News Archive

Italian bank inquiry points to improper behavior, commission’s chairman tells paper

MILAN (Reuters) – A new investigation of Italian banking scandals by a parliamentary commission has already revealed some improper behavior, the commission’s chairman, Pier Ferdinando Casini, told the newspaper La Repubblica in an interview.

The cross-party commission, comprising 40 parliamentarians, was set up to look into the scandals and crises that have rocked Italian banks in recent years.

“Only the commission as a whole will be able to make a final judgment, but indications of improper behavior have certainly been found,” Casini said in the interview published on Sunday.

Casini said the initial findings pointed to a “network of complicity” that resulted in offers of employment and consultancy jobs.

“It’s certainly not a good thing seeing Bank of Italy directors quickly take up top positions at the banks that were the target of inquiries,” Casini said. “If this had happened to a politician, it would certainly have triggered a chorus of deserved criticism.”

The cross-party commission has the same investigative powers as the magistrature, although it has little to reach conclusions before the legislature ends. The role of the Bank of Italy and market watchdog Consob, which share supervision of the sector, is expected to come under scrutiny.

The government has had to spend more than 20 billion euros ($23.22 billion) this year to prop up the sector, injecting 5.4 billion euros to salvage Italy’s fourth-biggest bank, Monte dei Paschi di Siena (BMPS.MI), and offering billions of euros in guarantees as it wound down two major banks in the Veneto region.

Four other, smaller banks were wound down in 2015, hitting thousands of small savers.

Critics have accused both the Bank of Italy and Consob of failing in their oversight duties – allegations both bodies have rejected.

Casini said, however, that the initial findings also showed how many of the judiciary investigations had been triggered by inspections launched by the Bank of Italy itself.

“It’s a mix bag of positives and negatives. We need to understand which had dominated,” he said.

Asked about a risk that the inquiry could serve only as electoral propaganda before a forthcoming election, Casini said he had voiced the same concerns when the commission was set up but now would seek to guarantee that it does not become “political battleground”.

($1 = 0.8615 euros)

Reporting by Agnieszka Flak

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Chevron drops decision to leave Bangladesh

DHAKA (Reuters) – The U.S. oil company Chevron (CVX.N) will not sell three subsidiaries and leave Bangladesh as planned, Chevron said on Sunday.

Chevron had said in April it would sell to China’s Himalaya Energy Co. the wholly owned subsidiaries that operate three gas fields, which together account for 58 percent of Bangladesh’s gas production.

Chevron “will not be proceeding with an agreement to sell the shares of its wholly owned indirect subsidiaries,” Cameron Van Ast, Chevron’s external affairs advisor for Asia and the Pacific, said in a statement sent to Reuters on Sunday.

“Chevron has decided to retain these assets and will continue to work with our partners Petrobangla and the government of Bangladesh to provide reliable and affordable energy to the nation,” the statement said.

Chevron did not give a reason for reversing its decision.

Rather than leaving, Chevron will invest $400 million at Bibiyana, the country’s largest gas field, said Nasrul Hamid, Bangladesh’s junior minister for power, energy and mineral resources. Bibiyana produces 1,250 million cubic feet of gas a day.

Chevron formally conveyed its intention to stay in Bangladesh in a letter last week, Hamid said.

Reporting By Serajul Quadir, editing by Larry King

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CVS bid for Aetna: A $66 billion bet on cutting drug costs

NEW YORK (Reuters) – The proposed merger between U.S. pharmacy operator CVS Health Corp and No. 3 health insurer Aetna Inc represents a $66 billion bet that insurers can drive down high U.S. drug prices by cutting out the middleman.

The move is the most expensive effort to date that would enable a national health insurer to take back full control of prescription medicines for their customers by negotiating prices with pharmaceutical manufacturers and setting customer out-of-pocket costs for each drug.

CVS, one of the largest U.S. pharmacy benefits managers, has offered to buy No. 3 health insurer Aetna for more than $200 per share, sources said on Thursday. It could take at least several weeks for any deal to materialize.

If the deal happens, it would likely pressure rival insurers, drugmakers, pharmaceutical benefits managers, and retail pharmacies to also consider mergers or switching partners to try to keep up with the potential healthcare cost savings or increase in profit margins.

“It’s an alternate model at this point. It’s not clear that it’s definitely a better one,” BMO Capital Markets analyst Matt Borsch said. “More consolidation could lead to pressure on some of the brand-name drug prices and a better counterweight to the big pharma companies.”

For years, insurers paid drug benefits managers like CVS and Express Scripts Holdings Co to negotiate down drug prices, with both parties taking a share of any discount by the time a medicine was paid for by consumers.

But outrage over the high costs of drugs has grown as consumers have picked up a larger portion of the tab for drug costs and it is threatening profit margins all along the drug supply chain, from manufacturers to distributors, insurers and pharmacies.

UnitedHealth Group Inc and Humana Inc currently have in-house pharmacy benefits businesses, and say that it has helped them keep medical costs down.

Anthem Inc recently decided to go down that same path. It cut ties with Express Scripts during a $3 billion legal fight, and said it would use CVS to build its own pharmacy benefits business in the next few years. That tie-up could now be at risk if CVS reaches a deal to buy Aetna, Leerink analyst Ana Gupta said.

    CVS also provides management services for Aetna rival Cigna Corp. If CVS buys Aetna, that could revive Cigna’s interest in buying Humana, analyst Christine Arnold of investment bank Cowen Co said in a research note.

Aetna earlier this year closed the door on a deal with rival insurer Humana Inc after antitrust regulators said that combination and a rival deal between Anthem Inc and Cigna Corp were anti-competitive.

The pharmacy chain Walgreens Boots Alliance could need to match its business model closer to CVS to attempt to stay competitive, Arnold said in a note, and may look at buying Express Scripts.

Jefferies analyst Brian Tanquilut said that Express Scripts could also be a target for Amazon Inc which is reported to be looking to get into the pharmacy business.


Over the past decade, health insurers have diverged on the value of the pharmacy benefits business.

Anthem sold its pharmacy benefit manager to Express Scripts and outsourced almost all of the business in 2010.

UnitedHealth took the opposite approach when it decided in 2011 to bring its pharmacy benefits management in house, then bought an even bigger standalone benefits manager, Catamaran, in 2015.

    Humana operates its own pharmacy benefit manager and Cigna and Aetna have hybrid approaches where they manage some parts in house and outsource others.  

    Until recently, insurers sought to expand their profit margins by reducing their spending on hospital services, using their size to negotiate down what they pay to healthcare providers.

But with those profits in hand, and with drug prices representing a bigger proportion of overall healthcare spending, they see new opportunity in targeting the pharmacy benefits, Leerink’s Gupta said.

    Another potential lure of a deal for Aetna would be to capitalize on the growing number of simple health services offered in a CVS store, from flu shots to blood pressure checks. Reimbursing such patient care outside of a doctor’s office or hospital could cut healthcare costs, Gupta said.

Reporting by Caroline Humer and Carl O’Donnell; editing by Michele Gershberg and Meredith Mazzilli

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Telekom CEO argues for strong No. 3 player in U.S. wireless market: newspaper

FRANKFURT (Reuters) – A strong No. 3 player in the U.S. wireless market would enhance competition, the chief of Deutsche Telekom (DTEGn.DE) told a German newspaper, as T-Mobile US Inc (TMUS.O) seeks to merge with Sprint Corp (S.N).

Chief executive officer Timotheus Hoettges also urged the new German government to think twice before selling down its large stake in Deutsche Telekom, according to an interview in Welt am Sonntag.

T-Mobile US, majority-owned by Deutsche Telekom, is close to agreeing tentative terms on a deal to merge with Sprint Corp, people familiar with the matter have said, a breakthrough in efforts to merge the third and fourth largest U.S. wireless carriers.

Hoettges, in the interview published on Sunday, declined to comment directly on talks between the companies.

“In the U.S. there is a duopoly between two very big players, and then there are two smaller players well behind,” he said. “A third strong player would be good for competition.”

Verizon Communications Inc (VZ.N) and ATT Inc (T.N) are the two largest wireless carriers.

Competition regulators have in the past quashed consolidation efforts by T-Mobile, but Hoettges said chances are now better under U.S. President Donald Trump.

“History has taught us that governments led by Republicans are more hands-off than Democratic administrations,” he said.

On the German state’s nearly 32 percent stake in Deutsche Telekom, Hoettges acknowledged it would be the new government’s decision whether to sell or keep.

But he said those who argued for a sale “should perhaps ask themselves who will buy the stake”.

“What interest would the owner have in infrastructure security? Would the owner want to invest in Germany, and if so, where and in particular, how much?”

The FDP and Green parties, which are in talks to form a coalition government with Chancellor Angela Merkel’s conservatives, have both advocated a sale or partial sale of the stake.

Reporting by Tom Sims and Douglas Busvine; editing by John Stonestreet

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China’s Baidu teams up with Shouqi on driverless cars: Xinhua

BEIJING (Reuters) – Chinese search engine giant Baidu and Shouqi Limousine Chauffeur, a car-hailing operator, are joining up to develop driverless vehicles, the official Xinhua media service reported on Saturday.

Baidu (BIDU.O) will provide Shouqi with its Baidu Map service, while Shouqi will help Baidu develop high-precision maps for self-driving cars.

Baidu will also offer software and hardware to help the new vehicles navigate using artificial intelligence technology.

The Chinese internet company is trying to reshape its business around AI and autonomous driving, a strategy that has raised concerns among some investors.

Shouqi Limousine Chauffeur, a subsidiary of the state-owned Shouqi group, operates in more than 50 cities in China.

Baidu recently signed an agreement with BAIC Group to mass produce level 4 autonomous vehicles by 2021​. It is targeting mass production of autonomous buses with King Long by 2018​.

Reporting by Dominique Patton; editing by Alexander Smith

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China central bank boosting oversight of loans offered on the internet

BEIJING (Reuters) – China is stepping up its oversight of cash loans offered through the internet amid growing concerns over rapid growth in the lightly regulated industry, a business media report said on Saturday.

Caixin, in a report on its website, quoted Ji Zhihong of the central bank’s financial markets department as saying it has developed with other authorities a special regulation for controlling online financial risk.

According to Caixin, Ji told a seminar the regulation has already achieved some success.

Caixin also quoted Ji as saying China will improve regulations for all online financing businesses, and all financing activity should be subject to a basic level of oversight.

China’s fast-growing online micro-credit firms have been accused of taking advantage of regulatory loopholes to charge excessively high interest rates.

Securities Times, a state-backed media, earlier this month said new rules could emerge within six months to tighten controls on online microcredit firms.

This year, the People’s Bank of China has added wealth management products to its regulatory oversight as it seeks to contain risks to the financial system.

Reporting by Dominique Patton and Muyu Xu; Editing by Richard Borsuk

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As Trump tax comes to floor, failure could spell stocks selloff

NEW YORK (Reuters) – Investors are increasingly pricing in the effect of a corporate tax cut into the shares of U.S. companies, leaving the market primed for a steep sell-off if the Republican-controlled Congress fails to pass one of President Donald Trump’s top priorities.

The benchmark SP 500 .SPX is up nearly 6 percent from its August lows as the Trump administration has rolled out its tax reform proposal, which would cut corporate taxes to 20 percent from the current 35 percent and allow companies to bring back some of the $2.6 trillion in cash currently held offshore at reduced rates.

Bank of America Merrill Lynch said that a positive boost from taxes “had been priced out of stocks” in July but “has been making a solid comeback.”

Yet there are signs that the Trump administration has little room for error as it gets ready to introduce its tax legislation next week. The House of Representatives narrowly passed a budget measure on Thursday necessary for a vote on a tax bill, with Republicans from such high-tax states as New York and New Jersey among the opponents out of concerns that a bill would eliminate the deduction of state and local taxes.

Trump must also stem potential revolts over a proposal to scale back the level of tax-deferred contributions to 401(k) retirement savings plans, which many middle-class Americans rely on for their retirement.

“The nature of the rally over the last two months has been tax-cut led. If we don’t get a cut then the market is going down” several percentage points, said Edward Perkin, chief equity investment officer at Eaton Vance.

Such a decline would be the first significant sell-off of the year, he said, but would not likely be near the 20 percent decline that signifies the start of a bear market.

A collapse in the tax measure would likely send the SP 500 down 5 percent or more, Goldman Sachs said in an Oct. 20 note.

“Tax reform will determine the direction of the SP 500’s next 100 points,” the report said.

Over the last 30 days, roughly 75 companies – ranging from delivery service United Parcel Service Inc (UPS.N) to hotel operator Hilton Worldwide Holdings Inc (HLT.N) – have discussed how they would benefit from a corporate tax cut on conference calls with analysts, according to a Reuters analysis of earnings call transcripts, a sign that Wall Street is increasingly focused on the tax bill.

The White House’s plan would boost 2018 SP 500 adjusted earnings per share by 12 percent, to $156, Goldman Sachs estimates, while leading to an additional $75 billion in stock buybacks.

Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia, said that Trump’s clashes over the last week with members of his own party could threaten the tax bill’s success because it could alienate other Republicans. Because Republicans hold only a slim 52-48 seat advantage in the Senate, Trump can afford to lose only two votes.

“When the possibility of a defection of some Republican senators increases, that kind of puts the whole tax reform thing in jeopardy. He needs them all,” Tuz said.

At the same time, the 14.4 percent year-to-date rally in the SP 500 leaves the index primed for a decline of at least 5 percent, said Barry James, a co-portfolio manager of the $3.1 billion James Balanced Golden Rainbow fund (GLRBX.O).

The SP 500 trades at a trailing price-to-earnings ratio of 22.6, and a forward price-to-earnings ratio of 19.5, both well above their historical norms.

“We’re at levels today that are historically very risky for stocks and we’re primed for a correction,” James said. “If there’s not the tax cut that everyone is expecting, then the correction could be a whole lot more serious.”

Reporting by David Randall and Caroline Valetkevitch; Editing by Jennifer Ablan and Leslie Adler

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U.S. wants to remove ‘unnecessary’ barriers to self-driving vehicles

WASHINGTON (Reuters) – The U.S. National Highway Traffic-Safety Administration said Friday it is looking for input on how it can remove regulatory roadblocks to self-driving cars.

The auto safety agency said in a report that it wants to find any “unnecessary regulatory barriers” to self-driving cars “particularly those that are not equipped with controls for a human driver.”

The agency also wants comments on what research it needs to conduct before deciding whether to eliminate or rewrite regulations. But it could take the agency years to complete the research and finalize rule changes, and advocates are pushing Congress to act.

NHTSA said in a statement it plans to issue a formal notice in the “near future requesting comment” on the hurdles. The agency hopes to make the notice public by the end of November.

Automakers must meet nearly 75 auto safety standards, many of which were written with the assumption that a licensed driver will be in control of the vehicle. The agency said last year that current regulations pose “significant” regulatory hurdles to vehicles without human controls.

In early October, a U.S. Senate committee unanimously gave the green light to a bill aimed at speeding the use of self-driving cars without human controls and would allow the agency to waive requirements.

General Motors Co (GM.N), Alphabet Inc (GOOGL.O), Ford Motor Co (F.N) and others have lobbied for the landmark legislation, while auto safety groups urged more safeguards and have pledged to keep fighting for changes.

The Senate Commerce Committee approved the bill, and the U.S. House passed a similar measure last month. Automakers would be able to win exemptions from NHTSA for safety rules for up to 80,000 vehicles annually within three years.

Under the Senate measure, NHTSA would have to write permanent rules on self-driving cars within a decade.

Reporting by David Shepardson; Editing by Cynthia Osterman

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McDonald’s sets new welfare standards for chickens

CHICAGO (Reuters) – McDonald’s Corp will require suppliers to follow new standards for raising and slaughtering chickens served in its restaurants, the company said on Friday, the latest changes affecting popular menu items like McNuggets.

Animal activists said the mandates fall short of commitments made by other restaurants, such as Burger King and sandwich chain Subway, and failed to address their primary concern about chicken production: birds bred to grow quickly to large sizes.

Under McDonald’s updated guidelines, suppliers such as Tyson Foods Inc and Cargill Inc [CARG.UL] must comply by 2024 with rules dictating the amount and brightness of light in chicken houses, provide birds with access to perches that promote natural behavior, and take other steps to improve animal welfare.

The world’s largest restaurant chain by revenue also pledged to conduct trials with suppliers to measure the wellbeing of different chicken breeds.

“I think it’s one of the most comprehensive programs that I’ve seen for chickens,” said livestock researcher Temple Grandin, who pioneered humane slaughterhouse practices and works with McDonald‘s.

The treatment of animals in the food chain has become increasingly important to some consumers in recent years as animal welfare groups have released undercover videos showing abuse at U.S. facilities, including those associated with Tyson.

McDonald’s requirements are the latest changes to affect its menu that address concerns about animal and human health. It previously stopped buying chicken meat for U.S. restaurants from birds raised with antibiotics deemed important to human health and said it would shift to using cage-free eggs in the U.S and Canada.

Such moves generally raise costs for producers.

McDonald‘s, which has been working to boost flagging traffic at its U.S. restaurants, said it will not raise menu prices as a result of its new standards.

“While this might not be a direct impact on sales at McDonald‘s, it might help certain segments of our customer base make purchasing decisions that they might not have otherwise made,” Bruce Feinberg, a senior director for McDonald‘s, said about the requirements.

Tyson and Cargill supported McDonald’s moves.

However, animal welfare groups said the chain failed by not committing to buying meat from breeds that grow slowly enough to protect chickens’ health. Birds bred to grow more quickly can suffer organ failure and struggle to walk because they become too heavy, they said.

“McDonald’s at this point is allowing the industry to continue in this inhumane direction,” said Josh Balk, a vice president for The Humane Society of the United States.

Reporting by Tom Polansek; Editing by Bernadette Baum and Sandra Maler

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