|Bid||6.01 x 900|
|Ask||6.09 x 4000|
|Day's range||5.92 - 6.32|
|52-week range||4.99 - 11.16|
|Beta (5Y monthly)||1.41|
|PE ratio (TTM)||N/A|
|Forward dividend & yield||N/A (N/A)|
|Ex-dividend date||18 May 2017|
|1y target est||5.75|
(Bloomberg) -- The Trump Organization, the family business of U.S. President Donald Trump, is in informal discussions with Deutsche Bank AG about delaying some loan payments, according to a person familiar with the matter.The global coronavirus pandemic has forced borrowers and lenders to discuss ways to honor debts while acknowledging the enormous pressure on company bottom lines. The talks were reported earlier by the New York Times.A Deutsche Bank spokesperson declined to comment. A Trump Organization spokeswoman didn’t immediately respond to a request for comment.The Trump Organization has also spoken with Palm Beach County about expectations of lease payments for a golf course the company runs, the newspaper said, citing unidentified people familiar with the matter.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.
The economic fallout from the coronavirus pandemic has put a spotlight on contingent convertible bonds (CoCo), which are the riskiest debt banks can issue and are designed to act as a protective layer for them in times of trouble. Britain's Lloyds Bank and France's Credit Agricole this week launched tenders to buy back CoCo bonds as well. Other banks who have AT1 bonds - the most common type of CoCos - that will become redeemable this year include the likes of Julius Baer, Bank of Ireland, Lloyds Bank and Cooperative Bank, according to Axiom Alternative Investments records.
You can share your thoughts with Thyagaraju Adinarayan (email@example.com), Joice Alves (firstname.lastname@example.org) and Julien Ponthus (email@example.com) in London. Shares in European banks have taken a beating after they bowed to regulatory pressure by scrapping their dividends and keep the cash aside as an precautionary capital buffer. Analysts at Jefferies looked at asset managers Amundi and DWS, which are both majority-owned by Credit Agricole and Deutsche Bank respectively.
(Bloomberg) -- Amid all the economic despair in the age of coronavirus, there is still something about the promise of sky-high returns that the American investor finds irresistible.Cruise line operator Carnival Corp. proved that Wednesday when investors clamored to buy a new $4 billion bond sale that pays interest of 11.5%, one of the highest coupons ever offered, particularly by an investment-grade rated company. Demand was so frenzied -- as high as around $17 billion -- that Carnival was able to cut the coupon and increase the original size of the offering by an extra $1 billion, according to people familiar with the situation.Even with the economy spinning down, corporations around the globe have been able to tap the bond market to raise record amounts from investors in recent weeks. While executives are looking to stay liquid, investors’ confidence was buoyed by the trillions of dollars the Federal Reserve and other central banks are spending to buttress their economies.The demand for Carnival’s bonds was especially notable because investors have largely shunned riskier firms. Its business has been ravaged by the virus and investors still can’t be sure when the company will sail again. Appropriately enough, the majority of orders for Carnival’s offering are from junk-bond accounts.Yields that approach Carnival’s heights are usually seen only on the riskiest types of junk bonds, such as those issued from holding companies that are further removed from real assets or those that give borrowers the option to delay cash interest payments.A flurry of other bond deals Wednesday continued a strong performance for much of March, with 11 new investment-grade dollar deals, and T-Mobile US Inc. is marketing a potential $10 billion offering for its acquisition of Sprint Corp. Europe had 17 new deals, its busiest day since January, including Tiffany buyer LVMH and Absolut Vodka maker Pernod Ricard SA.Overall in March, U.S. investment-grade issuance topped $259 billion for a new monthly record, while European supply passed 135 billion euros ($148 billion), the most since 2016. Asia’s dollar market was quiet for most of the month, though Chinese internet search giant Baidu Inc. announced a deal to start April.Still, returns were dismal. Even with the Fed’s help fueling a late stage rally, March was still the worst month for returns since the end of 2008, with U.S. high-yield down 11.5% and investment grade dropping 7.1%. The European index lost 6.9% in March, its biggest loss ever. Spreads on top-rated Asian dollar bonds ended the first quarter 146 basis points wider, the worst blowout since 2009.“We expect issuance to continue as corporates look to bolster liquidity,” said Henrik Johnsson, co-head of capital markets at Deutsche Bank AG. “The long term effect of all this debt is hard to quantify.”U.S.Credit markets weakened with stocks on Wednesday as President Donald Trump told the U.S. to brace for one of its toughest stretches as a nation, with the death toll from the virus projected to potentially top 200,000. The high-grade borrowing bonanza showed no signs of abating with 11 companies launching $28.5 billion in new debt, meaning 36 issuers have already priced $78.8 billion this weekT-Mobile has hired banks to market its secured bond offering to investors, which may come Thursday in dollars and/or euros with maturities ranging from five to 40 yearsCarnival wrapped up its $4 billion bond sale after boosting the dollar component, dropping the euro tranche and getting a two-notch downgrade from Moody’s Investors Service on TuesdayAB InBev is testing investor demand with a four-part offering of maturities due between 10 and 40 years, capitalizing on interest lately in the long end. It sold 4.5 billion euros of bonds Monday, and may need to cut its dividend to preserve ratingsFor deal updates, click here for the New Issue MonitorOil producer Whiting Petroleum filed for bankruptcy, the first big casualty of a global collapse in crude prices that’s leaving debt-laden shale explorers struggling to surviveEuropeSeventeen deals priced Wednesday in the primary market’s busiest day for more than two months, totaling 26.8 billion euros. It follows the best-ever quarter for debt sales, with more than 510 billion euros priced, mainly reflecting huge volumes at the start of the year, and lots of reverse Yankee issuance.Borrowers including LVMH Moet Hennessy Louis Vuitton SE and Absolut Vodka maker Pernod Ricard SA are leading a calendar set to price 26.57 billion eurosInvestors have thrown almost 100 billion euros worth of cash at today’s deals, according to data compiled by Bloomberg, led by demand for offerings from Portugal, Total Capital International SA, a euro green note offered by Spain’s Iberdrola Finanzas SA, LVMH and Pernod RicardSpreads on euro IG company bonds remain elevated but have fallen about 8 basis points from multi-year highs reached on March 24, according to a Bloomberg Barclays indexSpanish bankers and lawyers are bracing for a steep surge in insolvencies, amid the country’s rising death toll and strict lockdown measures. Prime Minister Pedro Sanchez has announced 117 billion euros of fiscal stimulus, but some business leaders say aspects of the government’s response risk making things worseEuropean banks may get more time to meet loss-absorbing debt targets, the euro-area’s Single Resolution Board said. It’s ready to adapt transition periods and interim targets to help them deal with the coronavirus falloutAsiaThe rebound in global bond sales in recent weeks has so far eluded Asia. After record issuance in January, sales of dollar securities by the region’s issuers, including financials and sovereigns, sputtered in the first quarter, totaling about $86 billion, up only about 3% on the year-earlier periodOne reason for that is that unprecedented stimulus from the Federal Reserve and European Central Bank has had more direct benefits in the U.S. and European marketsAnother factor is that Asian companies have been able to tap local-currency markets. Chinese companies sold a record amount of domestic bonds in March, for example, after Beijing flooded markets with cashBut there have been signs in recent days that more borrowers may offer dollar debt. Chinese tech giant Baidu Inc. was marketing an offering WednesdaySpreads on top-rated Asian dollar bonds were 10-20 basis points wider Wednesday, according to traders. They ended the first quarter 146 basis points wider, the worst blow-out in a Bloomberg Barclays index going back to 2009For 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 is discussing whether it will waive bonuses for its management board in 2020 due to the fallout from the coronavirus crisis, a person with knowledge of the matter said on Wednesday. The discussion comes after the European Banking Authority on Tuesday said banks should be "conservative" in how they award bonuses to preserve capital and keep lending to an economy hit by the coronavirus outbreak. A decision hasn't been made yet but the bank is likely to result in waiving bonuses for top board members, the person said.
Deutsche Bank is discussing whether it will waive bonuses for its management board in 2020 due to the fallout from the coronavirus crisis, a person with knowledge of the matter said on Wednesday. The discussion comes after the European Banking Authority on Tuesday said banks should be "conservative" in how they award bonuses to preserve capital and keep lending to an economy hit by the coronavirus outbreak. A decision hasn't been made yet but the bank is likely to result in waiving bonuses for top board members, the person said.
Deutsche Bank said on Wednesday that it had won a deal to sponsor the local soccer team, Eintracht Frankfurt, as the German lender focuses more on its domestic market. The deal is a blow to rival Commerzbank , whose name and logo have graced Eintracht's home stadium for more than a decade. Deutsche Bank and Commerzbank, both based in Frankfurt, last year ditched talks to merge.
Deutsche Bank is set to ink a sponsorship deal with the local soccer team Eintracht Frankfurt, two people with knowledge of the matter said on Tuesday. The deal, which could be announced as soon as Wednesday, sidelines Commerzbank, the team's current long-time sponsor and a top Deutsche Bank competitor. The Frankfurt-based banks, Eintracht and a spokesman for the Commerzbank Arena declined to comment.
(Bloomberg) -- German unemployment was broadly stable in March, before far-reaching restrictions on business and movement sparked thousands of furloughs in Europe’s largest labor market.The number of people out of work rose by just 1,000, significantly less than economists predicted. Germany’s federal labor agency said on Tuesday the report was processed based on data available through March 12. With large parts of the economy in lockdown, unemployment is likely to have risen more.Early estimates have also shown a spike in companies applying for state wage support, which allows businesses to reduce workers’ hours or halt production while still paying them with the help of government salary subsidies. Carmakers Volkswagen AG and Daimler AG and sports-apparel maker Puma SE are among those planning to idle tens of thousands of staff. Even financial institutions like Deutsche Bank AG are considering such moves.A report containing the latest figures on applications for state wage support is due at 2 p.m. Berlin time.Read more: Germany Pays Workers to Stay Home to Avoid a Surge in LayoffsGermany’s strong labor market was a bright spot for the economy throughout last year, propping up domestic spending when trade tensions weighed down manufacturing. While the overall jobless rate held at 5% in March -- near the lowest level since the country’s reunification -- weaker employment prospects and reduced salaries mean an important pillar of the economy could now crumble.Economic experts have warned that a recession in Germany is unavoidable. Even if most measures aimed at containing the virus are lifted in mid-May, allowing the economy to recover through the summer, output is expected to shrink by 2.8% this year, according to a report published by government advisers on Monday.(Updates with details on state wage support 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.
(Bloomberg Opinion) -- The global stock market rallied on Monday for the fourth time in five days. The MSCI All-Country World Index is up 15.9% since March 23, led higher by gains in the U.S. Does this mean the carnage is over? Nobody can say for sure, and for every Wall Street firm saying yes, there’s another warning that the worst is yet to come. Yet, there was a lot to like about how markets gained at the start of the week.What was most encouraging about the latest action is that it came despite a slew of news that, one would think, would be negative for riskier assets. Yes, the news out of Abbott Laboratories that it has developed a coronavirus test that can tell if someone is infected in as little as five minutes did a lot to boost sentiment. But that’s where the optimism mostly ends. Over the weekend, top infectious disease expert Anthony Fauci said U.S. coronavirus deaths alone could reach 200,000, prompting President Donald Trump to extend nationwide social-distancing recommendations until April 30. The deadly and widespread nature of the pandemic was hammered home with the news that a longtime senior Wall Street executive died of virus complications. Risk sentiment not only overcame that news, but also more fundamental issues such as a broad gain in the dollar and another big decline in oil prices, this time to an 18-year low. A rising dollar and plunging oil prices had contributed almost as much to the equity market sell-off in the early days of the coronavirus pandemic as the expanding virus itself. The point here is that the market rallied in the face of negative news, which many suggested would be a prerequisite for stocks to regain their footing.There’s more to it than just the dollar and oil. The equity strategists at Bloomberg Intelligence note that in recent days, “reactions to earnings downgrades and buyback suspensions also turned positive, perhaps indicating most bad news is already in the price.” More specifically, they point out that stocks of companies that pared their earnings-growth targets did better over the past week than those with a higher bar, suggesting a considerable amount of negativity is reflected in prices.” When historians looks back on the stock market during this time, it’s possible that March 30 could be seen as a pivotal moment.A RUN ON BANK LOANSBloomberg News reports that the biggest U.S. banks have been discouraging some of the safest corporate borrowers from tapping existing credit lines to see them through the coronavirus pandemic. The issue isn’t that banks don’t have the funds, but that offering revolving lines of credit to investment-grade borrowers is a low-margin business. Lenders provide the service more for relationship purposes, hoping those customers will tap the banks for more profitable work over time. Based on the latest weekly data from the Federal Reserve, this issue could potentially be a drag on bank earnings as more companies seek to ensure they have cash on hand. Commercial and industrial loans outstanding surged by $176.2 billion, or 7.41%, to $2.55 trillion in the latest weekly period, Fed data released late Friday showed. That’s by far the most in any week going back to 1973. The good news is that big lenders are perceived to be better capitalized than at any time in history, which diminishes the possibility of a bank collapse. Still, that doesn’t mean their earnings won’t take a hit. That may help explain why the KBW Bank Index’s 40.1% plunge this year is more than double that of the S&P 500 Index’s 18.7% drop.CONSUMER CUSHION?Almost everyone agrees that the U.S. economy is headed into a recession, and may already be in one. How deep and long-lasting the contraction is depends on a host of factors, not the least of which is the financial health of consumers. In that regard, the prognosis is mixed. On the downside, 25% of U.S. workers make less than $600 a week, and delinquency rates on all types of consumer loans are the highest in about six years, according to Deutsche Bank strategist Torsten Slok. Meanwhile, household borrowing accelerated to a 4.1% increase in the fourth quarter, reaching $16.15 trillion, Fed data released earlier this month showed. On the other hand, household wealth surged, rising $3.15 trillion to a record $118.4 trillion, indicating Americans were in generally healthy financial shape prior to the pandemic. Looked at another way, U.S. household debt as a percentage of disposable income has come way down since the financial crisis, falling to 96.7% from 133.6% in 2007. And in another encouraging sign, savings as a percentage of disposable income has jumped to 8.1% from 2.2% in 2005. No doubt the pandemic will take a toll on consumer finances, but the data may mean that consumers also rebound much faster than expected.EM BEATS G-10In times of crisis, markets resort to predictable patterns. That means fleeing anything viewed as risky, such as emerging market currencies, and jumping into assets deemed safe, such as the currencies of Group of 10 economies. But globalization and the rise in importance of certain developing-nation economies have made such knee-jerk reactions obsolete. Some new research from Standard Chartered strategists Ilya Gofshteyn and Steve Englander found that currencies of “good EMs” tend to outperform those of “bad G-10s” in a time of crisis, and have done so this year. They identify “good EMs” as most of the universe of major emerging-market currencies less the Turkish lira, Brazil real, South African rand, Indian rupee and Indonesian rupiah. In many ways, this makes sense. Many emerging-market economies are in much better fiscal shape than developed nations, having stockpiled dollars for the proverbial rainy day. At $3.13 trillion, the foreign-exchange reserves for the 12 largest EM economies excluding China is up from less than $2 trillion in 2009, according to data compiled by Bloomberg.TEA LEAVESA big week for U.S. economic data kicks off Tuesday when the Conference Board releases consumer confidence data for March. As with other measures of March that have already been released, this one is unlikely to be encouraging. The headline number is seen tumbling to 110 from 130.7 in February. The real number to look at, though, will be the one that looks at how consumers feel about the future. That part of the survey hadn’t reached the heights of the one that measures how consumers feel about the current situation. This may help explain the elevated savings rate noted above, as consumers socked away money for the tougher times they knew would ultimately hit even before the coronavirus. If that number fails to fall as much as the present situation reading, it could help further underpin investor sentiment on the idea that the economic rebound, when it comes, will be impressive.DON’T MISS Don’t Read Too Much Into Stocks’ Sudden Rally: Mohamed El-Erian Markets No Longer Know How to Define 'Safe': Jared Dillian Fed Lax Corporate Lending Invites Trouble: Narayana Kocherlakota How to Win Coming Battle Over U.S. National Debt: Karl Smith Junk Bonds Should Never Be Backstopped by Fed: Brian ChappattaThis 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.
(Bloomberg Opinion) -- The rat-a-tat of banks in the U.S. and Europe pledging not to cut jobs in the midst of the coronavirus pandemic will be a relief to those inside and outside the industry as the world economy crumbles. For many bankers, though, the respite will be no more than temporary.As governments race to prop up companies and individuals with financial aid, lenders are critical to the transmission of these policies. It will be up to them to delay mortgage and loan payments and hand out state-backed loans to millions of customers. That will determine the extent to which economies can mitigate the slump as businesses battle to survive through the lockdowns. Bank of America Corp. — at one point the target of social media ire over its customer payment terms — has moved thousands of employees to its consumer and small business units to deal with the crisis, including bringing in temporary external hires.Unlike the crisis of 2008, the stresses on markets and the economy are not of banks’ making but they could be as severe. Policymakers have rushed through stimulus and eased lenders’ capital requirements to soften the blow. As they grapple with the operational challenge of fielding a volume of customer calls running as high as 10 times normal levels, now is not the time for layoffs. As regulators have said, buybacks and dividends must go first.Yet the pressure on bank jobs and other costs won’t go away in the medium term. Even the better-placed lenders, which have prospered from the recent spike in market trading activity, will be affected by the economic carnage of the next few months. Deutsche Bank AG, which has paused staff cuts in the middle of its biggest restructuring in decades, on March 18 said the positive business momentum in the fourth quarter of 2019 — in which trading was prominent — carried over into start of 2020. Two days later, it warned it “may be materially adversely affected by a protracted downturn.”From their markets businesses to lending and commissions from investment products, analysts expect all banks to suffer a drop in revenue and an inevitable build-up of bad loans that will erode profit. Record low interest rates will keep squeezing loan margins and appetite for new investments will almost certainly remain subdued for some time.Some analysts are starting to try to asses the financial hit. A Berenberg study of 38 European and U.S. banks estimates an overall revenue decline of 8.5% in 2020 and earnings 30% below what was expected for 2020. There’s only so much policymakers can do to shield financial firms.Europe’s banks, which were struggling to generate sustainable profit even before the latest crisis, will feel most acutely the pressure to shore up capital. This will create the conditions for more mergers.The cost-to-income ratio at the region’s top banks averaged 66.9% in 2019, the highest level since the financial crisis. Return on equity, a measure of profitability, dropped to 8.7%, the lowest in three years, Bloomberg Intelligence data show. Moody’s has downgraded the credit outlook for banks across France, Italy, Spain, Denmark, the Netherlands and Belgium to negative because the operating environment will “deteriorate significantly.” The ratings company already had negative outlooks for British and German banks.As well as the relentless squeeze on profit and costs, there’s another key factor that doesn’t bode well for bank jobs once the current environment ends: the sudden shift to digital banking during the pandemic. Banks are operating with only a fraction of their branches open, leading to a surge in online traffic that might well stick after the Covid-19 outbreak abates. One big U.K. bank saw demand for its online app more than triple to 5,000 daily downloads last week. In the U.S., Italy, France and Germany bank branches on average provide services to fewer than 3,500 inhabitants. In the Netherlands, where the banks are further along in introducing technological changes, the figure is closer to 11,000. This may well be a turning point in the desirability of local brick and mortar banks.The acceleration toward digital banking after the coronavirus “will probably be very fast,” UniCredit SpA Chief Executive Officer Jean Pierre Mustier told Bloomberg Television on Monday. Smaller banks in particular will have to adapt quickly. As economies implode under lockdowns affecting more than one-third of the world’s population, banks are in demand like never before. That won’t last.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.
(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.