October 25, 2020

DealBook: Société Générale Announces New Cuts as Profit Falls 50%

A branch of Société Générale in Paris.Jacques Brinon/Associated PressA branch of Société Générale in Paris.

Paris – The French bank Société Générale announced on Tuesday that it was planning a new-cost cutting drive that would result in hundreds of job losses in France, as its first-quarter net income fell sharply.

The bank said first-quarter net income fell 50 percent, to 364 million euros ($476 million), from the period a year earlier. That was well below the 674.6 million euro profit expected by analysts surveyed by Reuters.

Société Générale, the second-largest French lender, said it planned 900 million euros of cost reductions through 2015, adding to the 550 million euros of cuts last year. Severin Cabannes, the bank’s deputy chief executive, told CNBC television that the bank was in talks with its unions about eliminating 600 to 700 jobs at its headquarters, but added that there would be “no forced layoffs.”

French companies, faced with tough restrictions on firing employees, typically use buyouts and early retirement programs to cut jobs.

Société Générale, based in Paris, said its profit fell largely because it took a charge of around 1 billion euros to revalue the cost of its own debt. The firm’s net banking income fell 19 percent, to 5.1 billion euros.

The bank said that excluding the debt revaluation, legacy assets and one-time charges, it would have had “solid” net profit of 852 million euros. Debt revaluation — in which a bank accounts for changes in the market value of its own debt — flatters a firm’s results when it comes under stress in the market, but makes results appear worse when the debt rises in value.

Société Générale said its corporate and investment banking business, in particular, “turned in a very satisfactory performance.” The unit reported that net income rose 41 percent, to 494 million euros, as the equity division posted strong results as global stock markets rebounded in the first quarter.

Like its larger rival, BNP Paribas, which last week reported a 45 percent decline in first-quarter net income, Société Générale is facing a moribund European economy and a record-high unemployment rate of 12.1 percent in the euro zone. The ongoing slump subdues demand for loans, even as historically low interest rates hold down the profitability of the credit that it does extend to customers.

Société Générale’s chairman and chief executive, Frédéric Oudéa, said in a statement that the bank’s latest cost-cutting plan would help it to generate a return on equity, a measure of profitability, of 10 percent by the end of 2015, compared with 7.4 percent in the first quarter this year.

Mr. Oudéa also said the bank had reached a ‘‘Basel III’’ core Tier 1 capital ratio of 8.7 percent, putting it on schedule to reach the 9.5 percent level that it has targeted for the end of the year. Capital ratios provide an indication of a financial institution’s ability to withstand financial shocks.

While Société Générale announced a new round of cuts on Tuesday, Crédit Agricole, whose first-quarter revenue fell 26 percent, to 3.9 billion euros, benefited from finally shedding its exposure to troubled assets in Greece. Crédit Agricole said net profit rose 51 percent, to 469 million euros.

In February, Crédit Agricole “deconsolidated” Emporiki Bank, based in Athens, cutting 15.5 billion euros of risk-weighted assets from its balance sheet. Crédit Agricole paid 2.2 billion euros for the Greek bank in 2006, but its losses ballooned to well over 5 billion euros as the Greek economy imploded. Crédit Agricole sold Emporiki last year to another Greek lender, Alpha Bank, for a symbolic 1 euro.

Jean-Paul Chifflet, Crédit Agricole’s chief executive, said in a statement that the results reflected “resilient revenues and income in the group’s core businesses, a persistently moderate cost of risk and a steady decline in expenses, in a mediocre economic environment.”

Shares of Crédit Agricole rose 1.2 percent in Paris on Tuesday, while Société Générale shares rose 4.1 percent.

Article source: http://dealbook.nytimes.com/2013/05/07/societe-generale-announces-new-cuts-as-profit-falls-50/?partner=rss&emc=rss

Toyota Says It Is Primed for a Lucrative Year

Toyota said net profit was 99.9 billion yen, or $1.1 billion, in the three months through December, a 23.5 percent increase from results a year earlier, when the effects of the Japanese tsunami still weighed on its business.

Sales for the quarter climbed 26 percent, to 16.2 trillion yen, helped by a surge of almost 50 percent in sales of the company’s fuel-efficient vehicles in the United States.

Cost reductions at the automaker, already known for its lean production, saved 320 billion yen during the quarter, the company said in a statement.

Now Toyota, whose Super Bowl ad “Wish Granted” topped viewership rankings, is set to get a wish of its own: the weaker yen, brought about by the economic policies of Prime Minister Shinzo Abe, who took office late last year, is set to lift Toyota’s bottom line even further.

A weak currency helps Toyota because it lowers the cost of producing in Japan and inflates the yen value of overseas profits. Toyota is poised to get a particularly big lift from the weak yen because it manufactures more cars at home than its domestic rivals. Last year, Toyota made 53 percent of its vehicles in Japan and exported more than half of those cars.

Toyota shares have risen by almost 50 percent since mid-November, when the yen started to weaken. The currency has weakened by about 15 percent during the same period.

In 2013, Toyota expects to sell 9.91 million vehicles, improving on its record of 9.75 million last year, which helped it regain its crown as the world’s top-selling automaker from General Motors. Those sales figures include Daihatsu Motor and Hino Motors, which are part of Toyota Group.

Such a performance could help Toyota get closer to the 1.7 trillion yen in net profit it reported in 2008, before the global financial crisis decimated its earnings.

Since then, a recall scandal, natural disasters and a strong yen have hindered a full comeback. But the combined challenges have also led executives at the 75-year-old automaker to revamp quality control, cut costs and take more risks with design.

“We believe that our efforts have been bearing fruit,” Takahiko Ijichi, Toyota’s senior managing officer, said in the statement on Tuesday. “We are finally on the road to sustainable growth.”

Article source: http://www.nytimes.com/2013/02/06/business/global/toyota-raises-profit-forecast-on-rebounding-sales.html?partner=rss&emc=rss

DealBook: Standard Chartered’s Next Worry: A $1 Billion Indonesian Loan

Standard Chartered is facing another potential headache.

The British bank, which has just settled money-laundering allegations with the New York State’s top banking regulator for $340 million, may be at risk of losing money on a $1 billion loan to an Indonesian mining company to make an investment that has since soured.

The exposure highlights Standard Chartered’s reliance on often-unstable emerging markets for the majority of its income. The bank, based in London, earned around 90 percent of its $2.86 billion net profit from developing countries like China and India in the first half of the year.

The bank’s strategy is not risk free.

In January, Standard Chartered lent $1 billion to PT Borneo Lumbung Energi Metal, a Jakarta-based coal mining company owned by the Indonesian billionaire Samin Tan.

PT Borneo used the money to purchase a 23.8 percent stake in Bumi, a company that owns Indonesian coal mining assets and is listed on the London Stock Exchange.

Mr. Tan’s interest in Bumi is part of a wider boardroom standoff between the British financier Nathaniel Rothschild, who partly owns the company, and the Bakrie family, which controls another stake in Bumi.

After calling for a shareholder meeting earlier this year to reshuffle Bumi’s executives, Mr. Tan took over as chairman, while Mr. Rothschild became a nonindependent director.

In the wake of the management changes, Bumi announced on Monday that it was opening an investigation into financial irregularities at one of its divisions.

The allegations relate to financial accounting records at its subsidiary PT Bumi Resources. The irregularities are in connection to investments that were marked down to zero, according to a statement from Bumi.

The news caused the shares to drop 25 percent by the end of trading on Monday. Stock in the company has fallen 82 percent over the last year.

“We see this investigation as a positive development, although we feel it does have the potential to bring to light some gross and potentially criminal mismanagement of funds,” Richard Knights, an analyst at Liberum Capital, wrote in a note to investors.

For Standard Chartered, the danger is that PT Borneo may have lost money on its Bumi stake as the shares have continued to plunge.

In a default situation, Standard Chartered might have the right to collect the Bumi shares, but the stock may end up being worth a lot less than they were when Mr. Tan purchased them in January.

Still, Standard Chartered would be able to absorb any potential losses on the loan through its $33 billion of core capital. Standard Chartered may need those reserves, given that more of its corporate borrowers are having trouble staying current on their loans. In Standard Chartered’s wholesale banking division, “gross non-performing” loans totaled $4.06 billion at the end of June, up from $3.09 billion at the end of last year.

A spokesman for Standard Chartered declined to comment on the Indonesian loan.

Scott Merrillees, a director at PT Borneo and chief financial officer of Bumi, didn’t respond to an e-mail seeking comment on PT Borneo’s borrowings.

The investigation into financial irregularities at a subsidiary, coupled with a global financial crisis that has depressed coal prices, has hit Bumi’s prospects. The company reported a $106 million loss in the first half of the year.

The tough economic conditions also have weighed on PT Borneo, which reported a net profit of $191 million in 2011, the latest figures available. The company had $105 million of cash flow from operations over the same period.

It is difficult to ascertain the size of Standard Chartered’s exposure to PT Borneo, as the bank may have sold parts of the loan to other banks since January.

In April, Bloomberg News reported that First Gulf Bank of the United Arab Emirates had made a commitment to take $200 million of the $1 billion loan, citing a person familiar with the matter. A representative for First Gulf Bank declined to comment on Thursday.

PT Borneo’s chief executive, Alexander Ramlie, has also raised the possibility of a bond issuance to raise money to lower its debt to Standard Chartered, but the company’s Web site does not mention any such deals being completed.

In its most recent investor presentation in June, PT Borneo mentions the $1 billion loan. But it merely said that the Bumi stake was 100 percent financed by a $1 billion “amortizing senior debt facility provided by Standard Chartered Bank.”

If the London-based bank takes a hit on its PT Borneo loan, it would be another black mark against the firm, which until recently had a reputation as a careful lender.

Last week, Standard Chartered’s group executive director for wholesale lending, Mike Rees, gave an investor presentation outlining strategic goals for corporate lending. That included: “balancing the pursuit of growth with firm control of costs and risks.”

Article source: http://dealbook.nytimes.com/2012/09/27/standard-chartered-next-worry-a-1-billion-indonesian-loan/?partner=rss&emc=rss

Toyota Cuts Annual Profit Forecast by 54 Percent

Net income at Toyota, which analysts say is likely to lose its title as the world’s biggest automaker this year, is expected to fall 54 percent to 180 billion yen, or $2.3 billion, in the fiscal year that ends in March, the automaker said in a statement.

Global sales are likely to fall to 7.38 million vehicles, down from an earlier forecast of 7.6 million, Toyota said.

Those sales numbers are likely to put Toyota behind General Motors, which sold 7.48 million units last year and is on a big recovery push
.

The lower profit projections, meanwhile, could put Toyota behind rivals closer to home. Nissan forecasts a 290 billion yen net profit this year, while analysts told Bloomberg that the South Korean automaker Hyundai could earn over $6 billion this year. Toyota still produces more cars than any of its Asian rivals, however.

Toyota has been hit especially hard by Thailand’s worst flooding in decades, which has killed more than 600 people, damaged millions of homes and inundated hundreds of factories.

The disaster disrupted production at plants as far away as the United States, causing a net shortfall of 230,000 vehicles, Toyota said — almost four times the number at Nissan. Toyota says waters are now receding and most regions are back to normal output.

The flooding came just as Toyota and other Japanese manufacturers rebounded from Japan’s massive quake and tsunami in March, which severed supply chains and caused the company to suspend or reduce production at plants both in Japan and overseas.

A shortage of electricity in the wake of the nuclear disaster at Fukushima has also complicated efforts by Toyota to get production back on track.

Meanwhile, a stubbornly strong yen has weighed on Toyota’s bottom line by making production in Japan more costly and by eroding the value of its overseas profits. Toyota still makes over half of its cars in high-cost Japan, a setup that analysts have warned hurts the automaker’s competitiveness.

Toyota, based in Toyota City, Japan, hopes that a spate of new models will revive its fortunes. At the Tokyo Motor Show, which started last week, the automaker’s chief executive, Akio Toyoda, showed off a plug-in version of its popular Prius gas-electric hybrid vehicle.

Toyota shares, which have fallen 18 percent this year, dipped 0.4 percent in Tokyo before the forecast announcement.

Article source: http://feeds.nytimes.com/click.phdo?i=913184f5c026fb3513f30f74dd179682

DealBook: Zynga Rival in Japan Prices $1.2 Billion I.P.O.

Nexon, a video game developer founded in South Korea.Nexon America, via Business WireNexon, a video game developer founded in South Korea.

TOKYO – The online game company Nexon, a fast-growing Asian rival to Zynga, on Monday set the price for its initial public offering at 1,300 yen a share, a debut that could value the company at 560 billion yen, or $7.2 billion.

The public offering by Nexon — on track to be the biggest Japanese I.P.O. this year — underscores investor confidence that online game companies will continue to grow despite a cloudy outlook for the global economy. Nexon is expected to go public on Dec. 14 on the Tokyo Stock Exchange.

Founded in South Korea in 1994, Nexon has been a pioneer in developing free online games that users can access at no charge, but must pay for virtual goods like clothes and tools for their avatars.

Zynga, which has grown rapidly by developing such games on Facebook, set its price range last week. The offering, which aims to raise about a billion dollars, could value the company at $7 billion.

Though that pricing reflects tempered expectations in the I.P.O. market, it will still be the biggest technology offering in the United States since Google in 2004.

In a filing with the Tokyo Stock Exchange, Nexon said it would price its shares at 1,300 yen, compared with an expected range of 1,200 to 1,400 yen. At that price, Nexon could raise about 91.1 billion yen ($1.17 billion), the largest I.P.O. since the pharmaceutical company Otsuka Holdings raised 160 billion yen in December 2010. It is offering 70,100,000 shares, with an option for its underwriter, Nomura Securities, to sell an additional 5.3 million shares, depending on demand.

The company has hired Morgan Stanley, Nomura and Goldman Sachs to serve as the joint global coordinators for the offering.

Nexon has more than 77 million active monthly users, compared with Zynga’s 260 million. Net profit at Nexon, which employs 3,240 people, mostly in its native South Korea, has nearly tripled in the last two years, to 21.64 billion yen in 2010, according to its filing with the Tokyo exchange. In the same period, revenue has roughly doubled, to 69.78 billion yen.

The company, which plans to use the proceeds to repay debt, build facilities and invest in product development, derives most of its business from Asia. Last year, China and South Korea accounted for 66 percent of revenue.

Article source: http://feeds.nytimes.com/click.phdo?i=5f4ba0bd99fb557643040f72c88b556f

Berkshire Hathaway Reports Lower 3rd-Quarter Profit

That was nearly three times what Berkshire lost on the same instruments a year ago. Buffett has sharply criticized derivatives in general, but has said these particular contracts were safe and would ultimately be lucrative.

But Berkshire was hurt, like many other insurance companies in particular, by sharp declines in a broad range of market values. In a quarterly report to the Securities and Exchange Commission, Berkshire said the indexes covered by the contracts fell 11 to 23 percent in the quarter.

Berkshire reported a net profit of $2.28 billion, or $1,380 for each Class A share, compared with a year-earlier profit of $2.99 billion, or $1,814 a share.

Cash at the end of the quarter was $34.78 billion, down from $47.89 billion at the end of June. During the third quarter, Berkshire financed the purchase of the chemical maker Lubrizol and a $5 billion investment in Bank of America, which accounted for the decline.

Operating income rose across segments, except for the company’s finance business, where it fell slightly.

Profit in the insurance business rose as a rebound in reinsurance results offset sharp declines at the auto insurer Geico.

Earnings were also nearly 10 percent higher at Berkshire’s next-biggest unit, the Burlington Northern railroad, as revenue per car rose by more than 10 percent.

Article source: http://feeds.nytimes.com/click.phdo?i=25cb51a2620013237b9df5f5536a1185

DealBook: Prada Approved for Hong Kong I.P.O. in Late June

Prada, the Italian luxury goods maker, has received approval to go public in Hong Kong as the company seeks to sell a one-fifth stake in itself for about 1.8 billion euros, or $2.5 billion, a person with direct knowledge of the matter said Friday.

The approval for the offering, which would be the first for a European luxury group in Hong Kong, came after meetings late Thursday between the company and the exchange, the person said, requesting anonymity because he was not authorized to speak publicly.

Prada, which makes handbags, shoes and clothing, is tapping the wealth of Asian investors, whose appetite for share issues rivals their enthusiasm for luxury goods.

Globally, Hong Kong was the most active exchange last year for the second year running, with companies raising $57.4 billion.

Prada said in March that revenues grew by almost a third to 2 billion euros last year, while net profit hit 251 million euros, two and a half times what it earned the year before. Sales in Asia expanded 63 percent last year, it said.

The joint global coordinators for the issue, first announced in January, are Banca IMI-Intesa Sanpaolo, Unicredit, Goldman Sachs and a unit of Credit Agricole, CLSA. Its legal advisers are Bonelli Erede Pappalardo, Slaughter May and Davis Polk.

The company is planning to list around June 24, after a roadshow set to begin in Singapore on June 6, the person said.

Article source: http://feeds.nytimes.com/click.phdo?i=185d2b7fb9150ed3e7e6fcf7369f4637