74.24 +0.40 (0.54%)
Pre-market: 5:37AM EST
|Bid||74.00 x 2200|
|Ask||74.50 x 1100|
|Day's range||73.33 - 74.01|
|52-week range||48.42 - 76.28|
|Beta (3Y monthly)||1.80|
|PE ratio (TTM)||9.79|
|Earnings date||14 Jan 2020|
|Forward dividend & yield||2.04 (2.76%)|
|1y target est||83.85|
(Bloomberg) -- Sign up to our Brexit Bulletin, follow us @Brexit and subscribe to our podcast.Eight centuries of financial firepower were on vivid display last weekend at the annual Lord Mayor’s Show in the City of London.On a chilly Saturday morning in the financial district, the Bank of England and Royal Air Force joined a parade of floats and carriages from such time-honored institutions as the Worshipful Company of Feltmakers. The event showcases the City’s history and position at the heart of the British establishment.But the display of costumes and pageantry -- and more than 100 horses -- only weeks out from a general election couldn’t obscure what many in the Square Mile see as the unpalatable choice they face on Dec. 12.British financiers have long been vocal critics of Prime Minister Boris Johnson. An even bleaker prospect for them is victory for Labour’s Jeremy Corbyn -- the first leader of a mainstream party to challenge the City’s power since the Big Bang era of the 1980s. He wants to impose higher taxes on the wealthy and undo the privatizations of key industries undertaken by Margaret Thatcher.“If Corbyn gets a mandate to form a government, it will be a fundamental change to everything we’ve had in this country for so many years,” said John Elder, a founding partner of Family Office Advisors LLP. “Intellectual and financial capital may flee, and international markets will be taking a hard look at the U.K.’s credit rating.”Bankers, hedge fund managers and private equity chiefs are reluctant to discuss the election on record, for fear of offending any future government. Those interviewed privately by Bloomberg say they’re largely discounting the possibility of an outright Labour victory. At worst, they expect Corbyn to lead a coalition that would force him to moderate his policies.While recent polls support this sanguine attitude –- the Conservative Party has an average lead of 11 percentage points against the Labour Party based on the last five surveys -- the opposition leader still has a path to power. Pollsters have misjudged the public mood before, and Brexit makes the election result even harder to predict.Backup PlansIf the finance industry -- which still employs 1.1 million people and accounts for 6.9% of the U.K. economy -- gets the election result wrong, many firms will be left scrambling to adapt.One hedge fund -- wary that a Corbyn administration would immediately hit firms leaving London with a tax –- explored setting up a shadow entity in a different jurisdiction that would take over its London operations after a Labour victory. But the cost and complexity saw the idea shelved because the odds of a Corbyn victory were deemed to be sufficiently low.Similar calculations are being made elsewhere. A top executive at a large bank said Corbyn and Shadow Chancellor John McDonnell would be disastrous for the City and lead to a significant downsizing of his firm’s London footprint. No major precautions are being taken until it’s clearer who will wield power.The head of a wealth firm said while there are plenty of fears about a talent exodus, as well as Labour’s proposal to force companies to dedicate 10% of their shares to employees, few of its clients actually expect Corbyn to win.Labour’s policies worry many in the City. In an Oct. 31 speech kicking off his campaign, Corbyn criticized the U.K.’s “corrupt system,” slammed billionaires, and reiterated plans to nationalize rail, mail and water companies. The party has pledged to raise taxes on capital gains, corporations and the roughly top 4-5% of individual earners.“It will be a disaster for the U.K. economy,” said Jonathan Chia Croft, chief investment officer of distressed debt fund manager Lonsin Capital.Some of those fears are tempered by skepticism about the practicality of some of Corbyn’s policies. A civil servant examining how nationalizing assets might work describes it as an immensely complex process involving negotiations with dozens of other countries and stakeholders.While most are taking a wait-and-see approach, some are acting already.A billionaire client of one banker has frozen hiring in the U.K. until the result is known, while others have sent money abroad. Some are considering moves to jurisdictions like Italy, Switzerland and Portugal and increasing the time they spend overseas to escape being classed as U.K. taxpayers after any Corbyn victory.Christopher Groves, a partner at Withers law firm, says they are having discussions with clients about bringing forward planned asset sales, dividends, bonuses and gifts to heirs ahead of the election.For all this activity, though, the Conservative Party’s embrace of Brexit -- with a hardline wing pushing for a no-deal exit from the European Union -- means some analysts have made the case that a Corbyn-led coalition would be the lesser of two evils. Brexit threatens London’s position as Europe’s financial center, and firms are at risk of losing access to clients in the bloc.“A Labour party victory isn’t a positive scenario,” Christian Schulz, Citigroup Inc.’s director of European research, said in September. “It’s just less bad than what the Johnson government is proposing.”\--With assistance from Edward Robinson.To contact the reporters on this story: Tom Metcalf in London at email@example.com;Nishant Kumar in London at firstname.lastname@example.org;Benjamin Robertson in London at email@example.comTo contact the editors responsible for this story: Pierre Paulden at firstname.lastname@example.org, Chris Bourke, Marion DakersFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Tencent Holdings Ltd. slid almost 3% after reporting earnings below the lowest analyst’s estimate, underscoring the Chinese internet giant’s challenges in reviving growth during an economic slowdown.The social media goliath’s profit plummeted 13% last quarter -- worse than the most pessimistic analyst anticipated -- when an economic downturn depressed advertising and prompted charges within its huge portfolio of investments. Marketers fled to nurse shrinking budgets after drama series got delayed. And costs jumped 21% as Tencent hoovered up content to feed its Netflix-style service.Tencent was supposed to hit the comeback trail this year after a nine-month freeze on game approvals gutted its most profitable business in 2018. But the slowdown, competition from up-and-comer ByteDance Inc. for internet traffic and advertising, and now tricky political considerations is snarling that recovery. That’s a key reason its stock has vastly under-performed rival Alibaba Group Holding Ltd. this year, creating a gap of roughly $90 billion in their market valuation.“The PC gaming and media advertising business was under pressure,” said David Dai, an analyst with Bernstein. “Fintech and cloud are doing well but we need to wait a bit longer to see them contribute more significant profit.”Read more: Tencent Will Have to Wait a Little Longer for Its ComebackChina’s economic slowdown is dousing revenue growth across Tencent’s platforms, dampening appetite for advertising among large brands as well as subscriptions to its video and music streaming services. Sales from media advertising, including on the Netflix-like Tencent Video service, plummeted 28% as marketers cut spending while major shows got delayed. Beijing’s decision to cap game-time for underage users is also prompting Tencent to spend more on producing AAA-rated mobile titles that appeal to a global audience.On Wednesday, the company posted net income of 20.4 billion yuan ($2.9 billion) in the September quarter. That came alongside a 90% drop in one-time gains -- an item that tracks its vast portfolio of startups around the world -- after it swallowed charges for investments in connected automobiles. Tencent fell as much as 2.9% Thursday, testing key support at around HK$320 in its biggest decline in more than two months. The company, which has shed roughly $90 billion of market capitalization this year, is now trading at about 24 times its estimated earnings for next year, about its lowest in 2019.On Thursday, Citigroup and BOCOM International were among the brokerages that trimmed their share-price targets on Tencent. But both maintained their buy ratings and BOCOM said its HK$401 goal still implied a valuation of 31 times 2020 earnings.Read more: Tencent Analysts See Turnaround Delay as Media Ads DisappointWhat Bloomberg Intelligence SaysRobust growth in mobile games should continue, as deferred revenue from Peacekeeper Elite is recognized in coming quarters. Tencent’s rapid internationalization of its game operations will also help.\- Vey-Sern Ling, analystClick here for the research.Tencent might see light at the end of the tunnel in the fourth quarter. It hit pay-dirt with its smartphone adaptation of Call of Duty. The game garnered more than 100 million downloads in the first week, putting it ahead of Nintendo Co.’s Mario Kart Tour. That was four times more than Fortnite’s mobile version managed. That strong debut positioned it to join the other mega cash-cows in Tencent’s stable: old favorite Honour of Kings and 2019’s standout hit, Peacekeeper Elite.It wants to replicate that success over the longer term. Tencent owns stakes in some of the biggest U.S. game studios and publishers, including the outfits that created household names Fortnite, League of Legends and World of Warcraft. The Chinese company is now counting on converting popular PC content for smartphones to re-kindle growth. The pipeline for such content stretches into 2022, the company says.The “business strategy of Tencent remains intact to capture long-term opportunities ahead,” Thomas Chong and Ken Chong, analysts with Jefferies, wrote.(Updates with valuation analysis from the sixth paragraph)To contact the reporter on this story: Lulu Yilun Chen in Hong Kong at email@example.comTo contact the editors responsible for this story: Peter Elstrom at firstname.lastname@example.org, Edwin Chan, Charlie ZhuFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Citigroup Inc. warned Hong Kong staff to steer clear of dangerous places after police grabbed one of its investment bankers off a sidewalk. As protests raged, firms across the city urged workers to consider staying home to ensure their families’ safety.On a conference call Wednesday, Citigroup said that safety was the priority amid escalating clashes between protesters and police, people familiar with the situation said, asking not to be named because the matter is private. One of its bankers is the person seen in a video that has circulated widely on social media, according to the people.It shows a trio of officers surrounding a man in a covered walkway. He tries to break away, at one point grabbing and swinging one of their batons as they wrestle him to the ground. As officers pile onto the man, a voice -- possibly his -- can be heard shouting “Hong Kong people, resist!”Hong Kong police can arrest and hold suspects before formal charges are made. It’s unclear whether the banker has been charged and the police said they couldn’t immediately comment on Thursday. “We are aware of this incident and are investigating further,” said James Griffiths, a spokesman for the New York-based lender. “While investigations continue it would be inappropriate to comment further. We expect all our employees to abide by the law.”In a flurry of safety memos -- which have become a part of daily life at big banks in the Asian financial hub -- executives at a number of firms expressed a heightened level of caution heading into Wednesday after skirmishes repeatedly erupted in the streets during work hours this week, sometimes directly outside office doors.“Where meetings are already planned, managers should not hesitate to cancel and reschedule depending on the evolution of the situation,” BNP Paribas SA told employees. Standard Chartered Plc also advised staff to reschedule meetings and travel as appropriate, a Hong Kong-based spokeswoman said in an email.At JPMorgan Chase & Co.’s main Hong Kong offices, where some of this weeks’ biggest clashes between pro-democracy protesters and police have taken place just steps away, employees were reminded to feel empowered to make arrangements “in circumstances that require flexibility (e.g. family needs, school closures, transport issues.)”“I wanted to make sure that it was well understood given the circumstances,” Filippo Gori, the New York-based bank’s chief executive officer of Hong Kong operations, wrote in the memo. “Thank you for pulling together and supporting each other, and our clients, during what has been a difficult period in the city.”Firms are trying to operate normally despite intensifying demonstrations since a student died Friday of injuries sustained near a protest. The main challenge for many bankers and traders is simply getting to work, as protesters impede rush-hour traffic, closing subway stations and halting bus lines. Those who made it in have faced tear gas on streets at lunch and another challenge getting home.Then on Wednesday afternoon, the government announced for the first time that it would close public schools.HSBC Holdings Plc encouraged employees to work remotely if possible and to stay in touch with managers -- a message echoed by others.“All staff should exercise due care while commuting, remain vigilant of their surroundings and check travel plans before leaving for the office,” Deutsche Bank AG told employees in a text message.(Updates with arrest procedure in fourth paragraph.)\--With assistance from Carol Zhong and Hannah Dormido.To contact the reporters on this story: Lulu Yilun Chen in Hong Kong at email@example.com;Alfred Liu in Hong Kong at firstname.lastname@example.org;Manuel Baigorri in Hong Kong at email@example.comTo contact the editors responsible for this story: Jun Luo at firstname.lastname@example.org, ;Fion Li at email@example.com, David Scheer, Jonas BergmanFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Alibaba Group Holding Ltd. started taking investor orders for its Hong Kong share sale, which could raise more than $11 billion in the city’s largest equity offering since 2010.The New York-listed tech giant is offering 500 million new shares, according to terms for the deal obtained by Bloomberg on Wednesday. The base offering could raise about $11.7 billion based on Alibaba’s Tuesday close in New York, though it’s possible the stock will be priced at a discount. Alibaba’s American depositary shares, which represent 8 ordinary shares of the internet company, closed at $186.97 in U.S. trading Tuesday. The shares fell 2.4% on Wednesday.Asia’s largest corporation is proceeding with what could be one of this year’s biggest stock offering globally despite violent pro-democracy protests gripping the city. Alibaba aims to price the offering before U.S. market open on Nov. 20 and start trading in Hong Kong on Nov. 26, the terms show.Alibaba plans to use the offering proceeds to drive user engagement, improve operational efficiency and fund continued innovation, according to the terms. Deal underwriters have a so-called greenshoe option to sell an additional 75 million shares. Alibaba said in a regulatory filing that New York will continue to be its primary listing venue.China International Capital Corp. and Credit Suisse Group AG are joint sponsors of the offering, while Citigroup Inc., JPMorgan Chase & Co. and Morgan Stanley are joint global coordinators. HSBC Holdings Plc and ICBC International Holdings Ltd. are also helping arrange the sale, the terms show.Alibaba’s share sale marks a triumph for the Hong Kong stock exchange, which lost many of China’s brightest technology stars to U.S. rivals. The city’s bourse has introduced new rules that allow dual-class shares after resisting such a change for a decade. Efforts to lure Alibaba went all the way to the top of Hong Kong’s government, with Chief Executive Carrie Lam exhorting billionaire Jack Ma to consider a listing in the city.Alibaba has considered a Hong Kong listing for a long time, even as far back as five years ago when it was scouting for its initial public offering, said Michael Yao, head of corporate finance at Alibaba, on a call with investors. “We viewed Hong Kong as strategically important to us. It’s one of the most important financial centers. And this listing will allow more of our users and stakeholders in the Alibaba digital economy across Asia the ability to invest in and participate in the fruits of our growth,” Yao said.The New York-listed Chinese giant had aimed to list over the summer before pro-democracy protests rocked the financial hub, while trade tensions between Washington and Beijing clouded the market’s outlook. It’s unclear if the violence will affect the listing process, given growing resentment toward mainland Chinese influence as well as the country’s most visible corporate symbols.Yao said the deal size hasn’t changed as a result of the protests. “This has always been our deal size,” he said, adding that the company wants to ensure there is ample liquidity in the market.Listing closer to home has been a long-time dream of Ma’s-- a move that curries favor with Beijing and hedges against trade war risks. A successful Hong Kong share sale could also help finance a costly war of subsidies with Meituan Dianping in food delivery and travel, and divert investor cash from rivals like Meituan and WeChat operator Tencent Holdings Ltd.A successful Hong Kong debut will be another feather in the cap for Daniel Zhang, who took over as chairman from Ma in September. The former accountant is now spearheading the company’s expansion beyond Asia but also into adjacent markets from cloud computing to entertainment, logistics and physical retail.(Updates Alibaba’s share price to close in second paragraph.)\--With assistance from Manuel Baigorri, Crystal Tse and Julia Fioretti.To contact the reporters on this story: Lulu Yilun Chen in Hong Kong at firstname.lastname@example.org;Kiuyan Wong in Hong Kong at email@example.com;Carol Zhong in Hong Kong at firstname.lastname@example.orgTo contact the editors responsible for this story: Peter Elstrom at email@example.com, ;Fion Li at firstname.lastname@example.org, Ben ScentFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Google’s plans to roll out a checking-account service with Citigroup and a California credit union will likely meet with “stiff political opposition” amid consumer privacy concerns and rancor toward financial and tech companies, according to Cowen.“There is a real debate about whether big tech or big banks are more politically toxic in Washington,” analyst Jaret Seiberg wrote in a note. “We don’t see how combining the two will make either less contentious.”Seiberg flagged the “intense scrutiny” aimed at other big tech efforts to break into financial services. He cited the global focus on Facebook’s proposed stable coin Libra and New York’s sex-discrimination investigation of the Goldman-Apple credit card. He expects hearings before Senate Banking and House Financial Services committees, perhaps as soon as December.Washington is ultimately unlikely to block the partnership, but may subject it to “intense” federal and state oversight, Seiberg said, asking whether “the political and regulatory pressure is worth the benefits of the joint effort.”If Cowen is “wrong and the political reaction is muted,” the door might be open for big tech companies to seek Industrial Loan Company charters to more fully enter banking without working with existing banks, he added. “By contrast, a big uproar would tell us that Washington is not prepared for this outcome.”Shares of Alphabet Inc., Google’s parent, gained about 0.2% in mid-day trading on Wednesday, while Citigroup fell about 0.6%. Bank stocks underperformed, with the KBW Bank Index down about 0.8%, after Federal Reserve Chairman Jerome Powell said in testimony before Congress that the current stance of monetary policy is likely to be sufficient, provided the economy stays on track.\--With assistance from Will Daley.To contact the reporter on this story: Felice Maranz in New York at email@example.comTo contact the editors responsible for this story: Catherine Larkin at firstname.lastname@example.org, Steven Fromm, Will DaleyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Google is taking its deepest dive yet into the financial lives of its users with plans to roll out a checking-account service.Citigroup Inc. and a California credit union are the tech giant’s initial partners for the venture, which will let users access their bank accounts through the Google Pay app beginning next year, according to people familiar with the matter. Other banks could join up later, the people said, asking not to be identified because the plans haven’t been announced.“We’re exploring how we can partner with banks and credit unions in the U.S. to offer smart checking accounts through Google Pay, helping their customers benefit from useful insights and budgeting tools,” Google said in an emailed statement, adding that the accounts will carry federally guaranteed insurance.The move is the latest sign of Silicon Valley’s determination to muscle in on financial firms’ territory, looking to expand their hold on customers and accumulate data on their finances. At the same time, it shows banks are more willing to pair up with technology companies in their quest to avoid getting shut out of the relationship entirely. In the Google arrangement, the financial institutions will handle most of the compliance requirements.Google has spent years building out its payments capabilities, offering consumers the ability to send money to friends and check out both online and in stores through Google Pay. With the checking accounts, consumers will be able to receive their paychecks and transact solely inside the Google ecosystem.“We’re going to see more of this, but it’s not the death of banking,” Bryce VanDiver, a partner with Capco who advises banks and payment companies, said in a telephone interview. “Compliance is still being manged by Citi. If you look at banks’ core competencies, compliance being one of those, they’re really good at that.”The Wall Street Journal reported Google’s plan earlier Wednesday.For Google, the trove of data associated with checking accounts and financial products is another step in its push to collect information on all aspects of consumers’ lives. The firm has a wealth of information on consumers’ search behavior from its flagship site as well as partnerships with the largest U.S. health-care systems to analyze consumers’ health data. The move comes at a time when Google and other large tech companies are under increased scrutiny in D.C. with antitrust probes around competition law.“This is probably more about Google Pay and how they plan to position that going forward to access all financial products, not just credit cards,” VanDiver said.One of the people said Google partnered with Citigroup in part because the lender has spent the last year building out its digital banking arm, an effort that’s helped the bank gather more than $4 billion in deposits this year.“This agreement has the potential to expand the reach and breadth of our customer base while complementing our continued investments in digital,” Citigroup said in a statement. The partnership is a bit of a shift for Citigroup, which has been relying on marketing its digital bank accounts to existing customers in the firm’s sprawling cards business. The New York-based company said earlier this month it would offer special perks for checking accounts to customers of its co-brand credit card with American Airlines Group Inc.“This year we’ve increased the deposits we’ve raised digitally more than fourfold,” Anand Selva, who leads Citigroup’s consumer bank in the U.S., said at an investor conference this month. “As we continue to test and learn and enhance our digital capabilities and experiences, the digital deposit momentum has accelerated through the year.”For the finance industry, the worry is that tech giants could one day replicate the success of Alipay and WeChat Pay in China, where money flows through digital systems without the need for banks.To fight off the threat, banks are striking deals to keep a firm hold on their customers. Apple Inc. paired with Goldman Sachs Group Inc. this year to offer a credit card that extended $10 billion in credit lines as of Sept. 30. Uber Technologies Inc. announced last month that it would offer a bank account to drivers on its platform through a partnership with Green Dot Corp.(Updates with comments from Google, Citi starting in the third paragraph.)\--With assistance from Julie Verhage.To contact the reporter on this story: Jenny Surane in New York at email@example.comTo contact the editors responsible for this story: Michael J. Moore at firstname.lastname@example.org, Steve Dickson, James HertlingFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Senior managers at Citigroup condoned the sharing of clients’ information with currency dealers at rival banks, one of the Wall Street bank’s former top traders claimed in a London employment tribunal on Wednesday. Rohan Ramchandani, who was head of European spot foreign-exchange trading and was acquitted of forex rigging by a New York jury last year, is pursuing an unfair dismissal claim against the US bank in London. The 39-year-old alleged that three of his managers — including Citi’s chief client officer, Anil Prasad — condoned sharing information between traders at different banks as a means of gaining market colour.
(Bloomberg) -- Actis LLP and Engie SA have joined a unit of Blackstone Group Inc. in competing to take over three Egyptian power plants co-built by Siemens AG, a deal that might spark greater foreign investment in the Middle East’s fastest-growing economy.Whichever of the six international companies prove successful in their bids will work alongside Egypt’s new sovereign wealth fund, which plans to acquire roughly 30% of the state-owned facilities that cost about 6 billion euros ($6.6 billion) to build and the North African nation inaugurated in mid-2018.France-based Engie told Bloomberg it had submitted an expression of interest in the plants, which have a total capacity of 14.4 gigawatts. China Datang Overseas Investment Co. Ltd. and London-based Actis have also registered interest, according to three people familiar with the plans.They’re facing tight competition: Egyptian Electricity Minister Mohamed Shaker said in May that Blackstone’s Zarou Ltd. and Edra Power Holdings Sdn Bhd of Malaysia are also bidding for role. The head of the wealth fund, Ayman Soliman, has said that half a dozen firms are competing, but declined to identify them. The name of the sixth isn’t clear.The plants, operated by Siemens until 2024, are part of a series of mammoth projects introduced by President Abdel-Fattah El-Sisi that also include a Suez Canal extension and a new administrative capital. A deal could spur further foreign investment in Egypt, which has struggled beyond the oil and gas industry, and help ease the nation’s debt burden. Financing for the plants came via a consortium including Deutsche Bank AG, HSBC Holdings Plc and KfW-IPEX Bank AG, backed by a sovereign guarantee.Repeated phone calls to China Datang’s headquarters in Beijing went unanswered. Actis declined to comment.Egypt will select a financial adviser for the deal next week, which will then arrange negotiations with the interested companies, Soliman said in an interview, declining to identify any of the potential advisers. He expects the pact to be finalized in 2020.HSBC and Citigroup Inc. have bid for the role, while Zarou hired JPMorgan Chase & Co. and Edra enlisted Standard Chartered Plc, according to the three people. The World Bank’s International Finance Corp. has submitted a proposal to “advise on attracting private investors to this project upon request from the Egyptian government,” country manager Walid Labadi said by email.Neither London-based Zarou, Edra, nor any of the banks would comment on any plans involving the power plants.After an investor is selected, Egypt’s wealth fund could establish a joint venture with them to hold the investment. That will be followed by a power-purchasing accord that would let the JV sell the electricity the plants produce to the government. Offering a stake from the power plants on the Egyptian or an international stock exchange is also possible, Soliman said.\--With assistance from Emma Dong and Matthew Martin.To contact the reporter on this story: Mirette Magdy in Cairo at email@example.comTo contact the editors responsible for this story: Alaa Shahine at firstname.lastname@example.org, Michael Gunn, Vernon WesselsFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Argentina must repay $5 billion by the end of 2019. It doesn’t have much to work with.While the country’s foreign reserves total a still somewhat robust $43 billion, that figure shrinks markedly once untouchable assets such as dollar deposits of everyday Argentines and a credit line from China are stripped out. Analysts surveyed by Bloomberg News estimate that the amount that policy makers can actually freely spend is no more than $12.5 billion. One of the analysts, Siobhan Morden of Amherst Pierpont Securities, puts the figure at as little as $6.5 billion.“If you run out of money, you run out of money,” Morden, who runs the firm’s Latin America fixed-income strategy from New York, said in an interview. “There’s serious risk of a hard default next year.”Bond investors are largely prepared for that moment, having already driven down the price of some of the government’s foreign bonds to less than 40 cents on the dollar. But the dire foreign reserves situation indicates the default could come sooner than some expect, perhaps shortly after President-elect Alberto Fernandez takes office in December.Read More: A History and Timeline of Argentina’s Many Debt DebaclesMorden anticipates Argentina will manage to muddle through the end of 2019, though that will come thanks to capital controls that were first imposed after the August presidential primary victory by Fernandez and his running mate, former President Cristina Fernandez. Total reserves have dwindled by about a third, from $66 billion, since that vote sent Fernandez, a populist with broad promises to improve life for Argentines, on a path to the presidency. The central bank has managed to rebuild reserves by more than $1 billion by imposing even tighter controls on dollar purchases after Fernandez’s election in October.Argentina’s central bank doesn’t publish official data on net reserves, so estimates on how much it has left vary.Net reserves may be closer to $10 billion including Treasury deposits at the central bank and liquid reserves, according to Ezequiel Zambaglione, head of strategy at Balanz Capital Valores in Buenos Aires. Bank of America strategist Sebastian Rondeau in New York puts the figure as high as $12.5 billion, while Martin Castellano at Washington’s Institute of International Finance estimates the figure at $11.2 billion.The central bank declined to comment on net reserves.Interest payments on foreign-currency debt total $3.5 billion through the end of 2019. In addition, Argentina owes another $1.5 billion of peso debt. Economy Minister Hernan Lacunza told El Cronista that the nation would meet its financing needs until year-end by rolling over public-sector debt and said Argentina won’t simply go “out of control” printing pesos.All told, the nation has $115.8 billion in outstanding debt to institutional and retail investors, according to the Economy Ministry. While Argentina could conceivably dip into parts of its gross reserves to stay current on payments, doing so would further weaken investor sentiment and rattle existing or potential lenders. The International Monetary Fund, which arranged a record $56 billion bailout in June 2018, targeted at least $10.5 billion in net reserves by the end of November and $9.8 billion at the year’s end.It’s little surprise, then, that credit-default swaps imply a 97% probability that Argentina will suspend payments during the next five years. The ministry declined to comment.“Argentina’s market access is closed, and it is highly unlikely that it will be able to pay most, if any, of these interest payments given its current situation,” Citigroup Inc. emerging-market strategist Donato Guarino in New York wrote in a note, referring to the total debt load. “Argentina is running out of cash, hence the need to restructure.”Here are Argentina’s key debt obligations for the remainder of 2019, according to data compiled by Bloomberg:Exchange rate calculations as of close on Nov. 6, 2019*Note: Payment for peso-denominated bonds listed in dollar amount\--With assistance from Jorgelina do Rosario, Jenny Sanchez, Patrick Gillespie and Andres Guerra Luz.To contact the reporter on this story: Sydney Maki in New York at email@example.comTo contact the editors responsible for this story: Carolina Wilson at firstname.lastname@example.org, Alec D.B. McCabe, David PapadopoulosFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Rohan Ramchandani, who was Citi’s head of European spot forex trading in London, will begin giving evidence against the Wall Street giant on Wednesday in his unfair-dismissal claim at an employment tribunal in London’s Docklands, in the shadow of the bank’s skyscraper in Canary Wharf. Citi made Mr Ramchandani’s “dismissal known publicly, without warning to him” and this “caused him to suffer public humiliation and serious and possibly irreparable damage to his professional reputation, thus [ .
(Bloomberg Opinion) -- For generations, budding lawyers have been taught that if the bank forecloses on your mortgage and can’t sell your house for the amount of the loan, the bank can come after you personally for the rest. Apart from a handful of “non-recourse” states (California being the most prominent), this has long been the rule. But a mystifying recent decision by the U.S. Court of Appeals for the 8th Circuit might inadvertently lead to a reevaluation of what had been settled law — and potentially change the way the secondary market values mortgage loans.The facts of the case are simple but instructive. CitiMortgage, Inc., had purchased hundreds of home loans from Equity Bank, a regional bank doing business in Kansas, Missouri, Arkansas and Oklahoma. The contract stipulated that if CitiMortgage later discovered defects in any of the loans, Equity was required to cure the defects or repurchase the loans. The dispute arose from 12 mortgages that Citigroup found defective and Equity refused to buy back. Six had already been foreclosed.A disagreement over so small a number of loans would not ordinarily lead to litigation; the parties would settle, or one would write the loans off. Here, however, there was reason to press on. Six of the 12 loans had been foreclosed, and Equity Bank made the remarkable argument that foreclosure and resale meant that the mortgage loan no longer existed, meaning that there was nothing to repurchase.The 8th Circuit agreed. Part of the ruling relied on the language of the contract, but the court’s interpretation of the language assumed that Equity was right — that foreclosure extinguished the loan. “CitiMortgage has not explained what, exactly, Equity was supposed to repurchase,” the panel wrote. “Without evidence of what, if anything, remained of the underlying loans, we are left guessing about whether Equity breached by failing to fulfill its repurchase obligation.”But no guessing should have been necessary. What remained was the right to go after the borrower’s other assets. That’s the point of a recourse loan. That the value of this right might be very small in most cases of foreclosure does not mean the right does not exist. By ruling otherwise, the 8th Circuit in effect transformed recourse loans into non-recourse loans.The distinction is not trivial. A non-recourse loan means in practice that the lender provides the borrower with a put option — that the borrower can always escape the obligation by selling the asset to the bank at the price of the current loan balance. This structure should lead to higher interest rates and reduce the likelihood of a housing boom. The truth might not be so clear-cut: A 2017 study found that non-recourse states saw higher rates of real estate speculation and larger swings in housing prices. The study noted that a lender who plans to resell the loan to distant investors has a reduced incentive to price the risk correctly.True, even when the loan allows recourse, the lender will rarely pursue the borrower’s other assets, because their value is likely to be small compared to the cost of chasing them. But the borrower knows that the threat exists. As the dissent in 8th Circuit pointed out, the mortgage borrower signs a promissory note. The note’s enforceability is not affected by the disposition of the underlying property. That’s why the majority is wrong to suggest that the loan has disappeared. The borrower’s obligation to pay survives the foreclosure.The pricing of a home loan is always imprecise, and the lender always faces risks. The borrower might not have enough cash to repay or the house itself could depreciate to the point where its value is lower than the loan balance. That’s why purchasers in the secondary market include clauses like the one at issue in the dispute between Equity Bank and CitiMortgage. If the loan originator has to repurchase defective loans, it has a greater incentive to price the loan correctly. But if as the 8th Circuit ruled, the clause becomes unenforceable because foreclosure has occurred, the purchaser won’t pay as much for the underlying loans.To be sure, there’s an argument to be made that all U.S. mortgages should be non-recourse, as they are in most of the world. Activists in other countries — most notably Spain — have argued against recourse loans on the ground that mortgage debt shouldn’t follow a family to the grave. (It doesn’t.) More to the present point, non-recourse loans might reduce inflation in the value of the underlying asset — the home — and so reduce the risk of a bubble. But that’s a policy judgment for legislators, not one that judges ought to make.To contact the author of this story: Stephen L. Carter at email@example.comTo contact the editor responsible for this story: Sarah Green Carmichael at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Stephen L. Carter is a Bloomberg Opinion columnist. He is a professor of law at Yale University and was a clerk to U.S. Supreme Court Justice Thurgood Marshall. His novels include “The Emperor of Ocean Park,” and his latest nonfiction book is “Invisible: The Forgotten Story of the Black Woman Lawyer Who Took Down America's Most Powerful Mobster.” For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg Opinion) -- If their latest earnings are any guide, Singapore banks will be lucky to muddle through 2020 and use the lull in traditional business to extend their tentacles into fast-growing digital commerce. Worryingly for them, British, American and Japanese lenders — as well as Chinese fintech — have similar plans for the Singaporeans’ backyard in Southeast Asia. DBS Group Holdings Ltd., the largest of the three homegrown lenders, reported Monday a better-than-expected 15% jump in net income to S$1.63 billion ($1.2 billion) in the September quarter. However, its net interest margin eased by one basis point to 1.9% from the previous three months. CEO Piyush Gupta expects the margin to shrink by about 7 basis points next year.That squeeze is expected. DBS’s smaller rivals, Oversea-Chinese Banking Corp. and United Overseas Bank Ltd., have also reported declining interest margins. Singaporean banks did handsomely after the Federal Reserve resumed monetary tightening at the end of 2016. That cycle has now abruptly reversed, eroding the banks’ pricing power on loans. It’s a double whammy. Singapore’s economy, slowing sharply because of the U.S.-China trade war and attendant supply-chain dislocations in Asia, is threatening to push up bad loans. While DBS kept its nonperforming loan ratio stable at 1.5%, it did so by aggressively writing off soured assets. New bad loans rose almost 58% from a year earlier. There will be more credit-risk-related costs, just as interest-rate risks become unfavorable, a situation no bank likes.All this will bolster their resolve to go digital. On offer is Southeast Asia’s $100 billion-a-year internet economy, which is expected to triple by 2025. DBS has worked the hardest on third-party application interfaces. But Citigroup Inc. has built $500-million-plus annual revenue streams in Singapore, Indonesia, the Philippines, Thailand and Malaysia. The U.S. bank is using its balance sheet and expertise in transactions banking to push into regional digital deals. British lender Standard Chartered Plc, looking better than at any time in the past five years, has earned digital chops in Africa and is seeking to flex its virtual banking muscles in Hong Kong soon. HSBC Group Plc is late to the party, but it, too, will eventually try to mitigate the risk from overexposure to the restive Hong Kong economy by pivoting to Singapore and Southeast Asia. Meanwhile, the Japanese will want to deploy their ultra-low-cost funding at home to profitable lending overseas. The likes of Mitsubishi UFJ Financial Group Inc. are in the game in Indonesia, the region’s largest economy and the biggest digital-consumption opportunity.Then there’s JPMorgan Chase & Co., the biggest tech investor on Wall Street, earmarking part of its outsize capital spending to blockchain. The Monetary Authority of Singapore announced Monday a token-based prototype for multicurrency payment it has developed in collaboration with JPMorgan and Temasek Holdings Pte, the island nation’s investment firm. With Chinese President Xi Jinping announcing a “blockchain+” national strategy, there will be deep changes in Asia in the way flows of goods and assets are recorded in ledgers and financed.To stay relevant, Singapore banks will have to invest more in tech. And they will have to do it amid ho-hum prospects for the one asset they dominate: local property. A 16-month downturn in mortgages might start to fade as interest rates become more affordable. But that’s about all banks can expect. The government may not want another cheap-money-fueled property bubble. Tight curbs on immigration and high taxes on residential real estate are expected to stay in place, at least until the next general elections due by 2021. The banking market itself will become more contested with the arrival of online-only banks. In the mid-2000s, Citi won greater access to local savings thanks to the U.S.-Singapore free trade agreement. Now, Singapore is throwing open the local banking market for the sake of the city-state’s own competitiveness. Expect the Chinese fintech trinity of Baidu Inc., Alibaba Group Holding Ltd. and Tencent Holdings Ltd. to show deep interest.No, 2020 won’t be a banner year for Singaporean lenders. Lower-for-longer global interest rates will hurt, though if they sit down and do their digital homework, the pain will be considerably less. To contact the author of this story: Andy Mukherjee at email@example.comTo contact the editor responsible for this story: Patrick McDowell at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Xerox Holdings Corp. is prepared to offer HP Inc. almost a month for the companies to examine each other’s books as it seeks to win over the computer and printer maker for a takeover offer, according to people familiar with the matter.Xerox, one of the biggest sellers of photocopiers, is willing to give HP four weeks of mutual due diligence so the companies can weigh the merits of the $22-a-share cash-and-stock deal as well as the envisioned cost savings of such a combination, said the people, who asked not to be identified because discussions are private.Whether the time or scope of the access to one another will be sufficient to for HP to agree to enter discussions with its smaller rival is unclear. People familiar with the matter said, however, that HP had offered Xerox a non-disclosure agreement in September, typically a precondition of due diligence, which had been refused.The people added that while both HP and Xerox have acknowledged privately there is some rationale for combining, there are potentially intractable disagreements about which should be the buyer and which the seller, which management team should run the pro forma company, and which has a healthier underlying business.Xerox, which had a market value of about $8 billion at the close of trading on Tuesday, is pushing ahead with a plan to acquire and manage bigger rival HP, which was worth about $27.3 billion before news broke on the potential deal. The offer of $22 a share is a premium of about 20% to HP’s close Tuesday.A representative for HP declined to comment. Caroline Gransee-Linsey, a spokeswoman for Xerox, didn’t immediately return a call and email outside of normal business hours.HP confirmed last Wednesday that Xerox made a takeover offer a day earlier, a potential union of two iconic brands that would reshape the printing industry. The pair have had conversations about a potential combination “from time to time,” Palo Alto, California-based company HP said in that statement. “We have a record of taking action if there is a better path forward and will continue to act with deliberation, discipline and an eye toward what is in the best interest of all our shareholders.”Citigroup Inc. has agreed to provide Xerox financing to swallow HP, a person familiar with the matter said. The company would likely need to take on at least $20 billion of debt to close the deal.HP, one of the world’s largest printer makers, and Norwalk, Connecticut-based Xerox are struggling as waning interest in office and consumer printing blunts their most profitable businesses. HP also has contended with a stagnant PC market.Xerox Deal for HP Would Just Be a Way to Print Money: Alex WebbBoth have responded with significant cost-cutting measures. HP’s new Chief Executive Officer Enrique Lores announced another restructuring that could remove as much as 16% of the workforce by the end of fiscal 2022, amid falling sales in printer ink. Xerox said it plans to cut $640 million in expenses this year. The copy-machine company expects a combined Xerox-HP entity could save at least $2 billion in expenses, according to the Wall Street Journal.Since splitting from server maker Hewlett Packard Enterprise Co. in 2015, HP has avoided big mergers and acquisitions. HP did, however, spend $1.05 billion for Samsung Electronics Co.’s printer unit to bolster its presence in the $55 billion photocopier market, where Xerox has excelled.\--With assistance from Caleb Melby.To contact the reporter on this story: Ed Hammond in New York at email@example.comTo contact the editors responsible for this story: Aaron Kirchfeld at firstname.lastname@example.org, Kevin Miller, Josh FriedmanFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Gold headed for the biggest weekly loss in three years as progress in U.S-China trade talks hammered demand for havens and sent miners’ shares tumbling.The metal dropped 3.7% this week, the most since November 2016, as China and the U.S. indicated they are heading toward an interim deal to halt the trade war. Some signs of stabilization in the global economy have also dented gold’s allure, and JPMorgan Chase & Co. and Citigroup Inc. closed out their bets on the traditional haven.Other precious metals also plunged, with silver losing 7.6% of its value this week.Gold prices got a lift this year from trade frictions, interest rate cuts from the Federal Reserve, and robust demand from investors and central banks.That trio of drivers is now under attack as the two largest economies near an initial pact, with the sides agreeing to a tariff rollback as part of any deal. At the same time, the U.S. central bank recently indicated that, after three rate cuts, policy makers are now pausing.“The dollar appears to be in an uptrend pattern after a month of sideways action and fresh weakness on the charts early today suggests the bear case in gold is still unfolding,” according to the Hightower Report.Gold remained under pressure on Friday even as stocks took a breather after Thursday’s gains.The large long positions in gold left the metal vulnerable to sharp drops, said Georgette Boele, an ABN Amro Bank NV strategist.“If only a small amount of positions is closed, gold prices are back at $1,400,” she said. A profit-taking wave could turn into a “bearish vibe,” causing investors to doubt the positive outlook in gold prices, she said.Spot gold was down 0.8% on Friday at $1,457.31 an ounce, after tumbling 1.5% on Thursday. Australia’s Newcrest Mining Ltd. hit a five-month low and AngloGold Ashanti Ltd. dropped to the lowest since Oct. 1.“The principal driver behind the weakness in gold has been increasing optimism about the trade outlook,” John Sharma, an economist at National Australia Bank Ltd., said in an email. “However, it should be remembered that the trade deal is not done and dusted.”\--With assistance from Swansy Afonso.To contact the reporters on this story: Krystal Chia in Singapore at email@example.com;Elena Mazneva in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Lynn Thomasson at email@example.com, Liezel Hill, Nicholas LarkinFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- HP Inc. confirmed that Xerox Holdings Corp. has made a takeover offer, a potential deal between two iconic names in technology that would reshape the printing industry.“We have had conversations with Xerox Holdings Corporation from time to time about a potential business combination,” the Palo Alto, California-based company said Wednesday in a statement. “We received a proposal transmitted yesterday. We have a record of taking action if there is a better path forward and will continue to act with deliberation, discipline and an eye toward what is in the best interest of all our shareholders.”Citigroup Inc. has agreed to provide Xerox financing to swallow HP, a person familiar with the matter said. The company would likely need to take on at least $20 billion of debt to close the deal, which was reported earlier by the Wall Street Journal. HP’s market capitalization was about $27.3 billion at the close of trading on Tuesday, while Xerox’s was $8 billion, before news broke of the potential deal. Xerox had extended an offer at $22 a share, the Financial Times reported, a premium of about 20% to HP’s close Tuesday, before news of a potential takeover emerged.HP hasn’t decided whether the Xerox offer is the right deal, according to a person familiar with HP’s thinking. The PC maker doesn’t agree with Xerox on the potential synergies and has concerns about the debt needed for a deal, said the person, who asked not to be identified speaking publicly about internal talks. Even if HP decides a combination is worthwhile, it isn’t convinced Xerox has the relevant experience for a complex merger and doesn’t think Xerox should be the buyer, the person said.HP, one of the world’s largest printer makers, and Xerox, one of the biggest sellers of photocopiers, are struggling as waning interest in office and consumer printing has blunted both companies’ most profitable businesses. HP also has contended with a stagnant PC market.Xerox Deal for HP Would Just Be a Way to Print Money: Alex WebbBoth hardware makers have responded to the changing markets with significant cost-cutting measures. HP’s new Chief Executive Officer Enrique Lores announced another restructuring that could remove as much as 16% of the workforce by the end of fiscal 2022, amid falling sales in its lucrative printer ink business. Xerox said it plans to cut $640 million in expenses this year. The copy-machine company, based in Norwalk, Connecticut, expects a combined Xerox-HP entity could save at least $2 billion in expenses, according to the Journal.“Financing a $30 billion HP transaction with mostly debt may be challenging for Xerox, but not an insurmountable obstacle,” Robert Schiffman, an analyst at Bloomberg Intelligence, wrote Wednesday in a note.In its statement, HP expressed confidence in its plan for the future.“We have great confidence in our multi-year strategy and our ability to position the company for continued success in an evolving industry, particularly given the multiple levers available to drive value creation,” HP said.Since splitting from server maker Hewlett Packard Enterprise Co. in 2015, HP has avoided big mergers and acquisitions. The company has focused on financial discipline, minimizing debt and returning capital to shareholders in an operating template set by former Hewlett-Packard Co. CEO Meg Whitman. HP did, however, spend $1.05 billion for Samsung Electronics Co.’s printer unit to bolster its presence in the $55 billion photocopier market, where Xerox has excelled.Separately, Xerox announced Tuesday that it would get $2.3 billion from longtime partner Fujifilm Holdings Corp. for its stake in their joint venture, Fuji Xerox. The U.S. company had indicated since last year that it intended to end its ties with the Japanese company after a complex merger transaction fell apart.(Updates with reported bidding price from the third paragraph)To contact the reporters on this story: Nico Grant in San Francisco at firstname.lastname@example.org;Ed Hammond in New York at email@example.comTo contact the editors responsible for this story: Jillian Ward at firstname.lastname@example.org, ;Liana Baker at email@example.com, Andrew Pollack, Michael HythaFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- In what universe can a tiring, $8.8 billion maker of photocopiers even think about acquiring a $27 billion, moderately sexier maker of printers and PCs?This one, apparently. Xerox Holdings Corp. is contemplating a cash-and-stock bid for HP Inc., the Wall Street Journal reported on Tuesday. While the size of the discrepancy in market values makes a deal seem hard to digest, the capital requirements don’t exceed the realms of possibility. Xerox wouldn’t be buying an exciting new growth business. It would get HP’s cash flow and the ability to reduce costs, probably through significant job cuts.Xerox’s efforts to sell itself appear to have failed. But HP has endured a difficult year, with its stock declining 25% since an October 2018 peak. Its enterprise value is at the lowest level relative to estimated 12-month earnings since 2016. It’s vulnerable to an approach.Its situation has been exacerbated by operational turbulence. Chief Executive Officer Dion Weisler stepped down at the start of the month for family reasons, announcing a new turnaround plan soon before he left, which successor Enrique Lores inherited. Take into account HP’s relatively low debt and continued ability to generate strong free cash flow, and a bid from Xerox appears entirely feasible.The smaller company would, in a sense, be buying a license to print more money through HP’s cash flows. Remaining independent is only going to become more difficult, with global printer shipments set to decline by 2% annually through 2023, according to research firm Gartner. Teaming up would reduce costs and competition in the segments where they overlap; HP is generally stronger in the market for smaller printers, while Xerox holds the lead in larger ones. That could boost profitability even as revenue stagnates.Were Xerox to offer a 30% premium to HP’s average share price over the past 12 months, then a bid in the region of $35 billion might be realistic. Yes, even with a stock component, the required debt pile would be a lot for Xerox to swallow — funding needs could hit $20 billion, according to Bloomberg Intelligence analyst Robert Schiffman. But the merged entity would need to realize savings representing less than 5% of the companies’ combined $9.3 billion annual operating costs to cover the cost of capital, based on 2022 earnings projections.The Journal reported that Xerox, which is based in Norwalk, Connecticut, had received an informal funding commitment for the deal from a bank, which Bloomberg News identified as Citigroup, citing an unidentified person with knowledge of the matter. Xerox sees room for about $2 billion of annual cost savings from combining the two companies, the person said. If a bid materializes, credit Xerox CEO John Visentin for thinking big. Since he was appointed last year with the backing of activist investor Carl Icahn, Xerox’s second-biggest shareholder, the stock has outperformed that of HP. News of the possible bid for HP came just hours after Xerox agreed to sell a stake in a lucrative 57-year-old joint venture with Japan’s Fujifilm Holdings Corp. for $2.3 billion.Would it make sense for HP to do the inverse deal and acquire Xerox? Probably not entirely. It most likely already had the opportunity to do so and passed. But for Xerox, it could prove a canny piece of financial engineering.To contact the author of this story: Alex Webb at firstname.lastname@example.orgTo contact the editor responsible for this story: Daniel Niemi at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.