October 20, 2019

Markets Slump Over Fed Exit Plan and China Credit Squeeze

Just a day after the Federal Reserve hinted that it could soon begin winding down its bond-purchasing program, investors were unnerved by reports that Chinese banks had become reluctant to lend to one another, causing interest rates in the interbank market to spike to punishingly high levels.

On Wall Street, the broad-based Standard Poor’s 500-stock index ended down 2.5 percent Thursday, the Dow Jones industrial average dropped 2.3 percent — more than 350 points — and the Nasdaq composite index shed 2.3 percent. On Wednesday, the S.P. 500 fell 1.4 percent.

The pain was also felt in the bond market, with yields on government bonds, which move in the opposite direction of the price, surging worldwide. The 10-year United States Treasury bond was yielding 2.380 percent, up 2.8 basis points. A basis point is one-hundredth of a percent. Expectations that interest rates will rise tend to depress the prices of existing securities.

A purchasing managers’ report added to fears that China, which has been an engine of growth in the world economy, might not be able to carry the load indefinitely. The report suggested Chinese manufacturing was contracting.

“There’s been a lot of focus on the market rates in China,” said Laurent Fransolet, a European rate strategist at Barclays in London. “Whether it’s a full-fledged credit crunch remains to be seen.”

Analysts at Nomura International noted that one rate, known as the seven-day repo rate, rose to as high as 25 percent on Thursday, compared with just 4 percent a month ago, as the Chinese central bank declined to smooth the market.

“But the main driver here has been the aftermath of the Fed,” Mr. Fransolet said about the global stock activity. “We’re still seeing the ripples of that.”

In Europe, the benchmark Euro Stoxx 50 index fell 3.1 percent, while the FTSE 100 in London ended down 3 percent.

In Asian trading, the Shanghai Stock Exchange composite index fell 2.8 percent. The Nikkei 225 stock average in Tokyo dropped 1.7 percent, the Hong Kong benchmark Hang Seng Index declined 2.9 percent and the SP/ASX 200 index in Sydney fell 2.1 percent.

Gold futures dropped 6.2 percent, to $1,288.40 an ounce. The euro fell 0.6 percent, to $1.3220, while the dollar rose 1.6 percent, to 97.98 yen.

Markets had already been jittery after hearing about the Federal Reserve’s plans to end the special operations it has been using to add liquidity to shore up the financial system. On Wednesday, Ben S. Bernanke, the Federal Reserve chairman, said the Fed hoped to begin reducing the size of its monthly bond purchases by the end of 2013 and end the program as soon as the American jobless rate fell to 7 percent.

Mr. Fransolet said investors had become accustomed to the so-called quantitative easing policies used by central banks to provide liquidity and support asset prices. In recent years, he said, markets faltered when the authorities talked about ending those policies and the central bankers had then backtracked.

But this time, he said, investors have grasped that the Fed is much more confident.

“That’s something the markets need to take on board,” Mr. Fransolet said. “That’s a big change from the last few years.”

The sell-off Thursday came in the face of economic news that showed an improving trend, if not actual growth, in the European economy. Markit Economics said its purchasing managers’ composite output index for the euro zone rose to 48.9 in June from 47.7 in May, bringing the index to its highest level in 15 months. While an index level below 50 suggests economic contraction, the fact that the index has been ticking upward for three straight months indicated Europe may be on the way out of recession.

Chris Williamson, Markit’s chief economist, said the data signaled “stabilization in the third quarter and growth appearing in the fourth.”

London stocks fell as the Bank of England said British banks needed to raise their capital by another 13.4 billion pounds, or $20.7 billion, this year to improve their finances. The Bank of England made the announcement on the same day that euro zone finance ministers convened in Luxembourg, where banking issues were to be at the top of the agenda.

Article source: http://www.nytimes.com/2013/06/21/business/global/daily-stock-market-activity.html?partner=rss&emc=rss

DealBook: Crédit Agricole Cites Write-Downs in Posting a Record Loss

A branch of Credit Agricole in Marseille, France.Jean-Paul Pelissier/ReutersA branch of Credit Agricole in Marseille, France.

PARIS — Crédit Agricole, one of France’s biggest lenders, said on Wednesday that a series of write-downs and other charges contributed to its largest-ever annual loss.

The bank reported a net loss of 6.5 billion euros ($8.7 billion) for 2012. In the fourth quarter, the bank posted a net loss of about 4 billion euros, compared with a loss of about 3.1 billion euros in the period a year earlier. Revenue fell 23 percent, to 3.3 billion euros, in the three months ended Dec. 31.

Jon Peace, an analyst at Nomura International in London, described the fourth-quarter loss as “an even bigger kitchen sink” than that for which the market had been bracing, but said Crédit Agricole’s core French retail and asset management businesses had performed surprisingly well. There are “clear signs of improvement” in its finances, he wrote in a note.

“We are turning a page and will develop a new medium-term plan this year,” Jean-Paul Chifflet, the bank’s chief executive, said in a statement. “It will show that we are moving forward on solid foundations.”

After stripping out one-time costs, the bank said net income showed “the resilience of French retail banking and a good performance in savings management, the group’s core businesses.” The bank’s adjusted fourth-quarter net income was about 548 million euros, up 10 percent compared with the last three months of 2011.

Jean-Paul Chifflet, the chief executive of Crédit Agricole.Jacky Naegelen/ReutersJean-Paul Chifflet, the chief executive of Crédit Agricole.

Mr. Chifflet said in a conference call that the bank would not need to raise capital in the financial markets. Shares of Crédit Agricole rose 7.6 percent in afternoon trading in Paris on Wednesday.

The flood of red ink originated in good-will impairments of nearly 2.7 billion euros, losses linked to the sale of its C. A. Cheuvreux brokerage unit to Kepler. The charges take into account the decline in value of the unit.

The impairment comes as banks face pressure over good will.

Last month, the European Securities and Markets Authority called on companies to take a hard look at the value they assign to the assets on their balance sheets, particularly those they purchased in more favorable times. It warned that it would publicly identify those companies that failed to comply.

Crédit Agricole also booked a fourth-quarter charge of 706 million euros related to the sale last year of its Athens-based unit, Emporiki, to Alpha Bank, a write-down that it said left it with no residual exposure to Greece. But it said the French tax authorities had unexpectedly ordered it to pay a bill of 838 million euros on the disposal, causing its loss to grow.

Fourth-quarter results also were hurt by a charge of 541 million euros on the cost of revaluing the bank’s own debt.

Crédit Agricole, based in Paris, was caught flat-footed when the euro zone crisis caused a sharp fall in the value of assets in Greece, Italy and other struggling European countries.

Over the last few years, the bank has been streamlining its business and reducing its reliance on so-called peripheral European economies, as well as increasing its capital buffer.

Crédit Agricole said its core Tier 1 ratio, a measure of a bank’s ability to weather financial shocks, under the accounting rules known as Basel III, stood at 9.3 percent at the end of December, and that it hoped to exceed 10 percent by the end of 2013.


This post has been revised to reflect the following correction:

Correction: February 21, 2013

An earlier version of this article erroneously reported the size of the unexpected tax bill that Crédit Agricole bank had to pay on the disposal of its Greek unit, Emporiki. It was 838 million euros, not 132 million euros. The article also misstated the negative impact of that bill on the group’s fourth-quarter net income. It was 706 million euros, not 704 million euros.

Article source: http://dealbook.nytimes.com/2013/02/20/credit-agricole-posts-record-loss-on-write-downs/?partner=rss&emc=rss

DealBook: Credit Agricole Posts Record Loss on Write-Downs

A branch of Credit Agricole in Marseille, France.Jean-Paul Pelissier/ReutersA branch of Credit Agricole in Marseille, France.

PARIS – Crédit Agricole, one of France’s biggest lenders, said on Wednesday that a series of write-downs and other charges contributed to its largest-ever annual loss, as the bank looked to move beyond the problems in Greece and Italy that have hobbled its recent earnings.

The bank reported a net loss of 6.5 billion euros ($8.7 billion) for 2012. In the fourth quarter, the bank posted a net loss of about 4 billion euros, compared with a loss of about 3.1 billion euros in the period a year earlier. Revenue fell 23 percent, to 3.3 billion euros, in the three months ended Dec. 31.

Jon Peace, an analyst at Nomura International in London, described the fourth-quarter loss as “an even bigger kitchen sink” than that for which the market had been bracing, but said Crédit Agricole’s core French retail and asset management businesses had performed surprisingly well. There are “clear signs of improvement” in its finances, he wrote in a note.

“We are turning a page and will develop a new medium-term plan this year,” Jean-Paul Chifflet, the bank’s chief executive, said in a statement. “It will show that we are moving forward on solid foundations.”

After stripping out one-time costs, the bank said net income showed “the resilience of French retail banking and a good performance in savings management, the group’s core businesses.” The bank’s adjusted fourth-quarter net income was about 548 million euros, up 10 percent compared with the last three months of 2011.

Jean-Paul Chifflet, the chief executive of Crédit Agricole.Jacky Naegelen/ReutersJean-Paul Chifflet, the chief executive of Crédit Agricole.

Mr. Chifflet said during a conference call that the bank would not need to raise capital in the financial markets. Shares of Crédit Agricole rose 7.6 percent in afternoon trading in Paris on Wednesday.

The flood of red ink originated in good-will impairments of nearly 2.7 billion euros, losses linked to the sale of its C.A. Cheuvreux brokerage unit to Kepler. The charges take into account the decline in value of the unit.

The impairment comes as banks face pressure over goodwill.

Last month, the European Securities and Markets Authority last month called on companies to take a hard look at the value they assign to the assets on their balance sheets, particularly those they purchased in flusher times, and write down the goodwill of those that have declined below book value. It warned that it would publicly identify those companies that failed to comply.

Crédit Agricole also booked a fourth-quarter charge of 704 million euros related to the sale last year of its Athens-based unit, Emporiki, to Alpha Bank, a write-down that it said left it with no residual exposure to Greece. But it said the French tax authorities had unexpectedly ordered it to pay a 132 million euro bill on the disposal, causing its loss to grow.

Fourth-quarter results also were hurt by a charge of 541 million euros on the cost of revaluing the bank’s own debt.

Crédit Agricole, based in Paris, was caught flat-footed when the euro zone crisis caused a sharp fall in the value of assets in Greece, Italy and other struggling European countries.

Over the last few years, the bank has been streamlining its business and reducing its reliance on so-called peripheral European economies, as well as increasing its capital buffer. It disposed of its stake in the Italian lender Intesa Sanpaolo, booking a second-half loss of 445 million euros. But the bank is still working to sort out another Italian unit, Cariparma, where it took an 852 million euro charge.

Crédit Agricole said its core Tier 1 ratio, a measure of a bank’s ability to weather financial shocks, under the accounting rules known as Basel III, stood at 9.3 percent at the end of December, and that it hoped to exceed 10 percent by the end of 2013.

Article source: http://dealbook.nytimes.com/2013/02/20/credit-agricole-posts-record-loss-on-write-downs/?partner=rss&emc=rss

Crédit Agricole Posts Unexpectedly Large Loss

PARIS — The French bank Crédit Agricole posted an unexpectedly large third-quarter loss Friday, mainly from costs related to the disposal of its Greek unit.

The loss was €2.85 billion, or $3.6 billion; the market had been expecting a loss of about €1.8 billion. Crédit Agricole booked one-time costs of €1.96 billion on the disposal of its Emporiki unit . It said Oct. 1 that it had begun exclusive talks to sell Emporiki to Alpha Bank, also based in Athens, for a symbolic €1.

The French bank wrote down €181 million on its sale of CA Cheuvreux, a brokerage, to Kepler Capital Markets, and €193 million as the cost of deconsolidating its holding in Bankinter, after its stake in that Spanish bank fell below the regulatory threshold of 20 percent at which subsidiaries must be included in the parent’s results. It also wrote down the value of its own debt by €647 million and wrote down €572 million of goodwill in its consumer finance business.

Crédit Agricole’s revenue fell 32 percent to €3.4 billion, mainly as a result of the disposals of CA Chevreux and Emporiki.

Jon Peace, an analyst in London with Nomura International, said the charges on CA Chevreux and goodwill had come as a surprise to the market, as had the size of the own-debt charge, and that accounted for the entire difference between analysts’ expectations and the bottom line

The bank said that it had made “major progress” in straightening out its business and that without the exceptional items its net income would have been €716 million in the latest quarter. It credited a strong performance from its lending activities in France, where it is the market leader.

Still, that figure was well below the €786 million adjusted profit analysts surveyed by Reuters had been expecting. The bank’s shares fell 4.8 percent in Paris morning trading.

The Paris bank said its Core Tier 1 ratio, a measure of a lender’s ability to weather a financial shock, rose by seven-tenths of a percentage point since the end of last year, to 9.3 percent. It said it expected to reach its target of a fully loaded Basel III Common Equity Tier 1 ratio above 10 percent by the end of next year.

Article source: http://www.nytimes.com/2012/11/10/business/global/credit-agricole-posts-unexpectedly-large-loss.html?partner=rss&emc=rss

DealBook: Société Générale Profit Falls 31% in Third Quarter

The bank Société Générale said it would increase its reserves.Jacques Brinon/Associated PressThe bank Société Générale said it would increase its reserves.

PARIS — Société Générale said on Tuesday that its third-quarter net profit fell by nearly a third, weighed down by the cost of writing down its exposure to Greece.

The French bank said profit in the three months ended Sept. 30 fell 31 percent, to 622 million euros ($856 million), from the period a year earlier. Revenue rose 4 percent, to 6.5 billion euros, bolstered by a gain booked on a decline in the value of the bank’s own debt; excluding that one-time gain, revenue fell 10.6 percent.

The bank, based in Paris, said it was marking down 333 million euros of its Greek sovereign debt holdings on a pretax basis, equivalent to a 60 percent write-down, bringing its treatment of the holdings closer into line with its global peers.

Société Générale also said it had reduced its sovereign risk exposure to Greece, Italy, Ireland, Portugal and Spain to 3.4 billion euros by the end of October.

Financial institutions across Europe are recognizing losses on their holdings of Greek bonds as it becomes obvious that the country will never pay off its debts in full. On Tuesday, Munich Re, a German insurance group, said it had written down the value of its Greek bonds by 933 million euros this year.

Munich Re’s loss on Greek debt coincided with insurance losses related to the March earthquake and tsunami in Japan and Hurricane Irene in the United States, cutting its profit for the third quarter 62 percent, to 290 million euros.

BNP Paribas, the largest French bank, announced last week that it was marking down its Greek exposure by 60 percent and reducing its holdings of European sovereign debt, a move that cut its third-quarter profit 72 percent.

Jon Peace, an analyst with Nomura International in London, noted in a report that most of Société Générale’s reported net profit resulted from the 542 million euros the bank booked on its own debt. Considering that large one-time gain and the bank’s need to reduce leverage, he said, “we suspect the market will retain some caution.”

Société Générale’s shares rose 8.8 percent on Tuesday morning in Paris. For the year, the stock is down 53 percent.

Revenue from its core corporate and investment banking activities dropped almost 37 percent, to 1.2 billion euros, the result of “a challenging environment in the debt markets, with very weak activity in the primary market especially in Europe, and the effects of the European sovereign debt crisis on secondary markets.”

Frederic Oudéa, Société Générale’s chief executive, said in the statement that the third-quarter results “demonstrated the group’s resilience: the profit-generating capacity of the core businesses is robust.”

He also said there would be “a significant decline” in bonus pay this year.

Because of the regulatory requirement that banks strengthen their capital buffers, the bank said it would not pay a dividend for 2011. The third-quarter profit and the retaining of the dividend provision helped the bank to increase its core Tier 1 ratio to 9.5 percent on Sept. 30, from 8.5 percent on Dec. 31, 2010. That leaves it with the need to raise another 2.1 billion euros of capital, a sum the bank said it would cover through its own resources by the end of June 2012.

All the major French banks have said they hope to raise their capital ratios by trimming their balance sheets, rather than by raising additional equity.

Jack Ewing contributed reporting from Frankfurt.

Article source: http://feeds.nytimes.com/click.phdo?i=c22a4e0b249e3908631626f80a79b581