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Deutsche Bank poised for major revamp

Will Deutsche just spin off Postbank or its entire retail operation? Either way, there are mounting fears of job losses. They could be part of a major overhaul Germany's largest bank is expected to announce soon. Analysts and banking experts have been busy speculating on the future of Germany's largest financial institution, Deutsche Bank. The bank wants to reinvent itself and, to that end, its management is expected to submit a new strategy to the bank's supervisory board on Friday. Speculation is focused on the future of Postbank, which has been part of the group since 2010. According to reports, Deutsche has narrowed its options down to two. One is to split the group into two separate legal entities, with one focusing on investment banking and the other dealing with retail businesses. The second option is to spin off Postbank. Waiting for the big hit "I believe investors are expecting the board to provide more clarity on the new strategy, and that means they would like to see more decisions come out of the board meeting on Friday than just the sale of Postbank," said Hans-Peter Burghof, a banking expert at the University of Hohenheim. Burghof told DW that the goal of the new strategy therefore has to be to surprise the capital markets and show that the bank's management can produce results." The current uncertainty, however, means that employees at Postbank - numbering some 14,800 - are increasingly concerned about job security, particularly after recent wage negotiations came to a standstill, and employees began a strike on April 20. Strike at Postbank Trade union Verdi is demanding a 5.5-percent payrise for the bank's employees. The dispute, however, is chiefly about better protection from dismissal for all of Postbank's staff. Due to the discussions over strategy at Deutsche, the issue of protection from dismissals gained prominence during the collective bargaining round. However, many of the Postbank employees are already civil servants with permanent contracts who cannot be fired. But the bank has repeatedly said that it cannot exclude the possibility of redundancies, given the continuing pressure on margins and structural changes in the industry. Experts say offering employees protection against dismissals would reduce the price that any interested buyer would be willing to muster. Spain's Santander group and France's BNP Paribas are seen as potential buyers of Postbank. An acquisition would give either buyer the opportunity to expand their presence in Germany. Sell at a loss? It is not clear yet how much the sale of Postbank could net Deutsche Bank. German business weekly "Wirtschaftswoche" estimates Deutsche Bank could pocket 6 billion euros by selling its subsidiary - exactly the same amount it paid for Postbank five years ago. But insiders put the figure at a more modest 4 billion euros on account of the bank's portfolio of risky assets, which amount to some 11 billion euros. "It will be difficult to sell Postbank without offering a large discount on its book value," writes German daily "Süddeutsche Zeitung," citing an unnamed investment banker. Nevertheless, it remains to be seen what decision Deutsche Bank's management and its supervisory board will make with regard to Postbank, said analyst Burghof. "As a professor in banking, I believe a bank should be diversified and capable of offering a wide variety of services," he underlined. "A bank must also be able to deal with the tension between different corporate cultures," the expert stressed. Radical option If the board decides to split Deutsche Bank, it would be a radical decision to slim down its operations, which could boost earnings. At present, as a universal bank, Deutsche offers investment and retail banking as well as wealth management. Retail clients are offered services by both its Deutsche Bank and its Postbank brands. Big changes are therefore expected in retail banking. But even if Postbank were to be hived off, there could still be more job cuts at Deutsche Bank's retail banking operations. The new strategy paper is believed to contain proposals envisaging the closure of up to a third of the 700 branches the bank operates in Germany, with potentially thousands of job losses. Investment banking won't be spared The restructuring is also expected to affect Deutsche's investment banking division, which could see bigger cuts than originally expected. The division's business volume could be cut by up to 200 billion euros, reports say. The division has to be downsized as many of its activities consume too much capital, according to news agency Reuters, which cited soucres in financial circles. Deutsche, however, remains mum on all the speculation surrounding the bank. A spokesperson reiterated that the results of the ongoing strategy debate will be published before the end of June. The bank's management will then also have to focus on how to get its people back on board. Employees' motivation "This is the aspect I am most anxious about," says banking expert Burghof. He wonders what Deutsche will do to motivate staff and get them to commit to the bank after a period of high uncertainty. "The culture change the bank wants to achieve means that Deutsche has to be seen as a long-term and reliable partner. And it is not going to achieve that with short-term strategy changes."

Will Deutsche just spin off Postbank or its entire retail operation? Either way, there are mounting fears of job losses. They could be part of a major overhaul Germany’s largest bank is expected to announce soon. Analysts and banking experts have been busy speculating on the future of Germany’s largest financial institution, Deutsche Bank. The bank wants to reinvent itself ... Read More »

Nasdaq hits record high, smashes dotcom record

The Nasdaq Composite Index broke through its 15-year-old record on Thursday. Higher oil prices and solid earnings reports contributed to the rise. The index gained 0.42 percent, or just over 20 points on Thursday, to close at an all-time high of 5,056. It means the Nasdaq has now made up the nearly 4,000 points it lost after its previous high during the height of the dotcom boom on March 10, 2000. Higher oil prices pushed up energy stocks by 0.6 percent. Strong earnings from telecoms bellwether AT&T, up 4.2 percent to $34.23, and eBay, up 3.8 percent to $58.89, helped offset lackluster US economic data. Apple and Google also helped propel the Nasdaq to its new high. The index is up 353 percent from its October 2002 low, when the technology bubble burst. "It has the potential to go up, absent some external event that I can't predict." Walter Price, senior portfolio manager and managing director of the AllianzGI Global Technology fund in San Francisco told the Reuters news agency. He pointed out that unlike in the early 2000s, companies are generally not overvalued nor are share prices inflated. In 2000, "a lot of the high-growth companies were selling at 200 or 300 times next year's earnings," he said. "This is nothing like that. This is a whole different world versus 2000." The Nasdaq used to be dominated by technology companies. Today, biotechnology and consumer services firms make up a large share of the index.

The Nasdaq Composite Index broke through its 15-year-old record on Thursday. Higher oil prices and solid earnings reports contributed to the rise. The index gained 0.42 percent, or just over 20 points on Thursday, to close at an all-time high of 5,056. It means the Nasdaq has now made up the nearly 4,000 points it lost after its previous high ... Read More »

Greece hopes to strike a deal with Gazprom soon

Greek PM Alexis Tsipras and the head of Russian gas giant Gazprom have reportedly agreed to set up a working group to promote the creation of a pipeline which will transport Russian gas to Europe via Greece. The Greek prime minister and Gazprom chief Alexei Miller held talks in Athens on Tuesday over a multibillion dollar gas pipeline project. Reports said both sides would work towards setting up a "road map" detailing the responsibilities the two parties would commit to in the coming months. Government sources said Athens hoped an agreement would be signed shortly. The proposed pipeline, which has not been approved by the European Union, could deliver Russian gas through Turkey and Greece to Europe. The visit by Miller came after Tsipras met Russian President Vladimir Putin in Moscow at the beginning of April and expressed his country's interest in taking part in the so-called Turkish Stream gas pipeline project. The pipeline is expected to transport Russian gas though Turkey and then in to Europe by 2017. Some observers, however, doubt the pipeline will be built on time, or even at all. "The pipeline is of big interest to our country and is among our priorities," said Greek Energy Minister Panagiotis Lafazanis. "We are continuing talks with the Russian side and we hope to reach an agreement very soon," he added, terming the talks as constructive. Heavily-reliant According to the Greek Kathimerini newspaper, Athens stands to earn several billion dollars in advance of the deal. However, Lafazanis declined to comment when asked by reporters about any advance payments. Talking to reporters after meeting Tsipras, Gazprom's Chief Executive Alexei Miller also did not make any reference to any advance payments to Greece from the pipeline. Greece is heavily dependent on Russian energy imports and is looking to negotiate a deal with Moscow for the reduction of the price of gas that it imports from Russia. Furthermore, Athens has indicated its interest in becoming a European hub for the natural gas pipeline project. Greece is quickly running out of cash as the leftist-led government under Tsipras is struggling to strike a deal with its international lenders on the country's bailout terms and come up with credible reforms. Russia, on the other hand, is moving ahead with its plans to build the Turkish Stream project to Turkey and further out to Greece via the Black Sea, in line with its aim to stop exporting gas via Ukraine by 2019. Miller said Gazprom would pump up to 47 billion cubic metres (bcm) via Greece through the pipeline, which would be implemented strictly according to the EU law.

Greek PM Alexis Tsipras and the head of Russian gas giant Gazprom have reportedly agreed to set up a working group to promote the creation of a pipeline which will transport Russian gas to Europe via Greece. The Greek prime minister and Gazprom chief Alexei Miller held talks in Athens on Tuesday over a multibillion dollar gas pipeline project. Reports ... Read More »

Winterkorn to stay CEO at Volkswagen

German carmaker Volkswagen (VW) has ended the crisis in its top management which pitted CEO Martin Winterkorn against VW's powerful board chairman Ferdinand Piëch. Winterkorn's contract is set to be extended. A week-long power struggle at German carmaker Volkswagen (VW) came to an end on Friday, with the six-member presidium of the company's supervisory board saying it would recommend extending the contract of Chief Executive Martin Winterkorn beyond 2016. The presidium said in a statement that Martin Winterkorn was "the best possible chief executive" for Volkswagen. Winterkorn was under pressure after VW's powerful Board Chairman Ferdinand Piëch withdrew his backing for the CEO, telling German news magazine "Der Spiegel" on Friday last week that he was "at a distance to Winterkorn." On Friday, the presidium, however, said that it set "great store by the fact that Winterkorn should continue to act in his function as CEO as actively and successfully as he has done in the past." "He has the full support of the presidium, which will propose that his contract be extended at the supervisory board meeting in February 2016," the statement added. The announcement came after a crisis meeting of Volkswagen's inner circle in the Austrian city of Salzburg on Thursday that had industry experts wondering whether Piëch would kill off his own protégé. After less than three hours, the meeting was adjourned. The six-member leadership committee and Winterkorn left without saying a word. A twisting road The power struggle at Germany's biggest carmaker came as a surprise to everyone, including VW's second-most powerful man, and Piëch's own cousin, Wolfgang Porsche. The story took an unexpected turn, when, less than 48 hours after launching his verbal attack, some of Piëch's most trusted allies began defecting: From the state of Lower Saxony, which holds a 20-percent stake in the company, to Piëch's own family. "Dr. Piëch's statement reflects his private opinion, which is not aligned…with that of the family," said Porsche, who also chairs the Porsche SE holding company, which owns a 51-percent in the 12-brand VW group. By Monday, a throng of supporters had lined up behind Winterkorn. "We have in Mr. Winterkorn an outstanding industry leader and CEO, who has our full trust," VW Deputy Chairman Berthold Huber, also a former chairman of the powerful IG Metall trade union, told Der Spiegel. The company's council also refused to withdraw its backing of an extension of the CEO's contract, set to run out end of 2016, according to an unnamed source. As the dust began to settle, Piëch was left looking increasingly isolated. Strictly business But insiders disagree as to the 78-year-old patriarch's motives. Anonymous sources had said that the chairman had grown increasingly unhappy with Winterkorn's performance, particularly for his failure to turn around disappointing sales in the crucial North American market - something he had expressed at several supervisory board meeting over the past five months. Recent earnings reports may have provided Piëch plenty of ammunition to sustain his attack on Winterkorn - and win over skeptics: VW's first-quarter sales tanked in several key markets. Demand for the group's core brand dropped 1.3 percent, with deliveries down 9.3 percent in the US and 0.6 percent in China. The Russian market bled the most as Volkswagen suffered a 47.2-percent sales cut, amid continuing Western sanctions over Moscow's involvement in the Ukraine crisis.

German carmaker Volkswagen (VW) has ended the crisis in its top management which pitted CEO Martin Winterkorn against VW’s powerful board chairman Ferdinand Piëch. Winterkorn’s contract is set to be extended. A week-long power struggle at German carmaker Volkswagen (VW) came to an end on Friday, with the six-member presidium of the company’s supervisory board saying it would recommend extending ... Read More »

In cloud of confetti, ECB pledges to stay the course

Mario Draghi has said he will keep pumping money into the economy, doing his best to keep markets happy amid reports that the eurozone recovery is turning a corner. But it was a protester that ended up stealing the show. The European Central Bank (ECB) will forge ahead with its controversial bond-buying scheme, president Mario Draghi announced at a Wednesday news conference in Frankfurt, expressing surprise at speculation of an early end to the bank's quantitative easing (QE) policy. "Our focus will be on the full implementation of our monetary policy measures," the ECB chief said, stressing his resolve to stay the course until the 60-billion euro ($63.6-billion) a month money-printing program is set to expire in September 2016, at a total cost of 1.1 trillion euros. Draghi said that the 25-member governing council decision to keep the benchmark refinancing rate, known as "refi," at its current all-time low of 0.05 percent, reflected "clear evidence" that the central bank's aggressive monetary policy were "effective." The ECB will also leave untouched the two other key deposit and marginal lending rates, currently pegged at -0.2 percent and 0.3 percent, respectively. "Through these measures we will contribute to a further improvement in the economic outlook," Draghi predicted, pointing to data showing the threat of deflation on the retreat. "Financial market conditions and the cost of external finance for the private sector have eased considerably over the past months and borrowing conditions for firms and households have improved notably, with a pick-up in the demand for credit." Recovery ahead On Tuesday, the International Monetary Fund revised up its growth forecast for the eurozone to 1.5 percent this year, followed by 1.6 percent in 2016. The eurozone's top financial shepherd has repeatedly signalled that he won't scale back QE until consumer prices return to the bank's inflation goal of below, but close to, 2 percent. "I'm quite surprised, frankly, by the attention a possible early exit of the program is receiving, when we've been in the program only a month," Draghi said, comparing it to asking a marathon runner "is it over yet?" after just one kilometer. No olive branch, but much confetti Debate about the eurozone economy invariably also raised questions about Greece and the increasingly likely scenario of an exit from the 19-member currency bloc. Asked about ECB aid to Greek banks, Draghi replied, "the answer to your question is entirely in the hands of the Greek government and the negotiations between Athens and its eurozone partners." He added that the question of debt restructuring for Greece had been raised at the meeting of the governing council, but only said that it would "come back to this issue in due time." Overall, there was little to surprise anyone at Wednesday's press conference, save for a brief confetti-filled intermezzo, when a member of feminist activist group FEMEN charged at Draghi, jumped on the podium and shouted "end the ECB dictatorship!" After two men in suits carried her out of the room, Draghi picked up where he left off, albeit looking a little shaken. "You know it's been a dull press conference when the only real talking point to come from it is a protestor jumping on the table in front of Mario Draghi, throwing confetti on him. That was very much the case today," Craig Erlem, analyst at Oanda, concluded. "All things considered, as expected, today was something of a non-event from the ECB."

Mario Draghi has said he will keep pumping money into the economy, doing his best to keep markets happy amid reports that the eurozone recovery is turning a corner. But it was a protester that ended up stealing the show. The European Central Bank (ECB) will forge ahead with its controversial bond-buying scheme, president Mario Draghi announced at a Wednesday ... Read More »

Nokia to buy Alcatel-Lucent

Finland's Nokia has said it has agreed a deal with Alcatel-Lucent to fully take over its Franco-American competitor. The move would create a new global networking giant to rival Sweden’s Ericsson and China’s Huawei. Nokia announced Wednesday (15.04.2015) it had agreed to take over Alcatel-Lucent in a deal valuing the Franco-American company at 15.6 billion euros (16.6 billion dollars). "I firmly believe that this is the right deal, with the right logic, at the right time," Nokia CEO Rajeev Suri said. Both companies' boards of directors had given their blessing to the deal, which would help Nokia bolster its mobile infrastructure business against Swedish archrival Ericsson, profiting from Alcatel's position as a leading supplier of 4G and LTE mobile networks and related services. Alcatel-Lucent's market capitalization stands at roughly 11 billion euros ($11.63 billion), while Nokia's market capitalization is about 28 billion euros. On Tuesday, Alcatel-Lucent's shares bounced on the announcement that an agreement was in the works, gaining 13 percent to 4.38 euros per share in morning trading in Paris. Networking behemoth in the making A merger between the two companies would end years of speculation about a possible tie-up, and reshape the market for telecommunications equipment. The new company would have a combined 2014 revenue of 25.9 billion euros and more than 100,000 employees in businesses spanning wireless communications and Internet routing. Market leader Ericsson reported revenue of 25.1 billion euros in 2014, while the telecoms equipment business of China's Huawei had revenue of about 23.6 billion euros. Alcatel-Lucent CEO Michel Combes suggested the combined firm might emphasize the venerable Bell Labs name, which US-based Lucent brought with it when it merged with France's Alcatel in 2006. Bell Labs originated as the research wing of US telephone company AT&T and is credited with inventions as diverse as the transistor and the UNIX operating system. "This transaction comes at the right time to strengthen the European technology industry," Combes said. "We believe our customers will benefit from our improved innovation capability and incomparable R&D engine under the Bell Labs brand." According to Bloomberg financial services, Nokia is seeking the blessing of the French government for the purchase and is working with regulators in an attempt to preserve research jobs in France. Last year, Nokia sold its consumer handset business, once the world's largest, to Microsoft in order to focus on networking equipment. The company has also indicated it may be willing to sell its Here mapping division.

Finland’s Nokia has said it has agreed a deal with Alcatel-Lucent to fully take over its Franco-American competitor. The move would create a new global networking giant to rival Sweden’s Ericsson and China’s Huawei. Nokia announced Wednesday (15.04.2015) it had agreed to take over Alcatel-Lucent in a deal valuing the Franco-American company at 15.6 billion euros (16.6 billion dollars). “I ... Read More »

China’s growth slows to 7 percent

Growth in the world's second-largest economy has slowed to a six-year low of 7 percent. But these new figures were not as bad as some investors had feared following poor trade performace last month. In a further sign that China's economic slowdown is continuing, economic growth fell to its lowest rate since the global financial crisis six years ago. Official data released Wednesday showed growth in the world's second-largest economy came in at 7.0 percent for the first three months of the year, down from 7.3 percent in the previous quarter. The disappointing figures reflected slowing manufacturing and retail sales. They came in the wake of other weak indicators including February's trade figures, although slightly above a forecast of 6.9 percent. It was China's lowest posted growth rate since first-quarter 2009, when growth dropped to 6.1 percent as the world economy ground to a halt following bank collapses around the world brought on by a property bubble. Some of today's decline is due to official policy that came in response to that decline. To head off worries of overheating, China's communist leaders appear comfortable with a lower growth rate. They have tried to steer the economy toward a growth model that relies on domestic consumption rather than trade and foreign direct investment (FDI). "If the Chinese market were to double from here it would indeed be in bubble," James Griffiths of Citi Research said in a commentary Wednesday. "The same is true for Asia." But a further decline threatens job creation, a key factor in the social stability prized by the Chinese authorities. Many economists say the government may have to step in to stimulate the economy. "The weaker Q1 GDP growth and much weaker-than-expected March activity data suggest that growth momentum remains weak, which calls for further policy easing," Nomura analysts led by Yang Zhao wrote in a note. Statistics bureau spokesman Sheng Laiyun said Wednesday that China's survey-based unemployment rate stood at 5.1 percent, without specifying the time period. Asian markets were mostly down slightly following the news. The Shanghai Composite Index dropped 1.1 percent to 4,089.52, while Hong Kong's Hang Seng index lost 0.1 percent to 27,547.60.

Growth in the world’s second-largest economy has slowed to a six-year low of 7 percent. But these new figures were not as bad as some investors had feared following poor trade performace last month. In a further sign that China’s economic slowdown is continuing, economic growth fell to its lowest rate since the global financial crisis six years ago. Official ... Read More »

General Electric to cut finance arm, set share buyback

General Electric is ditching the lending business, despite it being a major profit generator. It's the latest move the US technology and industrial company is taking to reduce its holdings in the finance industry. General Electric announced Friday it intends to sell off most of its finance arm over the next two years, opting to shed a massive unit carrying its own set of risks and instead focus more on its industrial operations. In addition to the sale of GE capital, the Fairfield, Connecticut-based company also set a share buyback plan of up to $50 billion (47.2 billion euros), which sent its shares up in premarket trading Friday. Blackstone and Wells Fargo are buying most of the assets of GE Capital Real Estate valued around $23 billion. The total deal is the biggest in the commercial property market, since Blackstone's acquisition of office landlord Equity Office Properties Trust in 2007 for $39 billion, including debt. GE has been reducing its exposure in the finance industry following the global financial crisis, off-loading its consumer credit and banking divisions. The financial division generates almost half of the company's profit, but it's also a huge regulatory burden, causing anxiety for investors. In addition, the company has been selling off its worldwide property investments in favor of focusing more on earnings and product sales, such as of jet engines, generators, electric grid gear and oil field equipment. The US technology and industrial company said it expected earnings from its aviation, power and water and other industrial businesses to account for about 90 percent of total earnings by 2018. These units made up just over half of GE's profit in 2013. GE added "market conditions were favorable" to sell most GE Capital over the next two years.

General Electric is ditching the lending business, despite it being a major profit generator. It’s the latest move the US technology and industrial company is taking to reduce its holdings in the finance industry. General Electric announced Friday it intends to sell off most of its finance arm over the next two years, opting to shed a massive unit carrying ... Read More »

IMF: Foreign affiliates make international banking safer

The International Monetary Fund thinks international banking has become more stable since the financial crisis. But it depends on how global banks lend money to host countries abroad. Despite a slowing of cross-border lending by international banks, their foreign affiliates have instead stepped up to the plate, making local financial systems more stable, the International Monetary Fund said on Wednesday. The IMF's latest Global Financial Stability Report analyzed how economic crises could be exacerbated by sharp changes in global banks' lending policies. International banks were lending more from their subsidiaries inside recipient or "host" countries, benefiting countries that were vulnerable to sharp swings in capital flows during economic downturns, the IMF said. "While cross-border banking linkages tend to aggravate the effects of adverse domestic and global shocks on credit in host countries, local lending can play a stabilizing role during domestic crises," the IMF said in a statement. Look for funding where you are The US-based international organization said policies should be implemented by countries on the receiving end of international capital flows. "Governments can enhance the resilience to financial shocks by encouraging the subsidiaries of global banks to rely more on local funding sources," the IMF said. But host countries also need to keep their doors open to cross-border loans, the bank stressed. The report noted that Europeans have mostly driven subsidiary-based lending in other countries, while Japanese banks relied more heavily on cross-border business. On April 15, the IMF is expected to release more details from its Global Financial Stability Report.

The International Monetary Fund thinks international banking has become more stable since the financial crisis. But it depends on how global banks lend money to host countries abroad. Despite a slowing of cross-border lending by international banks, their foreign affiliates have instead stepped up to the plate, making local financial systems more stable, the International Monetary Fund said on Wednesday. ... Read More »

FedEx to acquire Dutch TNT Express

US delivery service FedEx has announced it has reached a deal to buy the Dutch logistics giant TNT Express in a bid to expand its European presence. Both companies said anti-trust concerns would be addressed properly. FedEx reported Tuesday that it would acquire Dutch rival TNT Express for 4.4 billion euros ($4.8 billion) with a view to strengthening its position on the European market amid a global e-commerce pickup. "The companies reached conditional agreement on a recommended all-cash public offer of 8 euros per ordinary TNT Express share," a joint statement said, with the suggested price representing a premium of 33 percent over what the share cost on average after trading closed on April 2. There were no objections to the deal by TNT Express' largest shareholder, Dutch mail service PostNL, which owns a 14.7 percent stake in the company. Win-win situation "Our customers can profit from the true global reach and expanded propositions, while with this offer our shareholders can already reap benefits today that otherwise would only have been available in the longer run," TNT Express chief Tex Gunning said in a statement. He noted that the Dutch firm would sell its airline operations in compliance with European airline ownership regulations. This and all other possible anti-trust concerns would be addressed in due course, Gunning stated while adding that both firms planned to shape the merger without any significant redundancies. TNT Express operates in over 200 countries and maintains a leading role in the European road freight network. It currently employs 65,000 people, while FedEx has a workforce of about 300,000.

US delivery service FedEx has announced it has reached a deal to buy the Dutch logistics giant TNT Express in a bid to expand its European presence. Both companies said anti-trust concerns would be addressed properly. FedEx reported Tuesday that it would acquire Dutch rival TNT Express for 4.4 billion euros ($4.8 billion) with a view to strengthening its position ... Read More »

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