Jan 21, 2014 ... Saudi Basic Industries Corp (SABIC) slipped 0.7 percent, ... “For petrochemicals,
some Q4 numbers were slightly dis- ... challenging in 2014.”.
Business
Peugeot opens door to Dongfeng, shares drop Page 22
China’s 2013 growth dodges 14-year low
TUESDAY, JANUARY 21, 2014
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FRANKFURT: The headquarters of Deutsche Bank is photographed in Frankfurt. Shares of Deutsche Bank AG have fallen sharply after Germany’s biggest lender announced a large fourth-quarter net loss. — AP
Deutsche Bank shares plunge on Q4 loss Watchdog to visit Deutsche in London in FX probe FRANKFURT: Shares of Deutsche Bank AG fell sharply yesterday after Germany’s biggest lender announced an unexpected fourthquarter loss largely due to weak investment banking results and the cost of strengthening its finances. Deutsche Bank, which warned the headwinds will continue this year, saw its stock slump 3.9 percent in early trading to 37.80 euros, making it the worst performer on Frankfurt’s DAX index. The bank on Sunday night posted a fourthquarter net loss of 965 million euros ($1.3 billion), an announcement that came 10 days before it was scheduled to release its results. Analysts were expecting a profit of about 200 million euros. Revenues also disappointed, falling 16 percent to 6.6 billion euros. The losses showed how the bank is still struggling to
overcome previous legal entanglements and deal with new regulatory demands in an uncertain European economy. Much of the decline in revenues in the fourth quarter came from the investment banking division, which suffered a steep fall in income from trading debt securities. The bank has also faced a steady drag on earnings from expenses for litigation and legal settlements resulting from investigations of alleged past abuses. They totaled 528 million euros in the fourth quarter. The bank suffered 1.1 billion euros in losses on risky investments it has set aside for disposal as it - along with other banks - faces demands from regulators to strengthen its finances in response to the market turbulence of recent years. Market strategist Ishaq Siddiqi at ETX Capital called the results a “nasty set of num-
bers which have geared investors here in Europe for what could be an ugly earnings season for European banks.” Co-CEO Anshu Jain said on a conference call with analysts that the bank was dealing well with factors that its management could control, such as reducing costs. He said that excluding one-time expenses and the unit disposing of risky assets, the bank’s core operations earned 8.4 billion euros in 2013. That was up from 7.6 billion euros the year before and comparable with earnings before the financial crisis hit in earnest in 2008. However, he warned that the outside factors - pending litigation, regulatory demands and tough markets - “will remain challenging in 2014.” Representatives from Germany’s financial watchdog Bafin will visit the London offices of
Saudi firms favor local debt markets: Deutsche official RIYADH: Companies in Saudi Arabia will favor local debt markets over international bond issues to meet their financing requirements in 2014 as high liquidity keeps funding costs down, a top executive at Deutsche Bank said. Saudi firms have increasingly looked to the local debt market in recent years to help diversify their funding sources away from bank loans, with ample liquidity in the domestic market often suppressing borrowing costs to levels well below rates for equivalent dollar-denominated bond sales. With interest rates on international markets expected to rise from historic lows as the US Federal Reserve begins to wind down its quantitative easing program in 2014, the insulated Saudi market and its low borrowing costs are expected to remain attractive to the kingdom’s issuers. “There is a lot of liquidity looking for a good home in Saudi Arabia. And importantly the Saudi market has developed comfort with long-term debt issues in Saudi riyals,” Jamal Al-Kishi, chief executive officer of Deutsche Securities Saudi Arabia, said. “We expect local debt market activity this year to surpass international bond sales by Saudi issuers,” he said. The German lender is one of the more active international banks in the Gulf’s largest economy, which is expected to open up its markets to foreign investors. Deutsche competes with HSBC and JP Morgan Chase Inc in arranging and advising companies and state-owned entities on their capital market needs in the kingdom.
The bank earned $14.4 million in fees from arranging debt issues in the Middle East during 2013, second behind HSBC, which earned $15.4 million, according to Thomson Reuters. Construction firm Saudi Binladin Group and dairy producer Almarai were among the issuers of local currency Islamic bonds last year, while Deutsche Bank helped Sadara Chemical Co, a venture between Saudi Aramco and Dow Chemical, raise 7.5 billion riyals to fund construction of its facilities last March. A number of banks, including Saudi Hollandi Bank and Saudi British Bank, have also sold sukuk in the local market to improve their reserves after a period of loan growth. “For entities who do not have a lot of outstanding debt, issuing in the local debt market may prove less costly and more straightforward,” Kishi said. Kishi expects measures will be taken in 2014 to open up Saudi Arabia’s stock market to foreign investors. Saudi Arabia is the Arab world’s biggest stock market and, by some measures, the world’s last sizeable market that has not opened to international capital flows. Hopes of the market opening to direct foreign investment has prompted international banks to beef up their presence in the kingdom. “Saudi needs responsible long-term oriented capital that will bring technology and best practice to our industrial and service sectors,” he said. — Reuters
Deutsche Bank, the country’s biggest lender, as it steps up investigations into alleged currency market manipulation, a source familiar with the process said yesterday. This follows Deutsche’s suspension last week of traders in New York and mirrors the arrival of US regulators in London last week at Citigroup’s London headquarters, marking an escalation in the global probe. German magazine Der Spiegel reported on Sunday that Bafin was setting up a so-called special investigation, putting the case at the top of its priority list. Bafin was not available for immediate comment. Deutsche Bank declined to comment, and referred Reuters to a previous statement that it is cooperating with those investigations, and will take disciplinary action with regards to individuals if merited.
The source could not say when the visit would take place, but said investigators are not on the bank’s London trading floor tapping on people’s shoulders just yet. The source also could not confirm if Bafin officials also plan to visit Deutsche’s US headquarters in New York. Benchmark foreign exchange rates, or daily fixings, are a cornerstone of global financial markets, used to price trillions of dollars worth of investments and deals and relied upon by companies, investors and central banks. London is the hub of the $5.3 trillion-a-day global foreign exchange trading market, accounting for around 40 percent of that total. Authorities around the world are investigating whether senior traders at some of the world’s biggest banks colluded to rig these rates. — Agencies
Real estate boosts Dubai; Gulf mixed MIDEAST STOCK MARKETS DUBAI: Dubai’s bourse surged yesterday, led by real estaterelated shares, as investors bet on a further rebound in the emirate’s property prices. Other regional markets were mixed, with Saudi Arabia soft after some high-profile earnings misses. Dubai’s residential property prices in 2013 rose 22 percent on average while rents improved 17 percent, consultants Jones Lang Lasalle said in a report on Sunday; they predicted further gains this year, though at a slower pace as new supply comes onstream. Union Properties climbed 2.7 percent and Deyaar Development jumped 6.0 percent. In a fresh sign of optimism in the sector, Kleindienst Group said it had started building a huge resort complex on the World, the man-made archipelago off Dubai’s coast which has been left mostly vacant since the emirate’s real estate crash in 2008. Arabtec gained 3.6 percent after the firm said it won a 5.7 billion dirham ($1.55 billion) contract to build a resort in the Aqaba area of south Jordan. Dubai’s index rose 1.5 percent to 3,670 points, a new fiveyear high. It is testing technical resistance at 3,625 points, the low of April 2007; a weekly close above that level would confirm a break. The index is also nearing the 50 percent retracement of its drop from the January 2008 peak, which lies at 3,807 points and may provide resistance. Saudi eranings In Saudi Arabia, the main index eased for a second straight session from a five-year high as major sectors declined follow-
ing some disappointing fourth-quarter earnings. Shares in Savola Group fell 3.1 percent after the company posted a net profit of 564 million riyals ($150.4 million), up 37 percent from a year earlier but well below analysts’ average forecast of 643 million riyals. Saudi Basic Industries Corp (SABIC) slipped 0.7 percent, extending its decline after Sunday’s lacklustre earnings. “It is proving difficult to find good buying opportunities in the Saudi market right now,” said Sleiman Aboulhosn, investment analyst at ING Investments. “For petrochemicals, some Q4 numbers were slightly disappointing and others were impressive. But in our opinion, the outlook is good given the continued improvement in product prices.” In Qatar, the benchmark slipped 0.2 percent, its second decline since it snapped a 13-session winning streak. Shares in Qatar Islamic Bank rose 1.9 percent after it posted a fourthquarter profit that more than tripled, beating analysts’ estimates. Some local investors in Qatar may be cashing out to buy into the initial public offer of Mesaieed Petrochemical Holding Co, a unit of state-owned energy firm Qatar Petroleum, the first IPO in the country since 2010. The offer will end today. It is not clear how strong investor demand for the IPO has been so far; a trader familiar with the offer said some investors were waiting for the last days to subscribe because they did not want to tie up their money for a long period. — Reuters
