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(Bloomberg) -- Jamal Al Kishi, Deutsche Bank AG’s chief executive officer for the Middle East and Africa, has quit to join Bahrain-based Gulf International Bank BSC.Al Kishi, who had been with the German lender since 2007, will become CEO of GIB’s parent company and deputy group CEO, the bank said in a statement.Headquartered in Bahrain, GIB is almost fully owned by Saudi Arabia’s Public Investment Fund. It also has operations in the U.K., U.S. and the United Arab Emirates, according to its website.Al Kishi is leaving Deutsche Bank as the lender puts on hold plans to cut almost 18,000 jobs over the next three years because of the coronavirus outbreak. The layoffs were part of a restructuring to restore the bank to profitability after half a decade of losses.The bank is in the process of appointing a replacement for Al Kishi and will make an announcement soon, it said in an internal memo seen by Bloomberg. A spokesman for Deutsche Bank declined to comment.Deutsche Bank’s Middle East operations have recently suffered a number of several high profile departures. Its CEO for Saudi Arabia left last year to become the head of international investments at Prince Alwaleed bin Talal’s Kingdom Holding Co., while Faisal Rahman, co-head of corporate and investment banking for Central and Eastern Europe, Middle East and Africa, left after almost 18 years in 2018 to join SoftBank Group Corp.(Updates with Deutsche plans to find a replacement for Al Kishi in fifth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Deutsche Bank AG became the latest bank to halt plans for widescale layoffs, joining lenders including HSBC Holdings Plc and Lloyds Banking Group Plc in putting thousands of job cuts on hold because of the coronavirus outbreak.“To avoid additional emotional distress in the current environment, we will defer new communications of individual restructuring actions to potentially affected employees,” the Frankfurt-based bank said in a memo to staff seen by Bloomberg. “The pause will be in place until we see a return to greater stability in the world around us.”Chief Executive Officer Christian Sewing last summer announced plans to cut almost 18,000 jobs over the next three years as part of a huge restructuring to restore the bank to profitability after half a decade of losses. The lender is exiting equities sales and trading and reducing its key fixed income business as part of Sewing’s plans to compete where it has a top 5 position. Sewing, who is suspending the dividend to help pay for the reorganization, has already reduced the workforce by about 4,000.“Deutsche Bank is in a tough spot,” Berenberg analysts led by Eoin Mullany wrote in a note on Wednesday prior to the staff memo. Carrying out the restructuring according to plan “in the middle of the COVID-19 situation is incredibly difficult.”Sewing has tried to reassure employees and investors of the bank’s resilience during the outbreak, saying earlier this month that business so far this year continued the positive trend of the fourth quarter. The price of Deutsche Bank’s credit default swaps had fallen to a multi-year low ahead of the virus outbreak, while shares had rallied, as investors were beginning to see progress in the turnaround.The German lender said in the memo it remains committed to its transformation and cost targets, and that it will allocate resources “to our most critical projects and regulatory commitments to ensure we remain on track.”Deutsche Bank’s announcement comes shortly after several other lenders including HSBC Holdings Plc, Credit Suisse Group AG and Morgan Stanley said they are pausing job reductions. Most cited the current economic hardship brought on by the virus crisis.Read more: Thousands of Bankers Get a Break as HSBC, Lloyds Vow No Cuts“I don’t think it’s in this kind of situation that we’re going to announce restructuring measures,” Societe Generale CEO Frederic Oudea said at a conference last week. “There is a question of decency.”Deutsche Bank said in the memo it will complete all discussions with individual staff about layoffs that have already been initiated. The vast majority of those discussions have been signed and are near finalization, it said.As it grapples with the coronavirus crisis, Deutsche Bank is also considering joining government-funded program that allows companies to put workers on shorter hours without a deep cut to their pay. The lender told staff it will give an update on its progress when the company reports first-quarter earnings late next month.(Updates with comment from Societe Generale CEO in seventh paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Deutsche Bank will continue restructuring talks and will not replace most of its voluntary leavers, according to the statement. The pause in the company's future job cuts was reported earlier by Bloomberg News. Sources told Reuters earlier on Thursday that U.S. banks Morgan Stanley and Citigroup Inc had also paused layoffs as the coronavirus pandemic has led to a record level of unemployment claims and unprecedented economic uncertainty.
(Bloomberg Opinion) -- It’s hard to imagine sentiment being any worse than it was coming into this week. The Dow Jones Industrial Average was down 35% from its high for the year in February, and more than a few Wall Street strategists were calling for a drop of 50% or more before it was over. What a difference a few days make. The benchmark briefly entered a (technical) bull market on Thursday, rising 20% over the course of three days from its lows on Monday. False rallies are a hallmark of bear markets, and this could be one of those, but this turnaround has one big thing going for it. Rather the some sudden confidence in the battle against the coronavirus pandemic and a subsequent quick rebound in the economy and corporate profits, much of the recovery in stocks can be tied to the dollar. As equities have soared the past three days, the Bloomberg Dollar Spot Index, which measures the greenback against a basket of major currencies, has tumbled some 3.78% from a record high after surging 8.91% the previous two weeks. Considered a haven, it’s not unusual for the dollar to strengthen in times of crisis. The problem is, the global financial system is tied to the dollar like never before, and its appreciation causes financial conditions around the world to tighten. The most visible example is in the debt markets, with the Institute of International Finance estimating that emerging-market borrowers alone have $8.3 trillion of foreign-currency debt, the bulk of it in dollars, up more than $4 trillion from a decade ago. So, any rise in the dollar makes it that much more expensive for these borrowers to make interest payments or refinance, which would only exacerbate the deep recession already facing the global economy. Much of the dollar’s recent weakness can be tied to one key move by the Federal Reserve to ease the run on the U.S. currency. What the Fed did was provide foreign-exchange swap lines with central banks in both developed and emerging markets, offering dollars in exchange for their currencies. The dollar “may now become a barometer of the efficacy of the policy response to corporate credit difficulties, interbank funding challenges, etc.,” Standard Chartered currency strategists Eric Robertson and Steve Englander wrote in a research note. “Global policy makers have adopted a ‘whatever it takes’ approach to countering financial-market volatility and the expected recession, but this response may also need to have an impact on the (dollar) to be seen as truly effective.”THE ‘SMART MONEY’ BELIEVESThere’s a school of thought on Wall Street that trading in the first 30 minutes after equity markets open represents emotions, driven by greed and fear of the crowd based on news, as well as a lot of trades based on previously set-up market orders. The “smart money,” though, waits until the end of trading to place big bets, when there is less “noise.” This action is what the Smart Money Flow Index tries to capture as it relates to the Dow. What’s encouraging is that this gauge has just risen back to pre-crisis levels, suggesting big institutions are more confident that perhaps equities have reached fair value. It’s also notable that Deutsche Bank AG equity strategist Binky Chadha, who called the S&P 500 Index’s surge higher in 2019, then pivoted to forecast no gain at all in 2020 before the coronavirus crisis hit, is turning more bullish — or at least less negative. Chadha just boosted his recommended equity allocation to “neutral” from “underweight,” according to Bloomberg News’s Joanna Ossinger. Among the main reasons for his shift, Chadha pointed out that equities’ peak-to-bottom decline was in line with historical patterns and that positioning was at a record low. BRING IT ONUsually it could be a warning sign when demand soars at an auction of U.S. Treasury securities. After all, Treasuries are the ultimate haven asset, and a rush into them may signal tough times ahead for the economy. So how should Thursday’s auction of $32 billion of seven-year notes be interpreted? Investors bid for 2.76 times the amount offered, the highest so-called bid-to-cover ratio since the height of the European debt crisis in 2012 and a big jump from the 2.49 times at last month’s sale. Yes, there is still a lot of concern about the future of the economy, but perhaps the jump in demand signals that the government will have no problems selling as much debt as needed to fund the $2 trillion rescue package. There’s even evidence of optimism in the corporate bond market, where the cost to insure investment-grade company debt from default has fallen for four consecutive days to the lowest since March 6. It has fallen three days for junk bonds. Not only that, Bloomberg News reports 34 issuers in the U.S. and Europe were in the market selling debt on Thursday, making it the busiest day in months. They wouldn’t be selling if there was no demand.COMMODITIES AS THE OUTLIERThe market for raw materials doesn’t seem to have received the memo. Some investors feel there won’t be a real recovery in markets until oil prices begin to rise, bolstering the cash flow of many U.S. energy firms that are now in jeopardy of defaulting after West Texas Intermediate crude plunged from more than $60 a barrel in January to as low as about $20 this month before trading at $22.78 Thursday. And it’s not just oil. Bloomberg Economics notes that metals consumption moves closely in line with global gross domestic product growth. As a result, the economists note that metals prices can provide a high-frequency guide to the ups and downs in the economy. “The fit is so strong that Bloomberg Economics uses the S&P GSCI Metals Price Index in our global GDP nowcast,” Tom Orlik and Niraj Shah wrote in a research note Thursday. “A 13% drop in the index since the start of March shows markets pricing in a sharp decline in activity.”TEA LEAVESThe news out of Italy has been grim. The nation reported the most coronavirus infections in the last five days on Thursday, even after weeks of rigid lockdown rules. The civil protection agency reported 6,153 new cases on Thursday, bringing confirmed cases there to 80,539, which is a level approaching China’s. On Friday, we’ll get some sense of what this is doing to consumer confidence when data for March is released. The median estimate of economists surveyed by Bloomberg is for a drop to 100.4, which would be the lowest since December 2014 from 111.5 in February. Such measures will likely gain in importance in the months ahead because market optimists are banking on consumer confidence rebounding quickly once the coronavirus pandemic slows. But no one knows when that will be and whether consumers will have the confidence — or the resources — to go about life as they did before Covid-19.DON’T MISS What More Could the Federal Reserve Possibly Do? A Lot: Tim Duy Euro-Zone Rescue Talks Are Irrelevant: Ferdinando Giugliano We Can’t Dismiss This Rebound as a Reflex Action: John Authers Dollar Crunch Is Europe’s Gift to Asia: Gopalan and Mukherjee Matt Levine’s Money Stuff: Nobody Wants a Margin Call Right NowThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Robert Burgess is an editor for Bloomberg Opinion. He is the former global executive editor in charge of financial markets for Bloomberg News. As managing editor, he led the company’s news coverage of credit markets during the global financial crisis.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Deutsche Bank is for the first time considering asking its German staff to cut their hours and take government money instead as it tries to navigate the coronavirus crisis. After years of losses, Germany's biggest bank has been trying to engineer an overhaul that includes pulling back from some of its international operations, but its recovery plan and share price have been hit hard by the pandemic. It has been widely used by industry, including Germany's car sector, but not by banks.
(Bloomberg Opinion) -- Banks in Asia are suddenly shy to part with dollars. And who can blame them? Many of their corporate clients are borrowing the U.S. currency and depositing it with the same banks — just in case they can’t get the funding when they need it. The caution amid the coronavirus outbreak isn’t all that different from Amazon.com Inc. trying to discourage vendors from cornering toilet paper supplies. “Corporate banks are becoming a bit more discretionary about permitting draws on credit lines where hoarding cash is the sole objective,” according to Greenwich Associates consultant Gaurav Arora. The dollar squeeze is evident, as one of us wrote Monday, in the hefty premiums South Korean banks must fork out to borrow the U.S. currency — a reliable indicator of trouble in the past. It also appears that China’s banks may be less eager or able than before to fund the dollar needs of their corporate borrowers, Bloomberg Opinion’s Anjani Trivedi noted Wednesday.For Asia, the crunch is an unwanted gift from European lenders, whose departure from the region post-2008, as well as regulations that reined in Wall Street firms, have led to a funding hole. Japan’s banks have expanded and lenders like BNP Paribas SA have scaled up trade finance, but they’re yet to fill the void, especially as troubled Deutsche Bank AG shrinks. The German lender was in the top five corporate banks in Asia in 2014; last year, it wasn’t even in the top 10, according to Greenwich. Some countries like Korea have felt the loss more keenly than others. U.K. banks’ exposure to Korea has dwindled to $77 billion from $104 billion in the first quarter of 2008. German lenders’ claims have fallen to $13 billion from $36 billion.Japan’s lenders have taken up part of the slack. Driven by negative interest rates and aging demographics at home, they have dished out funds aggressively in Southeast Asia as well as to global deal-chasing clients like SoftBank Group Corp. The large U.S. operations of megabanks like Mitsubishi UFJ Financial Group Inc. also provide them with liquidity, as does their stack of fully convertible, cheap yen deposits. But some Japanese lenders have piled into off-balance sheet products, which suck liquidity in times of stress. Japan's Norinchukin Bank, a lender to farmers and fisherman, was one of the world’s largest buyers last year of collateralized loan obligations, bundled U.S. leveraged loans.When the Fed extended emergency swap lines to South Korea, Australia, Singapore and New Zealand last week to ease the worldwide dollar shortage, a step that our colleague Shuli Ren called for here, it was a sign that the liquidity problem was serious enough. Overall, the Fed gave temporary access to nine authorities in addition to the five that it has permanent arrangements with for making dollars available.(2) Emerging economies like India, Indonesia, Chile and Peru, though, have seen their requests for swap lines rebuffed in the past. The U.S. only helps those it sees as important to the stability of its own banking system.So what can Asia do? Start with the most extreme case. Australia needs U.S. dollar funding not just for foreign-currency loans but also for Australian dollar mortgages. That’s because the domestic deposit base is small, compared with the size of the banking industry. The average loan-to-deposit ratio of Macquarie Bank Ltd. and other major Australian lenders was 126% versus 68% for the top Asian banks, namely DBS Group Holdings Ltd., Mizuho Financial Group Inc., MUFG, Standard Chartered Plc, and HSBC Holdings Plc, according to banking analyst Daniel Tabbush, founder of Tabbush Report.Offshore funding sustains around one-third of major Australian banks' total worldwide operations. While the International Monetary Fund and others have flagged the reliance on foreigners as problematic, the Australian regulators have so far refrained from discouraging lenders to borrow abroad. Yet, the fact that the country had to seek dollars from the Fed during the epidemic upheaval and auction them to its banks will call into question the sagacity of this relaxed approach. In rest of Asia, one lesson from the dollar squeeze is to shun protectionism. Well-capitalized regional banks like Singapore’s DBS could supplement the three traditionally entrenched foreign lenders: HSBC, StanChart, and Citigroup Inc., a big cash management bank for Western multinationals. DBS could emerge as an Asian global bank, though in good times its expansion has been stymied by regulators playing to nationalist political sentiment, as we saw when it wasn’t allowed to buy Indonesia’s PT Bank Danamon in 2013.The next step may be to seek more intermediaries with scale. JPMorgan Chase & Co. is pumping top dollar into serving corporate treasuries as a safeguard against the fickle fortunes of investment banking. Japan’s lenders could also do more: MUFG is already one of the region’s most aggressive lenders and has the historical advantage of having a dollar clearing license, like HSBC. Unlike 2008, this isn’t a credit contagion yet, though that could change if large, messy financial bankruptcies were to erupt. But beyond the current crisis, the regulators must plan for the next squeeze. Since not everyone can rely on the Fed, the dollar supply chain is each country’s responsibility. At least until a credible alternative to the U.S. currency comes along. (1) The standing facilities are with the Bank of Japan, the Bank of England, the Bank of Canada, the Swiss National Bank and the European Central Bank.This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Nisha Gopalan is a Bloomberg Opinion columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- As Americans and their elected officials struggle to deal with the economic devastation wrought by the coronavirus, there is an unheralded ray of hope: the dynamism of the U.S. economy.There are understandable calls for complete income and payroll support for workers and businesses suffering because of the Covid-19 outbreak. After all, none of this is their fault. Even more important, a strong economic rebound depends on the continuation of relationships between employers and employees that in some cases have taken decades to build.At the same time, I worry that even my fellow economists sometimes underestimate how adaptable the U.S. economy is. Current efforts to address the Coronavirus Recession focus first on economic relief and then on stimulus.Relief is primarily generous unemployment benefits and payroll support for businesses that have no cash flow. Stimulus centers on efforts to increase spending by consumers, business or the government in order to jump start the flow of cash moving through the private sector.Deutsche Bank has argued that any sort of traditional stimulus is not only inappropriate but also counterproductive: Since the government is refusing to allow people to work, the overall supply of goods and services in the economy is fixed. Increasing the level of spending on a fixed supply will only lead to bidding wars and higher prices.The flaw in this logic is that supply is not, in fact, fixed. Instacart, Walmart, Amazon, Dollar General and CVS are right now looking to hire combined 550,000 workers to cope with the surging demand for food and other staples.Meanwhile, online grocers have seen sales nearly double versus the same week last year. Not only are people are stocking up for what might a long quarantine, but restaurants are closed.And while groceries and pharmacies are considered essential because they supply food and medicine, they don’t supply only food and medicine. Walmart is both the leading grocer in America and the largest retailer. To the extent that it can keep its doors open and supply chains running, it will be able to offer most of what Americans need.This points to a larger potential phenomenon: the coronavirus economy. No one knows for sure how long the extreme social distancing measures will need to last (New York might need to hunker down for nine months). Under the worst-case scenario, efforts to slow the virus won’t abate until there is a vaccine.Under these eventualities, America will need to create an economy that can operate under pandemic conditions. This could bring such changes as widespread touchless delivery, temperature checks at retail stores and restaurants and nightly sanitation at essential businesses. It means an expansion of health clinics, in-home physician services and perhaps the provision of social-distance-compliant day care.Building these kinds of services will require not only entrepreneurial creativity but also a lot of labor. The U.S. has both.A free-market economy will always try to adapt to conditions. That process happens most seamlessly when there is amble demand and flexible regulations. As Congress debates how best to respond to the pandemic, it should keep these points in mind.This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Karl W. Smith, a former assistant professor of economics at the University of North Carolina and founder of the blog Modeled Behavior, is vice president for federal policy at the Tax Foundation.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- The U.S. commercial real estate sector could be the next shoe to drop for the Federal Reserve; it may need some emergency triage. There were $3.66 trillion of commercial mortgage-backed securities outstanding at the end of 2019, more than one-fifth of the overall U.S. mortgage securities market. And the signs of distress are appearing.Real estate investor Tom Barrack has issued dire warnings of a “domino effect” of margin calls, cross defaults and other related debt failures if financing in the sector dries up. To prove his fears might be well placed, Invesco Mortgage Capital Inc., a real estate investment trust, said on Tuesday that it can’t make its margin calls (demands for extra capital or securities that kick in when asset prices fall). It won’t be alone.The coronavirus-inflicted crisis of confidence is also afflicting the primary market for commercial property debt as deals slated for sale aren’t being completed. A syndicate of banks led by Citigroup Inc. — and including Deutsche Bank AG, Barclays Plc and Societe Generale — has been left holding billions of dollars of debt on a Las Vegas casino deal, involving currently shuttered MGM Grand and Mandalay Bay properties, according to Bloomberg News.This won’t be the last project that debt investors back away from, leaving the underwriting banks exposed. And unfortunately, this isn’t just about large, well-capitalized banks being overgenerous in financing risky projects. This could become a systemic problem if risk appetite is pared to the bone. If things keep heading in this direction, the world’s other central banks will be looking to take their lead from how the Fed’s prepared to respond. The commercial property market is under severe strain internationally because of the Covid-19 enforced shutdowns of retail and leisure businesses.That said, the commercial mortgage-backed security market is considerably larger in the U.S. than elsewhere, and has a much wider variety of credit quality. In Europe, there are measures in place to manage the fallout from similar asset-backed securities, although commercial mortgage-backed stuff is rarer there. The European Central Bank doesn’t buy the latter, but it has already purchased more than 30 billion euros ($33 billion) of investment grade asset-backed securities in an ongoing program.A crisis in commercial property could force the Fed and other central banks to ease up on a lot of accounting regulations, maybe by not making lenders mark assets to market prices and allowing more forbearance on loans. It might even require the Fed and the U.S. Treasury to build further on its bailout template from the last financial crisis and restart the Troubled Asset Relief Program (TARP) to buy toxic assets directly. It used the Public-Private Investment Program (P-PIP), unveiled back in March 2009, to buy legacy loans and securities.This time around, the U.S. has already restarted the Term Asset-Backed Securities Loan Facility (TALF), but that doesn’t include non-public distressed real-estate assets and commercial property derivatives. The Fed has fired several bazookas in response to the virus crisis, including unlimited Quantitative Easing for Treasury bonds and residential mortgage-backed debt. It’s even buying investment-grade corporate bonds, to the despair of some. But it won’t end there. The wider risk now is how commercial real estate copes if the banking system gums up its access to financing.This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Marcus Ashworth is a Bloomberg Opinion columnist covering European markets. He spent three decades in the banking industry, most recently as chief markets strategist at Haitong Securities in London.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- As the U.K. awoke to unprecedented peacetime limits on freedom of movement, a core band of finance professionals still had to find their way to the office.Deutsche Bank AG and Credit Suisse Group AG armed “critical staff” with letters in case authorities demanded documentation to explain why they were out and about. Barclays Plc covered Uber rides for some employees avoiding public transport. UniCredit SpA checks to make sure none has a fever.Banks still need traders on the front lines to take on the wild swings in just about every asset class. The push-pull of coronavirus fallout and policy makers’ response -- how deep will the global recession be? -- have fueled market chaos around the world. There was no need for the top brass to change their behavior in the wake of Prime Minister Boris Johnson’s announcement late Monday that all unnecessary movement of people was banned for at least three weeks. Senior executives have been working remotely for weeks as the coronavirus pandemic ravaged much of Europe and began spreading illness and alarm throughout Britain.In contrast to the financial crisis a decade ago, when groups of bankers and policy makers huddled to bail out the financial system, best practices now force key players to communicate without body language or that tell-tale raised eyebrow.“So much of crisis management is looking people in the eyes,” says Philip Hampton, who was named chairman of Royal Bank of Scotland Group Plc after the bank was bailed out in 2008. “In a crisis you often have to pack everything up and work through the night. You have to be there with the lawyers and the contractual documents and I don’t see how all of that can be done remotely.”Take the leaders of Standard Chartered Plc. The top three executives, Chief Executive Officer Bill Winters, Chief Financial Officer Andy Halford and Chief Risk Officer Mark Smith, haven’t met in person for three weeks to avoid risk they get infected at the same time, a person with knowledge of the bank’s plan said.At Lloyds Banking Group Plc, CEO Antonio Horta-Osorio is running the U.K.’s biggest retail lender from his home.“I am now running the bank with a much shorter horizon and I am now having virtual meetings,” he said at a virtual financial services conference hosted by Morgan Stanley last week. “Our planning cycle has shortened significantly.”Mortgage Bonds Rattle Wall Street Anew With Rush of Urgent SalesA government list of “key workers” who can still go to the office includes “staff needed for essential financial services provision,” giving banks some leeway in organizing their staff. And while desks are largely barren, some have been asked -- or told -- to make their way to an office: Equity and credit markets melting down and volatility is off the charts.At Lloyds, a trader drove his own car through the traffic-less metropolis instead of using public transport. Deutsche Bank’s critical employees comprise mostly traders and security staff. The few Commerzbank AG employees showing up to the office are being discouraged from taking public transport, with car parking, bike parking and even company accommodation provided.At Goldman Sachs Group Inc., only staff performing “essential functions” should go to the office, Richard Gnodde, who heads its international business in London, said in a memo to its staff.Italian companies, applying harsh lessons learned at home, have most staff working from home.UniCredit, Italy’s biggest bank by assets, has adopted the same standards for all its offices. In London, like in Milan and Munich, there is a rotation system and traders are deployed to different floors. The bank checks each employee’s body temperature, and it pays the commute for all of them to avoid public transport.Of Mediobanca SpA’s 100-person London staff, all are working from home except for about five traders who rotate in the office.Home or not, there are still standards to be maintained.RBS Chairman Howard Davies turned up on Bloomberg TV Tuesday morning via FaceTime wearing a white shirt and a tie against a backdrop of book shelves.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Companies in India are scrambling to ensure that the millions who staff the back offices of Wall Street banks and take on work outsourced by firms from airlines to insurers can keep going as the nation mandates increased work from home amid a spike in coronavirus cases.UBS Group AG, Deutsche Bank AG and other global giants are working with industry trade group Nasscom to ensure Indian states classify such work as essential services so staff can continue to work from offices if required.Infosys Ltd., Tata Consultancy Services Ltd. and other Indian firms that employ more than four million people in tech hubs such as Bengaluru, are also requesting that their clients relax non-disclosure and other privacy rules so that employees who must stay at home during the lockdown can still do their jobs.“Moving millions of desktops to employees’ homes, configuring software to allow for slower bandwidth and ensuring cybersecurity - it’s a mind-boggling physical and logistical exercise that our companies are in the midst of right now,” Keshav Murugesh, chairman of Nasscom, said in a phone interview.The move by Prime Minister Narendra Modi to impose a lockdown Sunday across most of India poses a significant challenge for banks such as JPMorgan Chase & Co. as well as India’s $181 billion outsourcing industry that handles everything from trade settlements to airline reservations for British Airways.Nasscom is asking state governments to grant special exemptions for their industry to ensure some workers can go to the office, where they have access to essential databases and reliable high-speed internet -- which most workers lack at home. While many states, including Karnataka, where Bengaluru is based, and Mumbai’s state of Maharashtra have already granted data centers “special status,” it’s not across the board.“Employee safety is paramount but we are also focused on keeping operations running without stoppages,” Murugesh said.Privacy ConcernsPrivacy is also an issue, with the prospect of millions of workers processing sensitive data from home. Outsourced work from the world’s largest banks, insurers, airlines and retailers are governed by strict non-disclosure agreements. Many companies don’t allow employees to even carry their phones in the workplace for fear of compromising clients’ confidentiality clauses, and restrict access to certain areas to only those working on the project.India’s data centers are vital for many global finance firms. Barclays Plc has more than 20,000 staff in India’s back offices, tending to all tech solutions globally. Deutsche Bank employs 10,000, while JPMorgan has about three times that many. Barclays has “significantly reduced” the number of staff working from its Indian offices, while most Deutsche Bank staff are also working from home, according to bank statements.UBS says about 90% of its 6,000 employees in India are working from home. The Swiss bank has drawn up a list of 600 essential staff who can go to the office and will be offered meals, and transport in cars regularly cleaned with sanitizer, according to people familiar with the bank’s plans.Mumbai-based Tata Consultancy, or TCS, has ordered 85% of its global staff to work from home, including the vast majority of its Indian employees, people familiar said.“As part of the business continuity in this critical situation, we have enabled work from home for large number of TCS associates,” the company said in a statement, adding its teams are on “war footing,” to ensure smooth operations.Bengaluru-based Infosys didn’t immediately respond to questions on the prevailing situation with clients and employees. Wipro Ltd. said its customers have been “supportive” of approving work from home arrangements.Cases SpikeThe coronavirus contagion that has arrived in India’s big cities like Mumbai, Bengaluru and New Delhi is prompting a complete rethink on how work is executed, as experts warn that the densely-populated country of 1.3 billion people with limited health-care infrastructure could soon be hit by an avalanche of cases.The recent spike prompted the Modi government to recommend sweeping lockdowns and transportation curbs. All passenger and commuter trains were suspended until at least March 31. By Monday, the country had reported 415 cases, including seven deaths. Many states began implementing curfew-like restrictions -- barring more than five people from assembling in public.Indian stocks rose Tuesday in a volatile session, following a record fall on Monday triggered by the lockdown. The S&P BSE Sensex Index rose 2.7% as of 11:41 a.m. in Mumbai, erasing an earlier loss of as much as 1.3%.State ApprovalIndia’s federal structure of governance has thrown up its own share of complications for companies. While the central government can advise regional governments to classify information technology and back office work as “essential services” allowing them to be exempt from lockdowns, only regional governments can amend the rules to allow such an exemption.Outsourced work such as the back-end of stock markets, airline bookings and medical insurance claims that can’t afford a “split-second latency” will need to be carried out from offices that already have the necessary infrastructure. Confidentiality concerns around work such as drug development and regulatory needs will also require employees to work from offices.“Both the central government and many state governments Karnataka and Maharashtra have been extremely helpful in declaring our industry as essential services,” said Nasscom’s Murugesh, who is also the group chief executive officer of WNS Global Services.Most IT services and back office services companies based in India have already received the required approvals to work from home, said Sangeeta Gupta, senior vice president and chief strategy officer at Nasscom. “The remainder should be hearing from their clients in the next couple of days,” she said.(Updates stocks in 16th paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
MILAN/MADRID/FRANKFURT, March 24 (Reuters) - Corrado Sforza Fogliani is on the frontlines of European efforts to keep the region's economy alive amid the coronavirus pandemic. Buried in paperwork and with Rome and banking lobbies still at odds over who should be on the hook for defaults when a six-month debt holiday ends, Banca di Piacenza's loan officers have only been able to process a fraction of the 1,000 applications they have received.
(Bloomberg) -- Citigroup Inc. and Deutsche Bank AG are among lenders stuck with billions of dollars of debt backed by MGM Grand and Mandalay Bay properties in Las Vegas, with the coronavirus pandemic’s impact on casinos hampering the banks’ ability to syndicate the loan.A joint venture of MGM Growth Properties LLC and Blackstone Real Estate Income Trust used $3 billion of financing to purchase the casinos last month, and Citigroup, Deutsche Bank, Barclays Plc and Societe Generale SA had planned to syndicate $1.9 billion of the total as commercial mortgage-backed securities. The efforts were met with tepid demand and the CMBS plans were put on hold, leaving the banks with the debt, according to people with knowledge of the matter.Representatives for Citigroup, Deutsche Bank and Barclays declined to comment, while spokespeople for Societe General, MGM Growth Properties and Blackstone didn’t immediately respond to requests for comment. It’s not clear now much of the loan each bank holds.MGM Resorts International, which continues to operate the MGM Grand and Mandalay Bay, has shuttered operations in Nevada and New Jersey to help stem the spread of the deadly virus. The CMBS facility has an initial term of 12 years, with an anticipated repayment date in March 2030, and bears an interest rate of 3.308% per year, according to filings.Pricing of the CMBS was expected during the week of March 9, Bloomberg reported earlier this month.If broad syndications are unsuccessful, banks typically retain loans on their balance sheets until market conditions improve and the deal can be brought back. However, it’s possible some banks may seek to reduce their exposure in off-market transactions.It’s not the only casino financing presenting a headache on Wall Street. Banks involved in Eldorado Resorts Inc.’s acquisition of Caesars Entertainment Corp. face an uphill battle offloading associated debt to investors amid concerns about the pandemic’s long-term impact on the travel and leisure industry, Bloomberg has reported.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Changes to how shares are traded off an exchange in the European Union have been delayed by three months because of the impact of the coronavirus epidemic on banks, the bloc's markets watchdog said on Friday. The European Securities and Markets Authority (ESMA) said enforcing the new "tick" size regime or size of share trades executed at "systemic internalisers", typically big banks, should be delayed to 26 June. Tick size refers to the increments a stock can move up or down, and the new regime formally comes into effect on March 26 to avoid off-exchange venues having a competitive advantage over exchanges.
(Bloomberg Opinion) -- Banks are thankfully in much better shape to face the coronavirus pandemic than they were before the financial crisis. But as the economic challenge they face grows, regulatory measures to help them that looked overly forgiving just a few weeks ago may prove to be just the start.In 2008-2009, the financial sector’s woes dragged down the real economy. Now it is the other way round. Supervisors are looking to financial institutions to be part of the solution to a real-world shock. Lenders on the whole are far better capitalized and their balance sheets included a good portion of easy-to-sell assets going into 2020.As forecasts for the severity of the economic downturn are worsening, so are the prospects of banks coming through the crisis intact. Expectations for a sharp “V-shaped” recovery are fading amid the realization that social distancing – and economic activity – will lead to a slump that could last several quarters. There is no visibility as to when or how quickly economic activity will resume.Deutsche Bank AG analysts forecast an annualized GDP contraction of 24% in the euro area and 13% in the U.S. in the second quarter. At this rate, the decline would be more than one and a half times greater than the financial crisis.Even with considerably more equity than a decade ago, banks remain inherently levered institutions. Borrowings of banks from JPMorgan Chase & Co. to Deutsche Bank AG to HSBC Holdings Plc exceed their capital by more than 15 times. Stress tests show the biggest lenders have sufficient capital, but it’s debatable whether these assessments capture the magnitude of the downturn ahead. Nor do they model the implications of the synchronized shutdown that is paralyzing large, interconnected economies.In the U.S. stress tests last year, banks’ resilience was measured against a real GDP decline of 8% from the pre-recession peak and a surge in the CBOE Volatility Index, or VIX, to 70. The index, often referred to as the fear gauge, soared past 80 this week for the first time since 2008.The Institute of International Finance estimates that at $75 trillion non-financial corporate debt is worth around 93% of global gross domestic product, up from about 75% of GDP before the financial crisis, with some of the highest burdens in sectors with weak earnings, such as small and medium-sized companies.Analysts at Goldman Sachs Group Inc. estimate that if credit lines across travel, commodities and energy get fully drawn, the liquid assets held by the top U.S. banks to cover draw-downs would come close to regulatory minimums. Executives from UBS Group AG, Credit Suisse Group AG and Deutsche Bank told a virtual conference this week they’re seeing clients drawing on credit lines, regardless of whether the cash is needed now.To be sure, central banks and governments have raced to ramp up their stimulus and are taking steps to ensure credit keeps flowing to the economy. From cutting interest rates, to resurrecting a commercial paper backstop, in a matter of days the U.S. Federal Reserve has gone through the financial crisis catalog of fixes.Even against that backdrop, banking supervisors rightly see the need to be accommodating with lenders. Post-crisis measures, some of which were designed to be eased in times of economic slowdown, are being rolled back. Banks will be allowed to let capital ratios fall - an inevitable function of assets going bad - and in Europe stress tests have been postponed.Regulators in Europe are also reportedly considering giving banks more time to set aside provisions for loans that will undoubtedly sour.At first, such measures looked like potentially detrimental regulatory forbearance. Perhaps not now. Deutsche Bank warned on Friday it may be “materially adversely affected” by a protracted downturn. As the economic impact of radical steps to curb the coronavirus worsens, the challenge will be to keep the banking sector part of the solution rather than part of the problem.This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Elisa Martinuzzi is a Bloomberg Opinion columnist covering finance. She is a former managing editor for European finance at Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
The European Union's markets watchdog said it may not be "practicable" to record all telephone calls for trading securities because of the coronavirus epidemic. Under EU law, traders must record calls when trading but banks have shut down their main trading floors, forcing dealers to work from back-up sites or even from home, making it harder to record all calls.
Deutsche Bank said on Friday that the impact of the coronavirus outbreak may affect the lender's ability to meet its financial targets as the fragile bank undergoes a major revamp after years of losses. Deutsche's shares have fallen to a record low amid a broad market rout. Last year, Deutsche posted a 5.7 billion euro ($6.13 billion) loss, its fifth in a row, as the cost of its latest turnaround attempt hit earnings.
(Bloomberg) -- The fallout from the worst rout in credit markets since the global financial crisis is spreading, threatening everything from mortgage debt in Australia to local government bond markets in the U.S.As the deadly coronavirus pandemic brought more grim headlines Wednesday, risk gauges in the U.S. and Europe pushed out further in another volatile session. The crisis has also closed in on Japan’s $650 billion local credit market, which had been an oasis of calm.In the U.S., even the $3.9 trillion state and local government bond market, which usually functions as a haven, has seen yields surge as investors pull out their cash, triggering waves of forced selling by fund managers who need to raise money. That has saddled investors with their biggest losses since 1987 and effectively locked states and cities at least temporarily out of the bond market, with all the big sales planned for this week on hold.Treasuries and other sovereign bond yields have marched higher ahead of trillions of dollars in expected stimulus globally. The U.S. Senate passed a second major relief bill, separate from an additional economic rescue package that President Donald Trump’s administration estimates will cost $1.3 trillion. The European Central Bank launched an extra emergency bond-buying program worth 750 billion euros ($820 billion) to calm the worsening financial crisis.“You can’t buy risk,” said Mark Nash, head of fixed income at Merian Global Investors in London. “We need easier financial conditions and some virus light at the end of the tunnel, and we are seeing neither at the moment.”U.S.CDX is approaching financial crisis levels as traders weigh the efficacy of fiscal and monetary stimulus to counter the effect of the coronavirus. That kept borrowers at bay, a stark contrast to Tuesday’s onslaught.Investment-grade bond spreads rose 30 basis points to 285 basis points, the widest level since July 2009, while high yield widened 58 basis points to 904 basis pointsYields on top-rated 10-year municipal bonds have more than doubled since March 9 to 1.86%, according to Bloomberg’s benchmark index. For debt that’s due in three months -- which is among the easiest for fund managers to sell in a hurry -- the yields have more than tripled to 1.6%JetBlue was cut one notch to BB- by S&P and may still be cut further, while Delta’s bonds fellMallinckrodt failed to line up funding for a loan deal designed to ease its debt load and help settle massive legal claims tied to its alleged role in the nation’s opioid crisisMoody’s followed S&P in downgrading Hertz, cutting the company one level to B3, with a negative outlookMoody’s also cut Occidental Petroleum Corp.’s credit rating cut to junk, saying its purchase of Anadarko “continues to burden the company’s balance sheet”The leveraged loan market has plunged to levels not seen since the financial crisis, signaling higher default rates and a potential funding crunch aheadThere’s still plenty of pent-up issuance in the investment-grade market, where borrowers have come forward opportunistically mostly to refinance commercial paper and other debtU.S. investment-grade bonds in the aircraft leasing industry are trading at distressed levelsThe front-end is especially feeling the pain, as pressure builds on companies to meet near-term obligations. Just 72% of short-dated debt now trades above par, versus 99% 10 days ago, according to Deutsche Bank strategist Craig NicolOaktree Capital Management is planning a new distressed debt fund, co-founder Howard Marks said in a note to clientsHere’s how cash-hungry companies could bite $700 billion out of banksEuropeFrance’s financial regulators helped banks including Societe Generale and Credit Agricole respond to the growing coronavirus crisis by eliminating a key capital requirement to keep credit flowingItaly’s Prime Minister Giuseppe Conte has proposed joint EU debt issuance, with German chancellor Angela Merkel saying she’s happy for her finance chief to explore the proposal with other ministersWhile joint EU debt remained a taboo for Germany even at the height of the financial crisis after 2008, Merkel said there are “no conclusions” at this stagePoland and the Czech Republic both announced fiscal stimulus packages aimed at shielding their economies from the impact of the virus. They offered holidays in debt repayments, loan guarantees and co-financing of workers’ wagesThe doors to Europe’s primary bond market slammed shut again on Wednesday, after a trio of borrowers attempted to get deals done a day earlier with mixed success. Toronto Dominion bank halted a sale of pound-denominated covered bonds, citing “adverse market conditions,” while Royal Bank of Canada failed to tighten pricing on a euro-denominated sale of covered notesRegular primary sales will only resume once virus-fueled volatility comes to an end, according to market participants interviewed by Bloomberg News, yet they have no idea when this might beMeasures of credit risk are climbing, with default swaps protecting high-grade European firms jumping as much as 10% today to the highest since June 2013Euro IG bond spreads ended Wednesday at 231 bpsCitigroup has more than doubled its forecasts for euro investment-grade and high-yield bond spreads this year; it now sees euro IG spreads versus swaps at 140 bps, and euro HY spreads ending the year above 600 bpsAsiaGlobal airlines have $29 billion of outstanding debt coming due by the end of the year, with most coming from China Southern and China EasternSpreads on Asian dollar bonds were 5-15 basis points wider, according to traders. That leaves them at their highest in about a decade, according to a Bloomberg Barclays indexThe Markit iTraxx Asia ex-Japan index of credit-default swaps was indicated about 2 basis points wider, according to trader pricesIn Australia, the mortgage-backed security market is “effectively closed” as yields on senior bank debt are up as much as 160 basis points in two weeks, according to Robert Camilleri, co-founder and head of structured credit at Realm Investment HouseIn Japan, S&P cut its outlook on SoftBank to negative late Tuesday, citing the broad market declines and the conglomerate’s plans for a share buybackIn India, the extra yield investors demand to own three-year top-rated corporate bonds over sovereign notes has jumped to a more than four-month high of 109 basis points. Here’s a chart showing that:(Updates U.S. details throughout)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Germany’s financial watchdogs eliminated a key capital requirement for the country’s banks to keep credit flowing and give flexibility to lenders such as Deutsche Bank AG and Commerzbank AG that have been hit hard by the recent selloff in stocks and credit risk.The countercyclical capital buffer, meant to strengthen banks during good times for a downturn, will be cut to 0% starting on April 1 and remain there until at least through December, the Finance Ministry said in a joint statement with financial supervisor BaFin and the Bundesbank. As a result, banks will be able to release more than 5 billion euros ($5.5 billion) of capital they were in the process of building up.That brings the volume of excess capital that German banks have on hand to digest losses and keep lending to about 225 billion euros, according to people familiar with the matter. That includes 120 billion euros of capital that the lenders held on top of their regulatory demands and 100 billion euros that the European Central Bank freed up last week, said the people, who spoke on condition of anonymity.After more than a decade of tightening financial strength requirements, bank regulators around the world are loosening the reins to prevent the economy from seizing up. The task for banks is daunting as many corporate clients are at risk of defaulting on loans while others will probably require additional funds as supply chains are disrupted, stores and restaurants shut down and public life grinds to a halt.“The move shows how critical the situation is in Europe,” ABN Amro Bank NV strategist Tom Kinmonth wrote in a note. “German regulators fought tough competition for a long period to raise the buffer and now have to remove it almost straight away.”ECB Freed Up $112 Billion at Banks to Bolster Credit Amid VirusThe ministry met BaFin as well as Germany’s central bank last week to discuss eliminating the buffer, Bloomberg reported at the time.German banks are well capitalized on the whole and the industry isn’t showing liquidity bottlenecks, according to the statement.The buffer applies to the German operations of banks, meaning those lenders with the biggest focus on the country will feel the most relief. Deutsche Bank AG, which has one of the most international footprints among German lenders, started the year with a countercyclical capital buffer of 0.08% while smaller competitor Commerzbank AG had a 0.12% requirement.German banks as well as their European competitors presented their regulators with a long list of demands last week to help them weather the fallout from the virus. The ECB loosened several capital demands on Thursday and nudged national authorities to follow suit on their own requirements.“One of the justifications to remove the buffers is to ‘free up lending capacity’,” wrote Kinmonth. “However, more realistically, banks will now try to actively reduce their provided credit lines” given the increase in risk.(Updates with capital reserves in third paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.