|Bid||109.97 x 1100|
|Ask||109.98 x 800|
|Day's Range||109.03 - 111.08|
|52 Week Range||91.11 - 119.24|
|Beta (3Y Monthly)||1.22|
|PE Ratio (TTM)||11.88|
|Forward Dividend & Yield||3.20 (2.91%)|
|1y Target Est||N/A|
(Bloomberg Opinion) -- Aviation has long been considered General Electric Co.’s crown jewel, but with the company’s free cash flow turning negative this year, “crown jewel” is a relative term and the business is coming under increasing scrutiny. Some of it is deserved; some isn’t.GE Aviation CEO David Joyce seemed to be on a mission at this year’s Paris Air Show to prove his division’s worth. He arrived armed with more financial detail than GE had ever previously provided for the business, came out swinging against suggestions he was sacrificing price to score revenue wins, and announced some notable orders. And yet questions remain about what the business’s true financial profile would be if it was reconstituted as a stand-alone company and cut off from the tax and working-capital benefits that have historically come with being part of the mother ship. That matters, because many investors continue to value GE based on the sum of its parts, the argument being that the aviation unit alone can offset trouble spots in GE’s power, renewables and long-term care insurance operations and support a higher valuation for the stock.First, the positives: GE Aviation and its CFM International engine joint venture with Safran SA booked $55 billion in orders for engines and services at the Air Show, exceeding the $35 billion target Joyce laid out at a media briefing at the start of this week.(2) Like most order tallies from the event, not all of that is technically new business. The number includes an order from AirAsia that had initially been announced in 2016 and entails 200 of GE’s LEAP engines. The purchase was finalized at this year’s event and AirAsia also expanded a servicing agreement, bringing the total value of the deal to $23.1 billion before customary discounts. But there was also a significant new win: Indian budget carrier IndiGo agreed to a $20 billion order for Leap engines, spares and overhaul support.The deal is a blow to United Technologies Corp.’s Pratt & Whitney arm, which had been the sole provider of engines for IndiGo’s Airbus SE A320neo jets. As with Boeing Co.’s face-saving win of an order for its embattled 737 Max jet, some analysts have wondered what GE had to give up in order to convince IndiGo to abandon Pratt. They were encouraged in this thinking by comments from Pratt President Bob Leduc, who said “GE was willing to be more aggressive than we were” on pricing. That may just be Leduc talking his book, though.(4) Unlike in the depressed gas turbine market, where every revenue win likely comes at a cost to GE’s margins, GE shouldn’t need to sacrifice profit to chase market share in aviation – both in general and in the case of this particular deal. Pratt’s GTF engine has had a series of glitches that ultimately proved fixable and relatively minor, but as one of the largest buyers, IndiGo has borne the brunt of the fallout, including in-flight engine shutdowns and grounded planes. Earlier this year, India mandated weekly inspections of certain engine parts and restricted some operations for Airbus planes powered by the GTF. GE has engine headaches of its own. Boeing’s CFO Greg Smith put GE on the hot seat earlier this month, saying its GE9X engine was holding up the aerospace giant’s new 777X plane. At a media briefing this week, Joyce said GE discovered a part of the engine was showing more wear than anticipated and because of the extensive testing required to prove it had fixed the issue, the 777X’s first flight likely won’t happen until the fall. Investors are understandably jittery over any product setbacks after the uncovering of durability issues with GE’s flagship H-class gas turbine. But given the GTF’s history of bugs, I find it hard to fault GE for making tweaks to its engine. In the wake of the voluminous criticism directed at Boeing and the FAA for not realizing the potential impact of a software system linked to the Max’s two fatal crashes, rigorous testing – before the planes start flying – would seem to be in everyone’s best interest.GE has argued it has a technology advantage that will continue to give it an edge even as United Technologies increases its R&D budget through a blockbuster merger with defense contractor Raytheon Co. That remains to be seen, and I don’t think GE’s order wins at the Air Show tilt the scale one way or another. A smart R&D budget is worth more than a big one, but United Technologies will have a lot of money to work with and that will make it difficult for GE and others to stand pat. GE Aviation’s ability to respond to that competition ultimately boils down to how much cash flow it generates – and that’s where confusion continues to reign supreme. At Tuesday’s analyst event, Joyce laid out the various inputs behind the unit’s reported $4.2 billion in free cash flow last year. It was a sign the company is taking investors’ demands for more transparency seriously, although it remains disappointing that these disclosures come in fits and starts. There were some positive takeaways: Citigroup Inc. analyst Andrew Kaplowitz noted the improvement in inventory turns in 2018 even as GE ramped up production of the Leap. But one sticking point was the allocation of corporate costs including pension, interest and taxes, with JPMorgan Chase & Co. analyst Steve Tusa and Gordon Haskett’s John Inch debating whether the unit was carrying its fair share.On the subject of taxes, GE didn't do itself any favors as far as illuminating what's really happening in the aviation unit. The presentation included a line that indicated taxes and other operating expenses deducted $100 million from the aviation unit’s cash flow, which seems quite low on the face of it. But the aviation unit actually pays more than that in taxes. And GE isn't hiding that burden from its calculation of the free cash flow. You just have to know where to look for it.The starting point for GE’s explanation of how it calculated the aviation unit’s free cash flow – $5.8 billion in net earnings after adjusting for depreciation and amortization – had already been adjusted for taxes accrued, based on its operations, according to a company representative. GE confirmed the aviation unit pays a tax rate in the low 20% range that CFO Jamie Miller has guided to for the entire company. The $100 million number for taxes and other operating expenses in the Air Show presentation is something different. That is the difference between taxes paid and accruals in 2018. Are you still with me?The fact that this is all so confusing underscores one of the issues I’ve had with GE’s efforts to be more transparent. Disclosures come in fitfully and often leave people with only more questions. I don’t think GE always does this on purpose; it’s partly a reflection of the fact that this remains an incredibly complex company and any given number is going to require a half-hour explanation. But you can’t have it both ways. Is GE Aviation a crown jewel? Yes. Is GE very good at explaining that? It could use some work in that department. (1) The total doesn't include engines for the 200 737 Max jets that British Airways owner IAG SA ordered at the Air Show. CFM is the sole engine provider for that plane.The list price for those engines is $5.8 billion.(2) The flip side of Leduc's comments was Rolls-Royce Holdings Plc CEO Warren East's description of GE as a "very savvy commercial operator."To contact the author of this story: Brooke Sutherland at email@example.comTo contact the editor responsible for this story: Beth Williams at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Brooke Sutherland is a Bloomberg Opinion columnist covering deals and industrial companies. She previously wrote an M&A column for Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
The annual stress-test report cards for large U.S. financial companies are due out Friday. The consensus is that the banks are largely well-capitalized.
After the June policy meeting, the Fed kept the interest rates changed. However, the Fed sounded amenable to future rate cuts. President Trump has been a fierce critic of Fed Chair Jerome Powell.
(Bloomberg) -- Treasuries led a global bond rally, with 10-year yields dropping below 2% for the first time since November 2016 as expectations grow that major central banks will ease policy.The U.S. 10-year yield slid as much as five basis points to 1.9719% after the Federal Reserve signaled it was ready to cut interest rates. Japan’s benchmark yield dropped to minus 0.185%, near the bottom of the central bank’s targeted range after Governor Haruhiko Kuroda suggested policy makers won’t step in to prevent further declines. Similar rates in Germany fell deeper into the negative, approaching a record low reached earlier this week.The Fed on Wednesday scrapped its use of “patient” in describing its approach to policy, offering support for bond bulls who argue that the U.S.-China trade war will sap growth momentum. The dovish tilt came after European Central Bank President Mario Draghi signaled he’s ready to add monetary stimulus.“You’ve got a Fed that’s now changed its language and we’re on a path where there’s going to be rate cuts ahead,” said Shyam Devani, senior technical strategist at Citigroup Inc. in Singapore. “Whether it’s two or three times, it’s hard to say -- but there will be cuts.”The Treasury 10-year yield has fallen more than 70 basis points this year as the U.S.-China trade war took its toll on the global economy. Calls for a rate cut are growing with Pacific Investment Management Co. forecasting a 50-basis-point reduction in July.Read What Analysts Are Recommending on TreasuriesFrance and Spain sold debt at all-time low yields Thursday, joining euro-area nations from Germany and Portugal to Ireland that borrowed at record-low costs in the past two weeks. Bonds in Australia joined the rally, with 10-year yields falling as much as seven basis points to a record 1.271%. Similar-tenor New Zealand yields slid to an all-time-low 1.51%.“As yields head lower, investors could be tempted to lower their allocation to fixed income -- but we’d caution them against that,” Rachel O’Connor, portfolio manager at Vanguard Group Inc. said at a Bloomberg investment forum in Sydney Thursday. “Given the high level of uncertainties in markets at the moment, we’d be encouraging investors to think long term.”With the Fed and ECB mulling easing, that’s raising expectations of other central banks also adding to stimulus. It’s “not unrealistic” to expect another rate cut in Australia, the nation’s central bank chief Philip Lowe said in a speech Thursday, after policy makers lowered their benchmark for the first time in three years this month.BOJ ComfortBOJ Governor Kuroda indicated he was comfortable with the recent slide in the 10-year bond yield, after the central bank kept its policy unchanged.“There is no need to be extremely and strictly mindful about the concrete range of the rate,” he said during a news conference. “It’s appropriate to deal with it with some flexibility.”Still, with U.S. President Donald Trump and Chinese leader Xi Jinping planning to meet next week at the Group-of-20 gathering, some investors are betting the two nations will eventually reach a trade deal.“There are still people out there who are seeing Treasury yields as being too low given the possibility of the U.S. resuming trade talks with China,” said Naoichi Kanaoka, a senior strategist at Mizuho Securities Co. in Tokyo. “However, if the Fed reduces rates because of low inflation, then it would be full-swing policy easing rather than a preemptive cut.”The Fed on Wednesday lowered its inflation forecasts. Futures are now signaling four rate cuts before the end of next year, with one at the July 30-31 meeting fully priced in.The prospect of lower rates has prompted some investors to move further out along the yield curve, with 30-year yields falling as much as six basis points to 2.48% on Thursday, the lowest since October 2016.“This will be the start of a rate-cutting cycle, not a one- or two-off cut in isolation,” Bob Michele, head of global fixed income at JPMorgan Asset Management in New York, wrote in a research note.(Adds German bond move in second pragraph, French and Spanish debt sales in sixth.)\--With assistance from Stephen Spratt and Toru Fujioka.To contact the reporters on this story: Ruth Carson in Singapore at email@example.com;Masaki Kondo in Tokyo at firstname.lastname@example.orgTo contact the editors responsible for this story: Tan Hwee Ann at email@example.com, Anil VarmaFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
JPMorgan has proposed stripping a swath of middle-income Asian countries from its influential emerging market corporate bond indices in a move that could raise returns for investors but increase risk. The proposal would see companies from South Korea, Singapore, Israel and Taiwan removed from the CEMBI bond index family, tracked by an estimated $110bn of assets. If enacted, the move would bring the country inclusion criteria for the CEMBI indices into line with JPMorgan’s EMBI hard-currency EM sovereign bond benchmarks, unrooting debt from companies such as Teva Pharmaceutical, Hyundai, Singtel and Kia Motors from the index.
Square stock is down roughly 3.5% over the last three months as investors decide what's next for the once high-flying financial tech giant.
In addition to a planned location on Lancaster Avenue, the New York bank has also signed a lease to open a branch in a West Philadelphia redevelopment project.
(Bloomberg) -- General Electric Co.’s transformation is being led by its aviation business, given the unit’s stability and underlying growth, Citi analyst Andrew Kaplowitz wrote in a note to clients.While the aviation business is not perfect, it does seem to be “operating on all cylinders,” the analyst said. He noted that the company is raising the projected growth for its military segment and continuing to gain share versus its primary competitor with large new orders announced at the Paris Air Show.GE and Safran SA’s joint venture, CFM International, earlier this week also won a $20 billion order for jet engines from Indian carrier IndiGo.“We sense a new energy in aviation and across GE especially regarding cash generation led by CEO Culp,” Kaplowitz added. The analyst maintained the buy rating on GE with a price target of $14.GE is currently undergoing a turnaround process after an unraveling that has wiped out more than 60% of the company’s market value over the past two years, and prompted the diversified manufacturer to divest multiple businesses. While its power turbine business is widely understood to be the most troubled, the aviation unit is often lauded as a competitive, well-run unit.JPMorgan analyst Stephen Tusa, who holds a bearish view on the stock, said the aviation business would have a valuation of about “$60 billion at best,” assuming a 2021 free cash flow yield of about 7%.To contact the reporter on this story: Esha Dey in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Brad Olesen at email@example.com, Jennifer Bissell-Linsk, Steven FrommFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- Earlier this month, my colleague Elisa Martinuzzi suggested that merging Deutsche Bank AG and UBS Group AG would, on paper at least, create a European banking champion. She concluded, though, that the regulatory obstacles to such a deal would probably be insurmountable. But there is a three-way combination that could create a regional lender with the heft to take on the U.S. banks without falling foul of national regulators.Jean Pierre Mustier has done much house-cleaning in his two years as chief executive officer of Italy's UniCredit SpA. So it’s not much of a stretch to posit that he might regard himself as the right leader to forge a European powerhouse. And while his current institution owns HypoVereinsbank in Germany, it still depends on Italy for almost half of its revenue.Mustier has already dallied with the idea of buying Commerzbank AG after talks between the German lender and Deutsche Bank broke down in April. Adding Commerzbank would increase his access to the small- and medium-sized German clients known as Mittelstand companies.With Deutsche Bank still in intensive care, the German authorities should welcome the opportunity to see its other problem child adopted by UniCredit for many of the same reasons as they championed the mooted domestic tie-up. But to build a true challenger to the growing U.S. dominance of European lending, Mustier would need to add a third geographic region to his stable – and here his nationality might be key to overcoming tribal objections.As a Frenchman running an Italian-German institution, Mustier would be well-placed to convince the authorities in Paris that Societe Generale SA would thrive under his stewardship.Adding SocGen’s expertise in derivatives would expand the range of balance-sheet tools that Mustier can offer to those Mittelstand companies and other customers in Europe. And the newly merged triumvirate – let’s call it UniComSoc, ignoring the Orwellian overtones – would be a true regional champion. In international bond underwriting, the trio would command a 6.3% market share based on the individual performance of the three banks in the first five months of this year. None of the trio is currently a top ten player; the merged group would rank behind only JPMorgan Chase & Co. with 7.2% of the market, and Citigroup Inc. with 6.9%.In European equity offerings, the merged firm would sneak into a top 10 dominated by U.S. and Swiss firms, again based on market share through May:But in European loans, a market worth almost 300 billion euros ($336 billion) so far this year, the combination would be a market-beating powerhouse with a share of almost 13 percent. Given European companies remain reliant on bank loans rather than the capital markets to satisfy the bulk of their funding needs, that’s the most important reservoir of capital and the one that European regulators would be keenest to see being provided by a leading domestic source.The futures market is now starting to anticipate a cut in borrowing costs from a European Central Bank whose ultra-low interest rates have already weighed heavily on bank profitability. The worsening economic outlook that’s seen European government bond yields drop to record lows this week should add a sense of urgency to the acknowledged need for cross-border banking mergers.If the combination of Deutsche Bank and Commerzbank turned out to be shooting for the moon, maybe Mustier should aim even higher to land among the stars.To contact the author of this story: Mark Gilbert at firstname.lastname@example.orgTo contact the editor responsible for this story: Edward Evans at email@example.comThis column does not necessarily reflect the opinion of the editorial board or 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/opinion©2019 Bloomberg L.P.
(Bloomberg Opinion) -- Expect “Pig-gate” to blow over. UBS Group AG’s ultra-rich Chinese clients are unlikely to desert the Swiss bank for local rivals, whatever the level of outrage over language used by its chief economist in a research report last week.The bank's potential loss of Chinese share-sale mandates isn’t a critical blow: UBS ranks a distant 11th in underwriting Hong Kong IPOs in 2019. (The bank fell behind after a one-year ban by the Securities and Futures Commission over deficiencies in its work on three companies that ran into trouble after listing.) Nor is the loss of bond mandates, such as its exclusion from a sale by state-owned China Railway Construction Corp.Wealth management is different. UBS is vying for a share of a Chinese private-banking market that was worth a record $24 trillion in 2018, according to Boston Consulting Group. The furor among local brokerages over UBS’s use of “Chinese pig” in a report on pork supply and inflation comes just as the Swiss firm and other foreign banks are muscling in on their turf. Switzerland’s Credit Suisse Group AG, Japan’s Nomura Holdings Inc., and Wall Street giants JPMorgan Chase & Co. and Morgan Stanley are among firms that have received approval to expand or are working toward taking majority stakes in China ventures.On top of that, Chinese regulators have cracked down on high-risk wealth management products sold by local banks and brokerage firms. That’s leveled the playing field for overseas competitors, which say their stricter compliance guidelines wouldn’t allow them to offer such investments.Still, it’s outside China where UBS has most to protect. Like all foreign banks, it’s a minnow in the mainland market. By contrast, there’s a treasure trove of Chinese money being managed offshore in cities such as Hong Kong, Singapore and New York, according to a survey by consulting firm Capgemini SE last year. Boston Consulting reckons that market is worth $1 trillion. And here, UBS is hard to beat.At the end of last year, the Zurich-based bank had $152 billion more in assets under management in Asia outside mainland China than Credit Suisse, its nearest rival. Chinese players don’t rank in the top 10 for bankers to well-heeled individuals in the region, according to data from Asian Private Banker.UBS took in an unprecedented $16 billion in net new money in the first quarter, driving its Asia-Pacific assets to $405 billion. Credit Suisse collected the equivalent of $4.4 billion. UBS was also the region’s top equities trading house in the region last year, ahead of Morgan Stanley and JPMorgan, according to data from London-based analytics firm Coalition Development Ltd. It’s been Asia’s No. 1 equities house since 2010. That’s key for high-net-worth individuals looking for ideas to trade on.Money tends to flow to where it earns the most, other things being equal. Also, many clients have bought derivatives from UBS, which can’t be unwound at short notice without heavy penalties. UBS can console itself with the thought that other foreign banks have been able to ride out similar difficulties in Asia. Time is on its side. To contact the author of this story: Nisha Gopalan at firstname.lastname@example.orgTo contact the editor responsible for this story: Matthew Brooker at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Nisha Gopalan is a Bloomberg Opinion columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
Investors have been excited for a while now about the potential for a Palantir market debut, even though the company has yet to lay out any specific plans for an initial public offering.
"The types of developments our clients are looking for, Aureum fits that to a tee," says developer with a client roster including J.P. Morgan, Liberty Mutual, Toyota, State Farm and defense contractor Raytheon.
(Bloomberg) -- U.S. new-home construction fell in May after an April reading that was stronger than initially reported, signaling stabilization in the market amid lower borrowing costs.Residential starts dropped 0.9% to a 1.27 million annualized rate after a revised 1.28 million pace in the prior month, according to government figures released Tuesday that compared with a 1.24 million estimate in Bloomberg’s survey. Permits, a proxy for future construction, increased 0.3% to a 1.29 million rate that was about in line with estimates.Key InsightsPermits increased to the best level since January in a sign that the market is poised to hold up during the busy summer season despite the dip in starts. Still, housing has shown signs of weakness including a report Monday that homebuilder sentiment fell for the first time this year on rising construction costs and trade concerns.Reports due over the next week are forecast to show existing home sales, which make up the majority of the U.S. housing market, rose in May while the pace of new home sales also increased.Economist’s View“Although housing prices continue to show signs of cooling and some other housing indicators have wobbled in recent months, this morning’s starts and permits data suggest little cause for immediate concern,” JPMorgan Chase & Co.’s Jesse Edgerton wrote in a note. Still, there’s “little sign of a decisive pickup.”What Our Economists Say“Wet weather conditions in the Midwest and cost increases for building materials amid higher tariffs will limit near-term progress in housing construction. Housing is unlikely to contribute to economic growth to any meaningful degree either this year or in this business cycle.”-- Yelena Shulyatyeva and Carl Riccadonna, economistsClick here for the full noteGet MoreSingle-family starts fell 6.4% to 820,000 while permits climbed 3.7%.New construction declined in three of four regions, led by the Northeast dropping 45.5% to a four-year low. The South posted an 11.2% increase.The report is produced jointly by the U.S. Census Bureau and the Department of Housing and Urban Development.(Updates to add chart, quote and Bloomberg Economists section.)\--With assistance from Jordan Yadoo.To contact the reporter on this story: Reade Pickert in Washington at firstname.lastname@example.orgTo contact the editors responsible for this story: Scott Lanman at email@example.com, Jeff KearnsFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
JPMorgan Chase & Co plans to convert its $2 billion Highbridge multi-strategy fund into a credit-focused fund as the bull market shows signs of slowing and clients want to invest elsewhere, a company spokesman said on Tuesday. The Highbridge fund, which is available to institutional and wealthy private investors, is part of JP Morgan's $150 billion global alternatives business, which offers real estate, private equity, credit, infrastructure and hedge fund portfolios. As part of the change, one of the four lead portfolio managers, Arjun Menon, will be leaving the company.
JPMorgan Chase & Co NYSE:JPMView full report here! Summary * Perception of the company's creditworthiness is neutral * ETFs holding this stock are seeing positive inflows * Bearish sentiment is low * Economic output for the sector is expanding but at a slower rate Bearish sentimentShort interest | PositiveShort interest is extremely low for JPM with fewer than 1% of shares on loan. This could indicate that investors who seek to profit from falling equity prices are not currently targeting JPM. Money flowETF/Index ownership | PositiveETF activity is positive. Over the last month, ETFs holding JPM are favorable, with net inflows of $7.28 billion. Additionally, the rate of inflows is increasing. Economic sentimentPMI by IHS Markit | NegativeAccording to the latest IHS Markit Purchasing Managers' Index (PMI) data, output in the Financials sector is rising. The rate of growth is weak relative to the trend shown over the past year, however, and is easing. Credit worthinessCredit default swap | NeutralThe current level displays a neutral indicator. JPM credit default swap spreads are within the middle of their range for the last three years.Please send all inquiries related to the report to firstname.lastname@example.org.Charts and report PDFs will only be available for 30 days after publishing.This document has been produced for information purposes only and is not to be relied upon or as construed as investment advice. To the fullest extent permitted by law, IHS Markit disclaims any responsibility or liability, whether in contract, tort (including, without limitation, negligence), equity or otherwise, for any loss or damage arising from any reliance on or the use of this material in any way. Please view the full legal disclaimer and methodology information on pages 2-3 of the full report.
(Bloomberg) -- European Central Bank policy makers anticipate using an interest-rate cut as their first stimulus move if they need to act again to boost inflation, according to three euro-zone central bank officials.Lowering borrowing costs further below zero would be the most likely initial step rather than resuming asset purchases, said the officials, whose alarm at the descent of market inflation expectations to a record low is nudging them all toward favoring action. They didn’t want to be identified, citing the confidentiality of such discussions. An ECB spokesman declined to comment.ECB President Mario Draghi appeared to set a low bar for action on Tuesday when he said additional stimulus will be needed “in the absence of any improvement” to the outlook for growth and inflation. He specifically cited rate reductions as an option, sending the euro lower and prompting money markets to price in a 10 basis-point cut by December.Investors subsequently brought forward their expectations to September after Bloomberg’s report. Commerzbank AG now predicts such a policy step in July, while JPMorgan Chase & Co. said it now expects a rate cut in September.“Draghi is going to finish his tenure with a cut,” said Claus Vistesen, chief euro-zone economist at Pantheon Macroeconomics. “The door is now open and I don’t see how they can not walk through it.”An ECB rate reduction could stoke trade tensions with U.S. President Donald Trump’s administration. He tweeted on Tuesday that ECB action that weakens the euro is unfair.Draghi, who spoke at the ECB’s annual forum in Sintra, Portugal, also said the institution could resume quantitative easing, even if it needs to raise self-imposed limits to do so. While those rules were put in place to avoid crushing markets and crossing the line between monetary and fiscal policy, he said they are “specific to the contingencies we face.”What Bloomberg’s Economists Say...“Draghi seems to be notching up his dovish tone. Today he hinted that the Governing Council may be willing to tolerate inflation running above the ECB’s goal to compensate for the recent, protracted period of below target price gains...Achieving this objective could involve further interest rate cuts or restarting the asset purchase program.”\--David Powell and Maeva Cousin Click here to read the full REACTThe ECB is grappling with an economic slowdown and an inflation rate that remains entrenched below its goal. Draghi said risks from geopolitical factors, protectionism and vulnerabilities in emerging markets haven’t dissipated and are weighing in particular on manufacturing.That sentiment is being felt at major central banks around the world, which are moving back into battle mode. The U.S. Federal Reserve, Bank of England and Bank of Japan all hold policy meetings this week, which should give further insight into their concerns. Investors are betting on U.S. interest rate cuts later this year, while central banks in Australia, Russia, India and Chile have already loosened policy.The ECB Governing Council looked at stimulus possibilities at its June 6 decision, though stopped short of determining a need for immediate action. Draghi’s mention then of the option of more QE left his former adviser, Arnaud Mares, now an economist at Citigroup, with the impression that the ECB would use that tool first rather than rate cuts.One concern over further rate cuts is that it might squeeze banks’ profitability to the point where they pare back lending to companies and households. They’ve complained that they can’t easily pass on the negative deposit rate onto their depositors.On Tuesday, Draghi also referred to possible need for “mitigating measures” to soften the effect of the ECB’s negative rate, currently at minus 0.4%.While one ECB official said a tiering system that exempts some banks’ deposits from the sub-zero penalty would almost certainly be required in the event of further cuts, that could be a sticking point. Another of the officials said there’s no need for tiering and a decision on that could at least be put off until later.The officials were open on the timing of any move. A Federal Reserve interest-rate cut could become a trigger if a narrower difference between U.S. and euro-area policy rates threatened to boost the euro, two of them said. The exchange rate isn’t a policy target for the ECB, but the officials noted that it can have a significant impact on inflation and growth.ECB staff see inflation reaching only 1.6% in 2021, compared with a goal of just under 2%, and Draghi will leave office this October as the only ECB president never to have raised interest rates.“If the crisis has shown anything, it is that we will use all the flexibility within our mandate to fulfill our mandate,” Draghi said Tuesday. “And we will do so again to answer any challenges to price stability in the future.”(Updates with money markets, Trump comments starting in fourth paragraph.)\--With assistance from Catherine Bosley and Joao Lima.To contact the reporters on this story: Paul Gordon in Sintra, Portugal at email@example.com;Piotr Skolimowski in Sintra, Portugal at firstname.lastname@example.orgTo contact the editors responsible for this story: Craig Stirling at email@example.com, Fergal O'BrienFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
A number of incumbent banks are known to be developing new digital-firstproducts in a bid to keep the new wave of challenger banks at bay and now itappears that the latest to make that move is J
JPMorgan Chase’s asset management chief Chris Willcox is retiring and will be replaced by senior executive George Gatch. The bank’s asset and wealth management boss Mary Erdoes announced the news in a memo to sent staff on Tuesday afternoon and seen by the Financial Times. A spokesman for JPMorgan confirmed the memo’s contents.
(Bloomberg Opinion) -- Ever since Deutsche Bank AG abandoned talks to merge with Commerzbank AG in April, a drip-feed of information on what Germany’s biggest lender plans next has leaked out.For Chief Executive Officer Christian Sewing, the danger is that he finds most of his cards have been played well before he can unveil his overhaul at the end of next month. He can ill afford to disappoint investors. Deutsche Bank has presented four strategic overhauls in as many years, not one of which has been able to stop the shares from plumbing new record lows. The firm is valued at just one quarter of its tangible book value – the steepest discount among its peer group.This week, the Financial Times reported that Sewing will transfer about as much as 50 billion euros ($56 billion) of trading assets – mostly long-dated derivatives – into a so-called bad bank. The firm is also considering plans to close its equities and rates trading businesses outside Europe.Exiting U.S. equities and rates has been a long time coming. A retreat from the U.S. securities business is a shift many (including yours truly) have argued is worth pursuing in light of Deutsche Bank’s sub-scale presence in the market. Global equities has been a sore spot for the firm, racking up annual losses of about 600 million euros, according to estimates from JPMorgan Chase & Co.What investors are still missing, though, is a clearer sense of how a smaller footprint would help restore profitability. Even if Deutsche Bank were able to finance the retreat from capital-intensive businesses without having to tap investors for more funds, sustainable returns remain a distant prospect.The bank had been counting on growing revenue this year to reach a 4% return on tangible equity. Given the dire outlook for trading in the second quarter after a contraction in the first, it’s hard to imagine that objective will be met.Return on tangible equity stood at 1.3% in the first quarter. Further cost-cuts beyond the investment bank may be necessary. According to JPMorgan, annual firm-wide costs may need to drop to 18 billion euros from 22.8 billion euros in 2018 for the firm to stand a chance of reaching a ROTE of 5% or more by 2021.What is also missing so far from Sewing’s vision is a sense of how and where the firm can grow as interest rates are likely to stay lower for longer. At home, the commercial bank, which generates about 40% of revenue, faces stiff competition from savings and cooperative lenders that is squeezing margins.Sewing is considering giving a boost to the firm’s transaction banking business, which tends to be overshadowed by the trading units, Bloomberg News reported in May. What that will mean in practice hasn’t been articulated. To keep up with the competition in payments and cash management, the lender will need to spend on technology. For the commitment to be credible, it will need to come with a big number attached.All that said, Sewing deserves to have a shot at putting his own mark on the company. The merger talks with Commerzbank have overshadowed a lot of his work so far. He has over-delivered on cost-cutting under the existing (if unambitious) plan. But with a German recession just around the corner, time isn’t on his side. He urgently needs to communicate his vision for Deutsche Bank – and on his own terms.To contact the author of this story: Elisa Martinuzzi at firstname.lastname@example.orgTo contact the editor responsible for this story: Edward Evans at email@example.comThis 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.
JPMorgan-owned hedge fund Highbridge is shutting large parts of its business to focus on corporate debt investing, after a long spell of poor performance by its former flagship “multi-strategy” fund. The hedge fund’s chief investment officer Mark Vanacore said in a letter to investors on Tuesday that after reflecting on “the most prudent approach for the future of our business, our employees and most importantly, our investors”, it has decided to focus exclusively on its credit funds. Among the funds being closed is the multi-strategy fund that once managed nearly $10bn, but was hit by the financial crisis and struggled to recover.