deutsche bank

DealBook: For Groupon, Faint Praise From Its Underwriters

December 15, 2011 by NewsMaker Leave a Comment

8:17 p.m. | Updated

Groupon’s bankers reaped more than $40 million in fees in November, when the daily deals giant went public at $20 a share. Now, Wall Street’s affections have cooled.

Six of the company’s underwriters, which had to wait until Wednesday to initiate coverage, stamped Groupon’s stock with neutral or hold ratings. Five issued bullish, or buy, calls. Their price targets ranged from $21 to $29. The lukewarm reception dragged on Groupon’s shares, as the stock tumbled 3.3 percent to close Wednesday at $22.55.

It is an ominous sign for the many Internet companies waiting to go public, like Zynga, the online game maker that is expected to begin trading on Friday. Despite continuing enthusiasm for new technology offerings, investors have proceeded cautiously amid turmoil in the equity markets and persistent skepticism about the fundamentals of new business models.

Groupon, which offered less than 10 percent of its stock, has fluctuated wildly in recent weeks, falling as low as $14 a share. Jive Software, an enterprise social network service, rose 25 percent on its first day of trading this week but was virtually flat on Wednesday. Nexon fared worse; the company, a rival of Zynga based in Tokyo, slipped 2 percent on its Wednesday debut, despite robust profits and a base of about 77 million monthly users.

On Wednesday, Groupon’s analysts echoed the longstanding concerns about the three-year-old service, including competitive pressures, the unproved business model and limited upside opportunity. Two underwriters, Citigroup and Deutsche Bank Securities, even led with the same pun — “waiting for a better deal.”

Critics, in part, are skeptical that Groupon can sustain its aggressive growth trajectory. The company recorded revenue of $1.1 billion for the first nine months of the year, but also splurged on online advertising, spending about $613 million on marketing in that period.

Two of its lead underwriters, Morgan Stanley and Credit Suisse, expressed optimism for Groupon’s outlook but still issued neutral ratings. Morgan Stanley initiated coverage at equal weight, with a $27 price target. It praised Groupon for its “prime mover status and scale,” but warned investors to “wait for a better entry point to build a position.” The firm also pointed out that Groupon’s competitive advantage might be eroded as merchants became more sophisticated on the Web and rivals attacked its market share.

“Groupon’s competitive advantage of sales-driven leads, deal execution strategy and high-quality customer service is not rocket science,” Morgan Stanley said, “but has proven difficult to replicate at scale.”

Credit Suisse, which was even more cautious, with a $25 target, also noted risk factors, including low barriers to entry and a new business model where “58 percent of the voting shares are controlled by insiders.” Deutsche Bank, the most bearish of Groupon’s underwriters, predicted a slight pullback in its report, to $21 a share.

“Our near-term neutral stance on Groupon shares rests largely in the nascency of the business model in the service/product shift, along with a transition from aggressive growth via marketing to improved profitability,” the bank said.

Although a so-called Chinese Wall separates the banks’ underwriting businesses from their equity research arms, investors typically expect favorable analyst reports from a company’s underwriters — at least for the first round. In June, LinkedIn’s bankers unleashed a wave of positive reports. Morgan Stanley, its lead underwriter, put an overweight rating on stock and gave an $88 price target, calling it a rising “standard utility” for recruiters. LinkedIn fell 2 percent on Wednesday, closing at $65.95.

Still, there were some kind words for Groupon. Five underwriters, including the co-lead, Goldman Sachs, issued buy or outperform ratings.

Goldman, one of the most optimistic, initiated coverage at $29 and praised the company as “the key to unlocking the massive local advertising market with which the Internet has long struggled.”

Article source: http://feeds.nytimes.com/click.phdo?i=1a55a44eaa033d3eb626f53905017310

German Industrial Orders Decline in Negative Sign for Euro Zone

November 5, 2011 by NewsMaker Leave a Comment

PARIS — Europe’s chances of avoiding recession appeared to have faded Friday after Germany, with the largest economy on the Continent, reported a sharp deterioration in orders for industrial goods as demand from its euro zone partners plunged.

Officials had been hoping that momentum in Germany would be sufficient to keep the European economy afloat despite the financial contagion that has gone from a series of brush fires involving the so-called peripheral euro zone members like Greece, Ireland and Portugal to a full-blown threat to the common currency.

But data Friday from Berlin showed the contagion reaching the heartland of the euro zone. Orders for industrial goods fell 4.3 percent in September from August, the Economy Ministry said, as orders from other euro members plummeted 12.1 percent. In August, overall orders fell 1.4 percent from July.

“The figures confirm that though Germany is more resilient than the rest of the euro zone, it too is slowing,” said Gilles Moëc, an economist in London for Deutsche Bank.

The German economy grew just 0.1 percent in the second quarter of 2011 from the first quarter, when the economy grew a more robust 1.3 percent. The French economy, the second-largest in the euro zone, has essentially ground to a halt.

On Thursday, the new European Central Bank president, Mario Draghi, warned of the possibility of a “mild” recession. He spoke after the E.C.B. reduced its main interest rate a quarter point, to 1.25 percent, its first cut since May 2009, after two increases this year.

Carsten Brzeski, an economist in Brussels for ING, described the decline in euro zone orders as “shocking.” German companies have a “safety net” in the form of big order backlogs, he wrote in a note, but added, “German industry has finally caught the crisis virus.”

“The financial turmoil and the economic slowdown in other euro zone countries have obviously spoiled the appetite for goods made in Germany,” Mr. Brzeski wrote.

Separately, a survey of purchasing managers by the data provider Markit showed the euro zone service sector contracting in October at the fastest rate since July 2009, with an index of service business activity falling to 46.4 in October from 48.8 in September. Business confidence also hit a two-year low, Markit said.

The survey found the German and Irish services sectors expanding modestly, but the sector contracted in a “marked” way in France, Italy and Spain.

Janet Henry, an economist with HSBC in London, said the purchasing managers data suggested “there is a growing risk the contraction may not be so mild,” estimating the euro zone economy would contract 0.5 percent in the October-December period from July-September.

Mr. Moëc estimated that the euro zone would suffer “a very shallow” recession in the last quarter of 2011 and the first quarter of next year, with a rebound in the spring. Recovery, he said, was contingent on there not being “a complete meltdown in credit origination and some kind of resolution of the crisis.”

During a speech in Frankfurt on Friday, Jürgen Stark, a member of the E.C.B.’s governing council, pointed to signs that the euro zone economy would grind to a halt in the final quarter of 2011.

“Possibly we will see, and I say this with all caution, a red zero in the fourth quarter,” Bloomberg News quoted Mr. Stark as saying. He predicted growth would remain “very weak” early next year as well, with “consequences for price and wage developments.”

Article source: http://www.nytimes.com/2011/11/05/business/global/german-industrial-orders-decline-in-negative-sign-for-euro-zone.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: deutsche bank, euro zone, german companies

DealBook: Deutsche Bank to Miss Profit Goal

October 4, 2011 by NewsMaker Leave a Comment

Alex Domanski/ReutersThe headquarters of Germany’s Deutsche Bank in Frankfurt.

FRANKFURT — Deutsche Bank, Germany’s biggest lender, joined a growing list of banks buffeted by the sovereign debt crisis on Tuesday, saying it would not meet its 2011 profit target owing to investor uncertainty and a loss from its Greek bond holdings.

The bank said in a statement that it would not be able to achieve its goal of a pretax profit of 10 billion euros ($13.2 billion) for 2011. The bank also said it would cut 500 investment banking jobs, most of them outside Germany.

“The intensifying European sovereign debt crisis led to sustained uncertainties among market participants in the third quarter and thus to significantly reduced volumes and revenues,” Deutsche Bank said in a statement.

Four Deutsche Bank Employees Are Charged in South Korea

August 22, 2011 by NewsMaker Leave a Comment

Sunday Review »

Sebestyen: The K.G.B.’s Bathhouse Plot

The latter-day Bolsheviks of 1991 unwittingly hastened the fall of U.S.S.R.

Article source: http://www.nytimes.com/2011/08/22/business/global/four-deutsche-bank-employees-charged-in-south-korea.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: bank employees, bolsheviks, deutsche bank

DealBook: Deutsche Bank Executive Puts Up a Fight

August 5, 2011 by NewsMaker Leave a Comment

Kevin Roose/The New York TimesRichard J. Byrne, chief executive of Deutsche Bank Securities, sparring with trainers at Mushin Mixed Martial Arts.

At first glance, Richard J. Byrne, the chief executive of Deutsche Bank Securities, doesn’t look much like a warrior.

“He isn’t the prototypical person you’d see and think, ‘This guy’s going to beat me up,’ ” said Erik Owings, a professional mixed martial arts fighter who has trained Mr. Byrne since 2008. But given the right circumstances, “if Bruce Lee rose from the dead, Rich could choke him out.”

Off The Clock

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Wall Street has always been a metaphorical boxing ring. But Mr. Byrne, 50, is perhaps the finance world’s biggest real-life booster of mixed martial arts, the combat sport that combines elements of wrestling, karate, Brazilian jujitsu and Muay Thai boxing.

Before work on a recent Monday morning, Mr. Byrne and Mr. Owings were sitting on a two-inch mat in Mushin Mixed Martial Arts, the gym on Fifth Avenue where they work out four or five days a week. Mr. Owings, a muscular man in a tight black T-shirt, was drinking a bottled yerba mate and praising his pupil’s progress.

“Rich went from being a guy who’d run from a fight to one who would stay and take it to you,” Mr. Owings said.

“Parenthetically, I don’t plan on getting in any street fights soon,” Mr. Byrne added with a laugh.

Mr. Byrne was introduced to mixed martial arts by two brothers, his clients at Deutsche Bank: Lorenzo J. Fertitta and Frank J. Fertitta III, who bought the Ultimate Fighting Championship franchise in 2001. Mr. Byrne helped them arrange a $350 million financing deal in 2007 and a $100 million loan in 2009.

The bank executive got into the sport after his running habit was curtailed by a hip injury. The Fertitta brothers connected Mr. Byrne with a trainer who recommended Mr. Owings, and the two began kickboxing and jujitsu lessons.

“It’s like if I were being trained in baseball by Jeter, A-Rod or other people of that caliber,” Mr. Byrne said of his training team, which has at various points included notable fighters like Sean Hinds, Chris Encarnacion, John Danaher, John Cholish and Renzo Gracie.

Mr. Byrne enjoyed his martial arts lessons, but finding a good training space proved difficult.

“I tried different places,” Mr. Byrne said, “but none of them had exactly the right formula of what I wanted. Some weren’t that clean, some just had a bunch of, I wouldn’t say thugs, but guys who wanted to fight.”

Chester Higgins Jr./The New York TimesRichard J. Byrne, chief executive of Deutsche Bank Securities, opened his own gym, Mushin Mixed Martial Arts.

So he decided to build his own gym. Last year, he financed the construction of Mushin, which derives its name from a Zen concept meaning “empty mind.” He brought in Mr. Owings and several other prominent fighters to run the 2,500-square-foot training space, in which he is the sole investor. Mr. Byrne declined to say how much he had invested in Mushin, but said that it was “still less than joining a Hamptons golf club.”

In addition to Mr. Byrne’s regimen, Mushin provides private, semiprivate and group lessons for aspiring fighters, as well as casual exercise buffs. It also hosts Model Fit, a conditioning class intended for female models. The gym caters to white-collar clients, Mr. Byrne said, with top-of-the-line equipment, boxing gear imported from Thailand and mats that are cleaned many times a day to avoid bacterial infections.

The result, Mr. Byrne said, is “a place that, if nobody ever came, would be my ultimate toy.”

Mr. Byrne has become something of a mixed martial arts evangelist on Wall Street. He has brought many of his colleagues and clients to Mushin, even though only “seven or eight have stuck.” And he reports that the Zen-like skills required for fighting have helped him in other areas.

“If I’ve learned one thing, it’s the ability to relax under pressure,” he said. “It’s definitely made me a better banker.”

Last year, Mr. Byrne tested his skills at a mixed martial arts competition. He entered the 47-and-older division. But the day before the event, he was told that since he was the only registrant in that age group, he had won by default. The same thing happened with the next two age divisions until, finally, he was placed in the 27-and-over division, where he was ousted in the first round.

“I lost my first match, but I’m still a three-time gold medalist,” he said.

On a recent afternoon, hours before flying to Frankfurt for Deutsche Bank’s annual conference, Mr. Byrne was practicing his grappling moves on a Mushin trainer. He grunted, wheeled around and took the trainer into an arm-bar hold, letting out a satisfied grunt. When asked whether his goal was to beat Mr. Owings in a match, Mr. Byrne laughed and, in true martial arts style, deferred to his teacher.

“I’m hoping that one day Erik will decide to take five years off, and then have temporary paralysis in his arms,” he said. “That would almost be a fair fight.”

Off The Clock is a new DealBook column that features the extracurricular hobbies, passions and interests of Wall Street professionals. If you or someone you know would like to be featured, e-mail your suggestion to offtheclock@nytimes.com.

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Filed Under: Business News Tagged With: deutsche bank, mr byrne, muscular man

Alcoa’s Profit More Than Doubled in Quarter, Following Aluminum Prices Up

July 12, 2011 by NewsMaker Leave a Comment

Net income was $322 million, or 28 cents a share, compared with $136 million, or 13 cents, a year earlier, Alcoa reported after the markets closed. Sales gained 27 percent to $6.59 billion, exceeding the $6.31 billion average estimate of seven analysts in the Bloomberg survey.

Earnings, excluding $38 million in restructuring and debt tender offer costs and other one-time items, were $364 million, or 32 cents a share, missing the 33-cent average estimate of 14 analysts surveyed by Bloomberg.

“The market should be pleased that Alcoa is showing these strong year-over-year trends,” Jorge Beristain, an analyst at Deutsche Bank, said on Bloomberg TV. “They are managing to hold the line on costs.”

Alcoa’s chief executive, Klaus Kleinfeld, reiterated his forecast for global demand to increase by 12 percent in 2011 and double by the end of the decade as Asian countries build more offices and buy more aircraft, cars and trains.

“Although the economic recovery is uneven, the overall outlook for Alcoa — and for aluminum — remains positive,” Mr. Kleinfeld said in a statement. “Demand for aluminum continues to rise and so does growth in our major markets.”

Alcoa, traditionally the first company in the Dow Jones industrial average to report earnings, was little changed in after-hours trading.

Aluminum prices have advanced in the last year in London as demand soared from Chinese and American automotive and aerospace sectors. Aluminum spot prices on the London Metal Exchange averaged $2,600 a metric ton in the second quarter, 24 percent more than a year earlier.

Article source: http://feeds.nytimes.com/click.phdo?i=f6d6fd1c92d5472e6ae577321b180095

Filed Under: Business News Tagged With: american automotive, deutsche bank, metric ton

S.E.C. Investigating Longtop Financial of China

May 24, 2011 by NewsMaker Leave a Comment

The case deepens concern about possible accounting irregularities at Chinese companies. The S.E.C. has created a task force to investigate fraud by non-American companies listed on United States exchanges. Longtop went public in 2007 in an offering led by the Goldman Sachs Group and Deutsche Bank.

The auditor, Deloitte Touche Tohmatsu, resigned on Sunday, three days after Longtop said that its chief financial officer offered to resign.

Longtop had a $1.08 billion market value before trading was halted in New York last week.

The company, based in Xiamen, China, makes software for Chinese financial services companies. It is among the largest of several Chinese companies, including China MediaExpress Holdings, that were hit recently by accusations of accounting fraud, including from short-sellers or regulatory inquiries.

According to Longtop, Deloitte said that its resignation stemmed in part from “recently identified falsity” in Longtop’s financial records, as well as “deliberate interference” by Longtop management in the audit process. Longtop also said Deloitte could no longer rely on its previous audit reports for the company.

Longtop said it would cooperate with the S.E.C., and had hired legal counsel and was about to hire forensic accountants.

Article source: http://www.nytimes.com/2011/05/24/business/24longtop.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: chinese companies, deutsche bank, financial services companies

DealBook: Deutsche Bank’s $4 Billion Las Vegas Bet

April 19, 2011 by NewsMaker Leave a Comment

LAS VEGAS — The names of the biggest players in gambling — Wynn, Caesars, MGM — dominate the neon-drenched skyline of the Las Vegas Strip.

But the owner of the most expensive casino ever built in this hedonistic city, Deutsche Bank, is not announcing its arrival in lights.

Even before that casino, the Cosmopolitan of Las Vegas, opened in December, the German financial company was planning its exit strategy from a $4 billion investment that could take years, if not decades, to recoup.

“There has to be pressure on Frankfurt to do something,” said Bill Lerner, an analyst with the research firm the Union Gaming Group. “They are a bank, and I don’t think they have any interest in running a casino.”

Deutsche Bank spared no expense on the Cosmopolitan, whose casino floor is dominated by a three-story glass chandelier that encompasses a cocktail bar. Guests rave about the oversize luxury hotel rooms with wrap-around terraces, which are often sold out. And management has lured popular restaurateurs and retailers.

The Cosmopolitan is missing just one major component: a deep base of gamblers. It is betting on a relatively young demographic, a challenging crowd that usually prefers partying. On a recent Saturday night, the casino was almost empty as visitors flocked up one flight to the Marquee nightclub, where one inebriated partygoer threw up in line.

The investment is also putting Deutsche Bank at odds with its own clients. In 2009, it hired the general manager at Caesars Palace to run the Cosmopolitan — a move that upset the parent company, Caesars Entertainment, a crucial customer of Deutsche, according to people with knowledge of the situation who were not authorized to speak publicly.

While big banks bristle at comparisons to casinos, big banks — by choice and by circumstance — have become a force in Las Vegas and other gambling hot spots. Goldman Sachs acquired the Stratosphere in 2008 for roughly $1 billion. The bond powerhouse Cantor Fitzgerald runs the sports books at the Tropicana and other locales. Until recently, Credit Suisse owned a stake in the Hard Rock Hotel and Casino.

View Big Banks and Their Las Vegas Casinos in a larger map

But few companies have as much riding on the industry as Deutsche Bank.

The bank reluctantly inherited the Cosmopolitan in 2008, just as the local and national economy began to crumble. After running into cash-flow problems, Bruce Eichner, then the owner of the casino and a developer mainly known for high-end residential properties in New York and South Beach, defaulted on his $768 million construction loan from Deutsche Bank. The lender foreclosed on Mr. Eichner and took control of the property — one of the first signs that the city was headed for hard times.

“It’s a story that’s closely linked to that of Las Vegas’s fortunes,” said Anthony Curtis, a former professional gambler who now runs the Web site Las Vegas Advisor.

Many big lenders and opportunistic investors ended up owning troubled, half-built properties in recent years. Some walked away, like Morgan Stanley, which took a $1 billion write-off on the Revel in Atlantic City. Others decided to wait out the economic downturn. The billionaire Carl C. Icahn, who picked up the unfinished Fontainebleau resort in Las Vegas in bankruptcy for $156 million in 2009, still has not restarted construction on it.

In contrast, Deutsche Bank doubled down on the Cosmopolitan, opting to go it alone after failing to find a partner. Almost immediately, the bank scrapped Mr. Eichner’s vision for the Cosmopolitan, which was originally planned as a modern residential building with 28-foot robots playing guitars in the lobby area. The bank also provided the project with a low-interest loan, potentially making Deutsche liable for roughly $4 billion.

Deutsche Bank soon recruited a high-powered management team, led by John Unwin, the former Caesars executive. The Cosmopolitan, say rivals who have lost staff, is offering pay packages 30 percent higher than the industry standard. Mr. Unwin collected $1.8 million in 2010, including a $1 million bonus.

After three years and an enormous financial commitment, the Cosmopolitan opened late last year to favorable reviews, said Mr. Curtis. Many of the hotel rooms, which are retrofitted condos from the housing bubble era, come equipped with kitchens and terraces that overlook Bellagio’s famous water show. Room rates — which can top $300 a night — are among the most expensive in Las Vegas, and the property is often filled to capacity.

The Cosmopolitan has also attracted a distinctive lineup of retailers and restaurants, many of which are new to the local scene. The trendy British clothing line AllSaints chose the casino for its first Las Vegas shop. The complex also has branches of top restaurants like Jaleo, the tapas restaurant by the Spanish chef José Andrés, and Blue Ribbon Sushi. The Cosmopolitan is also home to Marquee, a popular outpost of a New York City hot spot.

“In a sea of sameness, we are trying to stand out,” said Mr. Unwin.

But the young clientele attracted to the Cosmopolitan is a notoriously fickle group. While they willingly spend on food and drinks, they are less likely to drop thousands on roulette or poker — typically the largest source of industry profits. Rivals like Wynn Resorts, the Palms, and Hard Rock Casino have had varied results tapping into this demographic. The management at Cosmopolitan says its target audience is the “curious class,” well-traveled people who are receptive to different concepts.

The demographic cuts both ways, said David B. Katz, a gambling industry analyst at the brokerage firm Jeffries Company. “The young vibe can be attractive from a volume perspective, and it can become the place to be on the Strip,” he said. “The rub is that demographic profile isn’t the most affluent and most predisposed to spending, inside and out of the casino. People that are 40 years old and older simply have more money.”

Meanwhile, Deutsche Bank also has to contend with a tricky plot of land. The Cosmopolitan sits on a mere 8.7 acres, compared with 120.5 acres at the neighboring Bellagio, the resort modeled after an Italian palazzo. So Deutsche Bank had to build up rather than out, drawing comparisons to a New York City brownstone. The casino occupies the first floor, while restaurants, retailers and a common area with a pool table take up the next two. It is a challenging design, as it forces customers to leave the casino floor for food and shopping.

All that has left Deutsche Bank struggling to attract a critical mass of gamblers. At most Las Vegas properties, the casinos typically represent half of revenue, with the balance coming from lodging, retail and the like. It is less at the Cosmopolitan, according to industry analysts.

“When you build a $4 billion casino in the middle of the Strip, it is important to have a base of gamblers,” said Mr. Lerner of Union Gaming, who previously covered the industry for Deutsche Bank. “They have zip.”

Mr. Unwin, who indicated that the restaurants and retail were at or above targets, would say of gambling only that the “trajectory is good.”

To help build the casino profits, Mr. Unwin cut a deal with Marriott to gain access to its large database of travelers. While the list does not specifically focus on gamblers, it does give the hotel a wider group to whom it can market services.

“As a financial investor in the project, we are convinced that the executive management team will built an outstanding business, and thereby serve our shareholders well,” said John T. Gallagher, a spokesman for Deutsche Bank.

But behind the scenes, executives at Deutsche Bank have balked at some aspects of casino ownership. The Cosmopolitan created a risqué advertising campaign featuring farm animals and proclaiming that the casino had “just the right amount of wrong.” But senior officials in Germany felt that the commercials were too “racy for a bank,” said a former Deutsche staffer who spoke on the condition of anonymity. Despite Deutsche’s concerns, the Cosmopolitan ran the ads.

The bank’s senior management has also kept a low profile in Las Vegas. Its chief executive, Josef Ackermann, has visited the Cosmopolitan only twice in recent years. He was also notably absent from the opening party, a $12 million affair on New Year’s Eve with A-list appearances by Beyoncé, Coldplay and Jay-Z.

Meanwhile, Deutsche Bank is years — if not decades — away from breaking even on the Cosmopolitan, say analysts, given the weak cash flow and heavy debt load. The resort, which was open for just 17 days in 2010, logged a loss of $139.5 million for the year.

“With the world coming to an end in 2008, I wouldn’t have done that project if someone had a gun to my head,” said Mr. Lerner. “I suspect they will look for a liquidity event over a short period of time.”

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Filed Under: Business News Tagged With: casino floor, deutsche bank, restaurateurs