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(Bloomberg) -- Wells Fargo & Co.’s finance chief was promising analysts they would be kept abreast of the bank’s efforts to resolve scandals when his new boss chimed in.“I just want to be clear, I’m not suggesting here that any of these public issues will be closed this year,” Chief Executive Officer Charlie Scharf said earlier this month. “The time frames will be driven by when we accomplish that work and when the regulators are satisfied by it.”It was a telling moment in Scharf’s first earnings call since taking over a bank mired in revelations about customer abuses. Two years after the company launched an ad campaign called “Re-Established” to announce it was ready to start anew, a dark reality is sinking in: It has a long way to go.“This has dragged on far longer than we would’ve hoped,” Piper Sandler analyst Scott Siefers said in an interview. “This is a cultural issue as much as it is anything else, so I think most of us haven’t seen something of this order or fashion before. It’s new for all parties.”The Office of the Comptroller of the Currency last week announced civil charges against eight former senior executives, including ex-CEO John Stumpf. Stumpf accepted his penalties while five of the others are fighting the accusations, raising the prospect of keeping the firm’s missteps in the news for years.After the OCC unveiled a 100-page complaint laced with previously confidential emails, internal memos and testimony, Scharf pledged Wells Fargo will conduct its own review.The firm has yet to reach settlements with the U.S. Department of Justice and the Securities and Exchange Commission after setting aside more than $3 billion for litigation in the second half of last year. Justice Department staff also scrutinized the actions of individual executives, people familiar with the matter have said. And in its quarterly filings, the bank lists an array of other open-ended probes, investigations and sanctions including a Federal Reserve-imposed growth cap.It’s a strikingly long tail for a scandal that began with the 2016 revelation that employees had opened millions of potentially fake accounts to meet sales goals, possibly overcharging customers by a few million dollars. That unleashed a public and political backlash that has kept Wells Fargo in a harsh light ever since.“There’s this sort of free-floating anger and fury that’s out there in the populace, and anything that sticks its head up that’s a problem that isn’t resolved in the right way, it coalesces,” Davia Temin, founder of crisis consultancy Temin & Co., said in an interview. “That fury is magnificent -- it is stunning in its destructive power.”Mounting political pressure prompted the retirement in March of CEO Tim Sloan, who had replaced Stumpf. Sloan’s exit kicked off a six-month search for an external candidate to “complete the transformation,” as the bank’s chair described it at the time. The board landed on Scharf, who took over in October.In his first months at Wells Fargo, Scharf held a marathon of meetings with executives, asking them about their businesses. The depth and breadth of his reviews hint at wide-ranging changes.Scharf’s priority has been fixing relations with regulators that have taken unprecedented steps against the firm. The targeting of former managers is a divergence from enforcement actions after the 2008 financial crisis, from which Wells Fargo emerged relatively unscathed: Few individuals and no top executives were held accountable.After that crisis, Bank of America Corp. spent most of a decade working through probes and litigation linked to bad mortgages, some inherited through takeovers of Countrywide and Merrill Lynch. Citigroup Inc., which leaned on taxpayers to get through the turmoil, created a special unit to work off soured assets and undesirable businesses.“If you look at Bank of America and Citigroup, they took a minimum of five years to straighten themselves out, and then they took another three or four years to get a program in effect to grow their earnings going forward,” Odeon analyst Dick Bove, who downgraded Wells Fargo to sell from hold last month, said in an interview. “This is no easy task.”To contact the reporter on this story: Hannah Levitt in New York at email@example.comTo contact the editors responsible for this story: Michael J. Moore at firstname.lastname@example.org, Dan Reichl, David ScheerFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Oil tumbled to the lowest in more than three months on fears China’s deadly coronavirus will hit demand in a market that already has plentiful supply.Futures plunged more than 3% as China reported an increase in fatalities and infections. While the country extended the Lunar New Year holiday to control the outbreak, more cases have been reported in other parts of the world. Goldman Sachs Group Inc. predicted that global oil demand may fall, but Saudi Arabia said it believes the crisis so far will have a “very limited impact” on consumption.The virus is the latest upheaval for the oil market, which is has been struggling with demand concerns for months. Investors are selling crude and other commodities amid a broad withdrawal from riskier assets and fears the virus will curtail fuel consumption as travel is restricted.“A supply glut of fuel in China would filter through to the rest of the world through exports and on that basis the market is reacting in this defensive manner,” said Ole Hansen, head of commodity strategy at Saxo Bank A/S. “The Saudis can try to stem the sell-off but while its being driven by the need to mitigate losses that will be difficult to control.”Brent futures lost as much as 3.6% to $58.52 a barrel on the London-based ICE Futures Europe exchange and traded at $58.69 as of 9:34 a.m. local time. The contract slid 6.4% last week, capping the longest run of weekly losses since June. West Texas Intermediate fell as much as 3.8% to $52.15.Hedge funds boosted bullish bets on WTI by 2.8% in the week ended Jan. 21, the most in a month, a day before prices tipped into the worst three-day slump since September.Saudi Energy Minister Prince Abdulaziz bin Salman said the world’s largest oil exporter was monitoring the virus’s impact both on the Chinese economy and the oil market. Yet, he said that the same “extreme pessimism” that’s afflicting the market also occurred in 2003 during the SARS outbreak, “though it did not cause a significant reduction in oil demand.”“The current impact on global markets, including oil and other commodities, is primarily driven by psychological factors and extremely negative expectations adopted by some market participants despite its very limited impact on global oil demand,” the minister said in a statement.See also: Viral China: Behind the Global Race to Contain a Killer BugGlobal oil demand may slip by 260,000 barrels a day this year and could shave almost $3 from the price of a barrel of crude, Goldman Sachs said last week, using the 2003 SARS epidemic as a guide.China extended the Lunar New Year holiday by three days until Feb. 2, while companies in Shanghai have been asked not to start work until at least Feb. 9. There are more than 2,700 confirmed cases of infection in China so far. Canada confirmed its first while the U.S. announced a fifth, as the virus spread to at least 15 countries and territories.\--With assistance from Javier Blas and Saket Sundria.To contact the reporters on this story: Rakteem Katakey in London at email@example.com;Aaron Clark in Tokyo at firstname.lastname@example.orgTo contact the editors responsible for this story: James Herron at email@example.com, Rakteem Katakey, Christopher SellFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Goldman Sachs spent most of its first 130 years shrouded in the secrecy of a partnership structure. It is effectively a coming-out party for a group that has spent the past two years planning a radical overhaul of its operations as it moves from its trading and investment banking roots to an institution offering everything from current accounts to money management and credit cards for the masses. Mr Solomon’s decision to pull back the veil and explain Goldman’s strategy is anything but.
In recent years trading has become highly automated, relying on huge amounts of data coursing down the fibre-optic wires that link fund managers to banks and exchanges. “The numbers are big, that’s why this is fiercely competitive,” said Dan Schleifer, chief executive of ChartIQ.
(Bloomberg) -- Want to receive this post in your inbox every afternoon? Sign up here A recording appears to show President Donald Trump saying he wanted Marie Yovanovitch removed as ambassador to Ukraine, ABC News reported without providing the audio. “Get rid of her,” a voice that appears to be Trump’s is heard saying, ABC said. “Get her out tomorrow. I don’t care. Get her out tomorrow. Take her out. OK? Do it.” If accurate, the recording backs up testimony in the House impeachment hearings that Trump had Yovanovitch removed because she was viewed as an obstacle to his efforts to press Ukraine into investigating former Vice President Joe Biden and his son. She was recalled in May 2019. Bloomberg’s Green Daily is where climate science meets the future of energy, technology and finance. Sign up for our daily newsletter to get the smartest takes from our team of 10 climate columnists. Sign up here.Here are today’s top storiesHouse managers will wrap up their case against Trump Friday, completing three days of arguments in his Senate trial. Democratic Representative Adam Schiff drew plaudits from both sides of the aisle for his performance. Trump’s lawyers are to begin his defense on Saturday.U.S. health authorities are monitoring more than 60 people, including three in New York, for potential infection with the coronavirus. China, meanwhile, is struggling to contain rising public anger over its response to the outbreak as it restricts travel for 40 million people during a major holiday.Cities and states across America are using the courts to force energy companies to address the damage done by fossil fuels. But making Big Oil pay for climate change may be impossible.The Pentagon disclosed on Friday that 34 U.S. service members suffered traumatic brain injury in Iran’s missile strike this month, made in response to the U.S. assassination of its top general. Trump initially said no Americans were harmed. Goldman Sachs announced this week it won’t take a company public if the board is made up entirely of straight, white men (unless the company is in Asia).Can rodents be chic? Fashion labels trying to cash in on the coming Lunar New Year have a difficult task in 2020: It’s the Year of the Rat.What’s Luke Kawa thinking about? The Bloomberg cross-asset reporter says the 10-year U.S. Treasury yield is on track for its biggest one-week drop since November. However, it’s difficult to make the case that the retreat in yields is sending a meaningful signal about the economic backdrop. There are plenty of potential non-economic reasons for the strong start to the year for sovereign debt, he says. So while the bond market may be in a a tizzy, the Fed is still holding course, possibly because stocks aren’t far from last week’s all-time highs.What you’ll need to know tomorrowSalesforce encouraged employees to expense co-CEO's book. Soros to start $1 billion school to fight nationalists, climate change. Walmart is testing a higher minimum wage for certain jobs. Former Wells Fargo CEO walked away with more than $80 million. Elizabeth Holmes is defending herself in an Arizona fraud lawsuit. You can now use your AmEx at as many places as your Visa card. More and more NYC storefronts are empty as even banks disappear.What you’ll want to read tonightBoeing’s newest plane is expected to spread its gargantuan wings—so long that the tips are hinged—and rumble into the skies over Washington state in the next few days. The 777-9 is the planemaker’s first new model since two fatal crashes killed 346 people, leading to the global grounding of its 737 Max (which the federal government said was making strides towards returning to service). The new aircraft may face heightened scrutiny from regulators, airlines and investors. Safety aside, there’s concern that the jetliner is simply too big for today’s airlines.To contact the author of this story: Josh Petri in Portland at firstname.lastname@example.orgFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Crude posted the worst weekly decline in more than a year on concern that the spread of China’s coronavirus will cripple fuel demand. Brent futures sank 2.2% in London on Friday. Deaths from the coronavirus rose to at least 26 and China expanded travel restrictions for about 40 million people in an attempt to halt contagion. The U.S. is monitoring more than 60 people for potential infection and lawmakers said health authorities are expected to confirm a third case.The Asian virus has spooked traders even as the World Health Organization stopped short of declaring a global health emergency. The contagion is disrupting travel during the Lunar New Year holiday, when hundreds of millions normally fly or ride home. The selloff has accelerated as trend-following funds turned bearish, according to TD Securities.“Contagion fears are spiking ahead of the biggest yearly migration ahead of new year,” said Daniel Ghali, a commodities strategist at TD Securities. “The fear factor is the risk of contagion, synonymous to what happened in 2003 with SARS which led to a 2% drop in Chinese economic growth.”The fast-spreading virus is the latest challenge for a market that’s been buffeted this year by geopolitical turmoil in the Middle East and North Africa, as well as the phase-one trade deal between Beijing and Washington. Goldman Sachs Group Inc. said earlier this week that, if the coronavirus has an impact similar to the 2003 SARS epidemic, demand could be curbed by 260,000 barrels a day. While this is not the first time global oil markets contend with an epidemic threatening demand, the current supply environment could worsen the situation.“The slightest fear of any economic slowdown will spur a long wave of liquidations because the market is so oversupplied,” said Walter Zimmermann, chief technical strategist at ICAP Technical Analysis.Some businesses in China including McDonald’s Corp. and Starbucks Corp. temporarily shut some stores in efforts to contain the virus.See also: China’s Economy Was Brightening This Month Before Virus Fear HitBrent crude for March settlement fell $1.35 to settle at $60.69 a barrel on the ICE Futures Europe exchange in New York putting its premium over WTI for the same month at $6.50 a barrel. Brent futures fell 6.4% this week.West Texas Intermediate futures for March delivery slipped $1.40 to end the session at $54.19 a barrel on the New York Mercantile Exchange, the lowest level since October. Meanwhile, based on the commodity’s relative strength index, WTI is sitting in oversold territory and is due for a rally.Options traders are paying the most since Oct. 31 for protection against price swings, according to the CBOE/CME WTI volatility index.\--With assistance from James Thornhill, Grant Smith and Saket Sundria.To contact the reporter on this story: Jackie Davalos in New York at email@example.comTo contact the editors responsible for this story: David Marino at firstname.lastname@example.org, Jessica Summers, Mike JeffersFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
A new partnership plans to bolster the U.S. supply of generic drugs, as part of a wide ranging effort to help drive down spiking costs and ease shortages.
(Bloomberg) -- As Goldman Sachs Group Inc. moves to increase diversity on corporate boards, the investment bank isn’t extending the initiative to a particularly challenged region: Asia.Chief Executive Officer David Solomon revealed this week that starting in July the bank won’t handle initial public offerings for companies that lack either a female or diverse director. But the rule applies only to IPOs in the U.S. and Europe. Asia’s exclusion is striking, given how common all-male boards are in the region. Other bastions of male dominance, including Latin America and the Middle East, also went unmentioned.A Goldman spokeswoman said the bank will consider implementing the plan in Asia and other regions over time after consulting with its clients, as diversity awareness improves in those areas and that it will consult with its clients in those areas to improve board diversity.“Nowadays there’s no excuse for companies to have non-diverse, all-male boards,” said Fern Ngai, CEO of Community Business, a Hong Kong-based group that advocates for responsible and inclusive business practices. Goldman “should include Asia. I don’t see why they don’t.”Goldman is initially targeting regions where corporations have come further in making women a part of top-level decision-making. In California, new legislation mandates board diversity, with fines for noncompliance. Asia lags behind not just the U.S. and Europe, but also global leader Africa in the proportion of women on company boards, McKinsey Global Institute reported late last year.A study by index provider MSCI Inc. of companies in its global benchmarks last month showed about 33% of firms in Japan had no female board members, one percentage point worse than China and Hong Kong. By comparison, that figure was 1% in the U.S., while it was 94% in Saudi Arabia.Recent high-profile IPOs in Asia showed a paucity of female representation, with no women on the boards of Xiaomi Corp. and Meituan Dianping, which raised almost $10 billion combined in 2018. Goldman had a leading role in both those offerings.The bank was the biggest underwriter of IPOs in the U.S. and Europe last year. It had a more modest market share in Asia, coming in 19th, according to Bloomberg league tables. Goldman was an adviser on 86 IPOs in 2019, ranking sixth globally among underwriters.Last May, Hong Kong’s stock exchange issued a non-binding guidance letter to new IPO applicants, asking them to disclose their board-diversity policies and give an explanation if their directors are all of a single gender.\--With assistance from Zhen Hao Toh and Jeff Green.To contact the reporters on this story: Kiuyan Wong in Hong Kong at email@example.com;Julia Fioretti in Hong Kong at firstname.lastname@example.org;Cathy Chan in Hong Kong at email@example.comTo contact the editors responsible for this story: Candice Zachariahs at firstname.lastname@example.org, Jonas Bergman, Daniel TaubFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Firearm and ammunition companies are watching for signs of a mounting focus on guns as the 2020 presidential election draws closer, according to CL King.“Under the current Republican-dominated political narrative, gun enthusiasts have not engaged in nearly as much panic buying as they did in previous cycles, following mass shootings or in the aftermath of heightened Democrat party rhetoric on tightening gun ownership laws,” analyst Scott Stember said in a note.“While the lion’s share of industry players prefer not to run their businesses based on politically-fueled surge activity,” he said, many are “prepared to pick up the pace from a production standpoint, if rhetoric in the upcoming election cycle starts to heat up and creates a new lift in demand by way of panic buying.”Stember wrote his note after attending an event called “Shot Show” in Las Vegas earlier this week, where “many gun/ammunition manufacturers and related accessories companies release the lion’s share of new products for the upcoming selling year.” Shot Show, he said, is considered a “gauge for the health of the industry”; this year’s showed “extremely robust” distributor and dealer traffic, with a record 2,600 companies exhibiting.“We found most industry players’ (including gun distributors/dealers and gun/ammunition manufacturers) moods to be far better than they were a year ago, now with inventory (at both the distributor and consumer level) finally in balance and with a subsequent abatement in the level of aggressive promotional pricing,” he wrote. Stember added that “most were still cautiously optimistic, awaiting a direction as we enter the current presidential election cycle.”Potential changes in federal gun laws pose risks for Vista Outdoor Inc. and American Outdoor Brands Corp., he said. CL King rates both neutral. Vista has shed 5.5% so far this year, versus a 1.6% drop for American Outdoor and a 6% gain for Sturm Ruger & Company Inc.Earlier this month, gun stocks including American Outdoor, Sturm Ruger and Vista climbed after the National Instant Criminal Background Check System reported the eighth straight month of positive year-over-year adjusted background check data.Stember added an observation about Walmart Inc., which in September said it would curtail ammunition sales after store shootings. “We found from most that the stalwart retailer completed its process of discontinuing the sale of various types of ammo by the end of December,” he said. “The major belief is that the lion’s share of the displaced product (about $150 million to $200 million worth of annualized sales) will simply find other homes and be sold by other outlets over time.” Walmart’s shares have climbed 1% since the end of August.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, Jennifer Bissell-LinskFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- The era of the white, all-male board is coming to an end.Goldman Sachs Group Inc. Chief Executive Officer David Solomon issued the latest ultimatum Thursday from Davos. Wall Street's biggest underwriter of initial public offerings in the U.S. will no longer take a company public in the U.S. and Europe if it lacks a director who is either female or diverse. Asia is not yet included in the firm’s new policy.The mandate is the latest in a series of signals that non-diverse boards and management are unacceptable. BlackRock Inc. and State Street Global Advisors are voting against directors at companies without a female director. Public companies with all-male boards based in California now face a $100,000 fine under a new state law. “It’s what big investors are looking for these days,” said Fred Foulkes, a management professor at the Boston University Questrom School of Business. “If the board has all white males, that’s a big negative.”Goldman Sachs acknowledged that “diversity” has other meanings around the world — including in Asia, where racial dynamics are different and gender disparities are sometimes even more glaring. The company said in a statement Friday that it intends to eventually expand its board-diversity mandate beyond the U.S. and Europe.The corporate board has become a rare bright spot for gender and racial diversity at the highest echelons of corporate America. Almost half of the open spots at S&P 500 companies went to women last year, and for the first time they made up more than a quarter of all directors. In July, the last all-male board in the S&P 500 appointed a woman. Still, new boards are less diverse: Among the top 25 IPOs by value each year from 2014 through 2018, 10 companies had no female directors, said Malli Gero, co-founder and senior adviser to 2020 Women on Boards, an organization that pushes for the Russell 3000 index to have at least 20% women directors on its boards. Last year, Goldman Sachs was hired to underwrite WeWork’s IPO, which only added a female director after its initial prospectus prompted criticism of its all-male board.“Starting on July 1st in the U.S. and Europe, we’re not going to take a company public unless there's at least one diverse board candidate, with a focus on women,” Solomon told CNBC Thursday. He didn't mention Asia, which continues to lag behind other regions when it comes to board diversity. Next year, the bank will raise the threshold to two diverse directors, which includes diversity based on sexual orientation and gender identity, Goldman said in a statement. The bank said the decision came after it learned more than 60 U.S. and European companies in the last two years went public without a woman or person of color on the board. Goldman Sachs has four women on its 11-member board.Among the IPOs where Goldman Sachs was an underwriter over the last two years in the U.S. and Europe, fewer than 10% currently have a board lacking a diverse candidate, the company said. Data was not available for the composition of those boards at the time of the IPO, the company said. “We realize that this is a small step, but it’s a step in a direction of saying, ‘You know what, we think this is right, we think it’s the right advice and we’re in a position also, because of our network, to help our clients if they need help placing women on boards,’” Solomon told CNBC. “So this is an example of us saying, ‘How can we do something that we think is right and help moves the market forward?’”JPMorgan Chase & Co. doesn’t have a similar policy to the new Goldman Sachs rule, but since 2016 has had a director advisory service that works to help companies find diverse candidates for their board, the company said in a statement. Morgan Stanley did not respond to requests for comment. For now, Goldman’s step is “pretty amazing,” said Boston University’s Foulkes, who was previously a director at Panera Bread Co. and Bright Horizons Family Solutions. “It's a seismic change.”(Clarifies second paragraph to show change refers to IPOs only. Adds quote in 7th paragraph. Adds reference to global diversity in 5th graf.)To contact the author of this story: Jeff Green in Southfield at email@example.comTo contact the editor responsible for this story: Rebecca Greenfield at firstname.lastname@example.orgFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- It’s easy to be cynical about the good intentions of a company caught up in one of the biggest frauds in history: the 1MDB scandal in Malaysia. Yet Goldman Sachs Group Inc.’s new stance on boardroom diversity shows how even the most profit-oriented of finance titans can — when pushed — further the virtues of stakeholder capitalism.Speaking at the World Economic Forum in Davos, where global leaders vowed to save humanity from climate change, Goldman’s chief executive officer, David Solomon, set forth a vision for his bank’s role in imposing better governance on its clients. From July it won’t manage the initial public offerings of American and European companies unless they have at least one non-white or non-straight male board candidate, Solomon said (the focus will be on women). In 2021, he’s going to “move toward… requesting two.”The move carries weight. Goldman is one of the top three IPO underwriters of the past decade, alongside Morgan Stanley and JPMorgan Chase & Co. It has an authority that wannabe public companies won’t be able to ignore.Going public is one of the critical junctures in a company’s history. It’s the moment when a century-old, family-owned widget maker, an upstart venture capital-backed tech unicorn, or a state-controlled behemoth, sets out on a course that will define its role in society for years to come. Getting the composition of its leaders right at the start sets the standard for what a company expects of itself just as it embarks on what’s often a period of rapid growth.Tech startups especially have been criticized for fostering a “bro’” culture that can be a hostile place for women, exemplified by Uber Technologies Inc. under the previous leadership of Travis Kalanick. But it’s not just about staff and society; shareholders will also benefit, according to Solomon. Companies with more diverse boards score better on measures of sustainability — an issue that’s increasingly important for asset managers. Broader representation has also been associated with higher profits and performance, although the empirical data is mixed.Goldman’s reputation could also use a little sprucing up, not only from the probes into its role raising money for the Malaysian investment fund 1MDB, but also around the subject of IPOs. It’s no coincidence that Solomon’s declaration follows two listing flops of epic proportions. Last year, his bank was one of the IPO underwriters for WeWork, which only added a female director after its first prospectus was pilloried. The deal was pulled eventually in part because of lingering governance concerns.International investors also spurned the biggest IPO of all time, Saudi Aramco, in part over concerns about controls and governance. Riyadh punished Goldman and its ilk by relegating them to the second-tier behind local banks, paying them considerably less after scrapping roadshows outside the Middle East.The two deals were embarrassments that Goldman will be keen to move on from by putting a more positive gloss on this part of the empire. What’s more, it’s unlikely to lose out on any big IPO business given the relatively modest ambition of its pledge. Of the listings managed by Goldman in the past two years in the U.S. and Europe, fewer than 10% had a board lacking a diverse candidate (many countries already enforce quotas). Half of the bank’s top-10 IPOs in 2018 and 2019 took place in Asia and the Middle East, regions not covered by Solomon’s promise. By flagging the more ambitious two-person target for 2021 now, Goldman is giving clients time to prepare. It’s also shrewdly reading where the “environmental, social and governance” trend is headed. Its first mover advantage may win it admirers among more enlightened startup companies and executives who have been weighing direct listings as alternatives to costly IPOs.It will take time for the “vampire squid” to shed its image as a pure opportunist, especially with 1MDB rumbling on. But whatever the motivation, pushing for greater diversity ups the collective pressure on other financiers to use their power for good. Over to you Morgan Stanley and JPMorgan.To contact the author of this story: Elisa Martinuzzi at email@example.comTo contact the editor responsible for this story: James Boxell at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Elisa Martinuzzi is a Bloomberg Opinion columnist covering finance. She is a former managing editor for European finance at Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Verizon (VZ) collaborates with financial services company, Synchrony, to offer exclusive credit card services to its customers, which are expected to be launched in the first half of 2020.
(Bloomberg) -- Sign up here to receive the Davos Diary, a special daily newsletter that will run from Jan. 20-24.The rich and powerful are in Davos, Switzerland, for the World Economic Forum’s 50th annual meeting, and the gathering is being closely watched to see how the global elite aims to tackle problems they helped create, above all climate change.The economy was in focus on the final day, and many delegates signaled optimism on the outlook for this year. European Central Bank President Christine Lagarde told Bloomberg TV that investors shouldn’t assume current monetary policy is locked in just because officials are reviewing their strategy.Swedish activist Greta Thunberg, who called a climate strike for Friday near the forum, slammed delegates for failing to treat global warming as a crisis.To get all the highlights delivered to your inbox, sign up for the Davos Diary newsletter. Here’s the latest (time-stamps are local time in Davos):Davos Endorses Fiscal Boost With Mnuchin Touting Tax Cuts (1:30 p.m.)Top financial officials from the major global economies used the forum’s final day to tout the benefits of government spending as a way to lift growth and reduce reliance on overloaded central banks.U.S. Treasury Secretary Steven Mnuchin labeled the U.S. a “bright spot” and attributed that to President Donald Trump’s tax cuts -- along with his rollback of regulations and his trade deals. Bank of Japan Governor Haruhiko Kuroda said his nation, where fiscal and monetary policies are aligned, is seeing “very strong” business investment.The International Monetary Fund‘s chief, Kristalina Georgieva, said the global economy is “in a better place” than last year for three reasons -- an easing of trade tensions, synchronized interest-rate cuts, and a bottoming out in industrial production. “We have to see fiscal policy being more aggressive,” she added.‘Things Going Pretty Well’: Bain’s Pagliuca (1:20 p.m.)Bain Capital Co-Chair Stephen Pagliuca joined other Davos delegates in expressing optimism about the economy, saying “things are going pretty well.”“It’s kind of chugging along,” Pagliuca told Bloomberg TV. “Our businesses are doing well, record low unemployment in the U.S., we’ve had kind of an oil dividend for six or seven years now, oil’s very cheap, energy’s very cheap. And so restaurants are full, planes are full and things are going pretty well.”Mnuchin Sees 20-Year Bonds Extending Average Maturity (1:39 p.m.)Mnuchin sees the U.S.’s new 20-year bond extending “slightly” the average maturity on government debt as his department prepares to launch that security and limit the cost of financing a budget deficit set to reach $1 trillion this year.Issuing ultra-long bonds, those due in more than 30 years, is “no longer on the near term -- our focus for the moment is issuing the 20-year,” Mnuchin said in an interview.“If you look at the number of 20-year bonds that we’ll raise, this will slightly extend” the average maturity, he said, declining to predict by how much. “This isn’t going to be a massive extension.”Kurz Sees German Greens in Government (1 p.m.)Austrian Chancellor Sebastian Kurz expects his German conservative peers to follow his lead and team up with the Greens after the next election.Kurz said that he hopes the era of “grand coalitions” between conservative and center-left mainstream parties is over in Europe.“I’m almost ready to bet that there can be a similar government in Germany after the next election,” he said in an interview. “I’m skeptical of those ‘grand coalitions,’ which had their justification after World War II but became just mutual blockade in recent years.”Mnuchin Says Technology Will Make a Carbon Tax Redundant (12:55 p.m.)U.S. Treasury Secretary Mnuchin said technological developments would make carbon tax redundant, going against the grain of other participants.“If you want to put a tax on people, go ahead and put a carbon tax. That is a tax on hard working people,” Mnuchin said, speaking on a panel alongside Lagarde. “I personally think the costs are going to be a lot lower 10 years from now because of technology.”“I don’t mean to minimize this issue, there’s lots of other issues we could talk about,” Mnuchin said. “The world is dependent upon having reasonable-priced energy for the next 10 or 20 years, or we’re not going to create growth, we’re not going to create jobs.”South Africa Must Push Reforms, Mboweni Says (12:53 p.m.)South Africa’s government will press ahead with structural reforms to kick-start the economy and needs to talk with labor unions to get them on board, Finance Minister Tito Mboweni said.Investors and business lobby groups have expressed frustration at the slow pace of reforms that were promised when Cyril Ramaphosa became president in February 2018. While the delays are often thought to be due to policy disagreements within the ruling party and government, Mboweni told reporters in Davos that there’s unanimity within cabinet to push structural reforms.“There’s a need for a long conversations with the trade union movement in South Africa about structural reforms,” he said. “There are some areas where they do not agree, therefore conversations have to be held.”Scholz Doesn’t See Negative Brexit Impact on EU (12:10 p.m.)German Finance Minister Olaf Scholz said Britain’s exit from the European Union will hurt the U.K. economy but won’t have a negative impact on the rest of the bloc.“There is a task left, which is to now to get an agreement about the further relationship, but if this is also managed I’m absolutely confident that, especially on the continent, there will be no negative effect of this development,” Scholz said during a panel discussion.“It will be more difficult for the U.K., obviously, because this business model must be reorganized,” he said, adding that he’s “relatively confident” about prospects for a U.S.-EU trade agreement.U.S., China Trade Spat Is World’s “Greatest Danger,” Frenkel Says (12:10 p.m.)Jacob Frenkel, head of JPMorgan Chase & Co.’s international unit and a former governor of the Bank of Israel, described the trade war between the U.S. and China as “the greatest danger to the growth of the world economy.”The “skirmish” between the two countries has affected expectations, mood and capital investment plans and placed in danger “the bridges that connect the various parts of the global economy,” Frenkel said in a Bloomberg TV interview.Frenkel added that interest rates close to zero has “exhausted its benefits” and is causing damage to the financial industry.Japan Still ‘Far Away’ From Inflation Goal: Kuroda (11:55 a.m.)The Bank of Japan will maintain its “accommodative” monetary policy stance for the time being as it strives to lift inflation closer to its target, according to Governor Kuroda.“We are still far away from the 2% inflation target so that the Bank of Japan will continue accommodative monetary policy for some time,” Kuroda said during a panel discussion. Domestic demand is fairly strong in Japan and strength in business investment will likely continue, Kuroda added.Trade Deals Reduce Uncertainty, Lagarde Says (11:50 a.m.)Lagarde said the outlook for the euro region is mixed but an easing of trade tensions has made downside risks less pronounced.“I see some positive signs, and I see some concerning signs as well,” the ECB president said during a panel discussion. “We are delighted to see trade agreements or truces being negotiated and concluded because we believe it will remove uncertainty the world over.”“Brexit is a little bit less uncertain, but we still have that possible cliff edge in December 2020,” Lagarde added, referring to the deadline for Britain and the EU to negotiate a trade agreement.Thunberg Protest Urges “System Change” (11:40 a.m.)Thunberg marched with a great swarm of media to join a group of more than 50 protesters near the forum. With placards that read “planet over profit” and “stop (f)lying to us,” demonstrators chanted “system change not climate change” and “oceans are rising and so are we.”Onlookers and media outnumber the climate activists by about two to one.At the press conference earlier, one of the activists said that there was an international group of climate strikers in Davos who had been sleeping outside in tents to experience the discomfort we all need to face to stop the use of fossil fuels.No End in Sight to Plastics Crisis (11:15 a.m.)Only a small fraction of all plastic produced is recycled, and much of the rest often ends up affecting wildlife in oceans and forests, according to participants in a panel discussion developed with QuickTake by Bloomberg.Reducing use of plastics needs to be a broad-based effort, but is critical for consumer goods companies, according to Tak Niinami, chief executive officer of drinks maker Suntory Holdings Ltd. “We industry want to be liked by society, otherwise we can’t survive,” he said.The use of plastics has doubled in the last two decades, and it’s expected to double again in the next two. “We cannot allow it,” said former U.S. Vice President Al Gore.‘We’re in a Better Place’: Goldman’s Patel (11:15 a.m.)Sheila Patel, chairman of Goldman Sachs Asset Management, said the global economy is “certainly in a better place than we were a year ago at Davos.”“A year ago you had everyone worried about liquidity, extremely worried about where the markets would head and we were counseling calm,” Patel told Bloomberg TV.“Today you have people worried about liquidity given the mix of public to private that they have in their portfolios, particularly the way that various investors have leaned in to things like private credit,” she added.Thunberg Says Davos Has Failed on Climate (10:46 a.m.)Thunberg used a Friday press conference to declare the forum a failure on addressing the case for climate action she first made at Davos last year.“Before we came here, we had a few demands for the WEF, and the demands have been completely ignored,” she said. “Of course we expected nothing less,” the 17-year-old said.“We must remember that as long as we don’t treat this crisis as a crisis, as long as science is ignored, we won’t be able to solve this crisis,” she said, speaking alongside other young climate activists.She interjected during remarks by one of her fellow activists to specify that the urgency they all felt around climate action didn’t mean the end is near. “Of course, this is not the last year we have,” she said.Germany Maintaining ‘Strong’ Investment: Scholz (10:40 a.m.)German Finance Minister Scholz said the country has “a very expansionary fiscal policy” and last year’s budget surplus will give Chancellor Angela Merkel’s government room to maintain strong investment.“We are already doing a lot of things which will help to expand investments,” Scholz said in an interview with Bloomberg TV. “Now with the surplus we have all the possibility to be strong in this field as anyone asks us to be and as we really want ourselves.”A trade deal between the U.S. and the European Union is possible “really soon,” although it will require “very hard work,” Scholz said.“It is absolutely important that we do not build trade barriers,” he added. “The wealth of the nation is better when we have a rules-based free trade.”Villeroy Calls for Flexible, Credible Inflation Target (10:31 a.m.)The ECB should ensure in its strategic review that its inflation target is “symmetric, flexible and credible,” Governing Council member Francois Villeroy de Galhau said.To be credible the ECB must explain its inflation target to households and businesses and listen to them about their inflation expectations, Villeroy said in a Bloomberg TV interview. The strategic review should go beyond market professionals to households and businesses because they are price makers and wage-setters, he added.Centeno Sees Germany Stepping Up Spending (10:10 a.m.)To spur economic activity, euro-area countries that can spend more need to, and Germany is showing signs that it is ready to play its part, according to Eurogroup President Mario Centeno.“We know that some countries have more space than others to act,” Centeno said in a Bloomberg TV interview. “Germany is one of those countries that can act, and actually we see some action from the German side.”Recent investment in the rail sector “goes precisely in that direction,” Centeno added. “It’s public investment, connected with climate action. I expect more of those actions to be taken in the course of 2020, so that 2020 can finally see this acceleration of the global economy, and Europe can also play a role in that.”EU, China, Brazil Form Trade-Dispute Alliance (10 a.m.)The European Union and a group of 16 nations that includes China and Brazil are forming an alliance to settle trade disputes among themselves using an interim appeal-arbitration mechanism at the World Trade Organization.“We will work towards putting in place contingency measures that would allow for appeals of WTO panel reports in disputes among ourselves,” according to a copy of a joint declaration obtained by Bloomberg.The development marks an advance of the EU’s backup plan for settling international trade disputes now that the WTO appellate body is paralyzed. WTO delegates meeting in Davos are expected to announce the arrangement later Friday.“We believe that a functioning dispute settlement system of the WTO is of the utmost importance for the rules-based trading system, and that an independent and impartial appeal stage must continue to be one of its essential features,” according to the document.ESM Chief Sees More People Now in Favor of Stronger Euro Role (9:05 a.m.)The international role of the euro is becoming increasingly the focus of debate in Europe, according to European Stability Mechanism Managing Director Klaus Regling.“More people are now in favor of having a stronger role for the euro which is partly the answer to the U.S. current administration withdrawing from multilateralism,” Regling said in a Bloomberg TV interview.”Europe believes in multilateralism, and one way to strengthen European sovereignty is the international role of the euro.”Tech CEOs Dodge Issues by Warning About AI (9 a.m.)Technology’s most influential leaders have a new message: It’s not us you need to worry about -- it’s artificial intelligence.Two years ago big tech embarked on a repentance tour to Davos in response to criticism about the companies’ role in issues such as election interference by Russia-backed groups; spreading misinformation; the distribution of extremist content; antitrust violations; and tax avoidance. Uber Technologies Inc.’s new chief even asked to be regulated.These problems haven’t gone away, but this time executives warned that AI that must be regulated, rather than the companies themselves.“AI is one of the most profound things we’re working on as humanity. It’s more profound than fire or electricity,” Alphabet Inc. Chief Executive Officer Sundar Pichai said in an interview. Comparing it to international discussions on climate change, he said, “you can’t get safety by having one country or a set of countries working on it. You need a global framework.”German Health Minister Says China Virus Less of a Threat (8:45 a.m.)China is more transparent and more aggressive in attempting to control the coronavirus outbreak compared with SARS, and that’s helping the international community better prepare to deal with the situation, according to German Health Minister Jens Spahn.“We are prepared and keep on preparing, but at the same time I think we have to put into perspective,” Spahn said in a Bloomberg TV interview. “There’s a big difference to SARS.”Coronavirus the ‘New Norm’: Axa’s Buberl (8:30 a.m.)Axa SA Chief Executive Officer Thomas Buberl said outbreaks like the coronavirus are the “new norm” and there will be more viruses popping up due to climate change.“We always learn in these emergency situations and then forget again when it’s gone,” Buberl told Bloomberg TV.“We need to remind ourselves that the environment is changing, it is getting warmer everywhere and therefore new viruses will pop up,” he added. “Going forward, the implication of climate on health is something that we need to study more and need to understand better.”VW’s Diess Upbeat on Battle With Tesla (8:10 a.m.)Volkswagen AG Chief Executive Officer Herbert Diess said he’s optimistic the German car giant can keep pace with Tesla Inc. in the electric-car market and even overtake Elon Musk’s company at some point.“I think it’s an open race” to define the car of the future, Diess told Bloomberg TV. “I would take Tesla more seriously than Google and there are also from our peers some very competitive companies like Toyota.”This year will be “very difficult” for automakers, with global demand “basically flat” and tighter emissions regulations coming into force in Europe, Diess said. “We’re basically optimistic, but it will be a very demanding year for the industry,” he added.Lagarde: ECB Policy Not Necessarily on Autopilot (7:30 a.m.)Lagarde said that market observers should not assume that the ECB’s monetary policy will be on “autopilot” for the next two years.“To those who think that it’s autopilot, I think that’s ridiculous,” Lagarde said in an interview with Bloomberg TV’s Francine Lacqua. “There is a forward guidance, which is strong, which is setting a very clear timetable that is fact dependent. But let’s look at the facts. Let’s look at how the economy evolves.”Lagarde added that if markets are interested in what happens over the next 12 months, “they should not pay too much attention” to the ECB’s strategy review.“To those who say it’s going to be completely static and stable for 12 months I say watch out, because things change and we might have different signals and we might reconsider,” she said. She conceded that the goal of completing the review by the end of this year is “ambitious.”Carrie Lam Courts Elite With Dim Sum (5:39 a.m.)Carrie Lam hosted 200 business and political leaders for dim sum and cocktails at a Swiss ski resort to reassure them that Hong Kong’s future is bright.The city’s leader said that Hong Kong is still open for business, despite paralyzing protests and an economy in recession. She also said that officials back home are working to contain the coronavirus that’s killed more than two dozen people in China and infected hundreds of others. Hong Kong has identified two cases.In a room decorated with gold candles and red Chinese lanterns for Lunar New Year, Lam said her government “will safeguard Hong Kong’s fundamentals, including the rule of law.” She was also “fully confident of the city’s future,” according to a readout from her office.Singapore Leader Says Rebound Depends on Calm (1:57 a.m.)Singapore Prime Minister Lee Hsien Loong said the city state’s economy could improve in 2020 only if any number of global risks don’t materialize, particularly emanating from the U.S.Lee said that he’s “relieved” that Singapore’s economy escaped recession in 2019. The government’s growth forecast for this year -- anywhere from 0.5%-2.5% -- indicates “we really don’t know” how things will pan out, he said in an interview with Bloomberg’s Editor-in-Chief John Micklethwait.“That’s the range of what our economy is capable of, but whether we realize that capability, that potential, depends on international conditions,” Lee said. “If there’s a blowout between China and America, or if there’s something happening in the Middle East, either with Iran or with Syria, then all bets are off.”Soros: Facebook Conspiring to Re-Elect Trump (00:18 a.m.)Billionaire George Soros said that nothing is keeping Facebook Inc. from spreading disinformation and the company may be in cahoots with Trump to get him re-elected.“I think there is a kind of informal mutual assistance operation or agreement developing between Trump and Facebook,” Soros, 89, said Thursday. “Facebook will work together to re-elect Trump, and Trump will work to protect Facebook so that this situation cannot be changed and it makes me very concerned about the outcome for 2020.”Soros didn’t offer any evidence for his claim. “This is just plain wrong,” Facebook spokesman Andy Stone said in response.\--With assistance from Shelly Banjo, Dandan Li, Michelle Jamrisko, Katia Porzecanski, Sarah Frier, Francine Lacqua, Geraldine Amiel, Haslinda Amin, Viktoria Dendrinou, Giles Turner, Bryce Baschuk, Joao Lima, Aaron Rutkoff, Javier Blas, Akshat Rathi, Donal Griffin, Boris Groendahl, Jill Ward, Saleha Mohsin and Paul Gordon.To contact the reporters on this story: Chris Reiter in Berlin at email@example.com;Iain Rogers in Berlin at firstname.lastname@example.orgTo contact the editors responsible for this story: Chad Thomas at email@example.com;Simon Kennedy at firstname.lastname@example.orgFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
The US Office of the Comptroller of the Currency has announced heavy penalties against former bosses of Wells Fargo over a fake accounts scandal. The reversal of fortune has been painful since the controversy erupted in 2016. As new chief executive Charlie Scharf recently noted, Wells Fargo had emerged from the 2008 financial crisis “as the most valuable and most respected bank in the US”.
(Bloomberg) -- Sign up here to receive the Davos Diary, a special daily newsletter that will run from Jan. 20-24.European Central Bank President Christine Lagarde warned investors not to assume that current monetary policy is locked in for the foreseeable future just because officials are focused on reviewing their strategy.“To those who think it’s on autopilot, that’s ridiculous,” she said in a Bloomberg Television interview at the World Economic Forum in Davos, Switzerland. “Let’s look at the facts. Let’s look at how the economy evolves.”Lagarde spoke a day after announcing the first reappraisal of the ECB’s inflation goal and tools since 2003, in a process that won’t conclude until around December. With the euro-area economy stabilizing and a stimulus package already in place, few analysts see much chance of a change in policy any time soon.Economists predict the quantitative-easing program, which was resumed by former President Mario Draghi just before he handed over to Lagarde in November, will run until the end of next year, with interest rates on hold until early 2022. Markets aren’t pricing a change in rates until at least mid 2021.Still, the economic threats haven’t entirely subsided. Data published Friday showed private-sector activity remained muted at the beginning of 2020, despite signs of a pickup in Germany. In its policy meeting, the ECB continued to describe the risks to its outlook as tilted to the downside, if less pronounced. U.S. President Donald Trump used his appearance in Davos to revive the prospect of tariffs on Europe’s car industry.“The ECB is still far from bringing inflation to its target and we believe it will act in the next few months,” said Nick Kounis, an economist at ABN Amro in Amsterdam. “I don’t think a central bank like that can close the shop for a year.”Read more: Euro-Area Economic Growth Remains ‘Muted’ at Start of 2020Lagarde said the rethink will be separate from the monetary-policy decisions that the Governing Council takes every six weeks.Policy “will be conducted irrespective of the strategy review,” she said. “So to those who say it’s going to be completely static and stable for 12 months, I say ‘ah, watch out,’ because things change and we might have different signals and we might reconsider. We might. I don’t know at this point in time.”Scant DetailsDetails on precisely what policy makers will study in their review were scant on Thursday, beyond general observations that it will be wide-ranging and focus on topics such as financial stability and climate change. The key question for the ECB is why it has fallen short of its inflation goal of “below, but close to 2%” for years.Lagarde has her own views on what needs to be done but says she doesn’t want to disclose them for fear of influencing the debate before others have had their say. The intention is to reach out to academics and the wider public via national central banks.“I know some people are disappointed that we didn’t say much more,” Lagarde said. “But a strategy review starts here and finishes there, and you cannot say here what you’re going to do there -- otherwise you don’t do a strategy review.”Bank of France Governor Francois Villeroy de Galhau told Bloomberg Television in Davos that he believes the inflation goal must be “symmetric, flexible and credible” -- reflecting the debate over whether to set a precise 2% goal with a range of tolerance either side.His Dutch counterpart Klaas Knot said in a panel discussion alongside Villeroy that the ECB must be “honest and open” about its failure to hit its target, and “at a minimum, I would say that it needs to be clarified.”For some ECB watchers, officials have effectively hinted that there is little urgency to share their thinking, and that they’re in no hurry to getting back to tweaking their current monetary stance either.“I get the sense that until the review is complete, or at least until you have some idea of what’s going to come out of it, it doesn’t make sense to be very activist,” said Peter Dixon, an economist at Commerzbank AG.The ECB also has less ammunition than it used to, giving it cause for caution before attempting more easing. Resorting to more QE, for example, might mean confronting self-imposed limits on the volume of purchases that could reopen wounds from a bitter showdown among policy makers last year. The program is particularly disliked by the Bundesbank, and indeed faces a ruling on its legality in Germany’s top court in March.The central bank isn’t alone in benefiting from what is, for now, a relatively benign economic outlook. Economists including those at Goldman Sachs Group Inc. predict most major central banks, including the Federal Reserve, which meets next week, is likely to keep its monetary policy on hold for the rest of the year.Lagarde will discuss the global growth outlook at Davos later on Friday with a panel of luminaries including her Bank of Japan counterpart Haruhiko Kuroda, as well as U.S. Treasury Secretary Steven Mnuchin, and Kristalina Georgieva, her successor as head of the International Monetary Fund.(Updates with comment from Knot in 13th paragraph)\--With assistance from Carolynn Look and Jana Randow.To contact the reporters on this story: Paul Gordon in Frankfurt at email@example.com;Francine Lacqua in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Alaa Shahine at email@example.com, Craig Stirling, Fergal O'BrienFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- There’s never a good time for the outbreak of a deadly virus, but this one is particularly bad. China’s Lunar New Year is often dubbed the world’s largest migration, a stretch of weeks when hundreds of millions of people visit their families. Before the pandemic started spreading, officials were expecting 3 billion airplane and train trips during the holiday rush between Jan. 10 and Feb. 18. Millions more have gone abroad.Little wonder, then, that the travel industry is suffering. With the death toll up to 25 and more than 800 infected, tourists are staying home. Some have no choice: The government has put seven cities on lockdown and airports are stepping up screening measures. On Friday, China ordered all travel agencies to suspend sales of domestic and international tours.Shares of China Southern Airlines Co. – the carrier most exposed to the site of the outbreak – have slid 14% since the second death from the virus was confirmed, while Cathay Pacific Airways Ltd., which said it would waive fees for tickets to and from the mainland, has slumped 7.6%. The country’s largest online travel agency, Trip.com Group Ltd. has tumbled 12%.If the SARS outbreak of 2003 is any guide, things could get even worse. In May of that year, Chinese air passenger traffic fell 71%, according to Goldman Sachs Group Inc. Bernstein Research cited concerns of a repeat outcome when it cut Trip.com’s rating one notch to “market perform” earlier this week. The Nasdaq-listed company, which changed its name from Ctrip.com last year, issued a statement Thursday saying it would refund travelers who’ve been diagnosed, or those in close touch with them.The hope is that, like SARS, the turbulence will eventually pass. For Trip.com, however, the business challenges are bigger than the coronavirus. In recent years, the company has struggled to keep up with competition from digital rivals like Meituan Dianping and Alibaba Group Holding Ltd.Few travel companies have benefited more from China’s transition to the world’s biggest source of tourists in 2012. Despite the trade war and Hong Kong’s protests,(3) China’s outbound tourism numbers have continued to rise. According to Euromonitor International, 108.39 million overseas trips were taken last year, a 9.5% gain, after surging 11.7% in 2018. Trip.com now makes up a quarter of its total sales from outbound Chinese visitors, from under 15% five years ago, reckons Bloomberg Intelligence analyst Vey-Sern Ling.But the hotel-booking sector is getting crowded. Meituan Dianping has recently overtaken Trip.com as China’s top site, just five years after the food-delivery giant started dabbling in the business. Meituan now has 47% of China's market, ahead of Trip.com, with 34%, according to TrustData. Now, Meituan is moving further into Trip.com’s territory with luxury hotels, while chains like Marriott International Inc. are pushing for direct booking on their China websites. Alibaba said part of the $13 billion it raised from its Hong Kong listing in November would go toward fliggy.com, its online travel group site.If there’s any lesson to be gleaned from all this, it’s the benefit of diversification. While China’s superapp business model has arched some eyebrows (how can one company possibly provide digital payments, taxis, food delivery, massages and pet grooming?) there’s a decent case to be made for having some crisis-proof subsidiaries. Consider AirAsia Group Bhd, Southeast Asia's most successful budget airline, which is setting up a regional fast food franchise.Plans could already be underway for Trip.com to diversify its investor base, with the company discussing plans to go public in Hong Kong, Bloomberg News reported earlier this month. Here, Alibaba is a successful model. With its second listing, the company is now closer to its Chinese end-users, and Alibaba’s New York-listed stock has soared 14%.The four-month span of the SARS outbreak shows how quickly things can turn around: While China’s growth dipped in the second quarter of 2003, it swiftly resumed in the following months. Given how much more important the Chinese shopper is to the economy now, the damage could be more painful. A 10% fall in discretionary transportation and entertainment could shave 1.2 percentage points from China’s growth domestic product, according to “back of the envelope” estimates by S&P Global Inc. Hong Kong retailers and restaurants, just coming off the pain of last year's protests, were already suffering. For those companies that enjoyed the fast-rising Chinese consumer, it may be time to devise a plan B. (Updates to include China’s measures to suspend travel-agency sales.)(1) Hong Kong, followed by Macau, are the top two destinations of mainland Chinese travelers.To contact the author of this story: Nisha Gopalan at firstname.lastname@example.orgTo contact the editor responsible for this story: Rachel Rosenthal at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Nisha Gopalan is a Bloomberg Opinion columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Investment bankers should count their lucky stars. The Chinese government has long held a tight grip on the country’s financial system, opening up to trade but closing out competition to its national businesses from foreign institutions.