMorgan Chase & Co. and Goldman Sachs Group Inc. -- made $28 billion from trading operations last year, according to reports collected by the Federal Reserve and people familiar with the matter. “The restrictions under the new proposal are not much different than complete divestment,” said Scott Talbott , senior vice president of government affairs for the Financial Services Roundtable, a Washington-based trade group. The revised language would clarify that banks with access to Federal Deposit Insurance Corp. guarantees and the Federal Reserve’s discount lending window would be allowed to hold a separately capitalized swap dealer in an affiliate of the bank holding company. Reconciling the Bills The proposed changes attempt to address issues raised by banking regulators, including FDIC Chairman Sheila Bair , who said they were concerned that the original provision would keep banks from hedging their interest rate or currency risks. The revised language would specify that commercial banks could make use of swaps for those purposes as participants in the market without losing their federal guarantees, as long as they didn’t operate a swaps-trading desk. The derivatives language is one part of the larger financial regulatory overhaul being completed by House and Senate negotiators, who will continue to meet this week to reconcile their bills. Congressional Democrats said they expect to have legislation ready for President Barack Obama ’s signature by July 4. The proposal remains in its early stages and hasn’t been presented to lawmakers, according to a Senate aide. Negotiators are currently scheduled to take up the derivatives language in the final days of the conference committee, said the aide, who spoke on condition of anonymity because the talks aren’t public. Proposed in April Lincoln, who is chairman of the Senate Agriculture Committee , in April proposed separating swaps trading from commercial banking. She has advocated for the rule in the face of opposition from federal regulators, lawmakers and banks. The banking industry focused much of its lobbying efforts on removing the provision, including a personal appeal to lawmakers by JPMorgan Chief Executive Officer Jamie Dimon. Banking officials and regulators including Fed Chairman Ben Bernanke said the original proposal could introduce more risk into the system by eliminating a primary hedging mechanism and could restrict bank capital at a time of economic stress. Derivatives, such as stock options, are financial instruments based on the value of another security or benchmark. Some instruments, including contracts that insured mortgage- backed bonds, have been blamed for fueling a financial crisis that led to the worst recession since the Great Depression. Consumer advocates and labor groups -- many of the same people who opposed Lincoln in the primary election battle she won last week -- have supported the provision from its inception. Lincoln has picked up other high-profile support in recent days, including from Federal Reserve Bank of Dallas President Richard Fisher and Thomas Hoenig , the president of the Federal Reserve Bank of Kansas City. To contact the reporter on this story: Phil Mattingly in Washington at pmattingly@bloomberg.net. Senator Blanche Lincoln, a Democrat from Arkansas, in Washington. Photographer: Joshua Roberts/Bloomberg //<![CDATA[ $(document).ready(function () { $(".view_story #story_content .attachments img.small_img").each(function(){ var self = $(this); if (self.width() != 190){ self.width(190); } }); }); //]]> |
2024-01-09 | Bloomberg | Banks Blame Countrywide for U.K. Mortgage Losses in 97 Suits | Suninder Sandha bought his luxury apartment in Coleorton Hall , a 19th century country mansion near Leicester in central England, using a 1.2 million-pound loan ($1.86 million) from Barclays Plc (BARC) in 2005. When the property market collapsed two years later, Sandha couldn’t make his mortgage payments and Barclays seized the apartment, selling it for 500,000 pounds. The lender has now sued Countrywide Plc (CWD) , whose surveying unit valued it at the peak of the boom, for its losses, according to court papers. The suit is one of 38 filed last year in London’s High Court against Countrywide, the nation’s largest residential property broker, by lenders including Barclays, Lloyds Banking Group Plc (LLOY) and GMAC-RFC. That’s more claims than any of the four largest U.K. banks faced in 2011, according to data compiled by Bloomberg. As many as 97 lawsuits have been filed since 2007 against Countrywide, bought that year by private-equity firm Apollo Management LP. “These banks have incurred huge losses and they are looking for someone to blame,” said Alexandra Anderson, a partner at law firm Reynolds Porter Chamberlain LLP representing surveyors including Countrywide. “Often the blame is themselves, and the lending practices they had.” Countrywide, now also owned by Oaktree Capital Management LLC (OAKTRZ) and Alchemy Partners LLP, said in an e-mailed statement it had seen a considerable increase in professional negligence claims, particularly from now-defunct lenders. ‘Fulfilled Our Responsibilities’ “We will continue to defend our position when we believe we have fulfilled our responsibilities,” Countrywide said. “If an error is made, then we do seek to settle with claimants.” The London company isn’t affiliated with Countrywide Financial Corp., the Calabasas, California-based subprime lender acquired by Bank of America Corp. in 2008. The Charlotte , North Carolina-based bank paid a fair-lending practices record $335 million last month to settle a U.S. Justice Department probe into Countrywide Financial’s practices. A U.K. judge ruled in Countrywide Plc’s favor last month in one of the first such cases to reach court, saying GMAC-RFC, the British mortgage-lending unit of Ally Financial Inc (ALLY) ., didn’t do enough research in making a loan on a property the surveyor valued. Lenders suing Countrywide say they issued home loans based on unrealistic valuations by its surveying unit and lost money when the properties turned out to be worth less than estimated. Buyout Holdings Apollo went public in March and reported a third-quarter loss of $1.14 billion in November after writing down the value of its buyout holdings as equity markets tumbled. The New York- based firm bought Countrywide when U.K. house prices were rising at the fastest pace in almost four years, figures compiled by researcher Hometrack Ltd. then showed. Apollo also bought Realogy Corp., the largest U.S. residential real estate broker, for $8.5 billion in 2007 during the worst downturn in home sales there since the Great Depression. By the end of the next year Realogy, owner of the Century 21 and Coldwell Banker brands, was on the verge of defaulting on the what Apollo had borrowed to buy it. U.K. home prices have fallen 9.5 percent since the market slumped in 2007, real-estate broker Savills Plc estimated in November. The biggest loser has been England’s northwest with a 14 percent drop. London prices have shed 2.9 percent. Barclays spokeswoman Emma Austin declined to comment on its lawsuit. U.K. telephone directories online didn’t list an address for Sandha since he left Coleorton Hall and the lawsuit didn’t provide details of where he is now. Apollo spokesman Charles Zehren declined to comment. Surge Last Year Many more claims haven’t yet reached court, said Anderson. The 2011 surge was caused in part by the statute of limitations requiring grievances be filed within six years, she said. The property boom continued into 2007 so the number of lawsuits may rise further, lawyers for both sides said. “I anticipate the volume of valuer claims will surge significantly again over the next couple of years particularly as limitation is becoming more of an issue for claimants,” said Andy Lyon, an attorney for lenders including U.K. banks. Countrywide, which has rental, estate agency and financial services units as well as the surveying arm, announced an exceptional charge of 11.9 million pounds in 2010 due to “an abnormal increase in the number of professional indemnity claims,” according to its annual report. Out of Business Surveying firms insure against legal claims, though they must pay a deductible and face rising insurance premiums because of the number of lawsuits filed, Anderson said. Several small surveying firms went out of business because of the costs associated with litigation, she said. In the GMAC-RFC case, a judge in Leeds ruled Countrywide was not liable for the 61,500-pound difference between its valuation and the eventual sale price of a seized property in York, in northern England. A unit of GMAC-RFC sued Countrywide saying it had been negligent in its initial valuation of the apartment, which was seized by the lender in 2008 after the borrower defaulted. Judge Andrew Keyser faulted GMAC for making the loan on the York property and sided with Countrywide. “If GMAC had made proper enquiries as to the borrower’s financial position, it would have found that he was unable to verify his declared income or to give satisfactory explanation for his inconsistent statements of earnings,” Keyser said in December in his written judgment. GMAC’s Paratus AMC unit said in an e-mailed statement the case had turned on expert evidence on the value of the apartment. It said it didn’t accept the judge’s finding that the lender was partly to blame for its losses. To contact the reporter on this story: Kit Chellel in London at cchellel@bloomberg.net To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net |
2024-06-08 | Bloomberg | European Insurers’ Capitalization Is ‘Comfortable’, Eiopa Says | European insurers have sufficient financial strength, the chairman of the region’s supervisory authority for the industry said before the publication of stress-test results scheduled for next month. The European Commission and the European Insurance and Occupational Pensions Authority, or Eiopa, along with local regulators, are developing a risk-based regulatory framework for the region’s insurers such as Allianz SE (ALV) and Axa SA. (CS) The new rules, named Solvency II, are scheduled for introduction in 2013. Insurers have been examined in a stress test this year based on the regulatory changes. “The situation and solidity of insurers right now is very comfortable,” Gabriel Bernardino, Eiopa’s chairman, told journalists in Frankfurt yesterday. “That doesn’t mean some insurers won’t need to raise capital under the new regime where risk is at the center.” The stress-test results from 221 insurers in 31 countries are being gathered by local regulators and Eiopa plans to publish aggregated results in July, according to Bernardino. The test include market risks as well as insurance-specific risks such as hits from major catastrophes, he said. The current timetable for the introduction of Solvency II at the beginning of 2013 is “challenging” as some legislation still needs to be put in place, Bernardino said, adding that “there will certainly be transition periods in areas such as hybrid debt.” To contact the reporter on this story: Oliver Suess in Frankfurt at osuess@bloomberg.net To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net ; Edward Evans at eevans3@bloomberg.net |
2024-05-30 | Bloomberg | Trade Messaging Protocol, Miami Fund, Quantek: Compliance | FIX Protocol Ltd., the London-based organization that owns the global messaging format for financial trading, published a set of European guidelines on how banks should report their equity trades. Brokers and banks should tag their trades using FIX’s standards so fund managers can tell on which exchange or alternative trading system the order has been executed, FIX said in a statement yesterday. The protocol would also enable them to see whether the transaction occurred in a so-called dark pool, where prices aren’t publicly disseminated, or a lit market. The guidelines follow requests from fund managers seeking transparency on where and how their trades were executed as market structure and trading practices grow more complex, according to FIX. Since the Markets in Financial Instrument Directive legislation was introduced in 2007 to spur competition, volume has spread across alternative venues such as Bats Chi-X Europe that vie with London Stock Exchange Group Plc (LSE) , Deutsche Boerse AG (DB1) and NYSE Euronext. (NYX) The guidelines should also flag whether a trade was agency, on behalf of a customer, or principal, on behalf of a bank’s own account, and whether it was executed passively, by posting liquidity, or aggressively, by taking liquidity, Chris Sims, co- chair of the EMEA Business Practices Subcommittee at FIX, said in an interview. Under the Mifid rules, markets and brokers are permitted to report transactions to any exchange, venue or third party, or publish it on their own website. The European Union is now reviewing the legislation. Compliance Policy FSB Agrees on Rules for Identifying Too-Big-to-Fail Insurers Global regulators agreed on draft rules for identifying insurance companies that should face tougher regulation because their failure would roil global markets. The Financial Stability Board endorsed a consultation paper setting out a framework for selecting the too-big-to-fail insurers, Mark Carney , chairman of the FSB, said today after a two-day meeting of the board in Hong Kong. The measure extends a 2011 agreement by global regulators to impose stricter capital rules and closer supervision on banks whose collapse could threaten the global economy. Deutsche Bank AG, BNP Paribas SA (BNP) and Goldman Sachs Group Inc. (GS) were among 29 banks subject to the so-called capital surcharge on globally systemic financial institutions agreed on by the FSB last year. Banks will have to boost reserves by 1 percentage point to 2.5 percentage points above minimum levels determined by international regulators. The consultation paper will be published ahead of a meeting of Group of 20 leaders in Mexico on June 18-19, according to the FSB, which brings together regulators, finance ministry officials and central bankers from the G-20 countries to devise rules for the financial system. The FSB confirmed a year-end deadline for agreeing on rules for money-market funds and other so-called shadow banks. The board also said that it will publish a report on banker pay next month. For more, click here. Congress to Present Bill Repealing of Parts of Obama Health Law The House Ways and Means Committee said yesterday that it will hold a markup, or present for debate, amendment and vote, on bills that would repeal part of the Patient Protection and Affordable Care Act, BNA reported. The bills would repeal the medical-device tax and the ban on using pretax dollars in flexible spending arrangements to buy over-the-counter medicines without a prescription, according to BNA. Both tax issues were created in the Patient Protection and Affordable Care Act. Republicans in Congress have criticized the 2.3 percent tax on manufacturers and importers of medical devices, which was crafted to raise $20 billion to help pay for the health-care overhaul legislation. The medical-device tax is set to go into effect in 2013. The change to require consumers to get a prescription before they can use money in flexible spending arrangements to buy over-the-counter medicines was also part of the health-care overhaul. Republicans have argued that the change actually costs the health-care system more money, because it requires people to visit their doctor unnecessarily. The health-care overhaul also capped the maximum amount of money that individuals can put into their FSAs at $2,500, but House Republicans haven’t announced an intention to roll back that part of the law. FSA Annual Funding Requirement Reduced by 18.6 Million Pounds The U.K. Financial Services Authority cut its annual funding requirement by 3.2 percent to 559.8 million pounds ($878 million), down from 578.4 million pounds, the regulator said in an e-mailed statement. The reduction is due to internal cost controls and the return of a contingency fund set aside to deal with “extreme macro-economic and regulatory events,” the FSA said in the statement. Taiwan Allows Banks to Accept China’s Bonds as Loan Collaterals Taiwanese banks are allowed to take China government bonds and certificates of deposit issued by Chinese financial institutions as collaterals for Taiwan dollar-denominated loans, the island’s Financial Supervisory Commission said in a statement on its website. Germany to Draft Rules on High-Frequency Trading, FTD Reports Germany ’s governing coalition are drafting rules to rein in high-frequency trading, Financial Times Deutschland reported, citing lawmakers. Market regulators should be able to bring a halt to such trading based on mathematical models and have access to algorithms, according to rules to be drafted by the end of June, the newspaper said. A draft law should be prepared for later this year, according to the newspaper. Compliance Action Miami Hedge Fund Misled Clients About Managers’ Stake, SEC Says A Miami-based hedge fund and two of its executives agreed to pay almost $3 million to resolve U.S. regulatory claims that they deceived investors about their own stake in the fund and failed to disclose conflicts of interest. Quantek Asset Management LLC falsely represented that it had “skin in the game” along with investors in a $1 billion Latin America-focused hedge fund from 2006 to 2008, the U.S. Securities and Exchange Commission said yesterday in an administrative order. Quantek, which made the claims in due diligence questionnaires and so-called side-letter agreements, also didn’t properly disclose loans to one of the executives and its former parent company, Bulltick Capital Markets Holdings LP , the SEC said. Javier Guerra, 41, who was the lead principal of Quantek, also agreed to a five year bar from the securities industry and Ralph Patino, 46, Quantek’s former director of operations and head of compliance, consented to a one-year bar, the SEC said. The agency also sanctioned Bulltick, which agreed to a pay a $300,000 penalty. Guerra said in a statement that he resigned in October 2011 after helping return about $260 million to investors from the fund, which was forced to liquidate amid global financial market turmoil. Stanley Wakshlag, Patino’s attorney, said in an e-mail “We are pleased to have resolved this matter and to have put it behind us.” Bulltick, which separated from Quantek in 2009, said in a statement that the SEC didn’t allege any securities law violations by any of its current personnel. “The settlement with the SEC that is announced today concludes the investigation as to Bulltick,” the company said yesterday in the statement. “Bulltick cooperated fully with the SEC at all times during the course of this investigation.” Guerra, Patina, Quanta and Bull tick resolved the SEC’s claims without admitting or denying wrongdoing. Chuo Mitsui Fine Sought in Insider Trading Case, Japan SESC Says Japan ’s securities watchdog recommended Chuo Mitsui Asset Trust & Banking Co. and Asoka Asset Management Ltd. be fined for trading on inside information obtained from share sale underwriters. The Securities and Exchange Surveillance Commission is seeking a penalty of 80,000 yen ($1,000) from Chuo Mitsui, a unit of Sumitomo Mitsui Trust Holdings Inc. (8309) , related to a Mizuho Financial Group Inc. (8411) stock sale, it said in a statement yesterday. Separately, the regulator said it’s asking for a 130,000 yen fine for Asoka Management related to a share offering by Nippon Sheet Glass Co. (5202) Japanese regulators have been probing trades related to stock offerings in response to criticism from investors alleging that leaks on financing plans are eroding market confidence. Lead underwriters for the Nippon Sheet Glass offering included Daiwa Securities Group Inc. (8601) and JPMorgan Chase & Co., the SESC said. Underwriters for the Mizuho deal included Mizuho Securities, Nomura Holdings Inc. (8604) , JPMorgan and Bank of America Corp. ’s Merrill Lynch, it said. Canada Competition Bureau Says Tribunal Orders CCS Divesture Canadian Competition Commissioner Melanie Aitken won an order forcing CCS Corp. to sell off a hazardous-waste landfill site, which she said marks the first such challenge since 2005 and sets a precedent for future disputes. The ruling yesterday by the country’s competition tribunal forces the company to sell the Babkirk site, an asset it acquired when it bought Complete Environmental Inc. “Today’s ruling sends a clear message to companies who seek to eliminate competitive threats through acquisition,” according to a statement from Aitken. “The Bureau has prevented a multi-billion dollar company from entrenching its monopoly for hazardous waste disposal in Northeastern British Columbia.” Courts BankAtlantic, Levan Lose Bid to Toss SEC’s Disclosure Fraud Suit BankAtlantic Bancorp Inc. (BBX) and its chief executive officer must face a U.S. Securities and Exchange Commission lawsuit alleging they misled investors about the extent of the losses the bank was facing because of a troubled loan portfolio. U.S. District Judge Robert Scola in Miami ruled yesterday that the SEC can proceed with allegations of disclosure fraud and misrepresentations or omissions in earning statements and investor conference calls. He dismissed parts of two out of the seven counts in the lawsuit against the bank and CEO Alan Levan, while giving the agency permission to amend its complaint. The judge wrote in reference to one count that survived his review that when viewed as a whole, the allegations go beyond “severe recklessness and touch upon intent to deceive.” The SEC said in its January complaint that BankAtlantic and Levan made misleading statements in public filings and earnings calls to hide losses on the Fort Lauderdale, Florida-based bank’s commercial and residential land holdings and improperly recorded loans they were trying to sell from the portfolio in late 2007. Eugene Stearns, an attorney for BankAtlantic and Levan, didn’t respond to e-mail and phone messages seeking comment on yesterday’s ruling. During a hearing last month, Stearns argued that the suit should be dismissed because the bank disclosed in filings and on analyst conference calls that it was holding loans that would be affected by a real estate downturn. The case is SEC v. BankAtlantic BanCorp Inc., 12-cv-60082, U.S. District Court, Southern District of Florida (Miami). Hedge Fund Founder, Ex-Employees Must Pay $450 Million for Fraud Hedge fund Weavering Capital (UK) Ltd.’s administrators won a lawsuit to recover money from its founder Magnus Peterson and other former employees involved in sham derivative deals that caused its collapse. Peterson and nine others, including his wife and deputy investment manager Edward Platt, must pay $450 million, Judge Sonia Proudman said. Weavering’s lawyer Robert Anderson said recovery of the money is “unlikely” because all of the defendants might find themselves bankrupt “in the very near future.” Weavering’s administrators at MCR , a unit of Duff & Phelps Corp. (DUF) , sued Peterson and the former employees to recoup losses caused when the fund collapsed in March 2009. Peterson told investors he achieved returns of as much as 12 percent a year, while he covered losses with fraudulent swap contracts, administrators said at a London trial last year. Peterson and Platt, his deputy investment manager, were arrested by the U.K. Serious Fraud Office , which decided last year not to bring criminal charges. The pair represented themselves today and couldn’t immediately comment because the hearing was continuing. JPMorgan Challenges U.K. SFO with UBS Over Milan Swaps Case JPMorgan Chase & Co., UBS AG (UBSN) , Deutsche Bank AG (DBK) and Depfa Bank Plc asked a London court to block U.K. prosecutors from seizing documents that Italian authorities want to use at a criminal trial over derivatives. Julian Knowles, a lawyer for JPMorgan, Deutsche Bank and Depfa argued that the U.K. Serious Fraud Office shouldn’t be allowed to use “coercive measures” against the banks that wouldn’t be available to prosecutors in Italy. Prosecutors in Milan accused the four banks, which arranged swaps for the city to restructure its debt, of misleading city officials and earning 101 million euros ($126.7 million) in hidden fees from the deals. The banks, which deny the fraud charges, settled with the city government in March and agreed to unwind its interest-rate swaps , which adjusted payments on 1.7 billion euros of bonds sold in 2005. The prosecutor leading the case used the accounts of an Italian bank on a similar transaction to show that lenders set terms in their favor in swap deals. A witness testified last week during a trial in Milan over the derivatives sales that the city’s swaps may have broken rules on how municipalities can use derivatives, partly because they were used to raise funds instead of hedging risk. The U.K. Home Office received a request for assistance in April of last year, which was passed to the director of the Serious Fraud Office, Knowles said. The SFO isn’t investigating the defendants or any of its employees, Knowles said. The case is: The Queen on the application of UBS Limited v. Serious Fraud Office, CO/3165/2012, High Court of Justice, Queen’s Bench Division. Interviews JPMorgan Seems ‘Out of Control,’ MIT’s Johnson Says Simon Johnson, a professor at the Massachusetts Institute of Technology and a senior fellow at the Peterson Institute for International Economics , talked about the European sovereign debt crisis and his petition to have JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon removed from the Federal Reserve Bank of New York ’s board of directors. Johnson, who spoke with Tom Keene on Bloomberg Television’s “Surveillance Midday,” also discussed the outlook for further financial regulation. For the video, click here. Levitt Says Facebook Reached ‘Too Far’ and Fell Far Arthur Levitt, former chairman of the U.S. Securities and Exchange Commission and senior adviser to Goldman Sachs, said “if you reach too far, you fall far, and that is exactly what happened to Facebook.” Levitt talked with Bloomberg’s Tom Keene on Bloomberg Radio’s “Bloomberg Surveillance.” For the audio, click here. Barnier Says Euro Zone Must Have Banking Union European Union Financial Services Commissioner Michel Barnier discussed Greece ’s financial crisis, the need for an EU banking union and industry regulation. He spoke in Paris with Bloomberg Television’s Caroline Connan. For the video, click here. Comings and Goings House Cancels Hearing on NRC After Jaczko Successor Named The House Energy and Commerce Committee has postponed a May 31 hearing on the Nuclear Regulatory Commission after President Barack Obama nominated Allison Macfarlane to replace Gregory Jaczko as chairman of the safety board. Jaczko had announced his intention to resign following confirmation of a successor. His fellow commissioners have criticized his management style. Supporters said he was a strong advocate for safety as head of the NRC. All five commissioners, including Jaczko, were scheduled to testify at the May 31 hearing. 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 . |
2024-08-08 | Bloomberg | MGIC Mortgage Unit Cut by Moody’s on Capital, Freddie Clash | MGIC Investment Corp. (MTG) had the financial strength rating of its main insurance unit cut by Moody’s Investors Service as losses from backing home loans drain capital. The rating was lowered to B2 from B1 “due to the continued deterioration of the insurer’s regulatory capital position and to reflect the possible adverse credit implications of its ongoing dispute with Freddie Mac , one of its largest counterparties,” the ratings firm said in a statement today on Milwaukee-based MGIC. 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 |
2024-04-18 | Bloomberg | Bank of America Faces Bad Home-Equity Loans: Mortgages | Bank of America Corp. , whose home- equity mortgage portfolio exceeds its stock market value, probably will say about $2 billion of junior loans are bad assets tomorrow even as some borrowers are still paying on time. That’s what Barclays Capital estimates the bank will report in its first-quarter results, following decisions by JPMorgan Chase & Co., Wells Fargo & Co. (WFC) and Citigroup Inc. (C) to reclassify $4.1 billion of junior liens as nonperforming. Regulators are pressing for the change on concern that falling home prices have wiped out collateral on many second mortgages, leaving them as unsecured debt. About 20 percent of the nation’s $845 billion of home-equity loans exceed the value of the properties when combined with primary mortgages, according to CoreLogic Inc., and about 36 percent of Bank of America’s were at least partly “underwater” at the end of last year, according to regulatory filings. “The reclassification may change the way the investors look at the company but as far as the vulnerability it does nothing to take that away,” said Jeffrey Sica, the Morristown, New Jersey-based president of SICA Wealth Management who helps oversee $1 billion of assets and who’s bet on a decline in the shares of Bank of America in the past. “This is something they have very much tried to keep under wraps.” Almost a quarter of homes in the U.S. were worth less than the mortgages against them, according to CoreLogic, the data firm based in Santa Ana , California. About 4.4 million had home- equity mortgages, the firm said. Stripping Value Banks have been carrying some high-risk junior mortgages on their balance sheets at full value even after a rout in home prices stripped almost $7 trillion from property values, according to the Federal Reserve and other bank regulators. Executives including Bank of America Chief Executive Officer Brian T. Moynihan and Wells Fargo CEO John Stumpf have said borrowers tend to keep paying as long as they are able, even if home prices decline. The risk for lenders is that if the borrower does default and the property is auctioned, a junior loan stands behind the primary mortgage for repayment. Typically, the second-lien holder suffers a total loss. Investors are “trying to find the canary in the coal mine ,” said Chris Gamaitoni, a mortgage and banking analyst at Washington-based Compass Point Research and Trading LLC. “Bank of America is certainly the most worrisome.” Quarterly Report Bank of America, which has the biggest home-equity portfolio in the U.S., may post a 6.9 percent decline in first- quarter adjusted profit to $1.62 billion tomorrow, according to analysts surveyed by Bloomberg. The Charlotte, North Carolina- based company had been the nation’s largest mortgage lender after buying Countrywide Financial Corp. and had a portfolio of $136.7 billion in home-equity loans at the end of last year, according to a company filing. The lender was unchanged at $8.92 at 4:15 p.m. in New York trading. It’s gained 60 percent this year boosting the market capitalization to about $95.7 billion. About 22 percent of the bank’s home-equity loans were actually senior liens at the end of last year, according to a company filing. That compares with about 28 percent at New York- based JPMorgan (JPM) and 20 percent at San Francisco-based Wells Fargo. The figures at all three banks exclude impaired loans picked up in acquisitions. Potential Impact Bank of America has identified $4.7 billion of home-equity loans that stand behind a delinquent first, according to a year- end filing, and the total reclassified as nonperformers may be higher than Barclays’s estimate, according to Brian Foran, a New York-based analyst at Nomura Holdings Inc. Citigroup moved about 2 percent of its home-equity portfolio, the smallest of the four lenders. At that rate, Bank of America would reclassify about $2.73 billion. “I would expect BofA to be in the same ballpark and maybe slightly higher,” Foran said. “Given that they had identified and disclosed these loans ahead of time my guess is they will do the same as the others. The only question mark hanging over this issue: is it the last step, or the first step?” The three companies collectively hold 40 percent of the nation’s home-equity loans, according to Fitch Ratings. Wells Fargo, the biggest U.S. mortgage lender, and JPMorgan, the biggest bank by assets, had already set aside reserves for the loans they reclassified as nonperforming, so there was no impact on reported profit, the banks said last week. Still, the changes at the two banks “surprised and spooked investors, despite not having an earnings impact,” wrote Barclays analysts led by Jason Goldberg in a research note. ‘No Teeth’ The Fed’s directive, which reiterated rules in force since at least 2006, isn’t enough to mitigate the risk junior loans pose to the banking system, said Rebel Cole, a former Federal Reserve economist and now a finance professor at DePaul University in Chicago. “The guidance has absolutely no teeth,” Cole said. “The regulators could simply say, ‘We know at least 25 percent of first mortgages are under water, therefore, at least 25 percent of your second liens are uncollateralized and have to be classified as substandard or doubtful.’” The risk of home-equity loan defaults will increase if real estate prices continue to decline, analysts and economists said. Home values have tumbled by a third since reaching a peak in mid-2006, according to the S&P/Case-Shiller home price index. Diane Swonk , chief economist of Mesirow Financial Inc. in Chicago, estimates home prices will retreat another 3.9 percent this year, which would strip $706 billion from home values. Default Rates Fitch estimates 20 of the largest U.S. banks , including units owned by foreign lenders, may face another $110 billion in junior-loan losses under a stressed scenario, according to a Feb. 27 report that cited third-quarter 2011 figures. Bank of America leads the group with $29.1 billion in potential losses, Fitch said. While equity loans carry a higher risk if they default, delinquencies are lower. In the fourth quarter, 4.08 percent of home-equity loans were missing payments, according to the American Bankers Association in Washington. That compares with 7.58 percent for first-lien mortgages, according to the Mortgage Bankers Association in Washington. Some of the difference is because of the way banks book second liens. Non-performing home-equity loans typically are written off in six months. That compares to an average two-year period from delinquency to a foreclosure sale on a primary mortgage. Also, home-equity payments are smaller, meaning homeowners are likely to keep paying after a default on their primary mortgage -- at least for awhile. ‘Pretty Obvious’ “When we analyzed it, it was pretty obvious it was just a timing difference,” JPMorgan CEO Jamie Dimon said. “In almost all cases when the first went delinquent, the second eventually went delinquent. And in all cases where the first went into foreclosure, the second was a loss, basically a total loss.” Jerry Dubrowski , a Bank of America spokesman, declined to comment, as did Wells Fargo’s Mary Eshet and Citigroup’s Mark Rodgers. Amy Bonitatibus , a JPMorgan spokeswoman, declined to comment beyond Dimon’s remarks. “We’re seeing the lingering effects of the housing market bust,” Swonk said in an interview. Guidance from regulators “is the reality of making sure banks are sound and secure while we work through the ripple effects of the financial crisis.” To contact the reporters on this story: Kathleen M. Howley in Boston at kmhowley@bloomberg.net ; Dakin Campbell in New York at dcampbell27@bloomberg.net. To contact the editor responsible for this story: Rob Urban at robprag@bloomberg.net |
2024-05-20 | Bloomberg | Wildly Varying Hospital Prices Keep Health Care Expensive | If further proof were needed that price competition doesn’t exist in the expensive U.S. health-care market, it arrived this month. The Centers for Medicare and Medicaid Services published 2011 charges for medical treatments set by more than 3,000 American hospitals. In suburban Denver, a patient treated for a respiratory infection with complications could be billed $28,000, $46,000 or $97,000, depending on the hospital. In the Los Angeles area, knee and hip replacements cost seven times as much at one hospital as another. The wide -- and wild -- variation exposes a critical weakness in the national effort to control costs. Hospital charges, which account for about a third of spending on health care in the U.S., are uncontrolled by either government or competition. Even as states and the federal government work to hold down health-insurance rates, hospital prices will continue to exert powerful pressure on them to rise -- along with the overall cost of care. Private insurers negotiate for discounts, but with many hospitals they bargain at a disadvantage. Why? Because health-insurance buyers, including companies that purchase group coverage for employees, demand a choice of hospitals. They especially want their insurance to cover treatment at hospitals that have strong reputations or provide a special service such as organ transplantation or neonatal intensive care. Such hospitals are able to command the highest prices, while stand-alone community hospitals accept rates similar to the standardized payments made by Medicare. Growing Clout In the past decade and a half, the “must have” hospitals have compounded their clout, merging into regional and national health-care chains that typically negotiate for all their institutions in a single package. So prices keep rising. Although the Affordable Care Act gives states greater ability to control increases in insurance premiums, it doesn’t restrict what hospitals can charge insurers. Instead, the law aims to lower prices indirectly by encouraging the creation of “accountable care organizations” -- groups of hospitals, doctors and other providers that coordinate patient treatment to make it more efficient. If these organizations achieve lower costs, they get to keep some of the savings -- a welcome incentive. If they are successful, though, accountable care organizations will also increase cooperation among health-care providers, which may further consolidate their market power. Publicizing prices, as CMS and others have done , is a step in the right direction, raising awareness of how arbitrary hospital charges can be. Ideally, it also signals to hospitals that aggressive price-setting strategies may invite regulators’ attention. States might consider, for instance, rules to prevent hospitals from charging different rates to different insurers, or to set caps on what hospitals can charge patients with little or no insurance. (Even as more Americans gain insurance on the state exchanges that are gearing up to operate next year, some people are expected to remain uninsured or buy catastrophic-care policies that won’t cover all their hospital bills.) Standard Payments Maryland sets the prices that hospitals can charge all payers, including private insurers, uninsured patients, Medicare and Medicaid. The state takes into account the hospitals’ costs, the quality of treatment and the level of uncompensated care they provide. As a result, Medicare and Medicaid pay hospitals more in Maryland than elsewhere, but the state’s average hospital cost per case is 2 percent lower than the national average. Since 1976, when the state program started, Maryland’s rate of cost increase per hospital admission has been the second-lowest in the U.S. Another way for a state to achieve uniform hospital charges without actually setting them would be to let public and private insurers collectively negotiate them with hospitals, as health-care-policy experts writing in the New England Journal of Medicine last fall recommended. Once set, such charges could then be allowed to rise at the same rate as average wages in the state. This “all payer” strategy keeps hospitals from cost-shifting -- charging private payers more to make up for underpayments from Medicaid. Getting rid of cost-shifting, in turn, saves administration costs. Not all states would want a system as regulated as Maryland’s. But all states -- and the federal government, too -- would be remiss not to address out-of-control hospital charges. To contact the Bloomberg View editorial board: view@bloomberg.net . |
2024-11-12 | Bloomberg | Moneysupermarket.Com Is Unafraid of Google Threat, CEO Says | Moneysupermarket.com Group Plc (MONY) , the U.K.’s largest price comparison website, is confident that fresh competition from Google Inc. (GOOG) won’t reduce profits even if it eats into sales, Chief Executive Officer Peter Plumb said. Google started a credit-card price comparison website in March, prompting concern among analysts including David McCann at Numis Securities Ltd. that the owner of the world’s largest search engine could grab market share from Moneysupermarket by replacing it on popular searches. Google’s new sites are included on the list of paid-for ads that appear at the top of its searches, though they aren’t yet competitive on the so-called organic lists that are based on customer popularity, Plumb said. And while transactions generated by clicks on Google’s paid-for ads accounted for 24 percent of Moneysupermarket’s sales in the first half of 2012, Plumb said the area was not a source of profit for the company. “It doesn’t really matter to us because we have never made money out of that,” Plumb, 48, said in an interview in London ahead of a trading statement on Nov. 14. “All it would do is to reduce revenue in a zero-margin part of the business.” Moneysupermarket, which aims to save U.K. households a combined 1 billion pounds ($1.6 billion) in 2012, reported unchanged first-half net income of 8.8 million pounds on July 26, based on a 15 percent rise in sales to 102 million pounds. Car Insurance The Chester, England-based company boosted sales 19 percent from its money deals website, which covers credit cards, savings accounts and loans. It’s seeing a similar trend in vehicle insurance, Plumb said. Google also started a car insurance site in September this year, saying it could offer greater privacy and transparency than other price comparison sites. Google opened a property search website in 2010 only to close it in January 2011. Now the Mountain View , California- based company is betting it can attract more sales from its high ranking on the list of paid-for ads than providers like Moneysupermarket had previously been paying for the slots, Plumb said. Plumb also said he is convinced that Google, which is under investigation by the European Union over allegations that it promotes its own specialist search services over rivals, won’t alter its search algorithms to ensure it rises to the top of organic search lists ahead of Moneysupermarket due to the risk to its reputation. “If they ever decided to take us all out, it would be a big corporate decision which I don’t think they will take,” Plumb said. “If they ever messed about with the search terms it would destroy trust.” Sell Recommendation Not everyone is convinced that Google isn’t a threat to Moneysupermarket. Numis’s David McCann says investors should sell the U.K. firm’s stock in part because of that risk. “The elephant in the room to the investment case remains Google,” McCann said in a note to clients after Moneysupermarket’s first-half results. On Nov. 9 he lowered his price prediction on the shares to 99 pence from 109 pence. The stock closed at 151.7 pence today, down 0.2 percent. Google has the potential to disrupt Moneysupermarket’s growth significantly if it succeeds in diverting visitors from Moneysupermarket’s site to its own, McCann said. More than half of the company’s earnings before interest, taxes, depreciation and amortization comes via Google, he said. Moneysupermarket shares have risen 44 percent this year, including an 8.4 percent gain in the past week, compared with a 12 percent year-to-date advance in the Bloomberg European Internet Index. (BEUNET) The company has a market value of 815 million pounds. U.K. Based Plumb, a civil engineer by training, said expanding in Britain is his main priority even though Moneysupermarket is now in a position to consider similar operations overseas. The company agreed to buy MoneySavingExpert.com, an independent financial advice website founded by the broadcaster Martin Lewis, for as much as 87 million pounds in June. “I don’t need to be outside the U.K.,” he said. “I would be very happy still being U.K.-based in three years’ time, still focused on our seven main channels and growing market share.” Just 15 percent of savers switch bank accounts or open new ones each year and of those only 27 percent go online, according to data compiled by the company and GfK, a Nuremburg, Germany- based market research company. Fewer than one in five energy consumers switch supplier or are new customers each year, and of those only 23 percent do so online. Similar data apply to credit cards and loans. No Copies “There is a lot of opportunity for the company as it really starts getting focused on what it does well and be a business no one else can replicate,“ Plumb said. Unlike rivals such as Gocompare , Comparethemarket and Uswitch , Moneysupermarket covers all the main price comparison areas, giving it a 50 percent market share in terms of visitor hits, according to a company presentation. Its business model is also different in that it only gets sales once a customer’s application is accepted rather than being paid per referral. Plumb previously held executive roles at Walt Disney Co., PepsiCo Inc. (PEP) and James Dyson Ltd, before becoming chief executive of Moneysupermarket in February 2009. To contact the reporter on this story: Peter Woodifield in Edinburgh at pwoodifield@bloomberg.net To contact the editors responsible for this story: Douglas Lytle at dlytle@bloomberg.net ; David Risser at drisser@bloomberg.net |
2024-07-22 | Bloomberg | Travelers Misses Estimates, Cuts Forecast's Top Range | Travelers Cos., the insurer added to the Dow Jones Industrial Average last year, cut its full-year profit forecast after second-quarter results missed analysts’ estimates as the economic slump pressured sales and catastrophe costs rose. The stock posted the biggest decline in the Dow. Net income fell to $670 million, or $1.35 a share, from $740 million, or $1.27, in the same period a year earlier, when there was more stock outstanding, the insurer said today in a statement. Operating profit, which excludes some investment results, was $1.39 a share, missing the $1.49 average estimate of 20 analysts surveyed by Bloomberg. Travelers, led by Chief Executive Officer Jay Fishman , 57, is competing for business in a shrinking market after job cuts in construction and manufacturing reduced demand for business insurance. Travelers said full-year operating profit will be $5.20 to $5.45 a share, compared with the range of $5.20 to $5.55 the insurer gave in May. “A lot of people are concerned over the current competitive state of the property-casualty pricing cycle,” said analyst Daniel Theriault at New York-based Portales Partners LLC. “I just don’t see a catalyst for the stock in the near future.” The insurer slipped 58 cents, or 1.2 percent, to $49.29 at 4:15 p.m. in New York Stock Exchange composite trading. Travelers has dropped 1.1 percent this year, compared with the 1 percent slide in the 30-company Dow average. Policy Sales Policy sales rose about 1.5 percent to $5.69 billion from $5.61 billion in the year-earlier period. Business insurance, the largest part of Travelers’s premium revenue, declined about 1 percent. Sales increased about 6 percent for home and auto coverage through agents. “The continuing difficult economic environment” weighed on results as renewal premium increases fell below the insurers’ expectations, Fishman said in the statement. Travelers earned 4.8 cents per each premium dollar in the three months ended June 30, compared with 6.8 cents in the same period last year on record quarterly costs from natural disasters, including storms in Oklahoma. Catastrophe costs more than doubled to $439 million before taxes. Insurers typically face the highest disaster costs in the second half of the year, which includes the Atlantic hurricane season. The insurer’s book value, a measure of assets minus liabilities, rose 4.1 percent from the end of March to $55.67 per share. Investment Income Net investment income rose to $617 million after tax from $547 million in the year-earlier period. Alternative investments, including real-estate partnerships, hedge funds and private-equity holdings, produced a gain of $58 million, compared with a loss of $20 million. Results from fixed-income holdings were little changed. Travelers booked a $384 million gain by withdrawing funds from reserves after determining it had more money set aside than needed for claims on policies sold in prior quarters. That compares with a benefit of $261 million in the same period last year. “Reserve releases are an increasingly valuable component” of insurers’ earnings as claims have been lower than expected, said Amit Kumar , an analyst at Macquarie Capital Inc. Industrywide, policy sales fell 1.3 percent to $105.1 billion in the three months ended March 31, the Property Casualty Insurers Association of America said June 23. Until the slump began three years ago, quarterly sales had fallen only twice since 1987. U.S. property and casualty sales have dropped for 12 straight quarters through March 31 as insurers lower rates to win business. Dividend Increases Travelers increased its dividend twice in the last year and repurchased shares after remaining profitable in the financial crisis. Fishman put most of the company’s fixed-income investments in municipal bonds, sidestepping the losses from mortgage-backed securities that hobbled competitors. The insurer has about $41 billion in municipal bonds. “We believe our portfolio is strong, and we wouldn’t trade it for anyone else’s,” Chief Investment Officer Bill Heyman said today in a conference call. “We could certainly have losses in our municipal portfolio, maybe even material losses. But even viewed through the prism of recent events, we feel very comfortable with what we own.” To contact the reporter on this story: Sarah Frier in New York at sfrier@bloomberg.net. Enlarge image Travelers profit falls Daniel Acker/Bloomberg Travelers Cos Inc. CEO Jay Fishman. Travelers Cos Inc. CEO Jay Fishman. Photographer: Daniel Acker/Bloomberg //<![CDATA[ $(document).ready(function () { $(".view_story #story_content .attachments img.small_img").each(function(){ var self = $(this); if (self.width() != 190){ self.width(190); } }); }); //]]> |
2024-07-13 | Bloomberg | Discovery Is Exploring U.S. Opportunities for Vitality, Business Day Says | Discovery Holdings Ltd., which owns South Africa’s largest medical insurance administrator, is examining opportunities in the U.S. for its Vitality product, Business Day reported, citing Chief Executive Officer Adrian Gore. |
2024-02-25 | Bloomberg | Niagara Falls Bets on More Gaming Amid Casino Spat: Muni Credit | Niagara Falls, New York, lost its budget reserves and best bond rating since the 1970s amid a dispute over casino revenue between the state and the Seneca Nation of Indians. Now the city is betting even more gambling will bolster its credit. New York’s biggest Indian tribe stopped paying the state 22 percent of its slot-machine revenue in 2009 after nontribal lottery terminals were allowed inside its 10,500-square-mile exclusivity zone. With the two sides locked in arbitration, Governor Andrew Cuomo wants a rival casino for Niagara Falls. The move is supported by the city’s mayor, Paul Dyster, who said the revenue loss triggered a “full-blown cash-flow crunch.” “Our primary concern is to get paid the money that we’re owed under the existing arrangement,” Dyster, a 58-year-old Democrat, said in a telephone interview. Still, the new casino pushed by Cuomo “provides a potential way forward and suggests what the course of action would be if the Senecas continue to refuse to pay.” Niagara Falls joins cities from Pennsylvania to Iowa that are counting on gambling to fill budget gaps after the longest recession since the 1930s reduced tax collections. Yet casino revenue is dwindling as more competitors fight for market share. Long Dispute Atlantic City, the New Jersey resort that ruled the East Coast market for three decades after the first casino opened in 1978, is suffering after six years of declining revenue as a result of losing business to casinos in neighboring states. Across the border from Niagara Falls in Ontario, Canada, casino revenue has dropped 88 percent since 2001. New York has been battling the Senecas over money and sovereignty for decades. In 2010, the two sides fought in court over the state’s plan to implement a new tax on cigarette purchases made on the reservation. In the 1990s, the dispute over tobacco taxes turned violent as Senecas blocked the New York Thruway, burning tires and skirmishing with state troopers. The Seneca Nation has withheld payments of at least $350 million, according to Patrick Sullivan, an attorney at Dickinson Wright PLLC in Washington who specializes in gaming and Indian law. From 2002 to 2009, the Senecas gave the state $476 million, and New York in turn gave 25 percent to localities that house the tribe’s casinos, including Niagara Falls. Rating Cut Niagara Falls alone is owed $60 million, Sullivan said. The payment loss drained a $20 million reserve the city of 50,000 had in 2011, Dyster said. Moody’s Investors Service cut the city’s rating last month two levels to Baa1, the third-lowest investment grade, and may downgrade it again in the next two months based on the outcome of the dispute. Niagara Falls, site of the waterfalls dividing the U.S. and Canada that are a popular tourist destination, previously had an A2 rating after a so-called recalibration by Moody’s in April 2010. The downgrade caused the yield on some city debt to jump 39 percent. Cuomo, a 55-year-old Democrat, is planning to propose a privately run casino for downtown Niagara Falls if the state Gaming Commission determines the 2002 contract between New York and the Senecas has been breached, an administration official said. The official spoke on the condition of anonymity because Cuomo hasn’t announced the proposal. Voter Approval The Niagara Falls casino would add to the three that Cuomo said he wants to build in upstate New York, with 90 percent of the tax revenue generated going to education and 10 percent for property-tax relief. Last year, lawmakers gave the first of two approvals needed for a constitutional amendment allowing casinos in the state. After final legislative approval, the measure would go before voters in a referendum. Such a plan may be used by Cuomo to gain an advantage in negotiating with the tribe, said Howard Cure, director of municipal research at Evercore Wealth Management LLC, which oversees $4.5 billion. He said the company doesn’t invest in the area of New York that includes Niagara Falls, citing an aversion to “any place that is reliant on gaming revenues.” Susan Asquith, a spokeswoman for the 8,000-member Seneca Nation, said the tribe’s president, Barry Snyder, couldn’t publicly comment on the dispute. Josh Vlasto , a Cuomo spokesman, didn’t respond to an e-mail requesting comment on the status of the talks. Not Prepared Niagara Falls used the cash from the Seneca Niagara Casino & Hotel for economic development and infrastructure projects, Dyster said. The complex has 604 rooms, 4,000 slot machines and more than 100 live table games, according to its website. “We were prepared for delays or fluctuations in the amount of casino revenue,” Dyster said. “What we were not prepared for is what happened: a total stoppage in casino revenue for several years.” Moody’s placed the city on review for further downgrade on Jan. 9, signaling that the rating could be cut within 90 days. The yields on at least nine Niagara Falls bonds increased following the Moody’s cut. The yield penalty on some debt has since narrowed, according to data compiled by Bloomberg. A city general-obligation bond maturing in 2024 traded Jan. 10 at 3.54 percent, up 0.43 percentage point from three days earlier and about double the interest rate on benchmark AAA munis, Bloomberg data show. The debt most recently traded on Jan. 31 at 2.59 percent, or 0.65 percentage point above top- grade securities. Increasing Competition Across the border, profits the Ontario Lottery and Gaming Corp. gets from casinos dropped to $100 million in 2011 from $800 million in 2001, according to a 2012 report by the corporation, the agency that oversees gambling in the province. The study cites Chicago , Detroit , Baltimore, Boston and Buffalo as examples of U.S. cities either with casinos or that are planning to expand their offerings. That may imperil smaller municipalities like Niagara Falls that rely on income from gaming, said Matt Dalton, chief executive officer at Belle Haven Investments Inc. “If you don’t diversify yourself off of casino revenue, at some point you’re in trouble,” said Dalton, whose White Plains, New York-based firm oversees $1.4 billion in munis. “They become so dependent on that, and as the business of sin becomes more common, it’s at the expense of those original areas that had the monopoly on gambling.” Following are pending sales: BOSTON (18700MF) plans to sell $175 million of general-obligation bonds as soon as Feb. 28, according to Bloomberg data. The tax- exempt debt, which has Moody’s top grade, will be issued through competitive bid. (Added Feb. 25) VENTURA COUNTY PUBLIC FINANCING AUTHORITY in California is set to issue $300 million of tax-free lease revenue bonds as soon as this week, Bloomberg data show. Standard & Poor’s rates the sale AA, third-highest. (Updated Feb. 25) To contact the reporters on this story: Brian Chappatta in New York at bchappatta1@bloomberg.net ; Freeman Klopott in Albany, New York, at fklopott@bloomberg.net To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net |
2024-02-15 | Bloomberg | Malaysia Plans $9.9 Billion Sukuk to Finance Mass Railway | Malaysia plans to raise as much as 30 billion ringgit ($9.9 billion) through an Islamic bond program to fund construction of a mass railway in the Southeast Asian nation’s capital, the project’s manager said. Dana Infra Sdn., a finance ministry company created to fund infrastructure development, will sell ringgit-denominated Islamic notes, or sukuk, with maturities of as much as 65 years, Azhar Abdul Hamid, chief executive officer of Mass Rapid Transit Corp., said in an interview late yesterday. It will initially take a bridging loan of 500 million ringgit from a consortium of banks to cover early building work, he said. The sale of the bonds will help satisfy demand among insurers and banks for longer-maturity debt after companies in Malaysia issued a record 75.6 billion ringgit of sukuk last year, with 88 percent due in less than 10 years, according to data compiled by Bloomberg. Other local firms may also need to raise funds as part of a government-backed $444 billion plan to build railways, roads and power plants over the next decade. “The Dana Infra program will allow investors, especially insurers, to extend their asset duration,” Michael Chang, who oversees $1 billion as head of fixed income at MCIS Zurich Insurance Bhd. in Kuala Lumpur , said in an interview today. “Demand for such bonds will be healthy because long-dated Islamic paper are rare.” Sovereign Backing Dana Infra “will sell 20 billion ringgit to 30 billion ringgit of sukuk in three to four months,” Azhar said. “Getting funding isn’t a problem as we have government support.” The bonds will likely receive a AAA rating from local rating companies due to sovereign backing, he said. Irwan Siregar, deputy secretary to the treasury, wasn’t immediately available to comment by telephone yesterday. Malaysia’s government plans to sell 15-year Islamic bonds for the first time this year, which will also help set a benchmark for companies seeking financing. The planned sale by Dana Infra follows the 30.6 billion ringgit record issue of Shariah-compliant notes by the nation’s toll-road operator PLUS Bhd. completed in January. PLUS issued the debt with maturities ranging from five to 27 years. The 4.31 percent notes due in January 2021 yielded 3.88 percent yesterday, compared with 3.96 percent on Jan. 17, according to Bursa Malaysia. The Bloomberg-AIBIM-Bursa Malaysia Sovereign Shariah Index (BMSSITR) , which tracks the most-traded ringgit- denominated debt, rose 1.5 percent this year to an all-time high of 107.226 yesterday. Awarding Contracts Companies in Malaysia, the world’s biggest market for sukuk that pay returns on assets to comply with Islam’s ban on interest, have sold 2.9 billion ringgit of the debt this year, according to data compiled by Bloomberg. Global sales total $6.6 billion, compared with $3 billion in the same period of 2011. State-owned MRT Corp. is managing the 156-kilometer (97- mile) Kuala Lumpur railway that may cost 48 billion ringgit including rolling stock, according to a government estimate in 2010. An updated costing will likely be made at year-end once key contracts have been awarded, Azhar told reporters last week when granting the project’s first major construction contracts worth a total 1.74 billion ringgit to IJM Corp. (IJM) and Ahmad Zaki Resources Bhd. (AZR) The railway will ease traffic congestion in the capital and carry 2 million passengers a day when finished, with the first line scheduled for completion in 2016, the government said in its 2010 report. To contact the reporter on this story: Elffie Chew in Kuala Lumpur at echew16@bloomberg.net To contact the editors responsible for this story: Shelley Smith in Hong Kong at ssmith118@bloomberg.net ; Sandy Hendry in Hong Kong at shendry@bloomberg.net |
2024-09-12 | Bloomberg | Regions Names Heads as Bank Organizes Wealth Management | Regions Financial Corp. (RF) , the 10th- largest U.S. bank by deposits, arranged its wealth-management business into four units and named leaders for each. Personal trust and private banking combined into one unit, private wealth management, led by Nick Stonestreet, 51, Birmingham, Alabama-based Regions said today in a statement. Asset management and corporate trust merged to form institutional services, overseen by Ken Alderman, 60, who’s also chairman of investment management. Jim Nonnengard will lead investment services and Curren Coco will head insurance. “Our goal is to make financial management simple, convenient and more rewarding for our clients,” Bill Ritter, 41, who runs the wealth-management group, said in the statement. Chief Executive Officer Grayson Hall announced plans in June 2011 to form a wealth-management group to help increase fee revenue. Record-low interest rates are squeezing net-interest margins, the difference between what a bank pays to borrow money and what it gets for loans. Regions sold its Morgan Keegan brokerage to Raymond James Financial Inc. (RJF) this year for total proceeds of $1.2 billion. Mike Daniel was named chief operating officer of the wealth-management unit, Regions said in the statement. To contact the reporter on this story: Laura Marcinek in New York at lmarcinek3@bloomberg.net. To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net . |
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