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German regulator says Deutsche Bank CEO misled Bundesbank: FT

FRANKFURT Deutsche Bank’s (DBKGn.DE) co-chief executive Anshu Jain may have “knowingly made inaccurate statements” to Germany’s Bundesbank during investigations into manipulation of the inter-bank rate setting process, the Financial Times reported online, citing a confidential report from German regulator BaFin.

BaFin declined to comment.

Deutsche Bank told Reuters it disputed the allegation that Anshu Jain misled the Bundesbank.

Earlier this month, a source told Reuters that Germany’s financial watchdog Bafin heavily criticized Deutsche Bank in its report investigating attempts to manipulate inter-bank interest rates such as Libor.

The German regulator has been investigating Deutsche Bank and the role it played during the financial crisis when a global inter-bank lending rate mechanism was being manipulated.

BaFin recommends that Deutsche Bank should face “special banking supervisory measures” as a result, the Financial Times reported, quoting the BaFin report.

Jain, who resigned his position as CEO effective June 30, is accused of having “knowingly made inaccurate statements” in a 2012 interview with the German central bank, the Financial Times said.

Germany’s central bank, which is known as the Bundesbank, could not be reached for comment.

Jain is alleged to have told the central bank he had no knowledge of rumors of possible rigging in 2008, but contemporaneous e-mails about a meeting on the subject were forwarded to him at the time, the Financial Times said.

Deutsche Bank on Friday said, “The BaFin report confirms our findings that no present or former member of Deutsche Bank’s Management Board or Group Executive Committee instructed employees to manipulate intra-bank offered rates (IBOR) submissions or was aware of any attempted manipulations prior to June 2011 when certain misconduct first came to light during the Bank’s investigation of this matter.”

In a statement, Deutsche Bank said, “Mr Jain disputes as baseless the allegation that he misled the Bundesbank in his 2012 interview. He understood Bundesbank’s question about when he first learned of rumors of possible IBOR rigging to mean rigging at Deutsche Bank itself which he learned of in 2011, not rigging in the marketplace which was publicly reported on in 2008.”

Deutsche further said that report also addresses concerns about control related issues, a number of which have since been rectified and others of which the bank was still working to improve.

“As we have not yet responded to the BaFin report as part of the regulatory process,  we believe it would be inappropriate to comment further publicly at this time,” Deutsche Bank said.

From the report, the Financial Times quotes BaFin’s lead banking supervisor who is quoted Frauke Menke, lead banking supervisory as saying, “I have been astonished to learn […] that the suggestion is that the audit by BaFin supposedly resulted in clearing the senior management of DB, especially Mr Jain, and that supposedly no banking supervisory measures are expected,” Menke was quoted as saying in the report.

“I expressly want to point out that this is not correct,” the Financial Times said, quoting Menke in the report.

(Reporting by Edward Taylor and Frank Siebelt)

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Canada’s Element Financial close to GE fleet asset purchase: sources

TORONTO/NEW YORK Canada’s Element Financial (EFN.TO) is close to buying a large chunk of General Electric Co’s (GE.N) vehicle fleet-management business in a deal that could be sealed as early as the end of June, three sources familiar with the matter said on Friday.

GE has said the business includes $9 billion in assets. The sale would be part of a plan it unveiled in April to divest about $200 billion in GE Capital assets as it moves away from finance and focuses on manufacturing of industrial equipment.

The sources said Element is poised to acquire a good piece of the vehicle fleet-management business, with a smaller portion being taken by another party. The business helps to finance and manage the vehicles of companies that own vast fleets for sales staff, technicians and others that are always on the move.

The sources said Element is mainly interested in the North American portion of GE’s fleet-management unit.

GE’s private-equity lending portfolio was scooped up by the Canada Pension Plan Investment Board earlier in June for $12 billion.

GE and Element Financial declined to comment.

(Reporting by Euan Rocha, John Tilak and Lewis Krauskopf; Editing by Diane Craft)

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U.S. bankruptcy judge refuses Molycorp request for loan

WILMINGTON, Del. Molycorp Inc (MCPIQ.PK) failed to get approval from a U.S. Bankruptcy judge on Friday to borrow about $44 million at the rare earth producer’s first bankruptcy hearing.

Judge Christopher Sontchi agreed with the objection by an affiliate of Oaktree Capital Management that Molycorp could not justify its need for the money, which would deepen the company’s insolvency.

The company will discuss with its creditors how to structure the loan and will return to court on Thursday at 10 a.m., according to Sontchi’s chambers.

Molycorp, which filed for bankruptcy on Thursday, sought the money for its operations and to signal to customers and employees that the company would meet its commitments. Molycorp was seeking the money on an interim basis and had planned to return to court to seek approval to borrow up to $225 million.

Oaktree, which had loaned the company about $250 million in September, argued Molycorp was essentially two businesses, a profitable developer and distributor known as Neo and the unprofitable Mountain Pass mining operation in California.

Oaktree’s loans are guaranteed by the Neo business. It objected to the additional borrowing, arguing it was burdening the profitable business with unnecessary debt to finance the development of Mountain Pass.

Molycorp’s chief financial officer, Michael Doolan, testified that the Neo business could survive without the bankruptcy loan. He also said Mountain Pass provided less than 30 percent of Neo’s raw material and acknowledged the board considered closing the mine.

“Neo would be wounded, no question,” he said, speculating on the impact of not getting the loan. But “it would not be a fatal blow in and of itself,” he added.

Molycorp’s value swelled in 2011 with a commodities boom and export restrictions on rare earths by China, the world’s leading producer of the elements used in smartphones and automobiles.

In 2012, the company bet on vertical integration and acquired Toronto-based Neo Material Technologies Inc, a leading processor and distributor of rare earth products.

The Mountain Pass side of the business had issued $650 million in senior secured notes, and the investors holding those notes had committed to providing the $225 million bankruptcy loan.

Molycorp plans to swap ownership of the company to the secured bondholders in return for their debt.

In the past year, a slowdown in China’s economy and slumping commodity prices pushed many mining companies into bankruptcy, including Allied Nevada Gold, iron ore producer Magnetation and Patriot Coal Co.

(Reporting by Tom Hals in Wilmington, Delaware; Editing by Leslie Adler and Chris Reese)

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Oil near flat, Brent up modestly after two-day drop

NEW YORK Crude futures ended little changed on Friday after signs Greece might have a deal by the weekend to avoid a debt default, while Iran faced continued difficulty in securing an nuclear agreement to end sanctions on its oil exports.

Brent rose modestly after falling for two straight days.

But U.S. crude extended its downside after indications that the country’s oil rig count, a measure for future production, may start rising soon.

A suicide bombing by Islamic State militants in Kuwait, which killed 25 people and wounded more than 200, raised fears about the security of Middle East oil supplies and lent some support as well to crude.

Other acts of violence with varying impact on the market included a terror attack in France; the shooting deaths of 28 people in Tunisia, including Western tourists, and the killing of at least 145 civilians in northern Syria by Islamic State militants.

In Greece, Finance Minister Yanis Varoufakis said he saw no reason for his government not to have a deal with its creditors by Saturday as Athens worked toward an agreement that would help it avert a debt default and stay in the euro zone.

A senior EU official said, however, Greece will probably be in arrears with the IMF for a few days.

“If there is a resolution to the Greece problems, this market could get a big boost,” said Phil Flynn, analyst at the Price Futures Group in Chicago.

Brent settled up 6 cents, or 0.1 percent, at $63.26 a barrel. For the week, it rose 0.3 percent.

U.S. crude settled down 7 cents, or 0.1 percent, at $59.63. It was down similarly for the week.

Among refined oil products, gasoline rose 0.6 percent while ultra-low sulfur diesel settled flat on short-covering after sharp declines in recent sessions.

In Vienna, ahead of a June 30 deadline for a final deal between Iran and world powers, major differences remained on key issues such as sanctions relief and U.N. access to Iranian nuclear sites, senior Western diplomat said.

On the data front, oil services company Baker Hughes said the U.S. oil rig count, a measure of future production, fell by 3 this week.

It was the smallest drop in five weeks and a sign that the collapse of U.S. drilling was coming to an end, with crude prices recovering after a 60 percent slump between last June and March this year.

“We’re bottoming out and should see an end to this drop in the coming weeks,” said Matt Smith, director of commodity research at New York-based Clipper Data, referring to the rig count.

(Additional reporting by Claire Milhench in London and Keith Wallis in Singapore; Editing by Marguerita Choy, Bernadette Baum and Steve Orlofsky)

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Ad executives cautious about growth, gear up for contract battle

CANNES (This version of the story corrects figures on Publicis contract wins, paragraph 13)

The reluctance of big companies to spend at a time of lacklustre global growth and fewer major sporting events this year are dampening demand for advertising, said the chief executives of two leading ad agencies.

In separate interviews on Friday, Martin Sorrell of WPP (WPP.L) and Maurice Levy of Publicis (PUBP.PA) sounded cautious about the prospects for the advertising market, citing a lack of vibrancy in the U.S economy, weakness in Brazil, Russia and China, and Europe’s continued fragility.

“There is a lot of uncertainty,” Levy told Reuters. “Companies have cash to spend but are not in the mood to do so, and consumers are not feeling confident either.”

Research firm Zenith Optimedia, owned by Publicis, recently cut its growth forecast for the global advertising market to 4.2 percent down from 4.9 percent earlier this year.

For his part, Sorrell said that the major companies served by WPP agencies such as Ogilvy and Mather and Group M were very focused on cost controls, sometimes to the detriment of long-term investment in their brands and products.

“Business is tough. Clients are very demanding in an environment where top-line growth is lower than it was before the financial crisis began,” he said.


Against that backdrop, the world’s top six ad agencies face upheaval because an unprecedented $27 billion in media buying and planning contracts are up for review in the coming months at companies including Coca-Cola (KO.N), Procter and Gamble (PG.N) and L’Oreal (OREP.PA).

That is requiring them to defend some major contracts, while trying to steal others from rivals.

Morgan Stanley estimated that Publicis was the most exposed, with 1.7 percent of sales at risk and 2.5 percent of earnings per share. It is defending seven contracts including PG, General Mills (GIS.N), Twenty-First Century Fox (FOXA.O) and Coca-Cola.

For WPP, about 1.1 percent of revenue and 1.6 percent of earnings per share are risk as it seeks to keep nine contracts including Volkswagen (VOWG_p.DE) and Unilever (ULVR.L).

Both Sorrell and Levy claimed the reviews were an opportunity to win business, while acknowledging that the fees would be lower on the new deals than the old ones.

“The reviews are worrying for the agencies but their effects will also be felt on media owners because the price of ads will fall further,” Levy predicted, referring to TV broadcasters, print outlets, and radio.

Levy said Publicis had already won one contract with beauty products maker Coty (ULVR.L) with billings of $100 million and another with coffee specialist Keurig worth $150 million.

“If we lose all our current contracts and win none of the new ones we’re going for then our sales could drop 2 percent,” said Levy.

“But if we defend everything and win all the new ones, then they could go up as much as 3 percent.”

Sorrell said that WPP’s plan was to stress its technology and data expertise in pitches to clients. WPP has made a big bet on data with its Kantar unit, which Sorrell argues offers a competitive advantage although a lower margin business.

“We are differentiated from our competitors and that will help in the reviews,” he said.

(Reporting by Leila Abboud; Editing by Keith Weir)

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FedEx says has requested EU approval for $4.9 billion TNT bid

BRUSSELS FedEx (FDX.N) has asked the European Union’s competition regulator to approve its 4.4-billion-euro ($4.9 billion) bid for Dutch rival TNT Express (TNTE.AS), the U.S. package delivery service company.

The deal, which will combine FedEx’s air fleet with TNT’s sizeable European road network, will extend FedEx’s reach in competition with United Parcel Service (UPS.N) and Deutsche Post (DPWGn.DE).

FedEx submitted its request to the European Commission on Friday, spokeswoman Nira Gale said.

The EU competition authority’s preliminary review takes 25 working days, which can be extended by another 10 working days if concessions are offered to head off regulatory worries.

FedEx will seek clearance from the Dutch financial market authority AFM before June 30, with the offer expected to close in the first half of 2016, Gale said.

TNT agreed to a takeover by UPS in 2013 but the deal was rejected by the European Commission.

Analysts said this second attempt is expected to be less problematic as it would create a strong third player in Europe to counter UPS and Deutsche Post.

(Reporting by Foo Yun Chee; Editing by Greg Mahlich)

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No longer so secret, Swiss banks look to expand after purge

ZURICH Switzerland’s private banks are close to ridding themselves of undeclared European accounts, a salutary process but one which has undermined efforts to grow their businesses.

Following the financial crisis, cash-strapped governments chased accounts hidden at banks in Zurich, Geneva and Ticino where wealthy Europeans had taken advantage of Switzerland’s famous bank secrecy rules.

Stunned by arrests of high-profile clients for tax evasion, large numbers of European citizens have joined voluntary disclosure program and pulled cash from Swiss banks to pay penalties and clear back taxes.

After billions of Swiss francs in withdrawals, recent figures from UBS (UBSG.VX) suggest the tide is beginning to turn.

In the first three months of 2015, the Zurich-based bank reported its steepest quarterly net percentage rise in European assets in over three years. That has helped to justify the bank’s decision to refocus on wealth management and slim down its investment bank.

“For the industry, and in particular UBS, the bulk of the European cross-border outflows may be behind us,” said Kinner Lakhani, an analyst at Citi.

Wealth in western Europe is expected to grow more slowly than the global average in the coming years, according to a Boston Consulting Group study.

But European clients are frequently viewed as more profitable because they are willing to pay banks higher fees to manage their often-inherited wealth.

There are still bumps in the road ahead for Swiss banks.

A global tax data sharing program, which Switzerland is set to implement from 2018, could trigger a fresh round of outflows, especially from emerging market depositors.

An end to European withdrawals however, would make it easier for banks to grow the amount of assets they manage. In recent years Swiss private banks have had to drum up fresh business simply to offset the amount of withdrawals.

Clearing the books of undeclared accounts has been no small task. One prominent Swiss banker estimates that they made up more than 80 percent of many banks’ assets prior to the financial crisis.

But at the end of 2014 some 95 percent of German assets with Swiss banks had been declared, according to the Swiss Bankers Association. The industry group expects this to reach 100 percent by the end of 2015.

France, Britain and Austria have also given taxpayers the chance to disclose undeclared accounts.


Bank secrecy in Switzerland for foreign account holders was effectively when the country signed up to the Organisation for Economic Cooperation and Development’s (OECD) tax data sharing program last year.

But its legacy will haunt the industry for some time yet.

Earlier this year, leaked files suggested HSBC’s (HSBA.L) Geneva-based private bank may have enabled clients to conceal millions of dollars in assets in years past.

HSBC this month agreed to pay Geneva authorities 40 million Swiss francs ($43 million) to settle a money laundering investigation at the bank.

Banks have reacted by overhauling their business models, devoting more resources and jobs abroad, particularly to Asia, which is the world’s fastest production line for multi-millionaires and billionaires.

Switzerland’s banking expertise has helped it to retain its position as the largest offshore wealth center with $2.4 trillion in assets as of 2014 according to the Boston Consulting Group. But the withdrawals have been a major challenge.

Martin Schilling, a director at accounting firm PricewaterhouseCoopers, estimates that between 350 billion and 400 billion francs have left Swiss banks since the financial crisis, with the majority going to other European countries.

“Over the next one and a half years or so, another 50 billion to 100 billion francs could follow,” Schilling said. “Then the situation should largely be settled.”

A voluntary disclosure program with Italy was signed in February and is scheduled to run until September. Banks say this will likely be the last major western European market to pull significant assets from Switzerland.

Recruitment experts say the decline of European withdrawals will boost hiring at home.

    Stephan Surber, finance specialist at recruitment firm Michael Page (MPI.L) said: “The stronger demand for personnel of the big banks has set in over the last 12 months after they went through a transformation phase for many years.”

(Additional reporting by Oliver Hirt; Editing by Noah Barkin and Keith Weir)

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Pimco CEO says client anxiety fading after star manager’s departure

CHICAGO Pimco’s chief executive officer said on Friday that improving flow trends showed the big bond firm is regaining client confidence after the departure of star manager Bill Gross last year led to billions of dollars of withdrawals.

Outflows at the flagship fund once managed by Gross, Pimco Total Return, slowed to $2.7 billion in May, the smallest of any month since Gross left last September, according to the most recent data from Lipper, the Thomson Reuters unit.

“We recognize that the organizational changes that have taken place at Pimco over the last 18 months have created change and created uncertainty and anxiety” among clients, CEO Douglas Hodge said at the Morningstar Investment Conference in Chicago.

But those jitters have diminished and led to better flow patterns, Hodge said, helped by steady performance. “As we look at the last two or three months, we’re starting to see the arrows come back up. I think that’s the resolution of the uncertainty,” he said.

With $1.7 trillion in assets under management, Pimco, of Newport Beach, California, remains one of the most influential fixed income managers.

But assets are down from a peak of around $2.1 trillion two years ago, hurt by investor withdrawals after Gross’ surprise announcement that he would leave the firm he founded for Janus Capital Group Inc.

Among Pimco’s 108 other mutual funds tracked by Lipper, outflows slowed to $1.9 billion in May, the smallest for any month since Gross left.

For the period after Gross left, from October 2014 to May 2015, Total Return had an annualized return of 2.58 percent, beating 66 percent of peers, according to Morningstar. The fund has about $107 billion in total assets.

Gross was outspoken, leading to tensions within Pimco before his departure. Speaking on the same stage as Hodge at Friday, Pimco Chief Investment Officer Daniel Ivascyn said the company now aims to gather more input into investment decisions from among its 250 portfolio managers.

“We are going to try to listen a bit more,” Ivascyn said.

Pimco, formally known as Pacific Investment Management Co, is a unit of Germany’s Allianz SE.

(Editing by Richard Valdmanis and Jeffrey Benkoe)

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U.S. consumer sentiment rises in June

NEW YORK U.S. consumer sentiment jumped in June, according to a survey released on Friday.

The University of Michigan’s final June reading on the overall index on consumer sentiment came in at 96.1, up sharply from 90.7 in May. It was higher than the survey’s preliminary reading of 94.6.

The final reading was the highest since January and topped the median forecast of 94.6 among economists polled by Reuters.

(Reporting By Michael Connor in New York; Editing by Meredith Mazzilli)

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