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VW brand profit plunges, Porsche lifts group

BERLIN Volkswagen (VOWG_p.DE) said third-quarter operating profit at its core brand plunged more than half, adding weight to management calls for cutbacks at VW’s biggest division.

Operating profit at the VW namesake brand dropped to 363 million euros ($396 million) from 801 million a year earlier, VW said on Thursday, or just 1.5 percent of sales.

The figure was well below a consensus forecast of 462 million euros in a Reuters poll of analysts.

Europe’s largest automaker needs to make savings at high-cost operations in Germany to help fund a shift to electric cars and self-driving vehicles while facing billions of euros in costs from its diesel emissions test-cheating scandal.

“The results reinforce the need for cost cuts at the VW brand,” said Commerzbank analyst Sascha Gommel, who has a “hold” recommendation on the stock.

In the seasonally slow July-to-September period, business at the VW brand was marred by suppliers halting parts deliveries to protest against the cancellation of a contract by VW, curbing output of the top-selling Golf and Passat models at the Wolfsburg and Emden plants by about 20,000 units.

Analysts estimated the supplier dispute shaved a three-digit million-euro amount off the brand’s quarterly profit and said the carmaker also offered incentives to offset the impact of its emissions scandal on sales.

Year-to-date sales of the VW brand swung back to growth on a 6.7 percent gain in September and posted the strongest growth in two-and-a-half years last month at group level, helped by strong demand in China and Europe.

The VW group raised its guidance for profit and revenue this year after posting higher-than-expected quarterly earnings of 3.3 billion euros, adjusted for special items, reflecting strong gains at premium brand Porsche.

The group said it expected revenue to match last year’s 213 billion euros after predicting in July that revenue would fall by as much as 5 percent this year.

The group’s operating margin may come in at the upper end of VW’s 5-6 percent target range before special items, the carmaker said. It previously forecast the profitability benchmark to fall within that corridor.

The shares were trading up 0.1 percent at 126 euros as of 0804 GMT.

“Despite major challenges and the negative impact of the diesel issue, the Volkswagen Group remains on a solid financial footing,” finance chief Frank Witter said.

(Reporting by Andreas Cremer; Editing by Maria Sheahan and Georgina Prodhan)

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Deutsche Bank promises faster revamp as braces for U.S. fine

FRANKFURT Deutsche Bank (DBKGn.DE) chief John Cryan pledged on Thursday to redouble restructuring efforts, warning that the bank faces tough times as it seeks to finalize talks with U.S. justice authorities over a multi billion dollar fine.

Germany’s biggest lender posted an unexpected quarterly profit, benefiting from a subdued rebound in bond trading, but which failed to dispel the cloud of uncertainty that drove clients to withdraw billions of euros.

“The quarter was clearly overshadowed by the attention paid to our negotiations concerning the U.S. Department of Justice’s initial settlement proposal relating to our RMBS (residential mortgage-backed securities) matters. This has created uncertainty,” Cryan told a conference call.

“Uncertainty that affects the market’s view of DB as an investment, uncertainty that affected some client views of Deutsche Bank as a counterparty and uncertainty that even affects our financial planning and strategy execution.”

In a letter to staff, Cryan wrote: “Unfortunately, we have to assume that the situation will stay difficult for a while,” adding the bank was working hard to wrap up negotiations for the fine “as soon as possible”.

“We will … accelerate and intensify our restructuring,” he wrote, referring also to a deteriorating environment more generally in certain important sectors.

After weeks of negative headlines, Deutsche was however able to announce an unexpected net profit of 278 million euros ($303 million) in the third quarter, lifted by a surge in bond trading that boosted all Wall Street banks.

The jump helped send the bank’s shares initially to a more than one-month high, though they retreated to be down 0.4 percent at 13.245 euros by 0739 GMT.


Nonetheless, negotiations over a $14 billion demand from the U.S. Department of Justice (DoJ) for misselling toxic mortgage-backed securities before the 2007-2009 financial crisis set a bleak backdrop.

After weeks of speculation about how this demand has rocked confidence in Germany’s one-time flagship lender, the results gave some insight.

In its retail and wealth management business, clients withdrew 9 billion euros in the third quarter. The bank, which had assets in that division of almost 440 billion euros, said outflows had since abated.

Its so-called global markets trading business was also hit.

Cryan said the bank had liquidity reserves of 200 billion euros, a fall from the more than 215 billion he had outlined on Sept. 30. In June, the bank had 223 billion euros.

Deutsche Bank set aside more money for its legal bill for numerous past missteps. Litigation reserves rose to 5.9 billion from 5.5 billion at the end of June.

Revenue grew slightly at 7.5 billion euros, ahead of analysts’ expectations, mainly driven by Deutsche’s trading, while business declined in other operating areas.

Its cash-cow bond trading division, which has volatile revenue and tough capital requirements to meet, was up 14 percent. Compared with its peers, however, bond trading showed a modest rebound, in part due to trimming the unit.

In equities trading, Deutsche Bank saw revenue decline as low stock market volatility gave investors less reason to trade, while revenue from corporate and investment banking fell by 1 percent.

(Additional reporting by Andreas Kroener and Kathrin Jones; Writing by John O’Donnell and Arno Schuetze; Editing by David Holmes)

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China courier ZTO delivers year’s biggest U.S. IPO

NEW YORK Chinese package delivery company ZTO Express said it raised $1.4 billion in the biggest U.S. initial public offering of the year on Wednesday as its backers cashed in on China’s booming online-shopping industry.

The stock market debut, the biggest by a Chinese company since the $25 billion IPO of e-commerce giant Alibaba Group Holding Ltd (BABA.N) in 2014, gave the Shanghai-based company a market value of more than $12 billion.

ZTO’s U.S. listing is a head start over rivals in the world’s largest express delivery market because it gives the company faster access to cash to expand.

The company wants to use $720 million of its IPO proceeds to buy more trucks, land, facilities and equipment.

Its Chinese competitors SF Express, YTO Express, STO Express and Yunda Express have all unveiled plans for listings in Shenzhen and Shanghai but with a backlog of about 800 companies waiting for approval to go public in China and frequent changes to the rules, a New York listing is regarded as a quicker and more reliable way of raising funds and tapping a broader mix of investors.

ZTO’s existing shareholders, including private equity firms Warburg Pincus, Hillhouse Capital and venture capital firm Sequoia Capital will also get much more leeway and flexibility to exit their investment under U.S. market rules. In China, they would be locked in for one to three years after the IPO.

ZTO priced 72.1 million shares at $19.50 a share, above its previously indicated range of $16.50 to $18.50 a share.

That price is about 27 times its expected 2017 earnings per share, according to people familiar with the company’s financials.

By comparison, rivals SF Express, YTO Express, STO Express and Yunda shares trade between 43 and 106 times earnings, according to Haitong Securities estimates.

U.S. rivals, United Parcel Service Inc (UPS.N) and FedEx Corp (FDX.N), which are growing at a much slower pace, are trading at multiples of 17.8 and 13.4 times expected 2017 earnings.


As concerns grow about a weakening Chinese currency, the New York IPO also gives the company more stable dollar-denominated shares it can use for international acquisitions, according to people close to the company.

ZTO will have a dual-class share structure that will give its founder Lai Meisong 80 percent voting power in the company, even though he will only hold 28 percent of the stock after the IPO.

Most of Lai’s shares are Class B ordinary shares carrying 10 votes, while Class A shares, including the new U.S. shares, have one vote. China’s markets do not allow shares with different voting power.

China’s express delivery firms handled 20.7 billion parcels in 2015, shifting 1.5 times the volume moved in the United States, according to consulting firm iResearch data cited in the ZTO prospectus.

The market will grow an average 23.7 percent a year through 2020 and reach 60 billion parcels, iResearch forecasts.

Domestic rivals STO Express and YTO Express have unveiled plans to go public with reverse takeovers worth $2.5 billion and $2.6 billion. The country’s biggest player, SF Express, and rival Yunda Express, are working on similar deals worth $6.4 billion and $2.7 billion respectively.

ZTO said the American depositary shares will begin trading on the New York Stock Exchange on Thursday under the ticker symbol ZTO.

Morgan Stanley (MS.N) and Goldman Sachs Group Inc (GS.N) are the lead IPO underwriters.

(Reporting by Lauren Hirsch; Editing by Bill Rigby and Sunil Nair)

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Exclusive: General Electric wins $900 million Brazil power plant, grid contract

NEW YORK General Electric (GE.N) has won a $900 million contract to build a 1,500 megawatt natural-gas-fired combined-cycle power plant in the Brazilian state of Sergipe, the largest such plant in Latin America, company executives said.

The contract with Centrais Elétricas de Sergipe SA marks the first such sale of GE’s power generators along with the heat recovery steam generator and transmission system technology it acquired from Alstom last year, the executives said in an interview. GE is expected to announce the contract in a few days.

“This plant is the first very large turnkey project encompassing the turbine and grid,” said Reinaldo Garcia, chief executive of General Electric’s grid solutions business.

GE’s revenue in this and similar future projects will double to about $300 per kilowatt of generation supplied from $150 previously by adding the Alstom pieces to the project, said Joe Mastrangelo, chief executive officer of GE Gas Power Systems.

“This is an indicator of the potential of the combined business,” Mastrangelo said.

The project, located near Aracaju, the Sergipe state capital, was awarded by GG Power, a joint venture between Britain’s Golar LNG Ltd (GLNG.O) and Brazil’s GenPower Participacoes SA.

Centrais Elétricas de Sergipe is made up of Golar and Brazilian company EBRASIL Energia Ltda. 

The plant will include three of GE’s H-Class turbines, with more than 62 percent efficiency. It will use liquefied natural gas (LNG) supplied by Exxon Mobil Corp (XOM.N) and delivered through a new floating natural gas storage and regasification facility to be built as part of the project.

Construction is scheduled to begin in November and the plant is scheduled to open by 2020.

(Reporting by Alwyn Scott; Editing by Bernard Orr)

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China’s slowing industrial profits show rising debt hampering economy

BEIJING Profit growth in China’s industrial firms slowed sharply as some key manufacturing sectors stumbled on weak activity and rising debt, suggesting the world’s second-biggest economy remains underpowered despite emerging signs of stability.

The September data from National Bureau of Statistics (NBS) underlined the daunting task facing policy makers as the nation’s vast manufacturing industry grapples with slack demand, overcapacity and ballooning debt.

Industrial sector profits last month rose 7.7 percent to 577.1 billion yuan, slowing markedly after surging 19.5 percent in August, NBS figures released on its website showed on Thursday.

Earnings in industries such as electronics, steel and electricity were hit by a significant drop in growth, He Ping, a NBS official said in a note accompanying the data.

“Although industrial profits have got back on track with more stable growth, unfavorable factors still exist,” He said, noting weak demand at both home and aboard, and delayed payments put a strain on firms’ cash flow.

The official also cautioned about rising debt levels in the coal and steel sectors, stressing the importance of controlling debt risks as capacity cuts and structural reforms get implemented.

China’s debt has soared to 250 percent of GDP and the Bank for International Settlements (BIS) warned in September that a banking crisis was looming in the next three years.

Recent data showed some signs of stability, with annual economic growth of 6.7 percent in the third quarter matching the previous quarter, as increased government spending and a property boom offset stubbornly weak exports.

But the profits data suggest China’s economy continues to face a host of challenges as authorities try to wean businesses off cheap credit-fueled growth, temper a surge in home prices and curb rising debt levels and shadow banking activity.

“If you look at the structure of the economy, it’s actually worsening because the growth of SOEs and public sector growth is relatively stronger, but private sector growth is much weaker. This shows the quality of the growth is deteriorating,” said Yang Zhao, economist at Nomura.


Profits in electricity tumbled 23.2 percent on-year, as electricity prices were adjusted lower and revenue growth slowed. Earnings in general and special equipment manufacturing also turned negative, dropping 10.8 percent on-year.

Total profits for the first nine months stood at 4.64 trillion yuan ($684.77 billion), up 8.4 percent from the same period a year ago, the same pace as in the January to August period.

Industrial overcapacity, mainly in the traditional sectors, have been a drag on profits in recent months and analysts say the outlook for earnings in the sector could hinge on the progress made by policy makers to cut capacity.

Beijing has embarked on a campaign to cut capacity in the coal and steel sectors in the economy’s most significant transformation in two decades.

The August profit growth – the fastest pace in three years – was helped by Beijing’s splurge on infrastructure projects and a booming real estate industry and so was seen as unsustainable.

China’s producer prices rose in September for the first time in nearly five years, thanks to higher commodity prices.

“Profits were largely driven by a restoration in commodity prices such as coal and steel,” David Qu, economist at ANZ said in Shanghai.

But Qu said the outlook for steel prices remain cloudy, as “the tightening in the property market means potential demand could shrink.” .

Indeed, a subdued property market is expected to drag on growth in the first two quarters next year, as policy makers introduce curbs to cool home prices.

“We are optimistic that stable growth will last through end of this year, because they have to finish the projects started earlier,” said Merchants Securities economist Xie Yaxuan in Shenzhen.

“But property and its related industries will definitely affect growth in the first or second quarter next year,” Xie said.

(Reporting by Yawen Chen, Elias Glenn, and Beijing Monitoring Desk; Editing by Shri Navaratnam)

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Wal-Mart focuses on online order pickup in stores, lower prices

NEW YORK Wal-Mart Stores Inc said on Wednesday it will make tens of thousands more items from its online assortment available for same-day store pickup, and will offer more lower-priced items instead of deals as part of efforts to attract shoppers this holiday season.

Wal-Mart said the volume of items ordered online and then picked up in stores the same day increases by five times during the holiday season, so it plans to make more items across categories including apparel, toys and seasonal decor available in that manner.

Buy online and pick up in store has been a key offering from brick-and-mortar retailers, which use their store inventory to fulfill online orders the same day and compete with rival Inc’s fast delivery times.

Wal-Mart also said it will focus more on discounts and offering the lowest prices on items instead of “gimmicky” product deals, for a second year in a row, as it said their customers expect more consistent pricing.

The moves were announced at a media briefing to outline its strategy for the November and December holiday shopping season, a crucial time for retailers during which they earn an outsized portion of their annual profits and sales.

“We want to lead on price and win the season on price,” Steve Bratspies, chief merchandising officer for Wal-Mart’s U.S. operations, told reporters.

Relentless price competition from, supermarkets and dollar stores has made it crucial for Wal-Mart to compete on price and highlight its low-price offerings.

Wal-Mart will, however, not follow its competitors in offering free shipping. It will continue to require a minimum online order of $50 to qualify for no shipping charges. Rival Target Corp on Tuesday extended its free shipping offer from Dec. 26 to January 1.

The retailer will also focus on making its store checkouts faster, Wal-Mart Chief Operating Officer Judith McKenna said. Dedicated staff wearing yellow vests will help shoppers find open registers and the shortest lines, as well as grabbing items customers may have forgotten.

(Reporting by Nandita Bose)

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Media companies want U.S. to force AT&T-Time Warner to share customer data

NEW YORK/WASHINGTON Media companies plan to ask U.S. regulators to force ATT Inc (T.N) and Time Warner Inc (TWX.N) to share their trove of customer data if the telecom and content companies merge, fearing the combined behemoth would have an unfair advantage selling targeted mobile advertising, a handful of media executives told Reuters this week.

Customer data has become a key to the media industry’s future as TV networks strive to provide the same kind of advertising as digital companies like Alphabet’s (GOOGL.O) Google and Facebook Inc (FB.O), which tailor pitches according to what they know about their customers.

ATT’s proposed $85 billion acquisition of Time Warner would give the media company’s networks, such as HBO, Cinemax and Turner, potentially unprecedented data about viewers who have ATT cell phones and DirecTV accounts.

The deal will be reviewed by the U.S. Justice Department, and it is unclear how the enforcement agency would approach customer data access as an antitrust issue since it has not yet arisen as a source of contention in a major U.S. deal.

With the rise of online and mobile video streaming services, the promise of sending different ads to different viewers appears attainable, starting a race among established media brands.

“With this deal, Time Warner will have access to more data on the content consumption habits than any other media company in the world,” said Patrick Keane, president of Sharethrough, a platform for buying “native” ads.

If Time Warner can use ATT data to target ads to a group such as young, affluent men who watch a specific sports team, it will have a huge new advantage with advertisers, said an executive at a rival media company.

“The money will gravitate to the programming with that data,” the person said, adding that the company would go to regulators. “We are interested in making sure that we have access to our customer data in the same way that Time Warner will have access to data.”

If HBO, which has its own over-the-top streaming video service, gets access to ATT’s data about viewers watching content on competitors like Hulu, Amazon or Netflix, that is also an unfair advantage, said another executive at a separate media company that also plans to ask regulators to act.

All the media executives wished to remain anonymous because conversations are early and confidential.


ATT and Time Warner acknowledge that data is a key driver of the deal.

“What it allows us to do is just move faster, with more innovation, better consumer offerings, more different price points, more effective advertising, and therefore people are going to see that more of the cost of content can be borne by advertising,” Time Warner Chief Jeff Bewkes told CNN on Monday.

And ATT Chief Executive Randall Stephenson told Reuters at a conference in California that the company is open to allowing other content providers access to customer data.

“To the extent that it keeps their content costs down, we’d be open to it,” he told Reuters.

Rivals are already amassing a significant amount of data from multiple sources. Verizon Communications Inc (VZ.N) will be able to tap data from Yahoo Inc’s (YHOO.O) 1 billion monthly users to tailor advertising if it completes its $4.8 billion purchase of Yahoo’s core assets.

Customer data is a new area for antitrust law, which enforcers will be pressed by media companies to take on in the ATT case.

“This is a structural advantage that ATT would have over its rivals, and competition authorities should be concerned about the possible effects,” said John Bergmayer, senior counsel at advocacy group Public Knowledge.

First the Justice Department and Federal Trade Commission, which share the work of ensuring that mergers are legal, must decide if there is a problem and then whether there is a solution.

“Enforcers don’t quite know yet what that (big data) means for antitrust or what to make of it,” said Elai Katz, an antitrust lawyer with the law firm Cahill, Gordon Reindell LLP.

Katz said that antitrust enforcers would look at how much data was involved, whether it was available from other companies and whether access was a competitive issue before deciding whether it is worth addressing in the merger.

Antitrust enforcers usually prefer that companies who want to merge solve any antitrust problems by selling an asset, like a brewery or a factory, rather than have a behavioral condition on a deal, like requiring licensing data, which is harder to enforce.

But such behavioral remedies would “have to be considered in a case like this,” Katz said.

The Federal Communications Commission, which regulates the telecoms industry, still puts behavioral conditions on merger approvals, but it was not clear whether the FCC will consider this deal.

If ATT has to share data with media rivals, that could undercut the value of the deal, advertisers said. But if ATT can build a platform with addressable advertising and targeted content, it might compete with new media such as Google, Facebook and Snapchat, said Bernard Gershon, president of media and technology consulting firm Gershon Media.

“The Holy Grail is advanced advertising and delivering custom content and ads,” said Gershon. “It is the data and the direct relationship with the consumer that makes this deal so powerful.”

(Additional reporting by Diane Bartz in Washington and Julia Love in Laguna Beach, California; Editing by Peter Henderson and Meredith Mazzilli)

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Salesforce CEO speaks of failed efforts to buy Twitter, LinkedIn Inc (CRM.N) Chief Executive Marc Benioff spoke on Wednesday about a pair of key acquisitions that got away, suggesting his vision for LinkedIn (LNKD.N) was different from Microsoft’s (MSFT.O) and that he would have pursued Twitter (TWTR.N) if shareholders had not learned of his plans

Speaking at a technology conference hosted by the Wall Street Journal in Laguna Beach, Calif., Benioff declined to elaborate on what he had hoped to do with micro-blogging site Twitter Inc.

Twitter hired bankers earlier in October to explore selling itself. Technology and media companies including, Walt Disney Co (DIS.N) and Alphabet Inc’s (GOOGL.O) Google looked at the company but passed on buying it.

Some regarded Twitter as an unlikely fit for, whose platform is popular among sales teams. Benioff said he was forced to drop the deal when investors began voicing concerns.

“We’ve never had a deal leak before, we don’t really understand that dynamic,” said Benioff, who is an avid Twitter user. “We had to stop because I’m running the business in partnership with my shareholders.”

Benioff was also effusive about his interest in professional social networking site LinkedIn Corp, which Microsoft Corp agreed to buy for $26.2 billion in June. Benioff told technology news website Recode in June that made a bid for LinkedIn and was primarily interested in its recruiting business.

Benioff on Wednesday said he saw parallels between’s business model and LinkedIn’s.

“We really liked some of the business fundamentals,” he said, adding few details on his vision for an acquisition of LinkedIn.

He contrasted that vision with Microsoft’s, which he said centered on mingling the companies’ data streams to make it difficult for other companies to compete. has raised concerns about the deal to European antitrust regulators.

“Last time I checked, that was illegal,” he said of Microsoft’s plans for LinkedIn’s data.

Microsoft did not immediately respond to a request for comment.

(Reporting by Julia Love; Editing by Andrew Hay)

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Morgan Stanley to keep commission-based IRAs for wealth management customers

Morgan Stanley (MS.N) said on Wednesday it would allow its wealth management clients to choose the way they pay the firm for retirement accounts covered by a new fiduciary rule.

The company’s customers will have the choice of paying commissions or a fee based on the value of their assets for accounts subject to the new rule. (

The Department of Labor rule, announced in April, sets a standard for brokers who sell retirement products and requires them to put clients’ best interests ahead of their own bottom line.

The new regulation will take effect in 2018, giving brokerages time to comply.

The move puts Morgan Stanley in contrast to Bank of America Corp (BAC.N) which said earlier this month it would eliminate individual retirement accounts that charge investors for each transaction. Investors who want a retirement account will instead need to pay a fee that is a percentage of their assets.

Bank of America’s decision is intended to reduce conflicts that might arise if brokers push clients to more expensive investment products.

Morgan Stanley Chief Executive Officer James Gorman told analysts last week it does not think giving wealth clients a choice will present compliance problems.

During the third quarter, revenue from Morgan Stanley’s wealth management unit rose 7 percent to $3.9 billion. The business hit a 23 percent pretax margin, in line with Gorman’s target for year-end.

(Reporting by Nikhil Subba in Bengaluru and Olivia Oran in New York; Editing by Bernard Orr)

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