November 20, 2019

Greece Buys Back Debt, Clearing Way for More Aid

The complex and contentious debt buyback, financed by a 10 billion euro, or $13 billion, loan from the country’s creditors, will allow Greece to erase 20 billion euros of its 344 billion euro debt, and in so doing, secure the backing of the International Monetary Fund, which has said it cannot lend any more money to Greece unless its stack of debt is reduced.

As a result, Greece will soon be able to receive more than 40 billion euros in desperately needed loans to recapitalize its banks and keep the government functioning.

“The buyback only helps to get debt down next year to around 176 percent of G.D.P. and annual debt servicing costs are reduced by just a marginal amount,” said Dimitris Drakopoulos, a sovereign debt expert at Nomura in London. “However, it does help Greece move on from the debt sustainability roadblock it hit this summer.”

What remains undecided is whether Greece’s creditors will lend the country extra funds — perhaps as much as 1 billion euros — to buy back the additional 2 billion euros in bonds offered above the original target of 30 billion euros.

Finance ministers from euro zone countries were set to discuss the buyback on a conference call on Tuesday afternoon, and the final results are expected to be announced on Wednesday.

The deadline for the debt swap had been extended from last Friday to noon on Tuesday after it became clear that the deal was about 4.5 billion euros shy of completion. Responsible for the bulk of the shortfall were Greek banks, which, having tendered 10 billion euros last week, reluctantly agreed to add 4 billion euros or so and have now sold most of their restructured bonds.

Hedge funds, which have tendered about 15 billion euros in bonds, came in with a much smaller figure. Despite thinly disguised threats from the government that their bonds might take a big hit in a future transaction, many foreign investors preferred to keep half, if not more, of their bond holdings in the belief that a successful buyback would improve Greece’s standing in the markets and thus increase the value of their bonds.

With Greek bonds trading at 36 cents on the euro — up more than 100 percent from the early summer — that belief seems to have been justified. Investors, once frightened that Greece might leave the euro, have piled into the bonds, betting that the economy is on the way to recovery.

Still, the country’s economic condition remains dire and there are few signs of economic growth.

Article source: http://www.nytimes.com/2012/12/12/business/global/greece-exceeds-target-in-debt-buyback-plan.html?partner=rss&emc=rss

Tesco Backing Away From U.S. Operations

Tesco said that it was considering different options for the business and that it had in recent months been approached by several parties to buy all or parts of Fresh Easy. Tesco said it might also team up with other companies.

Tim Mason, Fresh Easy’s chief executive, will leave Tesco after more than 30 years with the company, it added.

Aldi Group, the German discount supermarket chain, could be among those interested in acquiring the business, while Wal-Mart Stores could bid for parts of it, analysts said.

“It is now clear that Fresh Easy will not deliver acceptable shareholder returns on an appropriate timeframe in its current form,” Tesco said.

The Tesco chief executive, Philip Clarke, said during a conference call Wednesday that it was “likely that our presence in America will come to an end.”

Mr. Clarke turned his focus on the company’s home market this year with a $1.6 billion investment program to reverse a drop in profit in Britain. The decline had alarmed some investors, who had criticized Tesco for falling behind rivals at home while plowing money into an expansion abroad, including into the United States, that failed to pay off.

“They’ve given it a good go in the U.S. but clearly it has proven to be more difficult than they believed it to be,” said Robert Talbut, chief investment officer at Royal London Asset Management.

Tesco started its Fresh Easy brand about five years ago, hoping to have discovered a market niche for smaller stores offering warm meals. But despite pouring as much money into in Fresh Easy as it invested in its British operations — £1 billion, or $1.6 billion — only a few U.S. stores made a profit.

Earlier this year, Mr. Clarke pushed back the target date for when the business would break even. He also said Tesco would slow new store openings in the United States and remodel the existing stores, with in-store bakeries and stands selling fresh flowers.

Analysts have repeatedly warned that the U.S. business would struggle to make a profit amid fierce competition and a difficult economic environment.

Tesco’s shares jumped 2.8 percent in London after the announcement Wednesday, illustrating some relief among investors that the company was limiting future losses in the United States. The shares ended 3.3 percent higher.

“Whilst the business has many positives, its journey to scale and acceptable returns will take too long relative to other opportunities,” Mr. Clarke said in a statement. “I have therefore decided to conduct a strategic review of Fresh Easy, with all options under consideration.”

Food retailers around the world are confronting the challenge of consumers becoming more cost-conscious as a result of the economic crisis. Many companies have cut prices to retain customers, while growth in Asia — once enough to offset sluggish business elsewhere — has started to dip as well.

Tesco is likely to incur some one-time costs by scaling back in the United States, but the withdrawal would allow Mr. Clarke to focus his attention on repairing the ailing British business and on operations in Asia.

Tesco has said it plans to open seven more stores in China in the next month.

In Britain, Tesco expanded its product range and added services to its online business. Despite that, sales, excluding gasoline, fell 0.7 percent in Britain in the third quarter from a year earlier, Tesco said Wednesday.

The company said it hired the advisory firm Greenhill to help review its options. It expects to give an update on its plan for Fresh Easy in April.

Article source: http://www.nytimes.com/2012/12/06/business/global/06iht-tesco06.html?partner=rss&emc=rss

DealBook: Facing New Legal Worry, Barclays Reports a Loss

A branch of Barclays in London. On Wednesday, the British bank posted a net loss of £106 million ($170 million) in its latest earnings report.Facundo Arrizabalaga/European Pressphoto AgencyA branch of Barclays in London. On Wednesday, the British bank posted a net loss of £106 million ($170 million) in its latest earnings report.

LONDON — The British bank Barclays disclosed on Wednesday that it faced two new investigations by American authorities, including one examining whether the company had violated anticorruption laws in its capital-raising efforts during the financial crisis. The news further hurt the share price as the bank reported weak third-quarter results.

The new joint investigation from the Justice Department and the Securities and Exchange Commission on the bank’s capital-raising efforts follows similar efforts by British regulators. The Federal Energy Regulatory Commission is also investigating the past energy trading activity in the bank’s American operations. The commission’s staff on Wednesday recommended taking action against the bank and levying a $470 million fine. Barclays, which has 30 days to respond to the commission, has said it would defend itself against the inquiry.

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The new legal woes, coming on the heels of a rate-rigging scandal that erupted this summer, complicate a difficult turnaround effort by the bank.

On Wednesday, Barclays posted a net loss of £106 million (about $170 million) in the three months ended Sept. 30, a steep drop from a £1.4 billion net profit it reported in the period a year earlier. The results were hurt by a charge on its own debt and provisions connected to the inappropriate sale of insurance to clients.

Libor Explained

Antony Jenkins, chief of Barclays.Justin Thomas/VisualMedia, via Agence France-Presse — Getty ImagesAntony Jenkins, chief of Barclays.

“The last three months have been difficult for Barclays,” Antony P. Jenkins, the bank’s chief executive, said on a conference call with reporters.

Shares in Barclays fell 4.7 percent in trading on Wednesday in London.

Mr. Jenkins took over as chief executive from Robert E. Diamond Jr., who resigned in July after Barclays agreed to pay $450 million to settle charges that it had tried to manipulate a key benchmark, the London interbank offered rate, or Libor. In the aftermath, Mr. Jenkins promised to increase the focus on retail banking, shifting away from riskier activity in the firm’s investment banking unit.

Unlike the Royal Bank of Scotland Group and the Lloyds Banking Group, Barclays turned to sovereign wealth funds in Abu Dhabi and Qatar for new capital during the financial crisis. Barclays raised a total of $7.1 billion from Qatar in July and October 2008.

The bank disclosed this year that British authorities were investigating the legality of payments to Qatari investors in connection with the bank’s capital-raising. Barclays said on Wednesday that American regulators were also pursuing similar inquiries, adding that the bank was cooperating.

Despite its net loss, Barclays is making progress as its underlying businesses show signs of improvement. Excluding the adjustments, Barclays said pretax profit rose 29 percent, to £1.7 billion, in the third quarter.

In the face of continued market volatility, Barclays said pretax profit in its investment and corporate banking division more than doubled in the quarter, to just over £1 billion, on a strong performance in fixed income and equities. The European debt crisis, however, weighed on the bank’s retail and business banking franchise, where pretax profit fell 31 percent, to £794 million.

Ian Gordon, a banking analyst at Investec Securities in London, said the decline in revenue in the investment banking division raised some questions about the unit’s performance. He added, however, that Barclays was in a position to win market share, as competitors like UBS moved to reduce trading activity.

“As others pull back,” Mr. Gordon said, “there’s a potential to win a greater share of the piece.”

Barclays warned, however, that difficulties in Europe and uncertainty in global markets could weigh on future profitability. “We continue to be cautious about the environment in which we operate,” the bank said in a statement.

Given the challenging environment, Barclays is moving to insulate its businesses. The bank said it had reduced its presence in heavily indebted countries. The bank said it had cut its exposure to the sovereign debt of Spain, Italy, Portugal, Greece and Cyprus by 15 percent, to £4.8 billion.

It is also bolstering its capital to protect against potential losses. The bank’s core Tier 1 ratio, a measure of its ability to weather financial shocks, rose to 11.2 percent at the end of September from 10.9 percent at the end of the second quarter.


This post has been revised to reflect the following correction:

Correction: October 31, 2012

An earlier version of this article misstated the pretax profit Barclays attributed to its retail and business banking franchise. It was £794 million, not £794.

Article source: http://dealbook.nytimes.com/2012/10/31/barclays-reports-third-quarter-loss-on-credit-charges/?partner=rss&emc=rss

Fiat Turns to High-End Production

Sergio Marchionne, who is chief executive of both companies, outlined a recovery plan that was fundamentally different than Fiat’s rival, Ford, which last week said it would shutter three plants in Europe. Both Fiat and Ford reported Tuesday higher losses in Europe, though overall profit rose because of healthy sales in the United States and elsewhere.

Instead of closing Italian factories, which have been producing fewer than half as many cars as they could, workers there will focus on producing Alfa Romeos, Jeeps and Maseratis, Mr. Marchionne said. Those premium Fiat brands have higher profit margins, but they must significantly increase their sales for the plan to succeed. Production of lower-priced Fiats will be shifted to countries where costs are lower.

“Building things is a lot more exciting than retrenching,” Mr. Marchionne said during a conference call with analysts Tuesday. Referring to the revival of Chrysler, he said, “We have to do it one more time.”

It has become increasingly clear that the decline in European auto sales, which have fallen 20 percent in the past five years, is more than just a temporary slump. Ford said Tuesday that it “believes the changes in the European business environment to be structural, rather than cyclical, in nature.”

The crisis in the auto industry has emerged as another threat to European stability because of the number of jobs at risk. The car industry employs about two million people in Europe, plus millions more who depend indirectly on automakers.

Last week, Ford announced plans to close three factories in Europe and eliminate 5,700 jobs. Analysts have predicted that other European carmakers would be compelled to follow suit. But Mr. Marchionne said that it made more sense to keep Fiat plants open.

Closing factories “would have relegated us to being a minor player in Europe because of the social delocations,” he said. “I’ve run the numbers both ways. This is the best economic choice we can make.”

Fiat reported Tuesday that its net profit globally more than doubled to €286 million, or $370 million, in the three months through September. Revenue rose 16 percent to €20.4 billion as the company sold more than a million vehicles.

But the company, based in Turin, said it would have lost €281 million in the quarter without profit from its Chrysler unit, which on Monday reported an 80 percent increase in earnings.

Mr. Marchionne’s decision to keep open the Italian plants was a surprise. As recently as September, at the Paris Motor Show, he had been lamenting Europe’s failure to do something about factories that have been operating at a fraction of their potential. The underused factories are ruinous for carmakers because companies must continue to pay fixed costs like worker salaries and maintenance.

The decision is good news for Italy, which is in recession and struggling to maintain its credibility with international bond investors. When car plants close, the damage quickly spreads to suppliers and the regional economy, costing tens of thousands of jobs and undercutting tax revenue.

Even as he expressed optimism that Fiat brands can win a share of high-end markets now dominated by BMW, Mercedes and Audi, Mr. Marchionne painted a grim picture of the European auto market.

Sales in Italy, the company’s core market, will be the lowest since 1979, Fiat said. Although Fiat closed a factory in Sicily last year, the company’s Italian plants are producing less than half as many cars as they could if they were running three shifts a day. Fiat will not break even in Europe until 2015 or 2016, Mr. Marchionne said.

In characteristically colorful terms, he acknowledged that it would be difficult for Fiat to break out of its dependence on less expensive, small cars. “It is shark-infested waters and you’re bound to lose some parts of your anatomy,” Mr. Marchionne said.

At the same time, Mr. Marchionne said, Fiat and Chrysler plants outside Europe were operating at full capacity, opening a chance for Italian factories to produce for export. He outlined plans to introduce seven new Alfa Romeo and six new Maserati models by 2016 that would be made in Italy for sale outside Europe, including the United States. In addition, he said, a new Jeep model would be produced in Italy for export beginning in 2014.

Fiat’s control of Chrysler allowed the company to return to the American market and means “we are no longer a marginal player,” Mr. Marchionne said.

“We now face the future together as a four million-plus vehicle producer,” he said. “The opportunities that are available to both of us now are opportunities that neither of us would be able to extract on our own.”

Article source: http://www.nytimes.com/2012/10/31/business/global/fiat-turns-to-high-end-production.html?partner=rss&emc=rss

DealBook: Deutsche Bank Posts $975 Million Profit in Third Quarter

The headquarters of Deutsche Bank in Frankfurt, Germany, under construction in 2009.Ralph Orlowski/Getty ImagesThe headquarters of Deutsche Bank in Frankfurt, under construction in 2009.

12:43 p.m. | Updated

FRANKFURT — Deutsche Bank reported earnings on Tuesday that were better than expected, illustrating how lenders were beginning to benefit from the ebbing of tensions in the euro zone.

But the report also provided a reminder that banks continued to struggle with the legacy of the financial crisis and pressure from regulators.

Deutsche Bank, Germany’s largest lender, said on Tuesday that profit declined 3 percent, to 755 million euros ($975 million), in the third quarter, as a comeback in investment banking revenue offset costs related to the bank’s legal problems and a restructuring program.

Shares in the bank rose almost 4 percent in Frankfurt, in part because Stefan Krause, the bank’s chief financial officer, said some of the decline in profit merely reflected accounting rules and would be recouped in future quarters.

But, in a conference call with analysts, Mr. Krause had to fend off suggestions that Deutsche Bank carried more risk than other European banks and was vulnerable to proposed regulations that would curtail profitable but risky businesses.

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The bank’s relatively high dependence on borrowed money to operate ‘‘is the wrong indicator to look at,’’ Mr. Krause said. ‘‘We are quite satisfied with our third-quarter results,’’ he said.

Overall revenue in the three months ended Sept. 30 rose 18 percent, to 8.7 billion euros. Revenue in the investment banking unit rose 67 percent, to 2.5 billion euros, as customers stepped up trading of stocks, bonds and other securities.

That was a reversal from the previous quarters, when Deutsche Bank clients avoided volatile financial markets, cutting into the fees that the bank earned from trades.

Deutsche Bank also recorded gains in other areas, including the unit that serves private and business customers. That business, which includes the Postbank network serving individual depositors, increased pretax profit 59 percent, to 492 million euros.

Fear of a breakup of the euro zone has eased after the European Central Bank said in September it was willing to buy bonds of countries like Spain, if necessary, to keep their borrowing costs under control. That has encouraged investors to return to markets, and it has benefited banks.

Anshu Jain and Jürgen Fitschen, who share chief executive duties at the bank, warned in a news release that the economic environment remained unsettled.

‘‘We will maintain a cautious and risk-focused approach,” they said.

Deutsche Bank has built up the size of its capital reserves, but still has a thinner cushion than other large banks, analysts said. ‘‘The key issue remains weak capital,’’ analysts at J.P. Morgan Cazenove said in a note to investors Tuesday.

Deutsche Bank is also under pressure from regulators. Proposed European Union rules would compel banks to isolate their retail and lending businesses from risks created by trading and other investment banking activities. Deutsche Bank, which has often earned much of its profit from investment banking, could be among those most affected if the rules go into force, some analysts say.

Mr. Krause, the chief financial officer, said the proposed changes would be bad for the European economy, by curtailing banks’ ability to recycle excess cash into other uses. ‘‘We hope that sense will prevail,’’ he said.

He was referring to a report by a group of experts convened by the European Commission and led by Erkki Liikanen, governor of the Bank of Finland. They recommended this month that the European Union require banks to put trading activities in separate legal units, to protect ordinary depositors.

Hugo Bänziger, former chief risk officer of Deutsche Bank, served on the expert panel and endorsed its recommendations.

Deutsche Bank continues to wrestle with legal proceedings related to charges of unethical or illegal behavior in recent years. It is among the banks accused of manipulating the London interbank offered rate, or Libor, which is used to set interest rates on trillions of dollars of financial contracts worldwide.

Expenses related to litigation cut profit by 289 million euros in the quarter, Deutsche Bank said.

The bank disclosed on Tuesday that it had been asked by American regulators to provide information on its processing of dollar payments to people from countries that are subject to embargoes. The regulators are examining whether Deutsche Bank’s activities were in compliance with state and federal laws, the bank said.

During the conference call, Mr. Krause declined to elaborate on the inquiry.

Costs related to a restructuring program, which is intended to make Deutsche Bank more efficient and less complex, subtracted another 276 million euros from third-quarter profit.

Deutsche Bank is trying to reduce annual operating costs by 4.5 billion euros in three years. About 1,500 jobs are being eliminated, and more cuts are likely, but so far the restructuring is not as radical as the one Deutsche Bank’s Swiss rival, UBS, announced on Tuesday. UBS said it would eliminate 10,000 jobs, after reporting a quarterly loss of 2.2 billion Swiss francs ($2.3 billion).

In September, Mr. Jain and Mr. Fitschen, the co-chief executives, outlined an overhaul of the bank that included lower profit targets, bigger capital buffers and smaller bonuses for top executives.

‘‘We are aware that we are now entering a phase of execution and delivery on the promises we made,’’ Mr. Krause said on Tuesday.


This post has been revised to reflect the following correction:

Correction: October 30, 2012

An earlier version of the article and headline had the incorrect amount in U.S. dollars for Deutsche Bank’s third-quarter profit. The bank’s profit was $975 million, not $795 million.

Article source: http://dealbook.nytimes.com/2012/10/30/deutsche-bank-records-975-million-profit-in-third-quarter/?partner=rss&emc=rss

PayPal Executive Named Chief of Yahoo

Mr. Thompson, analysts say, has a background mainly as a technologist instead of being an expert in digital media or corporate turnarounds. While PayPal, a division of eBay, is a consumer service, analysts said that is very different from a media company.

But in a conference call on Wednesday morning, Roy J. Bostock, the chairman of Yahoo’s board, said that at PayPal Mr. Thompson had proved he could take a company with solid assets and build the business. That is the central challenge at Yahoo, Mr. Bostock said, noting that the company has a wealth of strong media and advertising assets, and an online audience of more than 700 million visitors a month.

The problem, he said, was that Yahoo had been floundering — “treading water,” as he put it. “You can call it a turnaround, if you want to,” Mr. Bostock said.

Under Mr. Thompson, PayPal expanded its number of users to more than 104 million, from 50 million, and increased its revenue to more than $4 billion, from $1.8 billion. “That, to me, is a track record of building,” Mr. Bostock said.

Mr. Thompson said it was too soon to discuss any strategic shifts he might make. But he said Yahoo has to innovate and improve its offering for both consumers and advertisers. “That balancing is what we need at Yahoo,” Mr. Thompson said. “That is how big businesses with network effects are built on the Internet.”

The chief executive job at Yahoo, Mr. Thompson said, represents a daunting challenge, but also a major opportunity. “The core business assets are stronger than people believe at this point,” he said.

Mr. Thompson replaces Carol Bartz, who was dismissed in September. The company has been run by Tim Morse since Ms. Bartz left. He will now return to his former post as chief financial officer.

Yahoo shares were down 2.1 percent in early trading Wednesday.

Article source: http://feeds.nytimes.com/click.phdo?i=f5b22b1f4f441147d7e185a9f5170e0c

Judge Says S.E.C. Misled Two Courts in Citi Case

Judge Jed S. Rakoff of the Federal District Court in Manhattan issued a supplemental order saying that the S.E.C. appeared to file a “materially misleading” request with the Court of Appeals for the Second Circuit earlier this week, when the commission sought an emergency halt to further proceedings in the case.

The S.E.C. was seeking the temporary stay while it appealed Judge Rakoff’s earlier decision to reject a proposed $285 million settlement between the two parties and to order the two sides to prepare for a July trial.

Judge Rakoff said the S.E.C.’s filing to the appeals court was misleading in its argument that an emergency halt was needed because Citigroup had until Jan. 3 to file an answer in district court to the S.E.C.’s fraud case against it.

Judge Rakoff said the S.E.C. knew or should have known that Citigroup was planning to ask him to dismiss the case entirely, negating the urgency to halt proceedings. The appeals court granted the temporary stay on Tuesday, saying it would consider a longer halt on Jan. 17.

The case involves S.E.C. charges that Citigroup misled customers when it sold $1 billion in mortgage-related securities without telling investors that it was betting against some of the mortgage investments in the portfolio.

Judge Rakoff said that, in addition, the S.E.C. and Citigroup each misled the district court by not telling him that the S.E.C., with Citigroup’s approval, had applied to the appeals court for the emergency stay more than four hours before he issued a decision on the S.E.C.’s same request for a stay in his court.

He said that the S.E.C. had the chance and the obligation to tell him about its emergency motion to the Court of Appeals after it was filed on Tuesday, because the commission and Citigroup had a telephone conference call with Judge Rakoff about his management of the case. In that conversation, Citigroup asked Judge Rakoff to be allowed to file extra pages in its coming motion to dismiss the case.

By not informing him of its appeals court plea, “there appears to have been a similar misleading of this court,” the judge wrote, because both the S.E.C. and Citigroup “held back from this court material information it needed to do its job.”

The judge even complained that he had spent the Christmas holiday considering the stay request and drafting an opinion in order to speed the case along.

Judge Rakoff said that the purpose of the supplemental order, which was filed in his court, was “both to make the Court of Appeals aware of this background and to attempt to prevent similar recurrences.” It ordered the parties to “promptly notify this court of any filings in the Court of Appeals.”

John Nester, an S.E.C. spokesman, said: “We will respond as appropriate in the proceedings before the Court of Appeals.” A Citigroup spokeswoman declined to comment on the new filing.

Judge Rakoff has sharply rebuked the S.E.C. over its method of settling fraud cases over the last two years. In 2009, he rejected a proposed settlement between the S.E.C. and Bank of America over charges that the bank misled its shareholders in filings regarding its takeover of Merrill Lynch.

In the Citigroup case, the judge took aim at the S.E.C.’s practice of settling cases without making the defendant either confirm or deny the charges. Such an agreement means there is no established set of facts in the case, the judge said, robbing judges of the ability to determine whether a proposed settlement is “fair, reasonable, adequate and in the public interest.”

Article source: http://feeds.nytimes.com/click.phdo?i=e921f2ee55c2fc42d570a18aa899b8ff

Research in Motion Stock Hits Eight-Year Low

OTTAWA — Shares in Research in Motion fell 11 percent Friday after the company’s announcement that it would delay a new series of BlackBerry phones that it hopes will revitalize its brand.

It was the lowest level RIM’s stock had reached in about eight years. The stock ended the day at $13.44, or down $1.69.

The company said late Thursday that the BlackBerry 10 phones, which had been expected to appear early in 2012, will not appear in stores until the end of the year because of a component delay. Several analysts suggested that the company’s future might be in jeopardy because shoppers and software developers might not care about BlackBerry by then.

Kris Thompson of National Bank Financial titled his research note “Likely Game Over,” and Mike Abramsky of RBC Capital Markets cut his target price for RIM to $16 from $20. He said in his note that delay would make RIM “significantly late to the high-end smartphone market, risking further share losses and competitive developer momentum.”

During a conference call Thursday, Mike Lazaridis and Jim Balsillie, the Canadian company’s co-chief executives, said that until the new phones arrived, they would focus on current BlackBerry models through increased advertising and other promotions.

Canalys, a market research firm, said that RIM’s share of the smartphone market in the United States fell to 9 percent in the last quarter. In 2006, before the iPhone and Android phones were available, RIM commanded just under 60 percent of the market.

Tim Long, an analyst with BMO Capital Markets, predicted that efforts to push the current phones in the United States “will not work and will be a big hit to earnings.” He lowered his rating for RIM to market perform, from outperform.

“While we clearly waited too long to downgrade, we are more concerned that management’s new strategic moves will likely destroy even more value,” Mr. Long wrote.

Like some dissident RIM investors, Mr. Long suggested that the company should consider changing its senior management.

The delay in the new phone models was announced in a conference call for the company’s third-quarter results on Thursday. Net income fell 71 percent, to $265 million, from the same time period last year, while revenue was $5.2 billion, a 6 percent drop.

Article source: http://www.nytimes.com/2011/12/17/technology/rim-stock-hits-eight-year-low.html?partner=rss&emc=rss

Postal Service Predicts Record Loss for 2012

“We continue to see steady declines, unfortunately, in first-class mail, which is our most profitable product,” the postmaster general, Patrick R. Donahoe, said at a board meeting in Washington on Tuesday. “We have to build tomorrow’s postal service based on revenue and volume projections as we look forward. We can’t look backward.”

The amount of mail delivered by the Postal Service will probably fall about 6 percent in fiscal 2012, exceeding the drop of about 2 percent a year earlier, said its chief financial officer, Joseph Corbett. Revenue is expected to decline to $64 billion in 2012, from $65.7 billion in 2011, he said.

Mail volumes have dropped more than 20 percent in the last five years, hurt by the recession and the increasing use of electronic communications. The service, which is supposed to support itself financially, is closing post offices and processing plants, cutting jobs and promoting the mailing of letters and packages.

The Postal Service, which also said it might run out of cash by next September, posted a 2011 net loss of $5.1 billion in the year ended Sept. 30 after a $5.5 billion benefits payment was delayed into fiscal 2012. The loss in 2010, when the agency made a benefits payment equal to the deferred one, was $8.5 billion.

The loss forecast for 2012 assumes that the agency will not make any of the $5.6 billion in retiree health payments coming due, Mr. Corbett said in a conference call with reporters.

In September, Congress delayed the benefits payment deadline until Friday. If that remains in place, the Postal Service will default on the payment, Mr. Corbett said.

The Senate Homeland Security and Governmental Affairs Committee last week approved a bill intended to help the service remain solvent and to lengthen the payment schedule to its retiree health benefits fund.

Article source: http://feeds.nytimes.com/click.phdo?i=2b893af3c55def472fd4cca5a85166e4

DealBook: Citigroup Earnings Rise 74% to $3.8 Billion

Vikram Pandit, chief of Citigroup.Jemal Countess/Getty Images for TimeVikram Pandit, chief of Citigroup.

With a big boost from a one-time accounting gain, Citigroup on Monday squeezed out its seventh-straight quarterly profit, but it faces significant challenges to growth.

Citigroup announced a third quarter profit of $3.8 billion, or $1.23 a share, beating analyst consensus estimates of 81 cents per share. That represented a 74 percent increase from a year ago, when the bank announced a quarterly profit of 2.2 billion, or 72 cents a share.

But a big portion of that increase came from gains that will be difficult to repeat. Citigroup benefited from a paper gain of $1.9 billion, reflecting a sharp increase in the perceived riskiness of its debt — an accounting adjustment that gave JPMorgan Chase a similar earnings boost last week. Citigroup also delivered another $1.4 billion to its bottom line from money it had previously set aside to cover losses on credit cards and other loans. Together, those items accounted for more than 85 percent of the company’s earnings.

“Citi continues to navigate a challenging economic environment and delivered another quarter of solid operating results,” Vikram S. Pandit, Citigroup’s chief executive, said in a statement. In a contrast to the sober overtones when JPMorgan kicked off bank earnings season with its results on Friday, Citi executives were a bit more bullish about the broader economy.

“We are seeing loan growth in every one of our businesses, in every geography,” said John Gerpsach, Citigroup’s chief financial offer, on a conference call with journalists. “There still is a recovery in place. It may not be moving as robustly as we would like it, but it’s there and having an impact.”

Even so, revenue growth remains under pressure.

Excluding the accounting adjustment on its debt, revenue dropped 8 percent to $18.9 billion as the bank contended with the global economic slowdown and some of the most turbulent markets in decades. Like the rest of the banking industry, Citigroup has come under pressure from rising expenses, slim lending margins, and the evaporation of many of the lucrative fees that kept its consumer businesses afloat.

Indeed, Citi shares have fallen sharply since the bank completed a reverse stock split in early May that brought its price to around $45 from $4.50. In early trading Monday, Citi shares were trading up around 1 percent to about $28.65.

For almost four years, Mr. Pandit has been engaged on an ambitious plan to streamline sprawling bank and turn it into a leaner, more nimble lender. But Citi has had to play catch-up in investing in its businesses — it was much slower out of the gate to do things like ratchet up marketing efforts and add new branches and bankers than some of its stronger competitors.

Expenses continue to increase – a result of that investment spending as well as the weakening on the U.S. dollar. Expenses were up 9 percent in the third quarter, even as the bank’s core revenues were down by about the same amount. And that is after a deliberate plan to reduce the total size of its balance sheet.

Today, the pile of assets that Citi plans to sell or shed is about $289 billion, although the pace of reduction has slowed substantially since the beginning of the year. The bank has struggled to find buyers for some of the biggest assets that remain earmarked for sale: CitiFinancial, its large consumer lending franchise, a roughly $115 billion portfolio of U.S. mortgages, and a $42 billion private-label credit card loan business.

On Monday, Citi formally announced that it now planned to retain the retail partner cards business after telegraphing the decision for months. “We have been reworking that portfolio for the last couple of years, changing some of the underwriting criteria” so that it now is more heavily weighted toward borrowers with stronger credit records, Mr. Gerspach said on the conference call. “It’s a markedly different portfolio than what it was in 2008 and 2009.”

Mr. Gerspach said the bank continued to solicit buyers for its mortgage portfolio and consumer lending franchise, which he noted has been profitable for the last three quarters.

On the surface, Citigroup’s investment bank fared better in the third quarter than some of its Wall Street competitors. Profit was up 58 percent, to $2.2 billion. But the bulk of that profit stemmed from the widening of its own credit spreads on its debt, which allowed the bank to book a paper gain since it would theoretically cost less if it was to retire its debt.

But there was sharp fall-off in investment banking fees and trading revenue amid the market turmoil. In particular, the bank’s equities derivatives unit had an extremely bad quarter, while the bank also missed out on revenue from its decision to wind down its proprietary trading unit in light of the new financial rules restricting such activities.

Citigroup’s lending businesses fared better, with profits up 31 percent to $1.6 billion. The strong results reflected the bank’s strength in emerging markets in Latin America and Asia. Meanwhile, its U.S consumer lending businesses were helped by the bank’s decision to release about $1.4 billion of loan loss reserve, largely because of the continued improvement in the performance of its credit card borrowers.

Although JP Morgan Chase elected not to take down its reserves, Mr. Gerspach said Citi officials believed their action was prudent and told reporters that current economic data suggested that the bank had room to release additional funds in future quarters.

Citi officials said they were remaining very attentive to the risks stemming from the running debt crisis in Europe. The bank has about $20 billion in gross exposure to the peripheral countries, like Greece, Ireland, Italy, Portugal and Spain. In addition, it has about $14.4 billion of gross exposure to France and Belgium. But because of decisions to hedge and collateralize many of those loans, its net current funding exposure is about $7.1 billion to the peripheral countries, and another $2 billion to France and Belgium.

“We believe it is manageable at current levels but obviously, it is something we are vigilante about,” Mr. Gerspach said on the conference call.


This post has been revised to reflect the following correction:

Correction: October 17, 2011

An earlier version of this article referred incorrectly to Citigroup’s reverse stock split in early May. The split brought its price to $45 from around $4.50, not the other way around.

Article source: http://feeds.nytimes.com/click.phdo?i=faa368f6d7041ee944ead822d5a6011e