BusinessDay 17 Apr 2018

More documents

Recommendations

Info

Tuesday 17 April 2018 COMPANIES & MARKETS @ FINANCIAL TIMES LIMITED WPP shares tumble after Martin Sorrell’s departure Analysts suggest advertising group could be broken up and sold off MATTHEW GARRAHAN AND ATTRACTA MOONEY WPP shares fell almost 7 per cent on Monday as investors absorbed the departure of Martin Sorrell, the advertising group’s chief executive of more than three decades. Sir Martin quit late on Saturday after an investigation into an allegation of personal misconduct, which he has denied. One top 20 WPP shareholder told the Financial Times his departure would avoid a “protracted battle” with the board “which wouldn’t be good for either side”. WPP has appointed Mark Read, chief executive of WPP Digital, and Andrew Scott, WPP’s chief operating officer for Europe, as co-chief operating officers, with chairman Roberto Quarta, becoming executive chairman. However, the owner of advertising companies including J Walter Thompson, GroupM and Kantar Media is looking for a permanent successor to Sir Martin and is considering external candidates. “Uncertainty is likely to linger until a new CEO is appointed and a new strategy outlined to the market,” UBS analysts said. Shareholders canvassed by the FT said they feared a talent drain following his departure. One investor said several top employees had stayed with the company in the hope of being Sir Martin’s successor. “You will have some people leave who had been a number-one hopeful,” the shareholder said. WPP has had a torrid time over the past 18 months, losing more than a third of its market value S&P chart showing that bluechip dividend payers no longer shine Is trouble looming for the dividend aristocrats of the US stock market? Buying shares in companies that have proved themselves reliable dividend payers has been a winning strategy in the era of low interest rates and aggressive central bank policy. The S&P Dividend Aristocrats index — made up of 53 companies that have increased their annual dividend each year for the past quarter of a century — has generated a total return of about 440 per cent since the bull market for stocks began in March 2009. In contrast, the S&P 500 is up 372 per cent in the same period, including the reinvestment on earnings downgrades as the biggest consumer brands cut their spending on advertising. Sir Martin’s exit has focused attention on WPP’s future, with some analysts expecting it to be broken into its constituent parts and sold off. “Sir Martin could arguably be called the glue that bound much of WPP together,” said Liberum analysts. “With his departure, we think the chances of significant chunks of the business being sold off have dramatically increased.” Kantar Media, WPP’s data investment and market research unit, is among the companies most likely to be sold, said analysts. “WPP is unusual among the big global agency groups in having such a large exposure [to market research],” said Liberum, adding that WPP’s PR businesses were also likely to be put on the block. “We suspect WPP’s PR assets could also be put up for sale although this is less likely than a sale of the data investment unit.” A top 30 shareholder in WPP played down the likelihood of a break-up. “It’s far too easy to say it should be broken up,” the shareholder said. “How do you do it? It’s fiercely complicated.” A break-up would unravel a company that took Sir Martin 33 years to assemble, although he is free to start his own ad venture because he does not have a noncompete agreement with WPP. Sir Martin continues to own about 2 per cent of the company. His departure could hurt WPP in other ways. “We are uncertain how important his relationships with CMOs was in winning and retaining clients,” said UBS analysts. Shares in WPP closed down 6.5 per cent at £11.11. Is trouble looming for US dividend aristocrats? Holding cash has become a more viable investment decision MICHAEL MACKENZIE of dividends. However, this year the aristocrats index has fallen 2.2 per cent versus a 0.1 per cent decline for the broader S&P 500, including the reinvestment of dividends. Part of the explanation is that holding cash has become a more viable investment decision. As the Federal Reserve tightens policy, the rise in yields for short-dated government bills — seen as cash-like instruments because they can be sold very quickly — has for the first time in a decade become an attractive element for portfolios. At an implied yield of 2.08 per cent, the 12 month T-bill sits above the S&P 500’s 12-month trailing dividend of 1.95 per cent. Bills also look competitive against the low yields of longer-dated Treasury notes. If T-bills stay competitive, it does not bode well for the dividend aristocrats. FINANCIAL TIMES DAVE SHELLOCK What you need to know • S&P 500 up 1%, back in positive territory for the year • Markets relieved at lack of escalation in Syria crisis • Oil prices retreat after reaching four-year highs last week • Rouble adopts steadier tone • Sterling back above $1.43 for first time since January Overview US stocks started the week on a firm note and oil prices fell as concerns that the crisis in Syria could escalate in an uncontrolled fashion proved unfounded — for now at least. “The markets breathed a collective sigh of relief that air strikes on Syria conducted by the US, France and the UK were relatively constrained and limited to Syria’s chemical weapons capabilities,” said Piotr Matys, strategist at Rabobank. “That said, geopolitical risk has not evaporated and tension between the US, supported by its allies, and Russia is set to prevail.” Mr Matys noted that while the rouble had stabilised following its sharp fall last week, it remained vulnerable after the US vowed to impose more sanctions against Russia for supporting the Assad regime. C002D5556 All the sectors of the S&P 500 were higher at midday in New York, although financials once again lagged behind. Bank of America shares fell in spite of a robust set of quarterly results from the lender. The better tone to US equities left US and German government bond prices drifting lower, pushing the two-year Treasury yield to its highest in almost a decade. But the dollar failed to benefit from the rise in yields — with sterling outperforming as it climbed back above $1.43 for the first time since late January. The dollar’s broad retreat came in spite of data showing a rebound in US retail sales last month. “Despite the stronger 0.4 per cent month-on-month gain in underlying retail sales in March, real consumption growth looks to have slowed to around 1 per cent annualised in the first quarter,” said Andrew Hunter at Capital Economics. “Nonetheless, with incomes boosted by the recent tax cuts and a strong labour market, the conditions are in place for spending growth to pick up again in the second quarter.” The weekend’s events in Syria overshadowed news that the US Treasury had decided not to accuse any country of being a currency manipulator. However, President Donald BUSINESS DAY Sir Martin resigned on Saturday following an investigation into an allegation of personal misconduct © Reuters Wall Street forges ahead as Syria concerns ease Oil prices fall, 2-year Treasury yield touches highest in a decade Intesa set for record €11bn sale of non-performing loans MARTIN ARNOLD Intesa Sanpaolo is close to agreeing the Italian bank’s biggest ever sale of non-performing loans after receiving a binding offer from Sweden’s Intrum to buy its debt-collection operation and €10.8bn of bad loans. The board of Intesa is due to meet on Tuesday morning to decide whether to accept the deal, which marks a strategic shift for the bank and is a further sign the European Central Bank’s efforts to reduce the toxic loans weighing down European banks is bearing fruit. Intesa said in a statement on Monday evening that Intrum had made a binding offer to buy €10.8bn of bad loans from the bank for €3.1bn, which is close to their book value. The Swedish debt collection specialist is also taking on 600 employees from Intesa’s debt collection unit, which is being merged with its own Italian operations. The deal will create a new Italian debt collection business, which will be 51 per cent owned by Intrum and 49 per cent by Intesa. The new business will manage more than €40bn of bad loans in total. The deal allows Intesa to deconsolidate the bad loans from its balance sheet and means it is halfway towards the four-year target it set recently to reduce its bad loans by €26bn. The Italian lender, which had until recently resisted pressure from the ECB to dispose of its bad loans, said the deal would generate a net capital gain of about €400m. Italian banks have been stepping up their disposals of non-performing loans in recent years in response to intensifying pressure from regulators and investors. Last year, UniCredit set a new record for the country by selling €17.7bn of bad loans to Pimco and Fortress, the US fund managers. Monte dei Paschi di Siena, the partially nationalised lender, A5 Trump claimed on Monday that Russia and China were “playing the currency devaluation game as the US keeps raising interest rates Equities By midday in New York, the S&P 500 was up 1 per cent at 2,683 — taking it back above where it ended 2017. The Dow Jones Industrial Average was 1.2 per cent higher and the Nasdaq Composite was up 0.8 per cent. Bank of America shares were down 0.5 per cent as the S&P 500 financial sector gained 0.5 per cent — the worst sectoral performance in the index. Across the Atlantic, stock markets appeared more constrained by the strength of the euro and — to an even greater extent — sterling. The pan-regional Stoxx 600 index and the Xetra Dax in Frankfurt fell 0.4 per cent, while the FTSE 100 in London shed 0.9 per cent. Evraz, the UKlisted Russian minter, fell 7 per cent. Tokyo’s Topix added 0.4 per cent. The S&P/ASX 200 in Sydney was up 0.2 per cent and Seoul’s Kospi ticked up 0.1 per cent. Forex and fixed income The dollar index, a measure of the greenback against a basket of peers, was down 0.4 per cent at 89.43 as the euro gained 0.4 per cent to $1.2380 and sterling climbed 0.6 per cent to $1.4324 — not far from the day’s high. The dollar was down 0.2 per cent versus the yen at ¥107.14. is in the process of selling a €25bn portfolio of non-performing loans. The Italian banking system accounts for around a quarter of the eurozone’s stockpile of NPLs — by the far the largest in the bloc — built up during Italy’s triple-dip recession and as a result of poor lending and supervisory decisions. The bad loans have weighed on banks’ profitability and the wider economy, stifling lending to new businesses. New dynamism in the Italian economy has started to reduce the burden on the banks, although the growth of an active market for NPLs is seen as crucial to their reduction in the short term. Data from the Bank of Italy showed the stock of gross non-performing loans fell 5.5 per cent in November 2017 to €173bn compared with the preceding month, and were down 6.4 per cent compared with the same month in 2016.
A6 BUSINESS DAY C002D5556 Tuesday 17 April 2018 FT George Stephanopoulos of ABC News interviews James Comey © AP James Comey claims Donald Trump may be compromised by Russians Former FBI head attacks ‘morally unfit’ president who treats ‘women like they’re pieces of meat’ KADHIM SHUBBER Donald Trump “treats women like they’re pieces of meat” and may be compromised by the Russians, according to James Comey, the former FBI director who was fired by the US president last year. The claims were made in an ABC News interview broadcast on Sunday night in the latest round of an extraordinary slanging match between a sitting president and a former top law enforcement official. Mr Comey, speaking before the release of his memoir on Tuesday, called Mr Trump “morally unfit to be president”, referring to the clashes between white supremacists and anti-racist protesters in Charlottesville, Virginia last year. “A person who sees moral equivalence in Charlottesville, who talks about and treats women like they’re pieces of meat, who lies constantly about matters big and small and insists the American people believe it, that person’s not fit to be president of the United States,” he said. In one portion of the interview, Mr Comey claimed Mr Trump was reluctant to criticise Vladimir Putin, the Russian president, even in private, and suggested the Russians may have compromising information about the US president. “I think it’s possible. I don’t know. These are more words I never thought I’d utter about a president of the Unit- Russian journalist dies in fall from apartment building Maxim Borodin had written articles about Russian mercenaries fighting in Syria MAX SEDDON A Russian journalist who wrote about the deaths of Russian mercenaries in Syria has died after falling from his fifth-floor apartment. Maxim Borodin, 32, a reporter for the website Novy Den, died on Sunday after neighbours found him on the ground outside his apartment building in Ekaterinburg on Friday. Police investigating Borodin’s death said they were not treating it as suspicious. Borodin did not leave a suicide note, and the door was locked from the inside. Polina Rumyantseva, Novy Den’s editor, said police suspected that he had fallen off his balcony while sitting on a ledge to smoke. “He was going to move to Moscow and get married to a girl there,” Ms Rumyantseva said. “It looks like a terrible accident.” Borodin’s death nonetheless struck ed States, but it’s possible,” he said. The provocative new book by Mr Comey — and the media campaign around it — comes as the president’s legal woes continue to build. Mr Trump is grappling not just with the investigation by Robert Mueller, the special counsel, into alleged Russian election meddling, but also a criminal investigation of his personal attorney, Michael Cohen. On Sunday evening, shortly before the ABC News interview aired, lawyers for Mr Trump asked a New York court to stop prosecutors examining materials seized from Mr Cohen in raids earlier last week. Mr Trump’s legal team requested that any seized information relating to the president be reviewed by him first to protect his attorney-client privilege. Mr Comey’s book recounts his career up until he was fired by Mr Trump in May 2017, a decision the long-time prosecutor learnt about on television. It details the relationship between the former FBI head and the president, which has become a key part of the story of the early Trump White House. Mr Comey is a witness to the case that the president attempted to obstruct justice and said Mr Trump asked him to drop the criminal investigation of Michael Flynn, the former Trump national security adviser who pleaded guilty to lying to the FBI. The president has denied the claims. He also said Mr Trump asked for personal loyalty, comparing him to a Mafia boss. a chord on social media, where users pointed out that he was the latest of many Russian independent journalists to die in unexplained circumstances. Since 1992, 38 journalists have been murdered in Russia, while only five of those murders have been successfully prosecuted, according to the Committee to Protect Journalists. The Organization for Security and Co-operation in Europe called for a full investigation into Borodin’s death. Last year, independent newspaper Novaya Gazeta said it would arm its reporters with guns that fire rubber bullets after a man broke into the studio of Ekho Moskvy, a state-owned talk radio station popular among the liberal opposition, and stabbed host Tatiana Felgenhauer in the neck. Ms Felgenhauer survived the attack and later returned to work. Borodin had recently investigated the deaths of Russian mercenaries who fought alongside President Bashar al- Assad’s forces in Syria. CIA director Mike ANALYSIS The book, A Higher Loyalty, has kicked off a political firestorm, with Republicans branding Mr Comey “Lyin’ Comey” in an effort to discredit him. Mr Trump has responded furiously and fired off no fewer than five tweets on Sunday morning, calling the book “badly reviewed” and Mr Comey himself a “slimeball”. “I never asked Comey for Personal Loyalty. I hardly even knew this guy. Just another of his many lies. His ‘memos’ are self serving and FAKE!” said the president in one tweet. Mr Trump tweeted later: “Slippery James Comey, a man who always ends up badly and out of whack (he is not smart!), will go down as the WORST FBI Director in history, by far!” On Monday morning, the president tweeted again, accusing Mr Comey of lying to Congress and committing “many crimes”. The media war between the pair is unlikely to end soon, with Mr Comey due to do further television interviews in the coming week. A nationwide book tour is also scheduled. The former FBI director has not been wholly critical of Mr Trump. In the ABC News interview, Mr Comey recounts meeting the president for the first time at a meeting at Trump Tower. “He had impressively coiffed hair, it looks to be all his,” said Mr Comey. “I confess, I stared at it pretty closely and my reaction was, ‘It must take a heck of a lot of time in the morning, but it’s impressively coiffed.’” Pompeo said last week during hearings for his nomination to be US secretary of state that “a couple hundred Russians” died during an attack on US-backed forces in February. Russia denies that it has anything to do with the mercenaries and has acknowledged only five deaths in the incident. Western officials and Russian analysts say the deaths show that the Kremlin is using hired guns to mask its official involvement. Many of the Russians who died in Syria come from depressed industrial towns near Ekaterinburg, a major city in the Ural Mountains near Siberia. Viacheslav Bashkov, a friend of Borodin’s, wrote on Facebook that Borodin called him at 5am the day before his fall and claimed that several camouflaged, masked men were outside his apartment and a man with a gun was on his balcony. Borodin then called Mr Bashkov back an hour later and said the men were probably conducting a training exercise. Bank of America shareholder return tops double-digits Second-biggest US bank reports stronger-than-forecast first quarter ALISTAIR GRAY Bank of America has generated a double-digit shareholder return for the first time in seven years, the latest sign that the industry bellwether has put its post-crisis malaise behind it. Lower taxes and higher interest rates helped the second-biggest US bank by assets produce a return on common equity — a closely watched measure of profitability — of 10.8 per cent during the first three months of 2018. For years, its return has fallen short of the 10 per cent threshold that investors in the sector have traditionally demanded. In spite of the stronger-thanforecast results, however, shares in BofA ticked up only 0.3 per cent on Monday, showing how much bank investor expectations have risen. Bond trading revenues fell in the quarter, and bearish analysts said they were underwhelmed by the bank’s lending volumes. Paul Donofrio, chief financial officer, highlighted that BofA’s net income of $6.91bn, up 30 per cent from a year earlier, was the highest it had ever produced. While profits were boosted by a lower quarterly income tax bill, which dropped more than a quarter from a year ago to $1.5bn, Mr Donofrio noted that pre-tax income was also up 15 per cent. “This quarter is not an anomaly,” he added. The figures follow upbeat updates from rivals JPMorgan Chase and Citigroup last week. Taken together, they suggest that the promised “Trump bump” — which has driven S&P 500 bank stocks 44 per cent higher overall since the 2016 presidential election — is finally flowing through to bottom lines. It marks the first time since the third Syria and Russia accused of blocking investigators from Douma The UK delegation to the international chemical weapons watchdog has accused Syria and Russia of preventing investigators from reaching the site of an alleged chemical attack near Damascus. On Monday evening, investigators had still not gained access to Douma, site of the April 7 attack that prompted Saturday morning’s air strikes against Syria’s chemical weapons infrastructure by the US, UK and France. Investigators arrived in Damascus on Saturday but were unable to reach Douma, just 16km away. The UK delegation to the Organisation for the Prohibition of Chemical Weapons (OPCW) blamed Russia and Syria for not allowing the investigators to access the site to collect samples. Peter Wilson, the UK permanent representative at the OPCW, told Reuters the UN had cleared the inspectors to go to Douma but that Syria and Russia had said they could not guarantee their security. “We are obviously keen to make sure the inspectors have every means that they can to carry out their quarter of 2011 — when profits were supported by one-time gains — that BofA produced an return on equity above 10 per cent, according to S&P Capital IQ. Analysts have forecast a 10.3 per cent return for the full year, the strongest annual performance since the financial crisis. Despite this, David Hendler, founder of Viola Risk Advisors, said the bank was still playing “catch up” to JPMorgan, which produced an ROE of 15 per cent in the quarter. Steven Chubak, analyst at Nomura, said: “The results can best be described as good, not great.” BofA is regarded as among the biggest potential beneficiaries of higher interest rates because of its particular mix of assets and liabilities. Revenues from consumer banking rose 9 per cent from a year ago to $9bn as the lender increased charges for borrowers while keeping deposit rates little changed. Borrower default rates meanwhile remain minimal — the bank wrote off only 0.4 per cent of loans in the quarter. Executives have also expanded the loan book — balances for residential mortgages, credit cards and US commercial lending balances each rose between 4 and 6 per cent — although the level of increase disappointed some analysts. “Bank of America has a huge deposits cost advantage and needs to demonstrate greater levels of loan volume growth,” Mr Hendler said. The performance of the investment bank was also mixed. The return of volatility to financial markets helped equities, where sales and trading revenues leapt 38 per cent to $1.5bn, but it failed to boost the larger fixed income division. Revenues from fixed income, commodities and currencies fell 13 per cent to $2.5bn. International watchdog held back from site of alleged chemical attack, says UK team REBECCA COLLARD job and carry out their investigation as soon as possible,” Mr Wilson said. “We see no reason why they should not be able to get to Douma.” Russia denied the allegations and blamed the US-led strikes against Syria for the delay. The Syrian government retook control of Douma over the weekend after rebels surrendered in return for safe passage out. The US also accused Russia of blocking the investigators from reaching the site and raised concerns that evidence could be tampered with, while opposition activists and medical workers expressed fears evidence could be diluted or destroyed before investigators arrived. The OPCW mission is to determine whether chemical weapons were used in the attack, not who carried it out. Graphic images of dead bodies, people foaming at the mouth and panicked children being hosed down following the attack drew global condemnation last week. Syria and Russia have denied chemical weapons were used in Douma. But the US said it had proof before the air strikes, which hit at least three targets with more than 100 missiles.
Page 1 and 2: usinessday market monitor Commoditi
Page 3 and 4: Tuesday 17 April 2018 C002D5556 BUS
Page 9 and 10: Tuesday 17 April 2018 BUSINESS DAY
Page 11 and 12: Tuesday 17 April 2018 COMMENT RAFIQ
Page 19 and 20: Tuesday 17 April 2018 19 BUSINESS D
Page 21 and 22: Tuesday 17 April 2018 BDTECH JUMOKE
Page 37 and 38: A2 BUSINESS DAY NEWS NCC won’t ap
Page 39: A4 BUSINESS DAY C002D5556 Tuesday 1
Page 43 and 44: Tuesday 17 April 2018 Malabu: Right

BusinessDay 17 Apr 2018

Create successful ePaper yourself

Delete template?

Save as template?