record lows

Brazilian Central Bank Acts to Strengthen Its Currency

August 23, 2013 by NewsMaker

Similar moves have been undertaken by central banks in Indonesia and Turkey. The action highlights growing fears on the part of policy makers in these countries that the recent slide in their currencies poses a serious economic threat given the high levels of dollar-denominated debt that their banks and companies have taken on.

As local currencies weaken, dollar debts increase in value and become increasingly difficult to service.

The real has lost more than 15 percent of its value against the dollar this year as foreign investors as well as locals have sold their reals for dollars.

The Indian rupee, the South African rand, the Turkish lira and the Indonesian rupiah also have lost more than 10 percent against the dollar as the hot money that once poured into these economies heads back to more developed economies in anticipation of higher interest rates in the United States.

“We are in the midst of a significant rebalancing, and the growth outlook for emerging market countries has deteriorated,” said Jens Nordvig, a currency strategist at Nomura in New York.

Earlier this week, the Turkish central bank increased interest rates in a bid to stop the fall of the lira, which is approaching the psychologically crucial hurdle of 2.00 as it hits record lows against the dollar. Indonesia, which like Turkey and Brazil relied on dollars from abroad to finance large current-account deficits, also announced on Friday a series of steps to increase the availability of dollars in the markets and the broader economy.

While the measures may have a short-term impact — the real was up more than 1 percent against the dollar on Friday — their long-term effect is uncertain. After years of heady growth, spurred in part by a commodity boom coupled with very low interest rates and stagnation in the United States and Europe, economic momentum is shifting slowly from emerging to developed economies.

Another concern: As economies in Turkey, Brazil and Indonesia slow, it becomes difficult politically for central banks to push rates ever higher to halt the flow of money heading for the exits.

Recep Tayyip Erdogan, the Turkish prime minister, whose ruling Justice and Development Party faces crucial local elections early next year, has been especially vocal in this regard.

Article source: http://www.nytimes.com/2013/08/24/business/global/brazilian-central-bank-acts-to-strengthen-its-currency.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: indian rupee, reals, record lows

DealBook: As Citigroup’s Profit Surges, Skittish Borrowers Hurt the Consumer Unit

April 15, 2013 by NewsMaker Leave a Comment

Keith Bedford/ReutersA Citibank branch in New York.

8:34 p.m. | Updated

Citigroup beat earnings expectations on Monday as net income surged by 30 percent in the first quarter of 2013. But beneath the banner results, the bank is grappling with a sluggish economy and skittish American consumers who are still wary of shouldering fresh debt.

The bank, which has been aggressively working to slash costs and slog through a glut of soured assets, reported a profit of $3.8 billion, or $1.23 a share, for the first quarter. Revenue rose by 3 percent to $20.5 billion.

Still, Citigroup’s results were dampened by largely stagnant revenue growth in the consumer banking unit and persistent difficulties in Asia and Latin America. One challenge: the United States consumer.

Borrowers are still unwilling to take on new loans, even with interest rates hovering at near-record lows.

Draghi Dismisses Any Nation’s Move to Drop the Euro

April 5, 2013 by NewsMaker Leave a Comment

During the last year, Mario Draghi, president of the bank, has managed to quiet financial markets, cap government borrowing costs and contain the euro zone crisis by making it clear that the bank would not allow the 17-country euro currency union to come apart. But it is not clear what tools he sees at his disposal.

In a news conference, he also gave no indication how the central bank might stimulate the moribund economies of the euro zone. The bank said Thursday that it would leave its benchmark interest rate unchanged. “Cyprus is no turning point in euro policy,” Mr. Draghi said. There is “no Plan B.”

Making sure that “credit will flow to the real economy seems to be the E.C.B.’s No. 1 priority,” Carsten Brzeski, an economist at ING Bank, wrote in a note to investors. “However, judging from today’s news conference, the E.C.B. looks rather clueless on how to tackle the problem.”

The bank left its benchmark interest rate unchanged on Thursday at 0.75 percent, while the Bank of England held its rate steady at 0.5 percent. With both central banks’ rates already at record lows, there might be little room to use interest rates as an economic stimulus. But the euro zone economies, like that of Britain, are stagnant and in need of help wherever they can find it.

Mr. Draghi said the European Central Bank was looking for new ways to stimulate lending in the weak euro zone economy and could move quickly. “We will assess all the data in coming weeks and we stand ready to act,” he said, without offering many clues about what measures he might have in mind.

The global financial crisis in recent years has forced central banks around the world to do much more than simply tweak the official interest rate as they did in the past. On Thursday, Haruhiko Kuroda, the new governor of the Bank of Japan, Japan’s central bank, announced that it would seek to double the amount of money in circulation over two years to try to end years of falling prices.

Mr. Draghi said there was a consensus among the 23 members of the European Central Bank’s governing council not to cut rates even lower “for the time being.” The bank also discussed other, unconventional ways to help countries where credit remained tight, he said.

“The experiences of other countries tell us we have to think deeply before we can come up with something useful and consistent within our mandate,” he said.

Large-scale purchases of corporate debt, which the Federal Reserve has used to stimulate lending in the United States, would be more difficult in Europe because most companies get their credit directly from banks, Mr. Draghi indicated.

With inflation already below the European bank’s target of about 2 percent, some analysts have worried that the euro zone faces a risk of deflation — a broad decline in prices that can be more destructive and difficult to cure than inflation. Mr. Draghi said, however, that risks to price stability were “broadly balanced,” indicating that he did not see a major risk of deflation.

Data from Markit, a research firm, confirmed the continued downturn on Thursday. Its survey of business activity showed a marked drop in France and a stalling of growth in Germany, the largest and most robust economy in the euro zone.

Mr. Draghi predicted that the euro zone would recover, but he sounded slightly less confident than in the past. “Tight credit conditions,” he said, “will continue to weigh on economic activity.”

The Bank of England’s decision to keep the benchmark interest rate unchanged on Thursday was made despite concern that new data might show that the British economy fell back into recession at the start of the year.

Mr. Draghi found himself devoting much of the hourlong news conference to trying to dispel fears that Cyprus represented an ominous new phase of the euro zone crisis.

Mr. Draghi acknowledged that an initial decision by officials from the European Union, the International Monetary Fund and the central bank to impose a tax on small bank deposits was “not smart, to say the least.” But he pointed out that euro zone officials had quickly corrected that error.

At the same time, he defended the decision that did stick: to place much of the burden of bailing out Cyprus banks on large depositors. In a long discourse on the lessons of Cyprus, he said it showed the need for centralized banking supervision that would enable regulators to detect problems before they became a broader threat.

While European leaders have agreed to give the central bank power to oversee euro zone banks, they remain divided on measures to protect depositors and to deal with failed financial institutions.

Mr. Draghi warned that countries where banking risk was several times larger than the economy — as in Cyprus, Britain and Luxembourg — were especially vulnerable. Those countries have to be more conservative, he said, avoiding large budget deficits and ensuring that the banks have ample capital buffers. “If anything, the events on Cyprus have reinforced the governing council’s determination to support the euro while maintaining price stability and acting within our mandate,” he said. The muted market reaction to events in Cyprus, he said, showed that “we are now in a position to cope with serious crises without them becoming existential or systemic.”

He said no country in the euro zone would be better off leaving the euro, as some commentators have suggested. “What was wrong with Cypriot economy doesn’t stop being wrong if they are outside of the euro,” Mr. Draghi said. “An exit entails many risks — big risks.”

Melissa Eddy reported from Frankfurt and Jack Ewing from London. Julia Werdigier contributed reporting from London.

Article source: http://www.nytimes.com/2013/04/05/business/global/european-central-bank-holds-steady-on-interest-rate.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: central banks, global financial crisis, record lows

DealBook: Cargo Ship Losses Weigh on European Banks

March 23, 2013 by NewsMaker Leave a Comment

John Voos/ReutersParking an underused ship somewhere, like the River Fal in Britain, costs money.

FRANKFURT — Can a ship float and be underwater at the same time? If it has been financed by a European bank, the answer may be yes.

A glut of ships, and slack demand for shipping in the weak global economy, have reduced the value of cargo ships. According to some estimates, as many as half the cargo carriers on the high seas today may no longer be worth as much as the debt they carry — putting them underwater, in financial jargon.

Large vessels that might have sold for about $150 million new in 2008 fetch about $40 million today, according to Nicholas Tsevdos, a shipping specialist at CR Investment Management, which helps banks deal with distressed assets. And with cargo fees near record lows, many vessels are not earning enough to make debt payments, either.

As European leaders agonize about how to rescue Cyprus banks, the formerly obscure world of ship finance is a reminder of how much cleanup still lies ahead for the region’s banks. The growing fear is that some lenders, almost all of them in Europe, have yet to confront the scale of potential losses from an estimated $350 billion in loans made to the shipping industry.

“Many banks are still shackled by the leftover effects of the crisis,” Christine Lagarde, the managing director of the International Monetary Fund, told an audience in Frankfurt this week, without identifying any specific assets. “This is the weak link in the chain of recovery.” She urged banks to take a harder look at their problem loans.

Whether the risk from shipping loans is serious enough to put another torpedo into the euro zone financial system is hard to say because of a glaring lack of detailed information about banks’ portfolios of shipping loans.

Andreas R. Dombret, a member of the executive board of the German Bundesbank who is responsible for monitoring financial stability, said he thought the shipping crisis, while serious, did not pose a broad threat to the euro zone. “It’s not a concern for the stability of the financial system,” he said in an interview. “It’s not systemic.”

But he and other bank overseers are stepping up pressure on financial institutions to address their problems. Shipping is “a substantial regional and sectoral risk in the banking industry,” Mr. Dombret warned at an industry gathering in Hamburg last month. It was one of the few times a bank overseer of his stature had expressed concern about the shipping problem.

Under pressure from regulators, local governments that own most of HSH Nordbank in Hamburg said on Tuesday that they would raise their guarantees for the bank to 10 billion euros ($13 billion), from 7 billion euros ($9 billion). Though only a midsize bank, HSH is the biggest lender to the shipping industry, with more than $39 billion in outstanding loans. The announcement, by the City of Hamburg and State of Schleswig-Holstein, amounted to an admission that losses from shipping were greater than earlier estimates.

The shipping downturn, which began in 2008, has already driven several large fleet operators into bankruptcy. The Overseas Shipholding Group, the largest American tanker operator, filed for bankruptcy in November. The fear is that some of the banks most active in ship finance, which are concentrated in Germany, Scandinavia and Britain, are in denial about potential losses.

“It’s probably the most serious commercial problem that the banks have,” said Paul Slater, chairman of the First International Corporation, a consulting firm in Naples, Fla., that specializes in shipping. Banks with large portfolios of shipping loans “are just not taking the hits,” he said. “They are saying, ‘Give it time and it will work out,’ and it’s just not going to do that.”

For weak banks, the temptation to play down potential losses may be great. A frank appraisal of their losses would force some to raise billions in new capital or even to declare insolvency. That is true not only of shipping loans but also of other categories like commercial real estate, and it remains a fundamental problem for the euro zone economy.

The uncertainty about banks’ true financial health fosters mistrust among institutions, makes them reluctant to lend to each other and is partly responsible for a shortage of credit for businesses and consumers.

As sour assets go, ships are particularly troublesome. Unlike a plot of land, they require costly maintenance. They lose value over time from wear and tear or because more modern, fuel-efficient vessels make them obsolete. It costs money even to take an underused ship out of service and park it somewhere. The waters off Falmouth in Britain and Elefsina in Greece are popular anchoring spots for idle ships.

Investment funds that specialize in buying distressed debt have been wary about putting money into ships. That makes it hard for banks to unload unwanted shipping assets.

“Every hedge fund in the world is trolling Europe, but they are bidding on a small percentage of relatively good assets,” said Jacob Lyons, managing director of CR Investment Management in London.

Mr. Dombret of the Bundesbank pointed out that the banks that had made the most loans to the shipping industry were in nations like Germany or the Scandinavian countries whose governments had the least debt and were best able to cope with a banking crisis.

Mr. Dombret did not single out individual banks, but German banks like HSH Nordbank and Commerzbank in Frankfurt were among the top shipping lenders because German tax breaks favored ship finance. German banks’ exposure to shipping has been estimated at about $129 billion, more than double the value of their holdings of government debt from Greece, Ireland, Italy, Portugal and Spain. Aside from German banks, the DNB Group in Norway and Nordea in Sweden are big players in ship finance, as are Lloyds Banking Group and the Royal Bank of Scotland in Britain.

It does not necessarily follow that these banks will face losses on their shipping portfolios. Some of the savviest lenders probably still make money, or at least have made an honest appraisal of the value of their portfolios and set aside enough money to cover possible losses.

“We are very happy with our shipping business,” said Rodney Alfven, head of investor relations at Nordea. The bank, which is listed in Stockholm, increased the amount of money it set aside for potential bad loans in shipping to $81 million in the final three months of 2013 from $70 million the previous quarter. Over all, Nordea, the largest Swedish bank, has consistently made a profit from its shipping business, Mr. Alfven said. Shipping loans account for only 2 percent of Nordea’s lending, the bank said.

The sorry state of global shipping stems from a shipbuilding boom that peaked in 2008, just before the global financial crisis, and created a glut in cargo capacity. Rates for nonliquid cargo are half or less of the level needed for shipowners to break even, according an estimate by the consultant KPMG. That means that ships are doubly damaged. They do not earn enough to cover interest on their debt, nor can they be sold for the value of the loan.

Nordea has told investors it expects shipping to begin to recover in 2014, as the world economy rebounds. But others are more skeptical.

“By any kind of measure, this is a deeper and more difficult downturn than we’ve had in the last decade or two,” said Mr. Tsevdos of CR Investment.

Except for some specialized categories of ship, like liquid-natural-gas carriers, he said, “I don’t think there is a lot of indication for a lot of sectors that rates are going to turn around soon.”

Article source: http://dealbook.nytimes.com/2013/03/22/shipping-woes-may-weigh-on-european-banks/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: cargo ships, distressed assets, record lows

DealBook: Shipping Woes May Weigh on European Banks

March 22, 2013 by NewsMaker Leave a Comment

FRANKFURT — Can a ship float and be underwater at the same time? If it has been financed by a European bank, the answer may be yes.

A glut of ships, along with slack demand for shipping in the weak global economy, has slashed the value of cargo ships. According to some estimates, as many as half the cargo carriers on the high seas today may no longer be worth as much as the debt they carry — putting them underwater, in financial jargon. Their resale value is typically lower than the amount borrowed and spent to build them.

Large vessels that might have sold for about $150 million new in 2008 today fetch about $40 million, according to Nicholas Tsevdos, a shipping specialist at CR Investment Management, which helps banks deal with distressed assets. And with cargo fees near record lows, many vessels are not earning enough to make debt payments, either.

As European leaders agonize about how to rescue Cyprus banks, the formerly obscure world of ship finance is a reminder of how much cleanup work still lies ahead for European banks. The growing fear is that some lenders, almost all of them in Europe, have yet to confront the scale of potential losses from an estimated $350 billion in loans made to the shipping industry.

“Many banks are still shackled by the leftover effects of the crisis,” Christine Lagarde, the managing director of the International Monetary Fund, told an audience in Frankfurt in the past week, without singling out any specific assets. “This is the weak link in the chain of recovery.” She urged banks to take a harder look at their problem loans.

But he and other bank overseers are stepping up pressure on financial institutions to address their problems. Shipping is “a substantial regional and sectoral risk in the banking industry,” Mr. Dombret warned an industry gathering in Hamburg last month. It was one of the first expressions of concern about the shipping problem by a bank overseer of his stature.

Under pressure from regulators, local governments that own most of HSH Nordbank in Hamburg said last Tuesday that they would raise their guarantees for the bank to 10 billion euros, or $13 billion, from 7 billion euros. Though only a midsize bank, HSH is the biggest lender to the shipping industry, with more than 30 billion euros in outstanding loans. The announcement, by the City of Hamburg and State of Schleswig-Holstein, amounted to an admission that losses from shipping were greater than earlier estimates and an example of the cost to taxpayers already built in to the shipping crisis.

For weak banks, the temptation to play down potential losses may be great. A frank appraisal of their losses would force some to raise billions in new capital or even to declare insolvency. That is true not only of shipping loans but also of other categories like commercial real estate, and remains a fundamental problem for the euro zone economy.

As toxic assets go, ships are particularly troublesome. Unlike a plot of land, they require costly maintenance. They lose value over time from wear and tear or because more modern, fuel-efficient vessels make them obsolete. It even costs money to take an underused ship out of service and park it somewhere. The waters off Falmouth in Britain and Elefsina in Greece are popular anchoring spots for idle ships.

Investment funds that specialize in buying distressed debt have been wary about putting money into ships. That makes it hard for banks to unload unwanted shipping assets.

Mr. Dombret did not single out individual banks, but German banks like HSH Nordbank and Commerzbank in Frankfurt were among the top shipping lenders because German tax breaks favored ship finance. German banks’ exposure to shipping has been estimated at about 100 billion euros, more than double the value of their holdings of government debt from Greece, Ireland, Italy, Portugal and Spain. Aside from German banks, the DNB Group in Norway and Nordea in Sweden are big players in ship finance, as are Lloyds Banking Group and the Royal Bank of Scotland in Britain.

“We are very happy with our shipping business,” said Rodney Alfven, head of investor relations at Nordea. The bank, which is listed in Stockholm, increased the amount of money it set aside for potential bad loans in shipping to 63 million euros in the final three months of 2013 from 54 million euros the previous quarter. Over all, Nordea, the largest Swedish bank, has consistently made a profit from its shipping business, Mr. Alfven said. Shipping loans account for only 2 percent of Nordea’s lending, according to the bank.

Nordea has told investors it expects shipping to begin to recover in 2014, as the world economy rebounds. But others are more skeptical.

“By any kind of measure, this is a deeper and more difficult downturn than we’ve had in the last decade or two,” Mr. Tsevdos at CR Investment said.

Except for some specialized categories of ship, like liquid natural gas carriers, Mr. Tsevdos said, “I don’t think there is a lot of indication for a lot of sectors that rates are going to turn around soon.”

Article source: http://dealbook.nytimes.com/2013/03/22/shipping-woes-may-weigh-on-european-banks/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: cyprus banks, debt payments, record lows

Media Decoder Blog: CNN Announces Jeffrey Zucker as President

November 30, 2012 by NewsMaker Leave a Comment

Kevin Keelan/Clarion Pictures Jeff Zucker, in 2010, when he was the president and chief executive of NBC Universal.

8:00 p.m. | Updated
CNN announced on Thursday that it would install Jeffrey Zucker, the former chief executive of NBC, as president of CNN Worldwide.

The announcement was the culmination of a four-month search to find a replacement for Jim Walton, who had led CNN to record profits even as ratings for its American network, CNN/U.S., hit record lows. The network announced in July that Mr. Walton would step down at the end of the year.

What’s Next?

Many Paths for CNN

Jeff Zucker no doubt is getting much advice on how to revitalize the network: maybe add more celebrities or double-down on news or documentaries.

Mr. Zucker, 47, will be expected to revive the American network to competitive standing against its rivals, Fox News and MSNBC, even as it maintains its position as a nonpartisan news network, versus those speaking from the right (Fox) and left (MSNBC). Mr. Zucker said he would start his new assignment in January.

In a telephone interview, Mr. Zucker, who said he began discussing the job with CNN executives after Labor Day, summarized what would be his chief challenge: expanding the network’s appeal beyond times when there is breaking news.

“CNN has to find the right programming that exists in between the 25 nights a year when it is most relevant,” he said. “Beyond the fact that we are committed to news and journalism, everything else is open for discussion.”

Mr. Zucker will arrive at CNN carrying the baggage of the collapse of NBC’s own broadcast network, which fell from longtime leadership in prime time to last place under Mr. Zucker, even as the company’s cable networks, including MSNBC, thrived. But Mr. Zucker also brings a reputation for leadership in news, which he forged in two tenures overseeing NBC’s “Today” show to dominance in morning ratings and profits.

Time Warner’s chief executive, Jeffrey L. Bewkes, and his deputy, Phil Kent, the head of Turner Broadcasting, were known to have sought candidates with the right combination of management skills, programming expertise and journalistic credibility to oversee CNN’s many channels and Web sites. There was a shortlist, and Mr. Zucker was on it from the beginning.

Walter Isaacson, who ran CNN from 2001 to 2003, preceding Mr. Walton, said Mr. Zucker was a smart choice because “CNN has great journalists, but what it has needed is an imaginative programmer who knows how to build good shows.”

Phil Griffin, the president of MSNBC, said that if anyone could “bring CNN back,” Mr. Zucker could. Referring to Roger Ailes, the Fox News chairman, Mr. Griffin said: “Ailes on one side, Zucker on the other: Game on.”

This year, Mr. Zucker joined with his longtime friend Katie Couric to produce “Katie,” the syndicated talk show that started in September. The series had its best ratings yet last week.

Mr. Zucker said he had not been actively looking for another job when the CNN position came open. “You can’t come from the background I come from — news, television, great brands — and not be unbelievably intrigued by this,” he said.

At CNN, Mr. Zucker will report to Mr. Kent. He will be based at CNN’s bureau in New York. Mr. Walton was based in Atlanta, where CNN has had its headquarters since its inception in 1980.

Mr. Zucker steered clear of any specific plans he might have for overhauling CNN’s programming. But while underscoring CNN’s commitment to presenting news without the partisan slant of its cable news competitors, Mr. Zucker said several times that he would be looking to make CNN’s programs “more vibrant and exciting” and that news consisted of more than just “politics and war.”

As for examples of what he might mean by redefining news, Mr. Zucker mentioned a coming weekend show on CNN hosted by the chef and world traveler Anthony Bourdain. He also cited the “nonfiction programming” being produced on other cable networks, like Discovery, as part of the competitive landscape that CNN has to be a part of.

“When I say nonfiction programming, I’m not talking about reality shows,” Mr. Zucker said. “I’m not talking about ‘Honey Boo Boo.’ But there is plenty of nonfiction programming that could fit very well under the CNN brand.”

He added, “We know that continuing to do exactly what we’ve been doing will leave us exactly where we’ve been. And that’s not good enough.”

Mr. Kent said that as a cable network, CNN had to find a way to build a core constituency of viewers who considered the network essential viewing.

Still, Mr. Zucker acknowledged that the lineup of CNN prime-time shows, which have greatly lagged their competitors on Fox News and MSNBC, would be a “top priority.” Mr. Kent said one of the continuing issues he expected the new president to address, because of Mr. Zucker’s history as a hands-on news producer, was the subpar execution of some of the network’s programs.

Mr. Kent also said Mr. Zucker’s expertise in morning television was a “wonderful byproduct” of his hiring. Both executives said CNN was likely to redesign the network’s morning program to make it more competitive with its cable rivals and the morning shows on the broadcast networks.

Mr. Zucker acknowledged the negative marks he had received for his handling of the entertainment operation at NBC when he was the chief executive there, saying, “there is no doubt I made mistakes” running NBC Entertainment. “And I own them.”

But both he and Mr. Kent stressed that in joining a full-time news business, Mr. Zucker would be returning to the area of his greatest success and expertise. “I’m excited by the possibilities,” Mr. Zucker said.

Article source: http://mediadecoder.blogs.nytimes.com/2012/11/29/cnn-makes-it-official-zucker-to-be-new-president/?partner=rss&emc=rss

Filed Under: Business News Tagged With: msnbc, record lows, telephone interview