News Archive

Lufthansa cabin crew union says pay talks have failed

FRANKFURT Talks between Lufthansa (LHAG.DE) and its main cabin crew union have failed, the union said on Saturday, raising the prospect of more strikes at the German carrier.

Lufthansa is in talks with various staff groups as it seeks to cut costs in order to compete better with low cost carriers and Gulf rivals.

A long-running dispute with its pilots over pay and conditions has already resulted in more than a dozen strikes over a period of 18 months.

The cabin crew union, which represents 19,000 staff had given Lufthansa until Nov. 1 to put forward a better offer in long-running talks over pay, retirement benefits and working conditions.

Despite a constructive start to talks over the weekend, Lufthansa refused to reconfirm agreements it had previously made verbally, Nicoley Baublies, head of the union, told Reuters.

“Strikes are a possibility,” Baublies said, adding that the union would announce its next course of action on Monday.

Lufthansa was not immediately available for comment.

(Reporting by Peter Maushagen; Writing by Victoria Bryan; Editing by Alison Williams)

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Italy court says no proof of wrongdoing in UniCredit mafia probe

FLORENCE, Italy An Italian court said on Saturday there was no proof to back up allegations that three executives at Italian lender UniCredit (CRDI.MI) had helped a businessman who prosecutors claimed had links to the Sicilian mafia, according to a court document.

Fabrizio Palenzona, Unicredit deputy chairman, Chief Risk Officer Massimiliano Fossati and Alessandro Cataldo, head of corporate banking in Italy, had been accused by anti-mafia prosecutors of helping to arrange debt restructuring for entrepreneur Andrea Bulgarella.

Prosecutors claimed Bulgarella had links to Matteo Messina Denaro, one of Italy’s most wanted men. Bulgarella has denied any wrongdoing.

But in a ruling on Saturday the Florence court said no restructuring plan of the debt of the Bulgarella group had ever been approved by UniCredit and that there was no proof to show Bulgarella had relations with the Mafia.

According to a document from the court, it annulled the search warrant and said there was no evidence to support allegations of fraud or helping the mafia. It also called on material seized under the warrant to be returned, according to the court document.

“The court could do nothing else but recognize that the search warrant, annulled today, was based literally on nothing,” Palenzona’s lawyer Massimo Dinoia said.

UniCredit in a statement on Saturday confirmed the court decision and said its board had reaffirmed its full confidence in its managers at an extraordinary meeting on the same day.

The bank said there was nothing to suggest Palenzona and Fossati were unfit to retain their positions.

A source close to the matter said Palenzona, Fossati and Cataldo would stay in their jobs.

Earlier this month a source said Fossati and Cataldo were likely to be replaced.

(Reporting by Silvia Ognibene, writing by Stephen Jewkes; Editing by Raissa Kasolowsky)

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ECB reveals capital hole in Greek banks as unpaid loans soar

FRANKFURT Greece’s banks need to raise more than 14 billion euros (10 billion pounds) of extra capital to cover mounting unpaid loans, the European Central Bank said on Saturday as it announced the results of stress tests intended to rehabilitate Greek lenders.

The capital hole has emerged chiefly due to the rising number of Greeks unable or unwilling to repay their debt, after a dispute over reforms between the leftist government and international lenders almost saw Greece leave the euro.

As controls on cash withdrawals have squeezed the economy, loans at risk of non-payment have increased by 7 billion euros to 107 billion euros.

That is roughly half of all the credit given by the country’s four big banks, according to the ECB. Almost 57 percent of the loans made by Piraeus Bank (BOPr.AT), the bank which fared worst, are at risk.

The fact, however, that the declared capital hole is smaller than the 25 billion euros earmarked to help banks in the country’s bailout may encourage investors such as hedge funds to buy shares.

Germany’s Deputy Finance Minister Jens Spahn said attracting investors would reduce the support needed from the euro zone’s rescue scheme, the European Stability Mechanism.

The lenders are currently kept afloat by central-bank cash but there is a rush to get the recapitalization finished.

If it is not done by the end of the year, new European Union rules mean large depositors such as companies may have to take a hit in their accounts.

Greece’s Finance Minister Tsakalotos said on Saturday he was optimistic that Greece’s banks would successfully recapitalize by the end of the year.

The stress tests looked at how many loans would go unpaid if the country’s economy performs as expected up until 2017 – the so-called ‘baseline’.

It also simulated a ‘stress’ scenario, where Greece dips further than expected. For this test, ECB officials assumed that the economy would shrink by more than 3 percent this year and next before growing modestly in 2017.

In checking the financial strength of the country’s four main banks – National Bank of Greece, Piraeus, Alpha Bank and Eurobank – the ECB determined that even should the economy perform no worse than expected, the banks would still need almost 4.4 billion euros.

In the check, National Bank and Piraeus fared worst. To see a chart of the results, click here:

It is the performance of the banks under stress that determines how much capital is needed. The ‘baseline’ scenario, for instance, expects Greek growth of 2.7 percent in 2017 – far outstripping Germany now.

The ECB defended an earlier test that had given the banks a clean bill of health before the most recent political turmoil.

But Ramon Quintana, a director general in the ECB’s bank supervision arm, cautioned that Greece’s economy needed to stay on track for the banks to hold steady.

“Any deviations from these scenarios means that reality can go beyond what is expected in the exercise,” he told journalists. “This is why it is very important to avoid any deviation from the economic growth expected.”


Much of the focus so far in rehabilitating Greece has focused on the scale of its national debt, which is approaching double its economic output.

In comments to an Italian newspaper published on Saturday, ECB president Mario Draghi said that some debt relief may be required.

But the tests throw the spotlight on personal debt.

Banks have struggled most amid the months-long stand-off between leftist Prime Minister Alexis Tsipras and his country’s international backers – the International Monetary Fund and European Union.

The dispute led to the freezing of central-bank funding for Greece’s banks and forced controls on cash withdrawals. Although this stemmed a further hemorrhaging of savings, it squeezed the economy, making it harder for borrowers to repay loans.

Of an 86-billion-euro bailout of Greece, 25 billion euros is earmarked for banks.

To reach its outcome, however, the ECB counts into the calculation billions of euros of future tax rebates that the Greek government could pay its banks.

Greek bankers hope that private investors will buy shares in the lenders. But Greece’s future and that of its banks remains uncertain, despite the latest checks.

A fall of more than two thirds in the banks’ stock prices this year serves as a reminder of the risks.

(Reporting By John O’Donnell, Francesco Canepa and George Georgiopoulos; Additional reporting by Gernot Heller in Berlin; Editing by Raissa Kasolowsky)

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Swatch CEO sees 2016 Swiss launch for pay watch: newspaper

ZURICH Swatch Group (UHR.VX) expects to launch a smartwatch that can be used to make payments in Switzerland next spring, Chief Executive Nick Hayek said in an interview with a Swiss newspaper published on Saturday.

The watch is likely to use a pre-paid system, Hayek told Finanz und Wirtschaft, unlike a version launched in China this month that can be used like a debit card.

Hayek said this was because the payment system in Switzerland is a “complex regulatory matter” compared with similar systems in China or even the United States.

Hayek expressed optimism about 2016, saying the Swiss watchmaker had invested in a pipeline of new products.

He said Swatch had some catching up to do in the United States, but hoped a six-year deal with the National Basketball Association in which he’ll pay 180 million Swiss francs ($182.28 million) would help boost demand for the company’s Tissot brand.

“Up until now, the brand has gotten too little attention,” Hayek told the newspaper. “Our cooperation with the NBA will open doors to department stores and will give Tissot more space at sales points.”

Swiss watch exports posted their biggest quarterly drop since 2009 in the third quarter as plummeting sales in Hong Kong and China spread to other Asian markets in September, the industry said this month.

(Reporting by John Miller, editing by Susan Thomas)

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Merkel says VW must act in transparent manner

BERLIN The “Made in Germany” brand has not been damaged by the Volkswagen scandal, but the carmaker needs to deal with the matter in a transparent manner, German Chancellor Angela Merkel said on Saturday in her weekly podcast.

Almost six weeks after it admitted using illegal software to falsify U.S. diesel emissions tests, VW is under pressure to identify those responsible, fix up to 11 million affected vehicles and convince regulators, investors and customers it can be trusted again.

“A lot will depend on how Volkswagen deals with the issue,” Merkel said, adding that VW could recover if it acts transparently and changes its organizational structures so that nothing similar can happen again.

“I believe VW is working on this with all of its power,” she said.

(Reporting by Victoria Bryan; Editing by Toby Chopra)

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ECB will do what is needed to keep inflation target on track: Draghi

MILAN The European Central Bank (ECB) is ready to do what it takes to keep its medium-term inflation target on course, its head Mario Draghi said in a newspaper interview published on Saturday.

Consumer prices in the 19-country euro zone slipped by 0.1 percent in September – far from the bank’s aim of just below 2 percent – prompting calls for the ECB to expand or extend its 60 billion euros a month of asset purchases.

“If we are convinced that our medium-term inflation target is at risk, we will take the necessary actions,” Draghi told the Italian daily Il Sole 24 Ore.

“We will see whether a further stimulus is necessary. This is an open question,” he said, adding it would take longer than was foreseen in March to return to price stability.

Draghi said inflation in the euro zone was expected to remain close to zero, if not negative, at least until the beginning of next year.

“From mid-2016 to the end of 2017, also due to the delayed effect of the depreciation in the exchange rate, we expect inflation to increase gradually,” he said.

Asked about what other monetary tools the ECB could use, Draghi said the bank already had an extensive set of monetary policy instruments at its disposal.

“However, it is too early to say in any case that ‘this is the menu’ and that ‘there is nothing to add'”, he said.

In reply to a question on whether a cut in the deposit rate was a tool that would be used at the same time as amendments to quantitative easing policies, Draghi said it was too early to make that judgment.

“The interest rate on deposits could be one of the instruments that we use again,” he said.

The ECB launched in March a government bond buying program to flood the euro zone economy with cash and accelerate price growth that was stifled by a weak economy and very cheap energy prices.

The ECB is studying new stimulus measures that could be unveiled as soon as December and was prepared to cut its deposit rate deeper into negative territory if needed to fight falling prices, Draghi said earlier this month.


The ECB president said risks were on the downside for both inflation and growth in the light of weaker emerging economies and the potential slowdown in the United States.

“Global growth forecasts have been revised downwards. This slowdown is probably not temporary,” he said.

But the ECB president was upbeat on the future of the euro zone and the risk of a break up. “The risks of fragmentation and redenomination have diminished considerably, if not disappeared,” he said.

Asked about Greek debt, Draghi said it was sustainable if Athens met the obligations it had signed up to, adding for the debt to be sustainable a certain degree of relief was also required.

“The latter should be such as to remove any doubt as to the future sustainability of the debt itself, once the first condition has been met,” he said.

For full transcript click on the following link: here

(Reporting by Stephen Jewkes; Editing by Toby Chopra)

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Battered transport stocks could attract on price

Though the stock market has broadly recovered from its August swoon, the same can’t be said of transport stocks. Continuing weakness in railroad and trucking companies have pushed the Dow Jones Transport Average index away from the SP 500, a divergence that often is seen as a broad sell sign.

Not this time around, according to analysts. They say the transports, down 11 percent in 2015 compared with the SP 500’s 1.5 percent gain, might be oversold on sector-specific issues rather than from a marketwide problem.

“There is no ‘sell’ signal as far as I’m concerned,” said Katie Stockton, chief technical strategist at BTIG in New York. “The divergence is certainly something to make a note of, in terms of your positioning in the transportation sector, but I don’t see it as a message in regard to the broader market.”

Analysts point to specific transports, such as United Parcel Service Inc, FedEx Corp, and hard-hit railroads, down 25.1 percent this year, as places to bargain hunt.

The broad transport index, made up of 20 stocks that track the biggest U.S. railroads, trucking and airline companies, is selling at a trailing price-earnings ratio of 16.7, compared with 20.42 for the SP and down from the 19 level where it started the year.

“For investors who have a longer time horizon, that is more than a couple of months, we think the railroad stocks present compelling opportunities,” said Keith Schoonmaker, director of industrial research at Morningstar in Chicago.

“There aren’t going to be competitors encroaching upon their returns and they have a cost advantage over trucking companies,” Schoonmaker said.

He singled out Union Pacific Corp for its diversified revenue portfolio and strong management team and said the stock has a fair value of $110. Union Pacific traded at $89.30 on Friday.

UPS and FedEx, down roughly 7 percent and 10 percent this year, respectively, as they head into the holiday shopping season, their most profitable quarter, could be bargains, said Art Hogan, chief market strategist at Wunderlich Securities in New York.

A handful of transport companies reporting results next week, such as FreightCar America Inc, XPO Logistics Inc and Atlas Air Worldwide Holdings Inc, could post falling revenues and flat to negative earnings.


The Dow Theory, a decades-old method of market timing, holds that a broad index reaching a new high, such as the SP did in May, should be viewed skeptically unless it is confirmed by the transport index – not the case this year.

That divergence is expected to persist. Though the transport index is often seen as a powerful reading on the broader economy, it is down this year as a function of specific problems.

Also, the transport industry is less indicative of broad economic weakness than it might have been in earlier decades, when manufacturing and shipping were a bigger part of the U.S. economy, said BTIG’s Stockton.

Commodities, a key part of the rail business, remain beaten down.

While airlines have added capacity likely to reward them in the future, they are facing a short-term price war. Trucking firms, meanwhile, might be the weakest going forward.

Goldman Sachs slashed its 2015-17 North America truck production forecast by 14 percent on Thursday, citing further deterioration in truck freight volumes and continued weak trucker pricing.

“The downtrends there are very much intact,” said Stockton. “I think that would be a pocket of weakness for the transportation sector that for now you’d want to avoid.”

(Reporting by Tanya Agrawal in Bengaluru; Editing by Linda Stern and Jeffrey Benkoe)

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Largest U.S. banks face $120 billion shortfall under new rule

Six big U.S. banks need to raise an additional $120 billion, most likely in long-term debt, under a rule proposed on Friday by the Federal Reserve.

The requirements are aimed at ensuring that some of the biggest and most interconnected banks, which include Goldman Sachs Group Inc, (GS.N), JPMorgan Chase Co, (JPM.N), and Wells Fargo Co (WFC.N), can better withstand another crisis by turning some of their debt, particularly debt issued by their holding companies, into equity without disrupting markets or requiring a government bailout.

The banks are expected to meet the $120 billion shortfall by issuing debt, which is usually more cost-effective than issuing equity, according to Federal Reserve officials speaking at a background press briefing Friday. The rule proposed Friday, largely in line with banks’ expectations, concerns the lenders’ total loss-absorbing capacity.

It is one of a series of rules aimed at reducing risk in the banking system by determining how much debt and equity banks should use to fund themselves.

In a procedural vote, the Fed’s governors approved a draft of the proposal, meaning it will be submitted for public comment.

During a public meeting with Fed officials, one staffer who worked on the rule said banks should have an easy time complying, because many requirements overlapped with existing rules. Further, the bulk of the debt requirements can be fulfilled by refinancing existing debt, the staffer said.

Some requirements must be met by Jan. 1, 2019, while more-stringent requirements must be met by Jan. 1, 2022.

The requirements are most stringent for JPMorgan, followed by Citigroup Inc. (C.N) After that come Bank of America Corp, (BAC.N) Goldman Sachs and Morgan Stanley, (MS.N) all of which have the same requirement. Wells Fargo Co’s (WFC.N) requirement is the next highest, followed by State Street Corp (STT.N) and finally Bank of New York Mellon Corp. (BK.N)

JPMorgan has more than $2 trillion in total assets, making it the largest U.S. bank by that measure.

The officials declined to say which two banks already meet the long-term debt requirements under Friday’s proposal.

The rules also apply to U.S. operations of foreign globally systemically important banks, establishing roughly parallel requirements as those for U.S. banks, Fed officials said.

Also announced was a draft final rule establishing minimum margin requirements for swaps that are not cleared through an exchange. The rule is identical to one proposed by other regulators.

A Wells Fargo spokesman said in a statement the bank is reviewing the proposal and it appears to be in line with expectations. Representatives from the other banks either declined comment or were not immediately available.

(Reporting by Dan Freed; Editing by Chizu Nomiyama, Dan Wilchins and David Gregorio)

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BofA reaches $335 million settlement over mortgages, MERS

NEW YORK Bank of America Corp has reached a $335 million settlement of a federal lawsuit accusing it of misleading shareholders about its exposure to risky mortgage securities and its dependence on an electronic mortgage registry known as MERS.

The second-largest U.S. bank disclosed the accord in its quarterly report filed on Friday with the U.S. Securities and Exchange Commission. It said it set aside enough reserves for the settlement as of June 30, and that final documentation and court approval are still needed.

Shareholders led by the Pennsylvania Public School Employees’ Retirement System claimed they had been misled into buying Bank of America stock in 2009 and 2010, including stock sold to repay $45 billion of federal bailout money.

They said the Charlotte, North Carolina-based lender knew it could not raise enough capital had it revealed it might have to buy back billions of dollars of securities backed by risky loans, including from the former Countrywide Financial Corp.

Shareholders also said the bank knew that record keeping in Merscorp Inc’s private Mortgage Electronic Registration Systems registry was so poor that it would not be able to legally foreclose on thousands of delinquent mortgages.

MERS was established in 1995 to circumvent the often cumbersome process of transferring ownership of mortgages and recording changes with county clerks.

Spokesmen for Bank of America did not immediately respond to requests for comment. The pension fund and its in-house counsel did not immediately respond to similar requests. An outside lawyer for the fund declined to comment.

The bank has spent more than $70 billion since the financial crisis to resolve legal and regulatory matters, including those tied to its purchases of Countrywide in July 2008 and Merrill Lynch Co six months later.

The case is Pennsylvania Public School Employees’ Retirement System et al v. Bank of America Corp et al, U.S. District Court, Southern District of New York, No. 11-00733.

(Reporting by Jonathan Stempel in New York; Editing by Tom Brown)

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