|Bid||5.07 x 200000|
|Ask||5.07 x 110000|
|Day's Range||5.05 - 5.21|
|52 Week Range||4.66 - 9.66|
|Beta (3Y Monthly)||1.88|
|PE Ratio (TTM)||8.76|
|Earnings Date||Feb 4, 2019 - Feb 8, 2019|
|Forward Dividend & Yield||N/A (N/A)|
|1y Target Est||11.78|
(Bloomberg) -- Oil halted a two-week losing streak as trade tensions between the U.S. and China showed signs of easing, soothing a volatile market focused on the economic growth that underpins crude demand.Futures rose 0.7% on Friday in New York. The gain capped a tumultuous week of seesawing geopolitical indicators and conflicting supply forecasts. The protracted trade deadlock between the world’s two largest economies showed signs of breaking after U.S. President Donald Trump predicted he would speak “very soon” with Chinese leader Xi Jinping.“There was some relieving of trade tensions this week so I think there’s a bit of optimism in the market,” said Phil Streible, senior market strategist at RJO futures. “But many people are still bearish on crude. It will take a deal in writing between the two countries to change the dynamic in market.”Despite the weekly gain, oil was still down 6.3% this month. Saudi Arabia’s pledge to curb crude exports has done little to bump prices higher. A second weekly surprise increase in American crude inventories compounded demand fears after weak economic data from the biggest economies of Europe and Asia stoked negative sentiment. Meanwhile, OPEC warned that oil markets face a “somewhat bearish” outlook, despite tightening supplies.“The yo-yoing on the oil market continues and the oil price remains highly prone to fluctuations,” said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. “The oil price currently remains at the mercy of expectations for the global economy, and is thus caught between economic concerns and hopes that the trade dispute might end soon.”West Texas Intermediate crude for September delivery gained 40 cents to settle at $54.87 a barrel at on the New York Mercantile Exchange.Brent for October settlement added 41 cents to $58.64 on the ICE Futures Europe Exchange. The global benchmark traded at a $3.83 premium to WTI for the same month.See also: Goldman’s Currie Sees Oil ‘Unlikely’ to Reach $75/BarrelNew planned U.S. tariffs on some Chinese goods have derailed efforts by the two nations to resolve their dispute, China’s State Council Tariff Committee said in a statement on Thursday. Meanwhile, Trump told reporters he has a call scheduled “very soon” with Chinese President Xi Jinping on trade.\--With assistance from Sharon Cho and Grant Smith.To contact the reporter on this story: Kiran Dhillon in New York at email@example.comTo contact the editors responsible for this story: Simon Casey at firstname.lastname@example.org, Joe Carroll, Reg GaleFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. Germany’s economy shrank in the second quarter, ramping up pressure on Chancellor Angela Merkel to unleash fiscal stimulus as manufacturers reel from a U.S.-China trade war.The latest report, paired with a protracted slump in business expectations, raises the risk that Europe’s largest economy is on the verge of falling into a recession. It would be the first in six and a half years. Separate data showed euro-area industrial production plunged the most in more than three years in June, while economic growth cooled to 0.2% in the second quarter.German output fell 0.1% in the three months as exports slumped, a second contraction in four quarters. Merkel said Tuesday the country was heading into a “difficult phase” and even hinted her reluctance to respond is softening.Economists’ reactions to the German data resemble different shades of gloom.“We expect a period of protracted underperformance,” said Markus Guetschow, an economist at Morgan Stanley & Co. in London. Robert Greil, chief strategist at Merck Finck Privatbankiers said the second-quarter contraction “is not a drama but a warning shot.”Germany’s performance is weighing heavily on a region struggling to sustain momentum. While the Dutch economy managed to maintain its pace of expansion, growth slowed in the largest euro-area countries. Profit warnings from across the bloc suggest little sign of a turnaround.“The sick man needs its medicine,” Naeem Aslam, chief market analyst at TF Global Markets said. “Hence, the German Chancellor, Angela Merkel, will have to unleash a new fiscal stimulus package for her country to combat the effects of U.S.-China trade war. This may just do some of the trick for the euro-zone’s economy.”Two FrontsHenkel AG summed up Germany’s woes in a profit warning on Tuesday. The industrial firm is facing pressure on two fronts, a slowdown in the auto industry and weaker demand in China, the same environment that’s crippled manufacturing across the country.President Donald Trump on Tuesday delayed the imposition of some new tariffs on Beijing by three months to December. However, there was further bad news from China, the world’s second-largest economy, on Wednesday, with cooling retail sales and the slowest growth in industrial output since 2002.In Germany, second-quarter output was damped by trade, with exports falling faster than imports. Private consumption and government spending rose, and investment increased despite a decline in construction.What Bloomberg’s Economists Say“The industrial sector tipped the economy into contraction in 2Q, and the risk is of further weakness in the second half of the year. If there’s any good news to take from this release, it’s that services must have continued to expand, indicating patches of resilience persist.”\--Jamie Rush.Read the full GERMANY REACTThe European Central Bank has already all but committed to hand out fresh stimulus to jump-start the economy and is forecast to cut interest rates as early as September. All that has helped push yields on German debt to record lows below zero. Earlier this month, the euro fell to the softest since mid-2017.ECB President Mario Draghi has been among the chorus of international voices pleading with Germany to loosen the purse strings after running surpluses over the past half decade.German industry has been mired in a slump as worsening trade woes and weaker global growth sap demand for machinery and cars. Industrial production suffered its biggest drop in a decade in June, and freight volumes at German airports saw the steepest decline since 2012.Among the casualties is Siemens, which said earlier this month it would struggle to meet financial goals because of a deteriorating economy and heightened political uncertainty. Automotive supplier Rheinmetall also lowered its outlook, scrapping expectations for a “tangible” recovery in the coming months.\--With assistance from Kristian Siedenburg, Harumi Ichikura and Catarina Saraiva.To contact the reporter on this story: Piotr Skolimowski in Frankfurt at email@example.comTo contact the editors responsible for this story: Paul Gordon at firstname.lastname@example.org, Jana Randow, Fergal O'BrienFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- Bond buyers worldwide, awash in negative-yielding debt, are crying out for fiscal spending. A seven-minute stretch in the German bund market proves it.On Aug. 8, just before 9 a.m. in New York, Reuters published a headline that blared “Germany mulls fiscal policy U-turn.” According to an anonymous senior government official, Germany was considering abandoning its long-held balanced budget goal and instead was looking to fund an expensive climate-protection package with new debt. That unleashed a sell-off in bunds the likes of which hasn’t been seen in recent months. In minutes, yields “went parabolic” in a move that looked like one massive straight line upward. They shot up even faster than they did after European Central Bank President Mario Draghi gave a relatively upbeat assessment of the region’s economy after its most recent decision on July 25. Kevin Muir, a market strategist at East West Investment Management Co., said on Twitter what bond traders were thinking: “BOOM! Game on! Don’t underestimate how big this announcement is. Fiscal changes the whole equation.”The watershed moment didn’t last. Germany’s Finance Ministry quickly dashed hopes of widespread fiscal spending, commenting publicly that no decision has been made on giving up on a balanced budget. The official who talked to Reuters warned of such resistance, saying that “the challenge now is how to shape such a fundamental shift in fiscal policy without opening the flood gates for the federal budget” because “once it is clear that new debt is no longer a taboo, everyone raises a hand and wants more money.”To some, this commitment to fiscal restraint is commendable. It certainly provides a stark contrast to the trillion-dollar budget deficits in the U.S. But when a whopping $15.5 trillion of global debt yields less than zero, including the entire German curve, the lack of government spending could very well be doing more harm than good. Fitch Ratings, for instance, noted in a report this week that rock-bottom interest rates aren’t entirely good news for sovereign nations. While they make borrowing costs more manageable, they also speak to a gloomy outlook for the future:“The economic conditions leading to structurally lower yields may not be as supportive of sovereign credit. Lower interest rates to some extent reflect weaker potential GDP growth stemming from slower productivity growth and demographic changes. These, along with low inflation, will adversely affect growth in government revenues and put upward pressure on age-related spending, adding to fiscal challenges.”Simply put, negative yields are a painfully obvious sign that governments have room to take on more debt for projects like infrastructure improvements and climate-change related endeavors. They ought to seize the moment.Infrastructure, in theory, should be one of the easiest things for Democrats and Republicans to agree upon. Yet it has become something of a punch line and a symbol of Washington’s paralysis. With the U.S. government able to borrow at a near-record low 2.15% for 30 years, it sure would seem like an opportune time to address the 47,000 structurally deficient bridges across the country. Recent examples abound of how this has become a pressing issue, including a railing collapse in Chattanooga, Tennessee, earlier this year in an area the mayor called “one of the most heavily trafficked intersections in the country.” Or perhaps the federal government could be bold and take a more active role in high-speed rail or finally make an additional train tunnel linking New Jersey to Manhattan a reality.At least some people in Washington understand that spending more on infrastructure would be a near-surefire way to boost the country’s long-term growth potential. Jeffrey Stupak, a macroeconomic policy analyst for the Congressional Research Service, noted in a report last year that direct federal spending on nondefense infrastructure was less than 0.1% of gross domestic product in 2016 and that its relative spending lagged behind most Group of Seven countries (naturally, Germany spent even less). The White House’s Council of Economic Advisers also published a report extolling the benefits of a 10-year, $1.5 trillion program of infrastructure investment.All else equal, increasing the economic growth potential of a country should boost inflation, which, in turn, should send bond yields higher. This is the feedback loop that bond traders have been craving and thought they might be getting when hearing about a fiscal U-turn in Germany. Instead, markets are left with the narrative of negative yields and a “safe-asset shortage,” prompted in part by post-crisis banking regulations like Dodd-Frank and Basel III, in part by huge quantitative easing programs among global central banks, and in part by individuals who are living longer and are focused on saving for retirement. Perversely, this seems to have put the banking system at greater risk — shares of Frankfurt-based Commerzbank AG fell to a record low this week, for instance — and has made it all the more difficult for pension plans to meet their promises.The bond markets aren’t demanding fiscal profligacy. All they’re suggesting is a modest loosening of the purse strings, with money directed toward projects that benefit the overall economy. The problem, of course, is that more spending is usually framed as “bad” while lowering taxes is “good,” even though they both widen the budget deficit. In truth, both have appealing qualities — but only when applied properly.Infrastructure spending done right potentially solves several structural problems in one shot. It offers construction jobs to those who might not otherwise have one, further adding to record employment numbers. It creates new or improved structures that will be used for decades and will move people and products more efficiently. It will lead to more sovereign borrowing, which feeds the appetite for safe assets. And, most crucially for the bond markets, it could counter easy monetary policy and some of the other forces leading to negative interest rates.This is a better solution than trying to rationalize guaranteed losses on bonds. The U.S., Germany and other sovereign nations have a clear green light to borrow. It’s up to elected officials to step on the gas.To contact the author of this story: Brian Chappatta at email@example.comTo contact the editor responsible for this story: Daniel Niemi at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Brian Chappatta is a Bloomberg Opinion columnist covering debt markets. He previously covered bonds for Bloomberg News. He is also a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Three years into Commerzbank AG Chief Executive Officer Martin Zielke’s turnaround, the party’s over.Shares of the lender fell to a record low Monday, capping a roller coaster ride that saw the stock more than double after the CEO announced his plan, buoyed by expectations for higher interest rates and consolidation in European banking. Zielke has refocused the bank on lending to corporate and individual clients in Germany, turning it into a proxy for economic growth and interest rates in the region that attracted investors such as Cerberus Capital Management.But all those gains evaporated over the past year-and-a-half, as trade tensions took a toll on the economy. Prospects for European banking mergers were shattered when talks between Commerzbank and Deutsche Bank AG failed and no alternative suitors came forward, despite reports of interest from banks such as ING Groep NV and UniCredit SpA. A reversal in expectations for interest rates that pushed Germany’s entire yield curve below 0% for the first time sealed the stock’s decline.For banks, low or negative rates are bad because they rely on clients paying to borrow money. Commerzbank, which had already abandoned most of the financial targets set by Zielke’s turnaround plan, said this month that its profit goal for 2019 is also looking increasingly “ambitious” amid worsening trade conflicts and the prospect of even lower interest rates.Commerzbank fell as much as 3.3% in Frankfurt to 5.08 euros, the lowest in Bloomberg records going back to 1992.(Adds ING, UniCredit interest in third paragraph, updates shares in fifth.)To contact the reporter on this story: Steven Arons in Frankfurt at email@example.comTo contact the editors responsible for this story: Dale Crofts at firstname.lastname@example.org, Christian Baumgaertel, James HertlingFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Major German bank Commerzbank announced that it has developed a blockchain-based payment solution that specifically automates machine-to-machine (M2M) payment processes. "In the transaction, Commerzbank first brought in euros on the blockchain and then provided the so-called "cash on ledger," i.e. Digitalization has transformed the transportation sector, bringing the concept of connected vehicles, making them smart enough to be interacted with, unlike traditional vehicles that were designed with the singular intent of moving people and freight.
(Bloomberg) -- Want the lowdown on European markets? In your inbox before the open, every day. Sign up here.Commerzbank AG’s biggest shareholder, Germany, is seeking outside advice about its stake as Chief Executive Officer Martin Zielke readies the bank’s new strategic plan.The Finance Agency, which manages the government’s 15.6% holding in the lender, invited bids for a consultant that will assess Commerzbank’s “strategic orientation” and provide recommendations, according to documents published on a website for government tenders.The finance ministry declined to provide comment beyond wording used in the tender documents.Commerzbank has seen revenue fall for three years straight and its stock is close to an all-time low. The bank held merger talks with rival Deutsche Bank AG earlier this year, but the two lenders jointly decided to end the negotiations. CEO Zielke now plans to present a strategy update to investors in the fall.Foreign banks have shown interest in acquiring Commerzbank since the Deutsche Bank talks broke down, though no discussions have advanced beyond a preliminary stage, people familiar have said. Commerzbank Chief Financial Officer Stephan Engels said earlier this week that no suitors are currently “knocking” on the bank’s doors.The German government took a stake in Commerzbank as part of a bailout during the financial crisis a decade ago. The state has said it would need to sell its stake at 26 euros a share ($29) to break even. The stock currently trades at about 5.4 euros.Still, given Germany’s economic slowdown and growing demands for spending, it would be a good time to raise cash, said Otto Fricke, a budget expert with the liberal opposition party FDP."The risk of recession requires structural change," Fricke said in a text message. "Beyond tax incentives and a switch from spending on consumption to investment, that also includes the sale of shares, particularly in banks."The request for bids was published on Aug. 4 and the deadline for bids is on Sept. 3. BoersenZeitung first reported on the contract tender.(Adds legislator comment in seventh and eighth paragraph.)\--With assistance from Birgit Jennen and Christian Baumgaertel.To contact the reporters on this story: Steven Arons in Frankfurt at email@example.com;Birgit Jennen in Berlin at firstname.lastname@example.orgTo contact the editors responsible for this story: Dale Crofts at email@example.com, Ross Larsen, Raymond ColittFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
The German government is considering the potential sale of its 15.6 per cent stake in Commerzbank and is seeking “open minded” external advice on what to to with its shares in the struggling lender. “The aim is an open-minded evaluation and assessment of the [Commerzbank] stake and the deduction of strategic recommendations for the investment management”, the tender document says. The advisers will also be commissioned to assess a new strategy which Commerzbank’s management is currently working on, and which is scheduled to be unveiled later this year.
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. German exports registered their steepest annual decline in three years in June, underscoring the plight of the manufacturing sector as global trade tensions escalate.Shipments abroad were down 8% from the previous year, the most since July 2016. Imports, a gauge for the strength of the domestic economy, fell an annual 4.4%. Strains are also showing in France, where industrial production plunged in June.The data add to evidence that export-reliant businesses are hurting badly, threatening to bring Europe’s largest economy to a halt. Once a growth driver in the region, Germany is forecast to expand a mere 0.5% this year, with only Italy seen faring worse.There are few -- if any -- signs of imminent improvement. The U.S. and China, two of Germany’s key trading partners, remain locked in a war over import tariffs. The former recently announced its biggest hike in levies yet, prompting the latter to respond by allowing its currency to tumble to its lowest value in more than a decade.Germany is caught in the middle. Big-name companies including Continental, Daimler, BASF and Lufthansa have slashed their outlooks in recent weeks amid global geopolitical uncertainty.Economists at Commerzbank predict China is on the cusp of a more fundamental shift in how it’s running its economy, with repercussions also for Germany and the euro area.“There is much to suggest that China is taking the ‘Austrian’ path, accepting a protectionism-induced reduction in economic growth, and refraining from massively increasing the economic stimulus package which so far has had little effect,” Joerg Kraemer, Commerzbank’s chief economist, wrote in a note. The bank lowered its forecasts for economic growth in Germany and the euro area for 2020 to 0.8% and 0.7%, respectively.Industry PainIndustrial production is already suffering across the region. In France, output dropped 2.3% in June from the previous month, the most since early 2018. In the Netherlands, manufacturing registered its fourth consecutive annual decline, the longest streak since 2015. In Germany, production was down the most in nearly a decade, and receding confidence indicators are feeding speculation that the economy may be headed for a recession.Second-quarter data GDP data are due on Aug. 14, with economists surveyed by Bloomberg forecasting stagnation.So far, the German government has been reluctant to react, arguing additional fiscal stimulus isn’t needed. This stance means the country’s current-account surplus, which has drawn criticism from U.S. President Donald Trump as well as the International Monetary Fund, will remain significant. It widened to 20.6 billion euros ($23 billion) in June.European Central Bank President Mario Draghi said last month it’s “unquestionable” that governments will need to pitch in if conditions keep deteriorating. Policy makers have signaled that they could provide more monetary stimulus as soon as September.(Updates with Dutch manufacturing in eighth paragraph.)\--With assistance from Kristian Siedenburg, Catarina Saraiva, Harumi Ichikura, Fercan Yalinkilic and Ruben Munsterman.To contact the reporter on this story: Kristie Pladson in Frankfurt at firstname.lastname@example.orgTo contact the editors responsible for this story: Paul Gordon at email@example.com, Jana RandowFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Gold futures rallied above $1,500 an ounce on sustained demand for the traditional haven as the U.S.-China trade war festers, global growth slows and central banks around the world ease monetary policy.The metal advanced as much as 2.6% an ounce on the Comex to the highest since 2013. The move extends this year’s climb to 19%, with gains underpinned by inflows into exchange-traded funds and central bank purchases. China’s central bank expanded its gold reserves for an eighth straight month in July.Gold has been one of the chief beneficiaries of the turmoil in global financial markets as Washington and Beijing spar over trade. In recent days, the Trump administration threatened fresh tariffs against Chinese goods, the yuan was allowed to sink, and the U.S. branded China a currency manipulator. The stand-off has boosted the odds of more easing from the Federal Reserve. Mounting “growth worries,” prompted Goldman Sachs Group Inc. to predict prices will climb to $1,600 an ounce over the next six months.“Gold is serving its traditional role as a safe-haven asset,” said Wayne Gordon, executive director for commodities and foreign exchange at UBS Group AG’s wealth management unit. Under the bank’s risk case, marked by a further escalation of the trade fight, prices could go as high as $1,600, he said.Futures for December delivery rose 2.4% to settle at $1,519.60 an ounce at 1:30 p.m. in New York, gaining for a fourth day. Silver also surged, with futures climbing above $17 for the first time since June 2018.Miners also benefited from the rally, with AngloGold Ashanti Ltd. rising 4.8% to its highest price in more than seven years. Kinross Gold Corp., Barrick Gold Corp. and Newmont Goldcorp Corp. also soared.Lower RatesLast month, the Fed reduced borrowing costs for the first time in more than a decade, responding in part to the impact of the trade war. Lower rates boost the appeal of non-interest-bearing bullion.On Wednesday, New Zealand’s Reserve Bank shocked markets with a half-percentage point interest-rate reduction, while India’s central bank also delivered a bigger-than-expected move. Those cuts were followed by the Bank of Thailand unexpectedly lowering its benchmark interest rate for the first time in more than four years.The latest ructions have sent investors rushing to havens, pushing the world’s stockpile of negative-yielding bonds to a record, with the market value of the Bloomberg Barclays Global Negative Yielding Debt Index closing at $15.01 trillion Monday. The yield on 10-year Treasuries has tumbled.Bullion has plenty of fans among veteran investors. Mark Mobius said in July prices were poised to top $1,500 as interest rates headed lower, declaring: “I love gold.” Billionaire hedge-fund manager Ray Dalio has suggested the market may just be at the start of a period that would be very positive for gold.In addition to the challenges thrown up by the trade war, there are other risks. In Europe, investors are tracking the chances of a no-deal Brexit later this year, while there are tensions in the Middle East between Iran and the U.S.Further support for the rally has come from central-bank buying, with authorities in China, Russia, Poland and Kazakhstan all boosting holdings. That trend shows no sign of slowing, with the People’s Bank of China adding almost 10 tons to reserves in July.“We see the ongoing steep rise in the gold price as an expression of the high risk aversion among market participants,” said Daniel Briesemann, an analyst at Commerzbank AG. “Gold is quite clearly still in demand as a safe haven in the current market environment, as reflected, among other things, in continuing ETF inflows. ”\--With assistance from Krystal Chia.To contact the reporters on this story: Ranjeetha Pakiam in Singapore at firstname.lastname@example.org;Rupert Rowling in London at email@example.com;Justina Vasquez in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Phoebe Sedgman at email@example.com, ;Luzi Ann Javier at firstname.lastname@example.org, Jake Lloyd-Smith, Steven FrankFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Top European banks warned of weaker earnings as escalating trade tensions take a toll on their clients and the prospect of lower interest rates erodes their main source of income.Commerzbank AG said its goal of lifting profit this year is looking increasingly “ambitious” after revenue fell for a fourth quarter and it set aside more money for soured loans. UniCredit SpA slashed its full-year revenue target by 1.1 billion euros ($1.2 billion), citing expectations that interest rates will stay lower for longer. Dutch lender ABN Amro added to the gloom, saying its margins are being hit.Their warnings underscore how global trade tensions are rippling through the euro zone’s export-driven economy, the world’s third largest. Many firms have refocused their businesses on lending to domestic clients in expectation that borrowing costs will rise after half a decade of negative rates in the region. With interest rates now set to go lower, any profits they make from increased lending are being squeezed.Commerzbank Chief Executive Officer Martin Zielke has bet the future of the bank on adding new clients and boosting lending to companies and individuals. But the prospect of sustained low rates is making it increasingly difficult to earn enough money to finance investments in technology. The CEO earlier this year abandoned most of the bank’s 2020 financial targets and has signaled he remains open to mergers after talks with Deutsche Bank AG collapsed.“Challenges continue to increase for the industry and for us,” Zielke said. “This might require further investments. And this is exactly what we are examining and assessing in our current strategy process.”Shares SlumpShares of all three banks declined in early trading, with Commerzbank slumping as much as 6%, ABN Amro falling 5.7% and UniCredit losing 4.6% at its trough.Commerzbank, which started to pivot away from investment banking and toward lending shortly after Zielke became CEO three years ago, has been the subject of takeover speculation, though any talks have not proceeded beyond informal contacts, people familiar with the matter have said. Dutch lender ING Groep NV and Italy’s UniCredit have been named as potential buyers after the collapse of earlier merger talks with Deutsche Bank.UniCredit CEO Jean Pierre Mustier has focused on cutting costs and cleaning up the balance sheet to boost profit amid weak earnings from lending. He’s cut about 14,000 jobs since taking over about three years ago and may eliminate as many as 10,000 more under a new business plan to be outlined later this year, according to people with knowledge of the matter.Lower for Longer“With rates expected to be lower for much longer, we decided to adjust our 2019 revenue guidance,” Mustier said on Wednesday. The Italian lender lowered its 2019 sales goal to 18.7 billion euros from 19.8 billion euros previously, part of which was due to the sale of its stake in Finecobank SpA.Barely finished cleaning up from their last recessions, central banks across the globe are swinging back toward rescue mode as the U.S.-China trade war nudges the world economy toward its first recession in a decade. Having cut rates a week ago for the first time since 2008, the Federal Reserve is on course to do so again next month.The European Central Bank hasn’t even had a chance to raise interest rates again since lowering them to historic lows after the financial crisis. President Mario Draghi has kept a key rate below zero for five years, effectively punishing banks and savers for holding deposits, rather than spending or investing them. He’s expected to loosen monetary policy again in September, after saying that the outlook is getting “worse and worse.”Remedial ActionABN Amro, too, signaled that ultra low interest rates in Europe are eating into margins, forcing it to take remedial action to shore up profit. While second quarter net income of 693 million euros beat estimates for 638 million euros, the Amsterdam-based bank said the impact of rates on deposit margins is prompting it to explore different revenue opportunities and focus on “strict cost discipline.”Commerzbank in particular is exposed to trade tensions because of its extensive network of corporate clients, many of which rely on exports. German industrial production registered its biggest annual decline in almost a decade, a report showed Wednesday, highlighting the severity of the trade-inflicted manufacturing slump in Europe’s largest economy.That’s hurting lending to the country’s many mid-sized corporations. Operating profit at the Commerzbank unit that caters to them slumped 90% from year earlier, to just 22 million euros, as higher provisions for bad loans offset an increase in income from lending. The bank said “single cases” in the second quarter were responsible for the hit, without providing details. The bank recently announced that it will replace division head Michael Reuther with former ING executive Roland Boekhout.The business catering to individual clients and small businesses did better as it takes longer for individuals to feel the pain. The unit reported a 37% increase in operating profit and higher revenue.Commerzbank’s net income also beat analysts’ estimates, but that was mainly because of lower taxes. The lender said it still expects a “slight” increase in profit this year, but that goal “has become significantly more ambitious.”Stephan Engels, the chief financial officer of Commerzbank, said that wording is a reflection of the “fighting spirit” at the lender.“It’s pretty clear if you look at what’s happening around us, especially over the last two, three days, with the escalation of the trade conflict, the easier version is probably to give up” the target, he said in an interview. “But that’s not the corporate DNA of Commerzbank.”(Updates with Commerzbank CFO comments in final paragraph.)\--With assistance from Carolynn Look, Nicholas Comfort and Matthew Miller.To contact the reporters on this story: Steven Arons in Frankfurt at email@example.com;Sonia Sirletti in Milan at firstname.lastname@example.org;Ruben Munsterman in Amsterdam at email@example.comTo contact the editors responsible for this story: Dale Crofts at firstname.lastname@example.org, Christian Baumgaertel, James HertlingFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Industrial production in Germany dropped by a larger-than-expected 1.5 per cent month on month in June, compounding fears that Europe’s largest economy could be heading for its first recession in more than six years. Analysts polled by Reuters had estimated output would fall 0.4 per cent during the month compared with May. The fall meant that industrial production was 5.2 per cent lower than a year ago, Germany’s statistics office said. Carsten Brzeski, ING’s chief economist for Germany, characterised the figures as “devastating, with no silver lining”.
Commerzbank warned its 2019 profit target was “significantly more ambitious” after the lender boosted risk provisions for non-performing loans and said it was facing “worsening” economic conditions. with larger rival Deutsche Bank earlier this year, previously told investors that it expected a “slight year-on-year increase” in net profit, which in 2018 stood at €865m. Shares in Commerzbank, which have fallen 38 per cent over the past 12 months, were down more than 5 per cent in early Wednesday trading in Frankfurt.
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. German industrial production registered its biggest annual decline in almost a decade, highlighting the severity of the trade-inflicted manufacturing slump in Europe’s largest economy.Output was down 5.2% in June from the previous year, the most since late 2009, when the country was recovering from the Great Recession that followed the global financial crisis. The numbers are the latest in a series pointing to a quickly deteriorating outlook that’s also starting to affect the labor market.The U.S. and China have stepped up their fight over import tariffs in recent days, bringing the world closer to fully fledged trade war that will also have grave consequences for Germany and the 19-nation euro area.Trade uncertainty and slowing global growth have already hit German factories in recent months and forced industrial giants including Daimler and Continental to lower their profit outlook. Companies have announced job cuts, and unemployment started to increase.Industrial production dropped 1.5% in June from the previous month, driven by an even steeper decline in manufacturing. The sector “remains mired in a downturn,” the Economy Ministry said in a statement Wednesday, adding that a disappointing performance in the second quarter was primarily due to weakness in metal, machinery and car production.What Bloomberg’s Economists Say“This is consistent with the industrial sector trimming 0.6 percentage point off GDP growth in the second quarter. With industrial weakness likely to persist in the third quarter, it risks spilling over into the services sector and causing a sharper slowdown in Germany’s economy.”\--Maeva Cousin. Read the full GERMANY REACT.The numbers come on the heels of a report on Tuesday that showed factory orders increased in June. The ministry cautioned though that the sector hadn’t yet reached a turning point.The Bundesbank predicts the economy contracted in the second quarter, and receding confidence among companies and investors is feeding speculation that Germany may be headed for a recession. A first estimate for the April-June period will be released on Aug. 14.Germany’s weakness is damping momentum in the euro area. The European Central Bank is reviewing monetary stimulus measures including further cuts to interest rates and renewed quantitative easing to prop up the region’s economy.\--With assistance from Kristian Siedenburg, Harumi Ichikura and Catarina Saraiva.To contact the reporter on this story: Kristie Pladson in Frankfurt at email@example.comTo contact the editors responsible for this story: Paul Gordon at firstname.lastname@example.org, Jana Randow, Craig StirlingFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Commerzbank on Wednesday posted net profit in the second quarter that was little changed from a year ago, helped by low taxes, but the German bank said its target for a slight increase in full-year net profit had become "significantly more ambitious". Net profit of 271 million euros ($303.79 million) in the quarter was better than the 217 million euros expected by analysts and compares with 272 million euros a year earlier. Commerzbank is working on a new strategic plan that it will present later this year after talks to merge with Deutsche Bank were discontinued in April.
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Commerzbank loaded up on shares of Elon Musk’s company in the second quarter. The bank also initiated a position in ride-share firm Uber, and bought more shares of Microsoft and Mastercard.
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(Bloomberg Opinion) -- If investors had been willing to give Deutsche Bank AG’s mammoth overhaul the benefit of the doubt, they have been just given cause to think again.It's now clear that one of the key assumptions underpinning the fixed-income powerhouse’s July 7 restructuring plan was too optimistic – specifically that interest rates wouldn't fall as much as the market now expects them to. Without any relief from this deeper pain, Deutsche Bank’s goal of growing revenue at the businesses it wants to keep by 2% a year through 2022 is at risk.“It does represent a revenue pressure for us, and all of the banks, if rates from here go down further,” Chief Financial Officer James von Moltke told Bloomberg Television on Wednesday as the bank posted its biggest quarterly loss since 2015.If the European Central Bank doesn’t offset any cuts with, for example, the tiering of deposits – where it charges lenders less to park some of their surplus cash with it – the shift could have “a significant impact on revenues relative to our current expectations,” the company said in a statement. The ECB starts meeting today to set interest rates, and economists are divided on whether it will introduce such a measure if does decide to lower.For a firm struggling to rebuild credibility with investors after five restructuring plans in four years, just a hint that its latest overhaul may be built on shaky foundations is unhelpful. Odder still, though, is that interest rate assumptions in the euro zone haven’t shifted much in the two weeks since the bank announced the plan. That makes the apparent change all the more troubling.At the end of May, market implied rates pointed to little change in the ECB's policy in the coming two years. By the time of Deutsche Bank's statement earlier this month, expectations were for rates to decline by about 16 basis points. Now, the market is anticipating a drop of 25 basis points by 2021, as this chart shows.Von Moltke says Germany’s biggest bank had to make “some planning assumptions” and “those happened to be at the end of May” – but it seems odd not to have spelled out the impact of the shift in rate expectations in June when it announced the plan to investors the following month.To me, it looks worryingly like hope rather than realism may have formed the basis for some of the key estimates in the revamp. And remember this isn’t a small piece of tinkering. It’s an ambitious effort that will see the bank cut one in five jobs and exit the equities trading business. It will be especially challenging to keep growing the core bank as worried clients are wooed by rivals.Deutsche Bank’s second-quarter numbers highlight other concerns, too. Revenue from fixed-income trading fell 11%, more than at its U.S. peers. Income from advising on deals – remember that corporate finance will be the heart of the new Deutsche Bank – dropped by a staggering 30%, trailing rivals that have reported so far. UBS Group AG reported an 18% increase on Tuesday.Deutsche Bank Chief Executive Office Christian Sewing acknowledged this isn't good enough, and the investment bank must do better, saying he won't make excuses. Unfortunately, it's a refrain that has become all too familiar to investors.While the German banking behemoth remains committed to shrinking its balance sheet by about 250 billion euros, the composition of its new bad bank has also changed from two weeks ago. The company now intends to keep more revenue-generating assets within the core bank. The bad bank's revenue will now be about 1.8 billion euros, down from the 2.5 billion euros the firm estimated on July 7. Sales at the investment bank are expected to rise by almost the same amount. While Sewing has said the adjustment reflects a desire to minimize the damage to the franchise, it’s still not clear exactly how the lender is deciding whether to keep or shed assets.After abandoning talks to merge with smaller rival Commerzbank AG in April, Sewing has been under tremendous pressure to show what the firm can do on its own to restore profitability. If he is to stand a chance of delivering his turnaround effort, he cannot afford to fumble the execution. Counting on help from monetary policy makers to make his plan work isn’t a great start.\--With assistance from Mark Gilbert.To contact the author of this story: Elisa Martinuzzi at email@example.comTo contact the editor responsible for this story: Edward Evans at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or 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/opinion©2019 Bloomberg L.P.
(Bloomberg Opinion) -- The radical restructuring of Deutsche Bank AG unveiled at the start of July will be a monumental task for the lender’s senior managers. The job of the European Central Bank’s finance industry supervisors, who have to make sure the revamp goes smoothly, won’t be easy either.Deustche’s plan is a last-ditch attempt to make sure the troubled bank avoids more serious problems in the future. The ECB will need to use its regulatory stick and carrot wisely. This means standing by the lender in its sensible efforts to downsize, but being ready to demand more capital if the attempt doesn’t go according to schedule.Andrea Enria, head of the Single Supervisory Mechanism (the ECB’s banking supervisory body), dodged a bullet in April when Deutsche and its domestic rival Commerzbank AG decided not to merge. The combination would have created a mega-lender that was too big to fail and one that had little credible prospect of shrinking any time soon. The collapse of the talks left Deutsche’s executives with little alternative but to scale down on their own, which was always the best route.So far the supervisors have been supportive of the bank’s restructuring. Deutsche will target a core capital ratio (CET1) of 12.5%, which is above its minimum level of 11.8% but below the 13.7% in the fist-quarter and a previous full-year target of higher than 13%. This concession means the lender won’t have to raise extra capital on the market, a boon for its shareholders. The message from the ECB seems to be that so long as the bank is willing to address its problems and become less risky, the supervisors will support it.Such leniency makes sense but it cannot last forever. Deutsche’s strategy involves several uncertain steps, including the creation of a “bad bank” to hold 74 billion euros ($83.2 billion) of risk-weighted assets. This move accompanies the courageous decision to shut down Deutsche’s equity trading and sales business, which became a liability as the lender tried unsuccessfully to compete with Wall Street’s giants. Some of these assets will have to be sold and the central question for supervisors is what price Germany’s largest bank will be able to command. Should it be too low, this might create a capital hole.This issue is acute because Deutsche will start from a position of weakness in any sale negotiations. Some of the assets are illiquid and there may not be many buyers queuing up for them. Deutsche’s bargaining power will be weakened further because potential purchasers know it’s under pressure to sell.The unwinding of Deutsche’s equity business could bring to the fore a controversy that has long tormented the SSM. Some – notably the Bank of Italy – have argued that the illiquid assets sitting on the balance sheets of large lenders like Deutsche are a far bigger problem than the ECB has dared acknowledge. The central bank has always insisted supervision has been adequate and that there’s been no special treatment for certain countries or lenders.Supervisors certainly can’t afford for this restructuring to go wrong. In 2016 the International Monetary Fund singled out Deutsche as “the most important net contributor to systemic risks” to the global financial system. For now the German lender appears to have enough capital and plenty of liquidity, although its profitability has been poor. In the absence of a convincing turnaround, the ECB may face uglier questions in the future, including whether Berlin should be allowed to rescue the bank. While the EU has vowed to ensure that any bank can be wound down safely, this is untested in the case of mega-banks such as Deutsche.Enria’s legacy at the helm of the SSM will hinge on how well he oversees Deutsche’s reset. For the sake of the EU’s financial stability, one hopes he gets it right.To contact the author of this story: Ferdinando Giugliano 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 the editorial board or Bloomberg LP and its owners.Ferdinando Giugliano writes columns on European economics for Bloomberg Opinion. He is also an economics columnist for La Repubblica and was a member of the editorial board of the Financial Times.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg Opinion) -- One of Europe’s largest financial institutions, Deutsche Bank AG, finally appears poised to do what the entire region’s banking sector needs to do: get rid of bad assets and increase its capacity to absorb losses.If the plan works, it will be a step in the right direction. That said, European authorities had better be ready to act if it doesn’t.CEO Christian Sewing has announced the bank’s most ambitious reorganization to date — eliminating some 18,000 jobs, and largely abandoning the German giant’s efforts to compete with U.S. investment banks, particularly in equities trading. The new Deutsche Bank, if all goes well, will be much more focused on the expanding business of serving corporate clients.There is no question that this decision comes with great personal pain. A lot of lives were upended this week. Still, this course is far more promising than the one Sewing was previously considering: merging Deutsche with crosstown competitor Commerzbank AG. That would have created a bigger entity with potentially bigger problems.The new plan improves systemic safety in two ways. First, it will leave Deutsche Bank’s balance sheet more than 200 billion euros smaller — a good thing, bearing in mind that Europe is still overbanked and needs to redistribute its banking capacity to better reflect demand. Second, the plan will help Deutsche handle future shocks. By 2022, the bank aims to have about 5 euros in loss-absorbing capital for each 100 euros in assets — a leverage ratio of 5%, up from 3.9% at the end of March. This will make a hitherto undercapitalized bank less of a weak link in the European financial system.Granted, this new leverage ratio doesn’t account for the riskiness of Deutsche’s business, which (according to regulatory standards) will increase. Also, a ratio of 5% — assuming the bank can achieve it — would still fall far short of what would be needed to weather a severe crisis.This is where European authorities come in. They’ve been slow to compel banks to develop realistic crisis plans, and to pre-commit the financial resources needed to wind down large institutions with minimal collateral damage. And Europe’s governments, eager to build and sustain national champions, have often indulged the kind of overreach that blighted Deutsche’s prospects. In the future, regulators need to be less forgiving and more impatient, so that Europe’s financial system is better prepared for the next crash.—Editors: Mark Whitehouse, Clive Crook.To contact the senior editor responsible for Bloomberg Opinion’s editorials: David Shipley at email@example.com, .Editorials are written by the Bloomberg Opinion editorial board.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.