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Monte Dei Paschi Announces Loss for 2012

March 28, 2013 by Leave a Comment

ROME — The ailing lender Monte dei Paschi di Siena said Thursday that it had lost nearly €3.2 billion in 2012, an improvement from the €4.7 billion it lost in 2011, but still worse than analysts had expected.

The bank blamed a difficult Italian economy, as well as its own internal problems, which its new managers described as graver than they had anticipated.

The loss for 2012, equal to $4.1 billion, compares with an average estimate for a loss of €2.5 billion in a Reuters poll of eight banks and brokerages.

The Tuscan bank, hit by a trading and bad-loan scandal, said that in 2012 it set aside about €2.7 billion to cover possible loan losses. The bank also booked a pretax loss of €730 million as it restated the value of derivatives deals that are at the center of the scandal that has engulfed an institution founded in 1472.

But the bank said it had a solid portfolio of assets and its new chief executive said the financial results were, unlike past reports, a model of transparency.

“This balance sheet is a turning point and reports a bank that is very different from the recent past,” the chief executive, Fabrizio Viola, told investors in a conference call, adding that the new management’s review of the bank’s finances were complete and that there were no more unwelcome surprises lurking in the books.

The bank said revenue for 2012 declined 6.2 percent from the year before, due in part to a steep fall in net interest income and a slip in fees and commissions.

Mr. Viola said the bank had reduced its operations by 11 percent, taking a one-off charge of €311 million for the restructuring.

The lender, based in Siena, has been at the center of a financial and political storm since January, when it emerged that Mr. Viola, appointed as the chief executive in 2012, had found a suspect exchange of letters between Monte dei Paschi and Nomura, an investment bank, hidden in a safe. The following month, the bank disclosed losses of €730 million related to three structured product transactions, one of which was with Nomura.

The transactions came under scrutiny by prosecutors in Siena, who had opened an investigation into the lender’s financial troubles and the alleged bribes that brought the world’s oldest operating bank to its knees and led it to request a €4.1 billion bailout from the Italian government. In their latest action, magistrates this week directed financial police to search Nomura’s offices in Milan for documents related to one of the suspect transactions.

Monte dei Paschi has begun legal action to retrieve some of the losses and sued Deutsche Bank and Nomura, as well as two former executives of the Siena bank, over two of the financial transactions that were responsible for most of the losses.

The bank’s current management decided to sue the former chief executive, Antonio Vigni, over the so-called Santorini trade, a transaction with Deutsche Bank in 2008 that eventually resulted in a €305.2 million loss for Monte dei Paschi. It also filed a lawsuit against the bank’s former chairman, Giuseppe Mussari, for a 2009 deal with Nomura, called “Alexandria,” which resulted in losses of €273.5 million.

Monte dei Paschi’s problems began with its acquisition in 2008 of the regional lender Antonveneta for €9 billion, a price analysts say was wildly inflated. In the wake of that deal, Monte dei Paschi used transactions like “Alexandria” and “Santorini” in an attempt to raise money without eroding its capital base.

But the financial instruments were not disclosed to regulators, according to prosecutors and the Bank of Italy, the country’s central bank, and later resulted in steep losses. Some of the bank’s former executives are under investigation by the prosecutors in Siena.

As part of its efforts to rehabilitate its finances and its reputation, the bank brought in a new management team, including Mr. Viola and a new chairman, Alessandro Profumo.

The lender is also in the process of closing hundreds of branches and is cutting more than 4,000 jobs.

Article source: http://www.nytimes.com/2013/03/29/business/global/monte-dei-paschi-announces-loss-for-2012.html?partner=rss&emc=rss

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India Lowers Benchmark Interest Rate to Fuel Growth

January 29, 2013 by Leave a Comment

MUMBAI — India’s central bank lowered its key policy rate on Tuesday, as expected, for the first time in nine months to support an economy that is poised for its slowest growth in a decade, but signaled there was less room for aggressive cuts because of concerns over inflation.

The Reserve Bank of India cut its benchmark rate by 0.25 of a percentage point to 7.75 percent, in line with a Reuters poll this month.

The central bank unexpectedly also reduced the cash reserve ratio, the share of deposits banks must keep with the central bank, by 0.25 of a percentage point to 4 percent, which will pump an additional 180 billion rupees, or $3.3 billion, into the banking system.

India’s headline inflation rate moderated to a three-year low of 7.18 percent in December, and the central bank said there was likelihood that inflation would remain around current levels heading into the 2013-14 fiscal year, which starts in April.

“This provides space, albeit limited, for monetary policy to give greater emphasis to growth risks,” the central bank said in its quarterly monetary policy review.

Bond and stock markets were largely unmoved as dealers had already priced in a quarter-percentage-point rate cut. The 10-year bond yield was flat at about 7.87 percent. India’s main NSE index was also flat, with the bank sub-index up 0.2 percent, paring initial stronger gains.

The Indian rupee strengthened to 53.79 to the dollar from about 53.84 before the decision.

“RBI has not abandoned its cautious stance, stressing on the ‘calibrated and limited’ nature of rate support,” said Radhika Rao, an economist at Forecast Pte in Singapore. “The scale of rate cuts is closely tied to the government’s sustained efforts to correct the twin imbalances and moderating inflation trajectory.”

The central bank, however, reiterated its concerns over a bloated fiscal and current account deficits, adding that its pro-growth stance would be conditioned by the management of the risks posed by them.

“Financing the CAD with increasingly risky and volatile flows increases the economy’s vulnerability to sudden shifts in risk appetite and liquidity preference, potentially threatening macroeconomic and exchange rate stability,” the bank said, referring to the current account deficit.

Since a 0.5 percentage point cut in April, the central bank had kept interest rates on hold as inflation stayed stubbornly high, ignoring repeated calls from the government for a cut.

Having grown at near-double-digit pace before the Lehman Brothers crisis, the economy has suffered a rapid deceleration.

The central bank cut its G.D.P. growth forecast for Asia’s third-largest economy to 5.5 percent for the current fiscal year, from 5.8 percent previously, and lowered its projection for headline inflation in March to 6.8 percent from 7.5 percent earlier.

Article source: http://www.nytimes.com/2013/01/30/business/global/india-lowers-benchmark-interest-rate-to-fuel-growth.html?partner=rss&emc=rss

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Siemens Warns of Weakening Industrial Demand

January 23, 2013 by Leave a Comment

“For the rest of the year, we don’t expect any tailwinds from the global economy to help us reach our ambitious goals,” Chief Executive Peter Loescher said in a statement on Wednesday.

Siemens, an industrial bellwether that makes products ranging from fast trains and gas turbines to hearing aids, posted a 3 percent decline in new orders in the three months through December, to 19.1 billion euros (16 billion pounds).

At its Industry business, which generates about a quarter of group revenue, new orders were down 8 percent as the market environment grew more challenging.

But overall, new orders for the group were still better than the 18.9 billion euros expected by analysts, according to a Reuters poll, and Siemens confirmed its full-year outlook.

Its net profit from continuing operations eased by 1 percent to about 1.3 billion euros, beating a consensus of 1.1 billion.

For the full year through September, it sees profit declining to between 4.5 billion euros and 5.0 billion.

That compares with 5.18 billion last year, due to about 1 billion of costs from a 6-billion-euro savings programme announced late last year and the impact of a change in accounting standards.

Munich-based Siemens has come under pressure to cut costs and focus on its most profitable businesses to close a gap with rivals such as ABB and General Electric.

It is divesting its solar and water businesses and plans to spin off lighting unit Osram this year, while adding a rail business it bought from Invesnsys as well as industrial software companies such as Belgium’s LMS International.

(Reporting by Maria Sheahan; Editing by Victoria Bryan and Jeremy Laurence)

Article source: http://www.nytimes.com/reuters/2013/01/23/business/23reuters-siemens-results.html?partner=rss&emc=rss

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U.S. Jobless Claims and Sales Figures Bolster Hope for Recovery

December 14, 2012 by Leave a Comment

Initial claims for state unemployment aid fell for a fourth consecutive week, dropping by 29,000 to a seasonally adjusted 343,000, the Labor Department said on Thursday. They are now at their lowest level since early October, and within a hair of territory last seen in early 2008.

Another report suggested consumer spending picked up last month despite fear Washington would fail to avoid harsh austerity measures that could push the nation into recession. Worries over the automatic tax increases and spending cuts that would go into effect if Republicans and the White House cannot reach an agreement on the so-called fiscal cliff hit consumer sentiment hard in early December.

A slow but steady improvement in the labor market has helped support consumer spending, which propped up economic growth in the third quarter when business investment sagged.

Economic growth is expected to slow in the fourth quarter, hurt by slower inventory growth and a reduction in investment by companies worried about the continuing economic negotiations.

However, the economy does appear to be bouncing back after Hurricane Sandy, which made landfall in the East Coast in late October and led to a spike in jobless claims.

The four-week moving average for new claims, which irons out weekly volatility, dropped by 27,000, to 381,500.

“The labor market might be improving a bit quicker than expected,” said David Sloan, an economist at 4Cast in New York.

The Commerce Department said retail sales rose 0.3 percent last month, rebounding from October’s 0.3 percent decline. The increase fell short of the forecast in a Reuters poll of economists, but a measure of core sales exceeded expectations.

The core retail sales figure, which excludes automobiles, gasoline and building materials, rose 0.5 percent in November. The government uses this measure to calculate consumer spending.

The Commerce Department also said business inventories, a critical component of economic growth, rose 0.4 percent in October, in line with expectations.

Article source: http://www.nytimes.com/2012/12/14/business/economy/us-jobless-claims-and-sales-figures-bolster-hope-for-recovery.html?partner=rss&emc=rss

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