News Archive


Euro zone inflation edges up to dim chance of new ECB action


BRUSSELS (Reuters) – Inflation in the 18 countries sharing the euro edged up slightly in October, reinforcing the view that the European Central Bank will hold fire on any additional policy action at its meeting next week.

A first estimate on Friday from the European Union’s statistics office showed consumer prices in the euro zone rose by 0.4 percent in October, in line with market expectations. A day earlier, German data showed inflation in Europe’s largest economy slowing in October to 0.7 percent, its lowest reading since May.

Nick Kounis, head of macro research at ABN AMRO, said a number of factors meant ECB action as early as next week was unlikely, but that he expected further measures by the first quarter of next year.

“We still think that the ECB is likely to further step up its monetary easing,” he said “If you get any kind of economic shock with inflation this low, there is a risk, albeit a small risk, of deflation.”

ECB policymakers still appear somewhat divided on the likelihood of deflation in the euro area.

The central bank’s chief economist Peter Praet told Belgian media earlier this week that the possibility was limited, but Governing Council Member Ignazio Visco said on Friday that policymakers needed to remain cautious.

“We are not in deflation but we cannot ignore the concrete risk of it,” the Italian said in a speech to a conference in Rome shortly after Eurostat published its data.

The statistics office said prices rose fastest for services, up 1.2 percent, followed by a 0.5 percent increase in food, alcohol and tobacco costs.

Unprocessed food prices fell 0.1 percent year-on-year in October while energy was 1.8 percent cheaper, a slowdown in the rate of decline from September when prices for these goods dropped 0.9 and 2.3 percent respectively.

Excluding unprocessed food and energy, prices rose 0.8 percent in October, a stable rate from September. This number is referred to as core inflation by the European Central Bank.

The euro =EUR initially strengthened against the dollar and the pound following the release of the data but quickly gave up these gains and remained below levels seen at the start of the trading session.

The ECB, which has a mandate to keep inflation below but close to 2 percent, has committed to an expansionary policy, including an asset-buying plan, and has said it will consider further measures if needed.

Better-than-forecast economic sentiment figures on Thursday, which also showed higher inflation expectations among consumers and producers, may give the central bank an incentive to hold off on further policy action before the end of the year.

“The small rise in euro zone consumer price inflation to 0.4 percent in October reinforces the already very strong likelihood that the ECB will sit tight at its 6 November policy meeting,” said IHS Chief European Economist Howard Archer

Eurostat data also showed on Friday that unemployment in the euro zone remained unchanged at 11.5 percent in September.

(Additional reporting by Philip Blenkinsop; Editing by Adrian Croft and Catherine Evans)

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Trial of former UBS executive dredges up Swiss banks’ shady past


FORT LAUDERDALE Fla./ZURICH (Reuters) – From bundles of cash inside scraps of newspaper to setting up shell companies, the trial in Florida of a former UBS executive is a reminder of the extreme methods some Swiss bankers used to hide clients’ cash.

    Raoul Weil, 54, is the highest ranking Swiss banker to be arrested in the United States and prosecutors are seeking to paint him as a facilitator of efforts that helped conceal up to $20 billion in taxpayers’ assets in secret offshore accounts.

Weil’s main defense has been that these efforts were done by people below him and that the U.S. cross border business was a tiny fraction of his overall responsibilities. If convicted, Weil faces up to five years in prison for conspiracy to commit tax fraud. Weil and his attorneys declined comment on the trial.

    At the trial, which pits Weil against several former UBS colleagues who have chosen to cooperate with U.S. authorities in exchange for favorable sentencing, Swiss bankers have testified about using an arsenal of James Bond-like tactics to avoid detection while in the United States, and to help U.S. clients keep their accounts hidden from tax authorities.

    Bankers were given laptops with two hard drives, Hansruedi Schumacher, who formerly ran UBS’ cross-border business, told the trial, which began on Oct. 14 and is expected to run for about four weeks.

    One hard drive was filled with anything from family photos and personal emails while another contained a password-protected database with the U.S. citizens’ code-named bank records. Another witness said the drive with the bank details could be wiped simply by typing in a short password.

    “It was known all those account holders were not paying their taxes, and for the Swiss bank it was a very profitable business,” Schumacher said during testimony at the trial.   

    Eskander Ensafi, who banked with UBS, told the court about a clandestine meeting in 2005 at a Los Angeles hotel with bank adviser Claude Ullman. The adviser handed him roughly $50,000 in U.S. bills wrapped in newspaper, Ensafi testified, tax-free interest from a Swiss bank account in the name of Ensafi’s father, who had just suffered a debilitating stroke.

Ullman was sued by a number of U.S. individuals — who were jailed for not paying U.S. taxes by hiding their money in Swiss bank accounts — for alleged racketeering, along with UBS and a number of high ranking bankers, including Weil, in a 2009 lawsuit in the Eastern District of California. The case was dismissed with prejudice in September 2014. An attorney for Ullman did not respond to a request for an update on the case.

    German businessman Juergen Homann, 72, who pleaded guilty to a U.S. charge of failing to report a foreign account to the Internal Revenue Service (IRS) in 2009, told the court one UBS client adviser, Hans Thomann, helped him set up a Hong Kong-based shell company. The company, the Prodon Foundation, was then used to funnel income Homann made from his raw minerals business venture in China.

Attempts to reach Thomann for comment were unsuccessful.

In 2012, he was charged in the Southern District of New York with conspiracy to defraud the United States and conducting an unlicensed money transmitting business.

   

    SHADOW OF SECRECY

    Switzerland’s biggest banks have paid a heavy price to settle their U.S. tax evasion cases. UBS admitted to helping U.S. taxpayers hide money and paid a $780 million fine in 2009, while Credit Suisse pleaded guilty in May to a U.S. criminal charge and will pay more than $2.5 billion in penalties.

Since U.S. authorities began to chip away at the wall of Swiss banking secrecy in 2008, details have trickled out of the extraordinary lengths bankers would go to in order to smuggle assets in and out of the United States.

    A U.S. Senate report published earlier this year described how a customer at Swiss bank Credit Suisse was given statements tucked into the pages of an issue of Sports Illustrated magazine at a hotel meeting. Former UBS financial adviser Bradley Birkenfeld admitted in 2008 to smuggling diamonds in a tube of toothpaste for a client.

Birkenfeld was a whistleblower in the tax fraud case against UBS and won a record-setting $104 million reward from the U.S. Internal Revenue Service.

    On top of the fines forked out by Switzerland’s two biggest banks, about a dozen smaller Swiss players are still under U.S. criminal investigation and face serious penalties, while many more have joined a government-brokered program allowing them to make amends if they aided tax evasion by wealthy Americans.

    The United States is not the only jurisdiction that has cracked down on tax evasion by its wealthiest citizens.

UBS is under investigation in France over whether it helped wealthy individuals there dodge taxes. Investigating magistrates have proposed that UBS pay a fine of 4.88 billion euros ($6.2 billion), according to a judicial source.

    The bank also booked a near-$300 million charge in the second quarter of this year, mainly to settle claims it helped wealthy Germans evade taxes.

    The bankers who helped move clients’ money around undetected are themselves faced with a legal bind that goes beyond financial penalties.

    Since 2009, the U.S. Justice Department has charged more than 30 bankers and advisers in the offshore investigation, including several Swiss bankers set to testify at Weil’s trial, while others have been arrested by European authorities.

    In some cases, the accused can cooperate with foreign authorities in exchange for lighter penalties. However, such a move could put them at risk of violating Swiss banking secrecy laws, an offence punishable by up to three years in prison and a fine of up to 250,000 Swiss francs ($262,000).

Failure to cooperate, though, can expose the bankers to the danger of being detained by foreign authorities whenever they leave Switzerland.

(Editing by David Clarke)

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Italy says private capital will meet Monte Paschi, Carige needs


ROME (Reuters) – Banca Monte dei Paschi di Siena (BMPS.MI) and Carige CRCI.MI will make up the capital shortfalls revealed in the ECB stress tests through private sector financing, Italian Economy Minister Pier Carlo Padoan said on Friday.

“The remaining capital needs of our banking system will be filled through the mobilization of private resources,” Padoan said in a speech at a conference in Rome.

He made no comment on the status of repayments of existing state aid offered to Monte dei Paschi in a previous bailout. But the comments dampen prospects of outright new state aid being offered to the two banks, which were among the biggest losers in the European Central Bank’s health check of the sector.

Monte dei Paschi was left with a shortfall of 2.1 billion euros, while Carige had a gap of 814 million euros.

Padoan said the tests had shown the resilience of the banking system overall. Italy’s public finance credibility had been reinforced by the government’s recent budget plans for 2015 which had been well received on financial markets.

(Reporting by Alessandra Galloni and James Mackenzie)

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Futures rally after BOJ ramps up stimulus


NEW YORK (Reuters) – U.S. stock index futures rallied on Friday after the Bank of Japan significantly ramped up its stimulus program just days after the U.S. Federal Reserve wound down its own package of economic incentives.

* The BOJ’s board voted 5-4 to accelerate purchases of Japanese government bonds, increasing its holdings at an annual pace of 80 trillion yen ($723.4 billion), while tripling its purchases of exchange-traded funds and real-estate investment trusts.

* At the same time, Japan’s $1.2 trillion Government Pension Investment Fund announced new allocations for its portfolio, including raising its holdings of domestic and foreign stock holdings to 25 percent each from 12 percent. A Nikkei newspaper report on this announcement on Thursday contributed to an afternoon rally in U.S. stocks.

* Japan’s Nikkei .N225 rose 4.8 percent, while SP 500 e-mini futures rallied shortly before 1:00 a.m. New York time in a sharp volume increase.

* The U.S. economic schedule is busy on Friday with key inflation data and a quarterly gauge of worker compensation due at 8:30 a.m. EDT as well as a Chicago survey of business activity and a measure of consumer sentiment both shortly after the opening bell on Wall Street.

Futures snapshot at 6:59 a.m. EDT:

* SP 500 e-minis ESc1 were up 22 points, or 1.11 percent, with 281,269 contracts changing hands.

* Nasdaq 100 e-minis NQc1 were gaining 60 points, or 1.47 percent, in volume of 47,050 contracts.

* Dow e-minis 1YMc1 were up 187 points, or 1.09 percent, with 47,966 contracts changing hands.

(Reporting by Rodrigo Campos; Editing by Chizu Nomiyama)

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Continental AG CEO says Audi recall no threat to guidance


MUNICH (Reuters) – Continental (CONG.DE) said a fault with airbags installed at premium sportscar maker Audi could cost a double-digit million euro amount to fix, a sum which the German automotive supplier could absorb without revising its earnings guidance.

Earlier this month Audi said it was recalling 850,000 cars worldwide, because potentially faulty software may prevent airbags on its A4 model from deploying.

“We are the supplier of the system”, Continental’s Chief Executive Elmar Degenhart told journalists in Munich on Thursday evening, in remarks which were embargoed for Friday.

It remains unclear whether Audi or Continental was to blame for the fault, and both companies are still looking for what caused the problem to arise in the first place, Degenhart said.

“We have not analyzed this yet,” Degenhart said.

Degenhart declined to give a specific figure for how much the recall could cost Continental, should the supplier be held responsible for causing the problem.

“It can be between zero and a double-digit million amount,” Degenhart said, adding it was common practise at suppliers and car companies to set aside provisions to pay for potential recalls.

“Even if we were found to be fully responsible we would not have to change our earnings guidance,” Degenhart said.

In July, Continental AG raised its full-year profit margin forecast for the second time in five months.

Audi said its faulty airbags are not made by Japan’s Takata Corp (7312.T), which is at the center of a burgeoning number of recalls over air bags that could spray shrapnel at occupants.

(Reporting by Irene Preisinger; Writing by Edward Taylor; Editing by Maria Sheahan)

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Japan’s central bank shocks markets with more easing as inflation slows


TOKYO (Reuters) – The Bank of Japan shocked global financial markets on Friday by expanding its massive stimulus spending in a stark admission that economic growth and inflation have not picked up as much as expected after a sales tax hike in April.

BOJ Governor Haruhiko Kuroda portrayed the board’s tightly-split decision to buy more assets as a preemptive strike to keep policy on track, rather than an admission that his plan to reflate the long moribund-economy had derailed.

But some economists wondered if pushing even more money into the financial system would be effective as long as consumer confidence continues to worsen and demand remains weak.

“It’s clearly a big surprise given Kuroda’s repeated insistence that policy was on track and assorted politicians have been warning about the negative side of a weak yen currency,” said Sean Callow, a currency strategist at Westpac.

“We salute the BoJ for admitting that they weren’t going to reach their goals on inflation or GDP, though we do note that the new policy equates to about $60 billion of quantitative easing per month. This perspective does raise the question of just how much impact monetary policy is having.”

The jolt from the BOJ, which had been expected to maintain its level of asset purchases, came as the government signaled its readiness to ramp up spending to boost the economy and as the government pension fund, the world’s largest, was set to increase purchases of domestic and foreign stocks.

“We decided to expand the quantitative and qualitative easing to ensure the early achievement of our price target,” Kuroda told a news conference, reaffirming the BOJ’s goal of pushing consumer price inflation to 2 percent next year.

“Now is a critical moment for Japan to emerge from deflation. Today’s step shows our unwavering determination to end deflation.”

Kuroda said the BOJ’s easing was unrelated to major portfolio changes by the Government Pension Investment Fund (GPIF) also announced on Friday, but the effect of the day’s two major decisions means that the central bank will step up its buying of Japanese government bonds, offsetting the giant pension fund’s increased sales of them.

The BOJ’s move stands in marked contrast with the Federal Reserve, which on Wednesday ended its own “quantitative easing,” judging that the U.S. economy had recovered enough to dispense with the emergency flood of cash into its financial system.

In a rare split decision, the BOJ’s board voted 5-4 to accelerate purchases of Japanese government bonds so that its holdings increase at an annual pace of 80 trillion yen ($723.4 billion), up by 30 trillion yen.

The central bank also said it would triple its purchases of exchange-traded funds (ETFs) and real-estate investment trusts (REITs) and buy longer-dated debt, sending Tokyo shares soaring and prompting a sharp sell-off in the yen.

Kuroda said that while the economy continues to recover, plunging oil prices, slowing global growth and weak household spending after the tax hike were weighing on price growth.

“There was a risk that despite having made steady progress, we could face a delay in eradicating the public’s deflation mindset,” he said.

Before Friday’s shock decision, Kuroda had been relentlessly optimistic that the unprecedented monetary stimulus he unleashed 18 months ago would succeed in bolstering an economic recovery and ending 15 years of falling prices.

But the world’s third-largest economy has sputtered despite the BOJ’s asset purchases and earlier government spending.

Most economists polled by Reuters last week had expected the central bank to ease policy again but not so soon. A majority had expected it to move early next year.

The bank’s previous failed effort to defeat deflation via quantitative easing (QE) in the five years to 2006 failed.

ECONOMY FLOUNDERING

Still, Economy Minister Akira Amari called the BOJ’s easing a timely move, saying the decision was related to but separate from Prime Minister Shinzo Abe’s looming decision on whether to raise the sales tax again next October, which would help rein in hefty government debt but risk a further economic blow.

In a semiannual report, the BOJ halved its growth forecast for the fiscal year to March to 0.5 percent. It trimmed its CPI forecast for fiscal 2014 and 2015, but still expects to meet its inflation target within the two years it originally set out.

“This is very significant because it reasserts Kuroda’s leadership over the policy board, which was beginning to show open dissent,” said Jesper Koll, director of research at JPMorgan Securities.

“It recognizes what we have known, that the real economy has been weaker than expected, weaker than forecast, and reasserts that Kuroda thinks they can do something about this.”

The benchmark Nikkei stock index .N225 spiked to a 7-year high on the BOJ bombshell and closed up 4.8 percent. The yen tumbled, with the dollar climbing to 110.91 yen, its highest since 2008, from 109.34 before the announcement.

“It’s easy money, so financials, banks and securities, and real estate stocks stand to benefit further,” said Masayuki Doshida, senior market analyst at Rakuten Securities.

In a reminder of the challenges the central bank faces, data earlier on Friday showed annual core consumer inflation was 1 percent when stripping out the effect of April’s tax hike, half the BOJ’s target.

Household spending fell for a six straight month in September from a year earlier, while the job-availability rate eased from its 22-year high in August.

Also on Friday, a Japanese government panel overseeing the GPIF approved plans for the fund to raise its holding of domestic stocks to 25 percent of its portfolio from the current 12 percent.

The $1.2-trillion GPIF is under pressure from Abe to shift funds towards riskier, higher-yielding investments to support the fast-ageing population, and away from low-yielding JGBs.

With Abe set to decide in December whether to raise the sales tax next year to 10 percent from 8 percent, voices are growing for him to delay the planned fiscal tightening, given the economy’s weakness.

Isamu Ueda, a senior official in Komeito, the junior party in Abe’s coalition, said on Friday it would be difficult to press ahead with plans to raise the tax next year.

“I think conditions are severe for (raising the tax) next October,” Ueda told reporters after a meeting of Komeito’s economic revival council, which he heads.

(Additional reporting by Stanley White, Hitoshi Ishida and Kaori Kaneko; Editing by Kim Coghill)

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RBS takes $640 million forex charge and warns of more to come


LONDON (Reuters) – State-backed Royal Bank of Scotland (RBS.L) has set aside 400 million pounds ($640 million) to cover potential fines for manipulating currency markets and warned further charges for past misconduct would continue to hit its profits.

RBS, 80 percent-owned by the British government following a 45 billion pound bailout during the financial crisis of 2007 to 2009, on Friday joined other big rivals in signaling it is close to agreeing settlements over alleged manipulation of the $5.3 trillion-a-day foreign exchange market.

Rival Barclays (BARC.L) said on Thursday it had set aside 500 million pounds to cover potential FX fines, while JP Morgan (JPM.N), UBS (UBSN.VX) and Citi (C.N) have also set aside large sums.

The forex manipulation, revealed after banks were already under scrutiny for profiteering in the setting of benchmark lending rates such as Libor, relates to daily fixing rates which traders are alleged to have manipulated to suit their own market positions.

RBS also faces a number of other probes relating to past misdeeds which threaten to undermine its turnaround under Chief Executive Ross McEwan, who has steered the bank back into profit this year after it made a loss of 8.2 billion pounds in 2013.

“We are actively managing down a slate of significant legacy issues. This includes significant conduct and litigation issues that will continue to hit our profits in the quarters ahead,” McEwan told reporters on Friday.

RBS is being investigated by regulators looking into its selling of bonds backed by residential mortgages in the United States and its treatment of struggling small British firms. The bank is also expected to be fined by British financial regulators for an IT failure two years ago which left customers without access to their bank accounts.

In addition, RBS faces a mounting bill to compensate customers mis-sold loan insurance. It set aside another 100 million pounds to deal with the matter on Friday, taking its total bill to 3.3 billion pounds.

GROUP SETTLEMENT

RBS is one of six banks in talks with UK regulators on a deal that would involve them paying about 1.5 billion pounds in a group settlement in relation to alleged forex manipulation, sources have said. They said a deal could come in mid-November and U.S. regulators were also working on a group settlement.

McEwan said RBS would not pay a dividend until it has more clarity over future misconduct charges and has substantially strengthened its capital position, potentially making it more difficult for the government to start selling its shares.

“I don’t think we should be thinking about dividends until we’ve got a really good capital build and seen some of the bumps in the road out of the way,” he said.

RBS increased its core Tier 1 capital ratio by 70 basis points to 10.8 percent during the third quarter and its leverage ratio improved by 20 basis points to 3.9 percent. The bank has set a target of holding core Tier 1 capital of more than 12 percent by the end of 2016.

“There’s no way we will be paying a dividend until we get ourselves well in advance of that 12 percent target,” McEwan said.

Britain’s financial regulator expects banks to hold an absolute minimum of 7 percent core capital. However, investors generally expect a ratio of at least 10 percent.

The Bank of England is expected to impose a tougher leverage ratio than the current 3 percent requirement on UK banks later on Friday. It is expected to require banks to hold between 4 and 5 percent, meaning they can lend between 20 and 25 pounds for each pound of capital held in reserve.

RBS said it made a third-quarter pretax profit of 1.3 billion pounds, compared with a loss of 634 million the year before. That was ahead of an average analyst forecast of 1.1 billion compiled by the bank.

An economic revival in Britain and Ireland has enabled RBS to recover debts it had written off. The bank had a net release of previously written-off loans of 801 million pounds during the quarter, ahead of an average forecast of 590 million.

RBS’s corporate and institutional banking arm slumped to a loss of 557 million pounds, compared with an 18 million loss a year ago. That reflected charges of 562 million pounds for misconduct, including 400 million for forex fines.

The division, which is being shrunk and focusing on less risky areas, also had significantly lower income, RBS said.

Shares in RBS, which have risen by more than a quarter in the past six months, were up 4.3 percent at 7.45 a.m. EDT. They rose as high as 381.6 pence, their highest in 12 months.

“The build in capital is strong notwithstanding substantial conduct and restructuring provisions,” said Deutsche Bank analyst Jason Napier.

RBS said it had decided to keep Ulster Bank, having carried out a review of the business which could have resulted in it being sold off. McEwan said the unit could deliver attractive shareholders returns in future.

Like other British banks, RBS is closing branches in response to customers choosing to bank online instead. It has seen a 30 percent drop in branch transactions since 2010.

McEwan said RBS had already closed 102 branches this year and expects 154 to have shut by the end of 2014, the equivalent of 5 percent of its network.

(Editing by David Holmes and Pravin Char)

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BNP shakes off impact of U.S. fine, returns to profit


PARIS (Reuters) – France’s No. 1 bank BNP Paribas (BNPP.PA) returned to net profit in the third quarter, recovering from a costly U.S. legal settlement to publish what it called a “rock solid” balance sheet, sending its shares up over 4 percent.

BNP — battling to restore investor and client confidence after a $8.9 billion fine from U.S. authorities — reshuffled its top ranks in the quarter to tighten controls. It said veteran adviser and trouble-shooter Jean Lemierre would become chairman in December.

The bank settled with U.S. authorities in June, paying up over accusations that it violated U.S. sanctions against Sudan, Cuba and Iran over a 10-year period up to 2012.

“The excess capital story at BNP has been derailed by litigation for the time being, but trends this quarter are encouraging,” Geoff Dowes, an analyst at Societe Generale said in a note.

Shares in BNP were up 3.7 percent at 50.3 euros at 6 a.m. EDT, paring earlier gains, outperforming a rising French market.

BNP said on Friday its balance sheet had improved despite headwinds, reporting a core Tier 1 capital ratio under tougher Basel III rules of 10.1 percent. That was a small improvement from 10 percent at end-June, but taking into account the purchase of Polish bank BGZ and new regulatory adjustments.

Net profit rose 11 percent to 1.5 billion euros ($1.89 billion), driven by lower provisions, while revenue rose 3.9 percent to 9.54 billion euros.

Revenues in the investment banking business – a business line closely watched by the market following BNP’s settlement with the U.S. authorities – grew by 2.9 percent in the third quarter, signaling the affair did not affect relationships between BNP and its clients.

Alain Papiasse, head of its investment bank, has been placed in charge of overseeing its U.S. business.

“CIB activities have been doing well, particularly fixed income…in rates and in forex,” BNP Paribas Chief Financial Officer Lars Machenil said in an interview with Reuters Insider after earnings were announced.

Under the terms of the settlement with the U.S. authorities, BNP will have to clear all its dollar transactions in New York, under supervision. Any oil- and gas-related business landing there throughout 2015 will be forwarded to a correspondent bank for clearing.

Machenil said that operational solutions were being worked out in order to reach a deal with banks.

BOLT-ON ACQUISITIONS

Like its domestic rival Societe Generale (SOGN.PA) and other European banks, BNP is targeting new growth avenues after years of shoring up its balance sheet to meet tougher rules on risk taking after the financial crisis.

This year the bank agreed to buy German online investment broker DAB in a $354 million deal with Unicredit and Poland’s Bank BGZ BGZ.WA in a 4.5 billion zlotys ($1.39 billion) deal with Rabobank.

Asked if BNP was working on a bid for Italy’s Monte dei Paschi (BMPS.MI), which revealed the biggest outstanding capital deficit following Europe-wide banking stress tests and needs to raise 2.1 billion euros, Machenil said:

“It’s speculation. If you look at what we do in our plan, we are looking for bolt-on acquisitions … If we find that, as a bolt-on and at a reasonable price, that’s what we have to do.”

By bolt-on acquisitions, Machenil said he meant those that can “bring BNP an improved market share, intimacy with clients, and product knowledge”.

BNP owns Rome-based BNL, the sixth-largest lender by assets in Italy.

(Editing by Mark John and Clara Ferreira Marques)

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Wal-Mart to expand discounts as retail price war heats up


(Reuters) – Wal-Mart Stores Inc said it will expand its offering of discounted products during the holiday season and may broaden a price-matching scheme to include online rivals, in the latest sign of an escalating price war among big U.S. retailers.

Wal-Mart said it was bracing for competition to be as tough or tougher than in 2013, when heavy discounting depressed earnings across the industry. Wal-Mart’s profits dropped in the holiday quarter last year and it has posted six straight quarters of flat or declining same-store sales.

“It is starting to heat up right now, and I would expect it to be at least as competitive as last year,” Steve Bratspies, executive vice president of general merchandise for Wal-Mart’s U.S. operations, said on a call with media on Thursday, referring to competition during the holiday season.

Wal-Mart said it plans to have 20,000 “rollbacks”, or a product discounted for at least 90 days, on offer starting on Saturday. While it did not disclose a comparable number, it said the program was bigger and included a wider line-up of products, with a focus on toys and electronics, than last year.

Other retailers have been stepping up promotions, with a focus on attracting more customers online.

Target Corp said earlier this month that it would drop shipping fees for online purchases from Oct. 22 to Dec. 22.

Wal-Mart said it would provide free shipping for online orders of a selected list of 100 gift items. It normally waves shipping for purchases above $50.

Wal-Mart is also considering expanding a price-matching program for local bricks-and-mortar rivals to include online comparisons, Bratspies said, although he stressed a final decision on the strategy had not been made. It would mean Wal-Mart matching prices with Amazon.com in addition to local retailers and grocery stores.

The moves come ahead of what is expected to be a fiercely competitive year-end season. Research firm Customer Growth Partners (CGP) predicts spending will rise 3.4 percent, up slightly from last year’s 2.9 percent growth, which was the slowest growth since 2009.

“Demand is sluggish and consumers of all stripes are looking for value,” said Craig Johnson, president of CGP. “This is going to be a pretty promotional Christmas.”

However, Johnson said he expects Wal-Mart to return to same-store sales growth in its fiscal fourth quarter, helped by food inflation, strong demand for consumer electronics and a move to put labor back in stores to address long checkout lines and better stock shelves.

Wal-Mart said it planned to hire 60,000 additional workers for the holidays, up 10 percent from last year, and would aim to have all of its cash registers open during peak hours.

(Reporting by Nathan Layne; Editing by Ken Wills)

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