|Bid||3.1350 x 200000|
|Ask||3.1400 x 110000|
|Day's Range||3.0800 - 3.1990|
|52 Week Range||2.8040 - 8.2550|
|Beta (5Y Monthly)||1.68|
|PE Ratio (TTM)||6.11|
|Earnings Date||May 13, 2020|
|Forward Dividend & Yield||0.20 (5.58%)|
|Ex-Dividend Date||May 07, 2020|
|1y Target Est||11.78|
(Bloomberg Opinion) -- Financial regulators are applying all of the lessons of the 2008 credit crisis at record speed. In the past few weeks, they’ve worked with central banks to pump liquidity into markets and to make it easier for banks to lend. It’s essential now that lenders keep providing money to companies and households whose incomes have evaporated in the Covid-19 lockdowns. If the banks stop functioning, what hope for the rest of the economy?The next chapter in European regulators’ crisis playbook is ensuring that the banks don’t hand much of their excess capital to investors or keep paying hefty bonuses to senior staff. Supervisors are trying to make sure that financial firms remain solid by easing their capital rules, thereby freeing up hundreds of billions of dollars — that places a heavy burden on the banks to act responsibly. Shares in British banks, including HSBC Holdings Plc and Barclays Plc, fell sharply on Wednesday after they halted dividends at the Bank of England’s request.Regulators are also preempting a popular backlash by discouraging cash bonuses to bankers. This makes perfect sense, given the support that lenders have already received by way of looser regulation and state loan guarantees.As we’ve heard from supervisors and banking executives in recent weeks, banks — for now — remain part of the solution to the unprecedented economic shock, rather than the problem. This isn’t 2008.The excessive banker pay that fueled the risk binge in the run-up to the Lehmans meltdown is still fresh in people’s minds. What’s more, during the global financial crisis, banks often took too long to suspend dividends and buybacks, leaving themselves thinly capitalized as losses piled up and hastening the need for government bailouts. Excessive pay during and soon after the crisis, including at bailed-out institutions, rightly infuriated the taxpayers that were left footing the bill.More than a dozen years after the financial crisis, a number of Europe’s biggest lenders — Royal Bank of Scotland Group Plc, ABN Amro Bank NV and Commerzbank AG — are still at least partly state owned. Little surprise then that the U.K. regulator “expects banks not to pay any cash bonuses to senior staff, including all material risk takers,” while the European Banking Authority is urging firms to pay conservative bonuses and consider deferring awards for a longer period and in shares.It could be worse. While bankers won’t be able to cash in on their deferred compensation from previous years’ share awards after stocks plunged, they will have already received their 2019 variable cash compensation by now, and they’ll have plenty of time to prepare for next year.Take the 1,700 traders and bankers at Barclays, who’ll be affected by the measures. About 45% of their average pay of 825,000 pounds ($1 million) consists of fixed pay, 22% comes from share awards, and 23% is a cash bonus (of which 58% is deferred), according to Citigroup Inc. analysts. While cash is king — especially during an economic crisis — getting more of that pay package in shares wouldn’t necessarily be a disaster, even if people had to wait a few years to sell. Assuming stocks don’t bounce back too far from their current levels, bankers might be getting a lot of very cheap stock in 2021.And however painful the hit, regulators are probably just insisting on something that the markets will probably take care of over the rest of the year anyway. The first quarter may have been a bumper three months for trading in financial markets because of all of the volatility, activity could well be subdued over the coming quarters as the recession really hits. That would depress bonuses anyway. The very best financiers will expect to see their fixed pay rise to sweeten the blow, but for most of the thousands of bankers and traders fortunate enough to keep their jobs, lavish compensation will be a thing of the past. The crisis will be as Darwinian for investment banking as it is for every other pocket of the economy. Hanging on to your chair will be your 2021 bonus.This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Elisa Martinuzzi is a Bloomberg Opinion columnist covering finance. She is a former managing editor for European finance at Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- China’s central bank cut the interest rate it charges on loans to banks by the biggest amount since 2015 as authorities ramp up their response to the worsening economic impact from the coronavirus pandemic.The People’s Bank of China reduced the interest rate on 7-day reverse repurchase agreements to 2.2% from 2.4% when it injected 50 billion yuan ($7.1 billion) into the banking system, according to a statement Monday. The central bank said this will keep liquidity sufficient to help the real economy.The first cut to a PBOC policy rate since February is in line with a pledge by the Communist Party’s leadership on Friday to increase support to the economy through increased sales of sovereign debt, as domestic and international demand slumps due to the pandemic. The step brings the PBOC closer in line with the stance of global peers, who have loosened policy dramatically in recent weeks.“The larger-than-usual rate cut is an expression that China is willing to join the coordinated consortium for economic stabilization,” said Raymond Yeung, chief China economist at Australia & New Zealand Banking Group in Hong Kong. “Small and medium-sized businesses are collapsing for lack of cash flow.”Further Cuts ExpectedA reduction in the central bank’s main tool to adjust the price of market liquidity also signals coming reductions in its main one-year funding tool, and potentially a corresponding cut to the benchmark deposit rate. Reductions to policy rates should also be reflected in the main market benchmark of the cost of lending to companies, the loan prime rate.“Lowering banks’ lending rates without a reduction in the cost of their liabilities will squeeze banks’ net interest margin, eroding their profitability and capital base,” said Ding Shuang, chief Greater China and North Asia economist at Standard Chartered Bank Ltd. “A benchmark deposit rate cut is necessary.”China will increase its fiscal deficit as a share of gross domestic product, issue special sovereign debt and allow local governments to sell more infrastructure bonds as part of a package to stabilize the economy, according to a Politburo meeting on Wednesday, Xinhua reported late Friday.What Bloomberg’s Economists Say...“We expect the authorities to urge banks to expand lending, particularly to smaller and private companies. To achieve this, more liquidity will be injected by the PBOC via both broad-based and targeted methods, such as reductions in the required reserve ratio and offering liquidity via targeted MLFs.”\--David Qu, Bloomberg economistSee full report hereIn a separate statement published late Friday, the People’s Bank of China called for better coordination of global macro policies, while re-emphasizing it will keep liquidity sufficient to help with the real economy and watch out for inflation risks.Plenty of Room LeftThe cut Monday signals the PBOC has entered “a stage with stronger counter-cyclical adjustment,” out of consideration of both domestic demand and the global virus outbreak, Ma Jun, a PBOC adviser, said in a statement sent to the media after the rate cut. “The PBOC doesn’t use its bullets all at once. China still has plenty of room in monetary policy.”Economists have lowered their median forecast for economic growth to 2.9% for 2020, the slowest pace since 1976, when the Cultural Revolution wrecked the economy and society. Until the past few days, China’s policy makers had maintained a relatively cautious program of easing, mindful of the nation’s heavy debt load and of risks to financial stability.While the Politburo statement and the PBOC move signal the response is moving up a gear, it still falls short of a no-holds-barred stimulus.The leaders of the Group of 20 said last week they were injecting more than $5 trillion into their economies to fight the effects of the outbreak. Central banks globally have slashed interest rates and started quantitative easing programs.“Certainly, the policy easing is continuous and today’s liquidity injection at least suggests that the policy aid will be mildly constant and will be more proactive when the authorities deem necessary,” said Zhou Hao, an economist at Commerzbank AG. “China is joining the global easing wave.”(Updates with Bloomberg Economics, details of actions of other nations.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
MILAN/MADRID/FRANKFURT, March 24 (Reuters) - Corrado Sforza Fogliani is on the frontlines of European efforts to keep the region's economy alive amid the coronavirus pandemic. Buried in paperwork and with Rome and banking lobbies still at odds over who should be on the hook for defaults when a six-month debt holiday ends, Banca di Piacenza's loan officers have only been able to process a fraction of the 1,000 applications they have received.
(Bloomberg) -- New York state ordered non-essential workers to stay home, a move followed hours later by neighboring New Jersey and then by Illinois. Italy reported 627 fatalities, the most in one day anywhere, as the death toll in Europe’s epicenter topped 4,000.President Donald Trump banned all non-essential travel from Mexico, exempting commerce. He also deferred student loan payments.The U.K. and the U.S. warned that social distancing may be in place longer than expected. The European Union said the looming recession may be much worse than previously anticipated.It took three months to reach 100,000 cases but only 12 days for the next 100,000.Key Developments:Cases top 250,000, more than 10,000 deadInfections rise to almost 20,000 in both Spain and IranBiennial Farnborough Airshow postponed until 2022Four U.S. senators sold stock after virus briefings in JanuaryNew York City reports 5,151 cases of Covid-19, 29 fatalitiesLatin America isn’t ready for the virus onslaught headed its waySubscribe to a daily update on the virus from Bloomberg’s Prognosis team here.Click VRUS on the terminal for news and data on the coronavirus and here for maps and charts. For analysis of the impact from Bloomberg Economics, click here. To see the impact on oil and commodities demand, click here.Illinois Issues Shelter-in-Place Order (4:20 p.m. NY)Illinois Governor J.B. Pritzker ordered residents to shelter in place starting Saturday, following California, New York and New Jersey in restricting the movement of residents to combat the coronavirus.Earlier this month, Pritzker closed schools, dine-in service at bars and restaurants and banned gatherings of more than 50. Chicago earlier ordered sick residents to remain home.N.J. to Shut ‘Nonessential’ Businesses (4 p.m. NY)New Jersey Governor Phil Murphy said he will sign an executive order requiring all “nonessential” businesses closed to help slow the spread of the virus. Murphy said he would give more details when he signs the order Saturday.“The only way we’re going to beat this darn virus is if we literally stay home and stay away from each other,” Murphy said at a news conference in Paramus.World Needs 80-100 Times More Tests, WHO Says (2:30 p.m. NY)The number of coronavirus tests needed in coming months is probably 80 to 100 times the 1.5 million that the World Health Organization supplied so far, said Mike Ryan, the agency’s head of health emergencies. Governments need to step up their commitments because there are more than 26 million health-care workers around the world who need to have protective gear, he said.“The greatest tragedy for me among all the tragedies we’re seeing is the prospect of losing a part of our workforce, those doctors and nurses and hygienists and others who put themselves in the front line,” Ryan said.Nigeria to Conduct Trials of Chloroquine (2:30 p.m. NY)Nigeria’s Lagos State government plans to conduct a clinical trial on the effectiveness of the malaria drug chloroquine in the prevention and management of coronavirus infection, according to Health Commissioner Akin Abayomi.The trial will be carried out against “the fast spreading news that chloroquine could be effective in preventing and managing Covid-19,” Abayomi said in emailed statement on Friday.U.S. President Donald Trump touted the drug at a press briefing Thursday, urging regulators to approve its use for the coronavirus.U.K. to Help Pay Workers Wages (1:30 p.m. NY)The U.K. government said it will step in and help pay its citizen’s wages during the coronavirus pandemic “for the first time in the nation’s history.”The state will cover 80% of the salary of workers that firms can’t afford to retain as a result of the crisis. That is up to a total of 2,500 pounds ($2,900) a month, Chancellor of the Exchequer Rishi Sunak told reporters on Friday.“You will not face this alone,” Sunak said.Read full story here.Crowds Swarm New Jersey Test Site (1:23 p.m. NY)New Jersey closed its first drive-through test site to people beyond the 1,000 already in line, and even they may not get swabbed today.The line had grown too long less than four hours after its planned 8 a.m. opening at Bergen Community College in Paramus. The site was to get 2,500 new coronavirus test kits, with supplies replenished weekly.Read full story here.Brazilian Lawmakers Hold First Remote Voting (12:45 p.m. NY)Brazil’s Congress held its first-ever remote voting session as part of efforts to proceed with crucial legislative work while restricting movement of people in Brasilia’s often-crowded parliament.In a video conference broadcast on their official website, senators approved a calamity decree allowing President Jair Bolsonaro to increase anti-virus spending.Cuomo Orders All Non-Essential Workers Home (12:20 p.m. NY)Governor Andrew Cuomo ordered New Yorkers to stay at home for the foreseeable future, except for essential services like grocery stores and mass transit.He said the new orders would go in place on Sunday. The state’s death toll has reached 35. New York has more than 7,100 coronavirus cases, the most in the U.S.“This is the most drastic action we can take,” Cuomo said.Read full story here.First Virus Deaths in Peru (12:15 p.m. NY)Three people died on Thursday after becoming infected by the coronavirus, Peru’s Health Ministry says on Twitter.Two men -- one 47 and the other 69 -- died in Lima after visiting Spain. The third victim was a 78-year-old man.Medical experts worry that Latin America, which has so far reported relatively few cases, is unprepared for a larger outbreak.London Pubs, Restaurants Set to Be Told to Close (11:27 a.m. NY)London’s pubs, restaurants, leisure centers, and cinemas will be told to close to stop the spread of coronavirus, under plans expected to be agreed to on Friday, a British official said.Social Distancing Will Last Several More Weeks (11:08 a.m. NY)Americans will have to practice social distancing for at least several more weeks to mitigate U.S. cases of Covid-19, Anthony S. Fauci of the National Institutes of Health said Friday.“If you look at the trajectory of the curves of outbreaks in other areas, it’s at least going to be several weeks. I cannot see that all of a sudden next week or two weeks from now, it’s going to be over. I don’t think there’s a chance of that. I think it’s going to be several weeks,” Fauci said on The Today Show.FAA Closes Airspace Near Indianapolis (10:26 a.m. NY)The FAA has vacated three airspace work areas in Indianapolis after an air traffic control supervisor tested positive for COVID-19.Flights through the airspace handled by those sectors were rerouted, according to FAA in emailed statementIRS Moving Tax Day to July 15 (10:25 a.m. NY)U.S. Treasury Secretary Steven Mnuchin says people and businesses will have more time to file and make payments without interest or penalties.American Air Flies First Cargo-Only Flight in 36 Years (10:22 a.m. NY)American Airlines Group Inc. is shifting some of its biggest idled jets to ferry just cargo -- the carrier’s first flights without passengers in nearly four decades.The Boeing Co. 777-300s will fly medical supplies, military mail, e-commerce packages and high-demand office equipment as more people work from home, the airline said in a statement. The wide-body flights begin Friday, with two round trips over four days between Frankfurt and the airline’s home base at Dallas-Fort Worth airport.Read full story here.Brazil Bans Visitors from Europe and Asia (10:17 a.m. NY)Brazil will bar travelers from about three dozen European and Asian nations from entering the country. The ban doesn’t apply to Brazilians or foreigners living in the country and will last for 30 days starting Monday.Dutch Death Toll Jumps to 106 (9:15 a.m. NY)The Netherlands reported 30 more deaths, the biggest daily increase since the first coronavirus case was confirmed at the end of February. The total number of fatalities now stands at 106, according to Dutch health authorities.Frankfurt Airport Operator Furloughs Thousands (9:10 a.m. NY)Fraport AG put at least 18,000 of its 22,000 employees in Frankfurt on furlough until the end of May to offset the coronavirus impact. The company said in a statement that Frankfurt airport will also shut the shortest of its four runways, but intends to maintain flight operations and continue work on its new terminal.Amazon Prime Slows Europe Streaming (9:05 a.m. NY)Amazon.com Inc.’s Prime Video will follow Netflix and Google’s lead in reducing the speed of streams across Europe to ensure networks can handle increased use amid the coronavirus outbreak, which has sent thousands of workers home and shut schools.Social Distancing Could Be Needed Most of Year: U.K. Advisers (8:42 a.m. NY)U.K. government’s scientific advisers say social distancing measures to suppress the coronavirus outbreak may be necessary for “at least most of a year.” In documents published Friday, the U.K. scientific committee said: “It was agreed that a policy of alternating between periods of more and less strict social distancing measures could plausibly be effective at keeping the number of critical care cases within capacity.”In an NBC interview, National Institute for Allergy and Infectious Diseases Director Anthony Fauci said social distancing may be needed for at least several more weeks. “I cannot see that all of a sudden next week or two weeks from now, it’s going to be over,” Fauci said.Commerzbank Sticks With Target as Impact ‘Unforeseeable’ (8:37 a.m. NY)Commerzbank AG said it’s too early to quantify the impact of the coronavirus pandemic on the economy and its own outlook for the year. In its annual report published Friday, the German bank kept its forecast for a profit this year, while warning of numerous risks that “could affect the 2020 profit forecast to a considerable, though not reliably quantifiable, extent should events take an unfavorable turn.”Gilead’s Likely Remdesivir Approval Prompts Piper Upgrade (7:20 a.m. NY)Piper Sandler raised Gilead to overweight from neutral and said President Donald Trump’s comments on remdesivir at a Thursday press conference show the “tremendous pressure to approve the Covid-19 drug within days.”Separately, Sorrento Therapeutics says it has produced a pre-clinical batch of STI-4398 protein to immediately begin testing its neutralization and blocking activity in preventing SARS-CoV-2 virus from infecting ACE2-expressing cells.Singapore Suspends Large Events, Steps Up Social Distancing (7:17 a.m. NY)Singapore will prohibit events and gatherings of 250 or more people as it steps up measures to slow the spread of the coronavirus. The government said there were 40 new virus cases as of 12 p.m. on Friday, taking the total to 385. Thirty of the new infections came from abroad, the majority of them Singapore residents returning home.Cases Rise to Almost 20,000 in Spain, Iran (6:50 a.m. NY)Iran reported 1,237 new coronavirus cases and 149 deaths, bringing the country’s total to 19,644 cases and 1,433 fatalities. The health ministry also noted that 6,745 people had recovered from the virus so far, adding that 13 provinces have had a noticeable decrease in new cases.In Spain, cases rose by 2,833 to 19,980 and the death toll surged by 31% to 1,002.WHO Suspects Thailand Community Transmission Rising (6:40 a.m. NY)The WHO is concerned about the possibility that the transmission of the virus is more widespread in the community following recent increases in the daily confirmed cases. Thailand reported 50 more cases earlier on Friday, taking its total to 322 -- of the country’s total new cases, 41 are related to existing cases from Thai boxing stadiums and the nightlife sector.Disease Is Doubling at Even Faster Rate Now (6:15 a.m. NY)While the number of cases doubled to 200,000 cases in the 12 days through Thursday, on Friday the tally already was halfway to the 300,000 mark. The number of cases in France has doubled in four days, said Christian Lindmeier, a spokesman for the World Health Organization. When countries don’t have enough tests, they should triage, he said.The WHO said it developed new guidelines to investigate the extent of infection among the population with antibody tests. Thirteen countries have begun to implement some of the investigation protocols, and another 18 said they plan to do so. More widespread testing would give better information about the disease.The United Nations plans to give details next week about a humanitarian response as 100 million people in war zones face extreme risks related to the outbreak, said Jens Laerke, a spokesman for the UN humanitarian office.Altria CEO Tests Positive (6:11 a.m. NY)Altria said CEO Howard A. Willard III contracted the Covid-19 virus and is taking a temporary medical leave of absence. Chief Financial Officer William F. Gifford Jr. will take over Willard’s responsibilities until he returns.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Germany may impose a nationwide lockdown in the coming days as Bavaria became the first state in the country to enforce severe restrictions on citizens in an effort to stem the spread of the coronavirus.The southern region, a hotspot for confirmed cases, banned public gatherings and threatened stiff fines for anyone flouting the rules. The measures take effect at midnight Friday and will last for an initial two weeks, with Germany’s other 15 states expected to follow suit. A senior minister in Chancellor Angela Merkel’s cabinet warned that if people continue to socialize, all Germans may be confined to their homes.“We are almost completely winding down public life in Bavaria,” Premier Markus Soeder said at a news conference in Munich Friday. “From tomorrow it’s even more imperative: stay at home and only go out in exceptional circumstances,” he said, adding that restaurants will be closed down across Germany.Merkel will consult regional leaders Sunday to discuss the latest efforts to contain the virus and a cabinet meeting is planned for Monday, after which further restrictions could be announced. Germany has more than 15,000 confirmed cases and 44 deaths.As they struggle to contain the spread of the disease, officials are also moving to help companies suffering from the impact of the outbreak on the economy.The government will create a fund worth 500 billion euros ($538 billion) to provide firms with loan guarantees and injections of cash, Der Spiegel magazine reported. State aid of as much as 180 billion euros would be made available under the plan, which would lead to an increase in federal government borrowing, the report said. Finance Minister Olaf Scholz earlier threw his weight behind the government buying stakes in companies struggling to avoid bankruptcy.In a break from its policy of running balanced budgets, Merkel’s coalition wants to ask parliament for authorization for sweeping spending leeway, people with direct knowledge of the discussions said Thursday. The Cabinet is set to sign off on the request in the coming days.The historic move would be necessary under German law, which caps outlays under normal circumstances via a constitutional mechanism, known as the debt brake, which only allows for excess spending in crisis situations. The government has already pledged to lend as much as 550 billion euros ($594 billion) via state-owned development bank KfW.Scholz said that, if necessary, the federal government could buy company stakes using a fund set up to deal with the financial crisis a decade ago.Liquidity Shortage“We used something similar in 2008 to 2009, although that was focused on the banking sector,” Scholz told Deutschlandfunk radio Friday.“It could very well be that a company suddenly has a shortage of liquidity, and we are trying to address that with our liquidity program,” he added. “But at some point share capital will be required and we’re ready again to use the financial markets stability fund to make our contribution.”Germany set up its 480 billion-euro bank rescue fund in October 2008, the month after the collapse of Lehman Brothers Holdings Inc sparked a global credit crunch.The majority of its firepower consisted of guarantees, but the fund also took stakes in banks by injecting billions of euros of capital. More than a decade later, Germany still holds shares in Commerzbank AG and is continuing to wind down the assets of failed lender Hypo Real Estate Holding AG.As the economic fallout widens, companies in sectors like transport, retail and tourism are reeling and some of Germany’s corporate titans -- from Volkswagen AG to Daimler AG -- have taken unprecedented steps to idle plants.BMW AG this week abandoned hopes for another record year in sales, predicting deliveries will be “significantly below” 2019 levels and profitability the weakest in years.The government could purchase a stake in Deutsche Lufthansa AG -- which said Thursday it will stop 95% of flights -- as part of a rescue, a person familiar with the plan said last week.(Updates with Bavaria restrictions)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Gold investors appear to be bowing out of an increasingly erratic market.Open interest in the precious metal, a tally of outstanding futures contracts, has plunged to the lowest in more than seven months. The drop comes as volatility measures for bullion surge to multi-year highs.Gold futures swung between gains and losses Thursday, dropping as much as 1.2% as the dollar advanced. Pressure to dump bullion to raise cash and cover losses in other markets has sent the metal tumbling this month, blunting the boost from easier monetary policy worldwide, which is a usually boon to the non-interest-bearing metal.“Gold is not really managing to hold its own in the current market environment,” Daniel Briesemann, an analyst at Commerzbank AG, said in a note.Gold futures for April delivery rose 0.1% to settle at $1,479.30 an ounce at 1:30 p.m. on the Comex in New York.Bart Melek, head of commodity strategy at TD Securities, said surging volatility has prompted momentum-tracking commodity trading advisors to exit gold.On Wednesday, the Senate cleared the second major bill responding to the coronavirus pandemic and White House economic adviser Larry Kudlow said the government might take equity positions as part of an aid package. The European Central Bank launched an extra emergency bond-buying program worth 750 billion euros ($811 billion).Haven-seeking investors have turned from gold to the U.S. dollar instead, which soared to a record Thursday.“While stimulus measures/rate cuts -- including the ECB emergency bond-buying program -- are usually positive for gold, we think any support will be short-lived,” said Vivek Dhar, an analyst at Commonwealth Bank of Australia. “There is a clear preference for the U.S. dollar over gold as global market risks intensify, and that should pressure gold prices lower in the near term.”In other precious metals, silver rose on the Comex, while platinum fell and palladium rallied on the New York Mercantile Exchange.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Germany’s financial watchdogs eliminated a key capital requirement for the country’s banks to keep credit flowing and give flexibility to lenders such as Deutsche Bank AG and Commerzbank AG that have been hit hard by the recent selloff in stocks and credit risk.The countercyclical capital buffer, meant to strengthen banks during good times for a downturn, will be cut to 0% starting on April 1 and remain there until at least through December, the Finance Ministry said in a joint statement with financial supervisor BaFin and the Bundesbank. As a result, banks will be able to release more than 5 billion euros ($5.5 billion) of capital they were in the process of building up.That brings the volume of excess capital that German banks have on hand to digest losses and keep lending to about 225 billion euros, according to people familiar with the matter. That includes 120 billion euros of capital that the lenders held on top of their regulatory demands and 100 billion euros that the European Central Bank freed up last week, said the people, who spoke on condition of anonymity.After more than a decade of tightening financial strength requirements, bank regulators around the world are loosening the reins to prevent the economy from seizing up. The task for banks is daunting as many corporate clients are at risk of defaulting on loans while others will probably require additional funds as supply chains are disrupted, stores and restaurants shut down and public life grinds to a halt.“The move shows how critical the situation is in Europe,” ABN Amro Bank NV strategist Tom Kinmonth wrote in a note. “German regulators fought tough competition for a long period to raise the buffer and now have to remove it almost straight away.”ECB Freed Up $112 Billion at Banks to Bolster Credit Amid VirusThe ministry met BaFin as well as Germany’s central bank last week to discuss eliminating the buffer, Bloomberg reported at the time.German banks are well capitalized on the whole and the industry isn’t showing liquidity bottlenecks, according to the statement.The buffer applies to the German operations of banks, meaning those lenders with the biggest focus on the country will feel the most relief. Deutsche Bank AG, which has one of the most international footprints among German lenders, started the year with a countercyclical capital buffer of 0.08% while smaller competitor Commerzbank AG had a 0.12% requirement.German banks as well as their European competitors presented their regulators with a long list of demands last week to help them weather the fallout from the virus. The ECB loosened several capital demands on Thursday and nudged national authorities to follow suit on their own requirements.“One of the justifications to remove the buffers is to ‘free up lending capacity’,” wrote Kinmonth. “However, more realistically, banks will now try to actively reduce their provided credit lines” given the increase in risk.(Updates with capital reserves in third paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Gold tumbled again as investors rushed to raise cash to cover losses in other volatile markets, with global leaders striking a pessimistic tone over the likely economic impact of the coronavirus crisis.In a sign of the wild swings seen in markets during the health crisis, U.S. equity futures rebounded from their biggest drop since 1987, advancing alongside the dollar. President Donald Trump has warned of a possible recession and that the economic disruption from the virus could last into summer.A wave of central bank stimulus and a pledge from the leaders of the Group of Seven to do whatever is necessary to ensure a globally coordinated response has failed to quell investor concerns about the economic hit from the coronavirus.Spot gold dropped 2.9% and was at $1,470.71 an ounce by 11:56 a.m. in London. Prices are down more than 13% from a seven-year high reached earlier this month, and tumbled the most since 1983 last week.Other metals also extended losses, with silver dropping more than 5%, platinum losing 4% and palladium falling 2.2%.The sell-off in precious metals “reaches historic dimensions,” Commerzbank AG analyst Daniel Briesemann said in a note.“Gold declines remain linked to investors’ need for cash,” Stephen Innes, chief market strategist at AxiCorp Ltd., said in a report. “A constant question on every bullion investor’s mind is why is gold retreating when uncertainty and risk-off sentiment is rising? Gold’s recent declines are chalked up to margin-related selling as equities fell.”More and more countries are imposing travel restrictions and have closed schools, restaurants and canceled sporting events as deaths from the virus exceeds 7,000 globally.\--With assistance from Swansy Afonso.To contact the reporters on this story: David Stringer in Melbourne at email@example.com;Ranjeetha Pakiam in Singapore at firstname.lastname@example.orgTo contact the editors responsible for this story: Alexander Kwiatkowski at email@example.com, Nicholas Larkin, Dylan GriffithsFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Oil’s spectacular collapse deepened as widening global efforts to fight the spread of the coronavirus looked set to trigger the most severe contraction in annual demand in history.Global benchmark Brent crude fell more than 12.5% after Saudi Aramco’s chief financial officer said the company is “very comfortable” with oil at $30 a barrel. Demand for fuels is falling off a cliff as a result of global restrictions to prevent the spread of virus, with gasoline futures reaching their weakest level since at least 2005.Even a massive emergency move by the U.S. Federal Reserve to cushion the world’s biggest economy just added to the fear gripping markets. Forecasts for global oil use are being cut dramatically as government measures to contain the spread of the pandemic restrict the movement of people and throw supply chains into chaos. At the same time, giant producers are unleashing a flood of supply after the disintegration of the OPEC+ alliance.“Oil prices remain in freefall,” Commerzbank analysts including Carsten Fritsch wrote in a report. “The more countries ‘freeze’ public life, close their borders and cancel flights, the greater the impact will be on oil demand.”Oil traders, executives, hedge fund managers and consultants are revising down their estimates for global oil demand. The growing fear is that consumption, which averaged just over 100 million barrels a day in 2019, may contract by the most ever this year. That would easily outstrip the loss of almost 1 million barrels a day in 2009 and even surpass the 2.65 million barrels registered in 1980, when the world economy crashed after the second oil crisis.Travel restrictions across the globe tightened further over the weekend, with the U.S. extending its travel ban to include Britain and Ireland. Australia said anyone entering the country must self-isolate for two weeks, Spain imposed a lockdown and France closed cafes and restaurants.New York City limited restaurants and bars to takeout and delivery service, and shut nightclubs, movie theaters and concert venues. The U.S. Centers for Disease Control and Prevention recommended postponing any events with more than 50 people for the next eight weeks.The Fed cut its benchmark rate by a full percentage point to near zero and will boost its bond holdings by at least $700 billion. The move could trigger a fresh round of monetary easing around the world as countries look to keep money flowing as economic activity grinds to a halt. It wasn’t enough to calm markets though as U.S. equity futures hit limit down.\--With assistance from Sharon Cho, Dan Murtaugh, Ramsey Al-Rikabi, Andrew Janes, James Thornhill, Saket Sundria and Mike Jeffers.To contact the reporter on this story: Alex Longley in London at firstname.lastname@example.orgTo contact the editors responsible for this story: David Marino at email@example.com, Pratish NarayananFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
European banks took heart from the Bank of England's plan to defend Britain's economy from the effects of the coronavirus outbreak, pushing stock prices up and the cost of insuring against default down. The move raised expectations for a similar response from the European Central Bank on Thursday, driving the euro zone banks index 1.5% higher and putting them on track for their first gain in two weeks. Britain's finance minister, Rishi Sunak, said he would do whatever it took to protect the UK economy from the global epidemic, shortly after the BoE slashed interest rates and gave banks permission to tap capital reserves in a stimulus package aimed at thwarting recession.
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world threatened by trade wars. Sign up here. China’s exports fell more than expected in the first two months of this year as the coronavirus outbreak led to extended holidays, depressed factory output, and blocked transport and movement across the country. Imports also declined, although increases in commodities purchases offset some of that.The drop in exports was a bigger-than-expected 17.2% in dollar terms, while imports declined 4%, according to a statement from Chinese customs Saturday. While the trade surplus with the U.S. shrank, it’s probably too early to see a strong effect from the deal with the Trump administration, which was signed in January but only went into effect in mid-February.The first two months are normally volatile for China’s economic activity due to a week-long lunar new year holiday, and this year is more unusual due to the coronavirus epidemic. The holiday, as well as quarantine and containment measures, shut down much of the economy for weeks, disrupting travel, production and transport, and the economy is still struggling to return to pre-virus levels even as the government pushes companies to restart.“It’s hard to forecast the trend based on January-February data because these two months are quite special, but given that the coronavirus is now spreading across the world, March data won’t look so good either,” according to Larry Hu, chief China economist at Macquarie Group Ltd in Hong Kong. “China’s economic growth mainly relies on exports, real estate and infrastructure. The outlook of exports and the property market this year isn’t so optimistic, so China will likely ramp up infrastructure investment.”Trade DeficitImports of commodities rose, with purchase of soybeans up 14.2%, iron ore rising 1.5%, coal climbing 33.1% and liquefied natural gas increasing 2.8%. The overall trade balance fell to a deficit of $7.1 billion for the first two months.What Bloomberg’s Economists Say...The outlook for trade will hinge on China’s progress in getting its economy restarted and exports should rebound to growth in the coming months as exporters start delivering existing orders. However, a lot depends on what happens with external demand, and the impact of the virus on imports will become more evident in the coming months.\-- David Qu, Bloomberg EconomicsClick here to see the full noteThe disruptions from the virus may also jeopardize China’s ability to meet its commitments to the U.S under the terms of the trade deal, as it could affect Chinese demand for American goods. China agreed to increase its imports of U.S. goods and services by $76.7 billion over the level in 2017 in the first year of the deal, and then by $123.3 billion in the second year, increasing imports by a total $200 billion.Exports to the U.S. fell almost 28% in the first two months of the year, while imports rose 2.5%. That meant the trade surplus narrowed about 40% to $25.4 billion. Data released Friday U.S. time showed that the U.S. trade deficit with China narrowed in January as imports dropped and exports rose slightly.“The growth in imports from the U.S. is pushed by the phase-one deal,” according to Zhou Hao, an economist at Commerzbank AG in Singapore. “The reason that imports were better than exports overall is that the main problems for China are on the production side.”It’s hard to forecast whether that will continue to be the case as external demand could also decline due to the spreading outbreak, even if China’s production ability recovers, according to Zhou.The contraction in trade in the first two months was mainly due to the virus outbreak and the extended lunar new year holiday, and the impact on imports is not yet significant, according to a statement on the customs administration’s website.Almost 81% of 2,552 companies involved in trade have resumed operations, according to a customs administration survey. There were no more details on that, but other reports have shown that even if companies have returned to work, their capacity hasn’t returned to the level it was before the extended holiday and disease outbreak.This was the first time that customs has combined the data for the first two months of the year, and not released figures just for January.(Updates with Bloomberg Economics’ report.)\--With assistance from Tomoko Sato.To contact Bloomberg News staff for this story: Miao Han in Beijing at firstname.lastname@example.org;Lin Zhu in Beijing at email@example.comTo contact the editors responsible for this story: Jeffrey Black at firstname.lastname@example.org, James Mayger, Stanley JamesFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Issuers sold 5.25 billion euros on Europe's debt capital markets on Tuesday, a day after stocks rallied strongly on hopes of central bank support. UK analytics company Relx raised 2 billion euros of four, eight and 12-year bonds, while U.S. industrial conglomerate Honeywell International, which recently saw a surge in demand for its protective face masks, priced 1 billion euros of four and 12-year bonds.
European stocks drifted lower in volatile trading on Tuesday as markets failed to set a floor after the pounding they took over the spread of the coronavirus in Italy and South Korea
(Bloomberg Opinion) -- Italian banks embarking on a round of consolidation was always a matter of when, not if. Meager profitability, a fragmented industry and a desperate need for investment are obvious ingredients for M&A. Lenders have rid themselves of most of the bad loans that crippled Italy’s banks after the financial crisis, so dealmaking should be unhindered.Intesa Sanpaolo SpA’s surprise $5.3 billion offer for a smaller Italian rival in a four-way carve-up may not have been what investors had in mind. Intesa is already Italy’s biggest bank and its target, Unione di Banche Italiane SpA — the country’s fourth-largest — was seen as more of an acquirer of weaker rivals than a target.But the deal may provide the jolt the European industry needs. Almost a year has passed since the failed effort to combine Germany’s Deutsche Bank AG and Commerzbank AG through a more complex, risky deal. The completion of a simpler union could embolden chief executives elsewhere in the continent too.Intesa’s unsolicited all-stock bid, at a 25% premium to the closing price, would make it one of the biggest European banking mergers since the Lehman crisis. UBI, which hasn’t commented on the approach, was caught off guard. Just hours earlier in London, it presented its strategy as a standalone company.A deal would move Intesa into the group of top 10 European lenders, measured by operating income. Though UBI investors could argue for juicier terms, the strategic and financial rationale for a deal is compelling. The European Central Bank’s initial positive feedback on the merger should improve Intesa CEO Carlo Messina’s chances of persuading his UBI counterpart.A takeover would create a joint business with a market share of about 21% in loans and deposits, 23% in asset management and 19% in life insurance. To avert antitrust concerns, Intesa has agreed to sell as many as 500 branches to a regional lender and to dispose of insurance activities too. The banks have similar business models and the 5,000 anticipated job cuts are expected to be voluntary (3,400 job losses have already been announced by the banks). The deal would bring 510 million euros of cost savings and 220 million euros of revenue synergies, according to Intesa. The buyer is promising to pay a cash dividend of 0.2 euros per share for 2020, and higher from 2021, above current consensus estimates. To cover the deal’s cost, Intesa expects to benefit from about 2 billion euros of negative goodwill to help pay for integration expenses and a deeper clean-up of bad loans.Investors like what they’re hearing. A bond UBI sold five weeks ago has delivered an impressive 12% return, making it the best-performing bond in Europe this year. UBI shares rose as much as 29% on Tuesday, above the offer price; Intesa shares rose as much as 3.6%.Some investors had hoped that Intesa would make a bolder move to diversify its business away from Italy and to reduce its reliance on lending income. But support from the ECB for the UBI approach would at least show the regulator is willing to countenance much-needed M&A in Italy, and Europe.Messina’s unexpected move might inspire a broader consolidation. As sub-zero interest rates persist and economies sputter, European banks’ low profitability is unlikely to improve. Cross-border deals are still complicated by different national insolvency laws and the absence of a common European deposit-insurance scheme. At least Messina is doing something.To contact the author of this story: Elisa Martinuzzi at email@example.comTo contact the editor responsible for this story: James Boxell at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Elisa Martinuzzi is a Bloomberg Opinion columnist covering finance. She is a former managing editor for European finance at Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- Jupiter Fund Management Plc is getting something of a bargain in its purchase of Merian Global Investors, based on the post-announcement pop in the acquiring firm’s share price. Odd, then, that the deal has a clause that could see a dramatic drop in the takeout price if the target firm stumbles in the next two years.Jupiter is paying 370 million pounds ($482 million) for Merian, which is owned by TA Associates Management. The Boston-based private equity firm agreed to pay 600 million pounds for Merian a bit more than three years ago, backing its managers in a buyout from Old Mutual Ltd. So it’s taking a hit on its initial investment.Moreover, Jupiter has secured what it calls “downside protection” if Merian’s assets under management decline by the end of 2021. The purchase price falls by 20 million pounds if assets decline by 15%, by 40 million pounds if the drop is 25%, and the full 100 million pounds if Merian manages 40% less money. Reductions between those levels will be applied proportionately, while Merian’s management can earn an additional 20 million pounds by increasing revenue.It’s a smart hedge for Jupiter, given the inability of many active fund managers to stop money from walking out of the door. Jupiter itself has had seven consecutive quarters of net outflows, and saw customers withdraw 4.5 billion pounds last year, so the value of its assets under management was only defended by rising global market values.And Merian had 25.7 billion pounds under management at the time of its buyout in December 2017; based on Monday’s offer documents, it’s down to a bit more than 22 billion pounds now.Once the deal is completed, TA Associates will end up with about 16% of Jupiter, while Merian’s management will own about 1% of the firm. It’s a case of back to the future for the buyout firm. In 2007, TA Associates backed Jupiter’s managers and took a 22% stake in the London-based firm when it was spun off from Commerzbank AG. It maintained a stake in Jupiter until 2014, when it offloaded its final 10.6% holding. So the private equity outfit still has skin in the U.K. active management game, which is a vote of confidence of sorts.The deal will mean Jupiter has more than 65 billion pounds of assets under management, an boost of more than 50% from the 43 billion pounds it currently has. The transaction offers “substantial cost efficiencies,” which Jupiter says will eventually allow Merian to deliver an operating margin of at least 50%, handily outstripping the 43% margin Jupiter generated in 2019.Jupiter’s shares jumped as much as 10.4% in the wake of the deal’s announcement, driving them to their highest since July 2018. But it’s hard to shake the suspicion that the insurance clause Jupiter has included in the transaction — and which the vendor has accepted — suggests that takeovers alone can’t fix what ails the active fund management industry. What’s needed is a solid period of outperformance against benchmarks. Otherwise investors will continue to vote in favor of low-cost passive products, and will be right to do so.To contact the author of this story: Mark Gilbert at email@example.comTo contact the editor responsible for this story: Melissa Pozsgay at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Mark Gilbert is a Bloomberg Opinion columnist covering asset management. He previously was the London bureau chief for Bloomberg News. He is also the author of "Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable."For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.