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Markets News Thursday: Deutsche Bank reports net income of €5.0 billion in 2009; Embattled Toyota swung into black in last quarter
By Finfacts Team
Feb 4, 2010 - 9:05:32 AM
The White House is pictured in the morning after a night of snow February 3, 2010.
Deutsche Bank, Germany’s biggest bank, today reported its fourth straight quarterly profit on a recovery in trading, after a record loss a year earlier. DB had a net income of €1.3 billion in the fourth quarter after a loss of €4.8 billion in the year-earlier period, it said in a statement today. For the year 2009, net income was €5.0 billion, versus a net loss of €3.9 billion for the year 2008.
Dr. Josef Ackermann, Chairman of the Management Board, said: "Deutsche Bank achieved a great deal in 2009. We delivered very substantial profitability, while simultaneously reducing risk and balance sheet leverage. We used these good results to bolster our capital base, and our capital ratios are stronger than ever."
He added:"We also took decisive strategic action in 2009. We re-positioned core businesses, and widened our scope for profitable growth, both by organic investments and via targeted acquisitions. We also defined our management agenda for the post-crisis era. Looking forward, we see a clear trend to recovery, and stabilisation of financial markets, although the effects of the recent crisis will take time to work through. The regulatory framework of our industry will also likely see changes. With our financial strength and our strategic positioning, we are very well placed for both the challenges and the opportunities of 2010."
Bad weather probably made Irish data look worse than reality in January:Davy chief economist, Rossa White comments: "It has been a largely gloomy week of Irish data. Both PMI indicators disappointed, and unemployment claimants rose at their fastest pace since August. But one other release hints that the activity indicators are probably not as bad as they looked. New car sales actually rose 5% year-on-year last month, albeit from an incredibly low January 2009 base. Yet that hides a month of two halves, where sales were pitiful while the country froze before rebounding. Weather probably affected the seasonal adjustment of the other indicators too. Expect some payback in February.
Yesterday's PMI services reading was surely too bad to be true. At 44.4 seasonally adjusted, the index was well short of the key 50 dividing line between growth and decline. Moreover, it was the worst reading since July – breaking what had been an improving trend. Disappointingly, new export business slipped to 50.4 from readings between 52.7 and 54.7 in the previous four months. Bar new business (which reached 49.7 in October), no other component got near 50 during 2009. Orders were possibly affected by uncertainty over delivery. Note that days were missed in many service businesses thanks to transport issues.
The manufacturing PMI earlier in the week had slipped but only slightly. Bad weather almost certainly made both PMI indices look worse than reality. Seasonal adjustment factors are based on the experience (patterns) of previous years. Ireland had not experienced such cold weather since Christmas 1981/early 1982. So the adjustment factors probably underestimate the unusual dip in activity. Orders were likely delayed rather than cancelled, so February will see some snapback in activity. Weather probably cannot be blamed for the Live Register numbers: if anything, the seasonally adjusted series may underestimate the monthly rise."
Expect a continued improvement in the U.S. labour market but Olivier Desbarres, director of FX strategy at Credit Suisse, warns that the improvement won't be fast enough to justify Fed hikes. He tells CNBC's Oriel Morrison how this will affect the dollar's direction:
US jobs: The U.S. may lose 824,000 jobs when the government releases its annual revision to employment data on Feb. 5, showing the labour market was in worse shape during the recession than known at the time.
Click here for a Bloomberg Multimedia interactive visual analysis of the economy’s job losses.
Toyota: Toyota swung into the black in the quarter ended December, and now forecasts a net profit for the full fiscal year. The world's biggest car maker by volume today reported a net profit of ¥153.22 billion yen ($1.68 billion) in the period, compared with a net loss of ¥164.64 billion yen in the same quarter a year earlier.
The earnings recovery news coincides with a public relations nightmare for the giant that took years to build its image of quality. On Wednesday, Japan's transport ministry asked the company to investigate brake complaints related to the newest Prius hybrid model.
Toyota's quality general manager, Hiroyuki Yokoyama, said Thursday that the car maker had already modified the breaking system design of its popular Prius hybrid model in January, and will consider steps for current Prius owners.
Toyota also said today that the accelerator/gas pedal problems that have led to the recall of millions of its cars across the world are expected to cost it ¥180 billion ($2 billion) in the year ending March 2010.
The company has recalled almost eight million vehicles worldwide -- equivalent to annual global sales units -- to fix problems with accelerator pedals that are liable to get stuck to floor mats or which do not spring back.
US markets
On Wednesday in New York, the Dow dipped 26 points or 0.26% to 10,270.
The S&P 500 fell 0.55% and the Nasdaq gained 0.04%.
China is shooting itself in the foot by threatening to sanction U.S. defense contractors, says Charles Alcock, editorial director at Aviation International News. He tells Martin Craigs, president at the Aerospace Forum Asia & CNBC's Martin Soong why:
Asia
The MSCI Asia Pacific Index lost 0.9% Thursday.
The Nikkei 225 dipped 0.46% and the Shanghai Composite declined 0.28%.
In Europe, the Dow Jones Stoxx 600 has risen 0.18% Thursday.
Royal Dutch Shell today reported a 69% fall in annual profits to $9.8 billion and said it would cut another 1,000 jobs in 2010 in addition to 5,000 existing reductions.
The Anglo-Dutch firm also announced a big dip in fourth quarter earnings, down 75% to $1.18 billion, after incurring big margin drop son refining.
Rival BP said earlier this weak that refining margins are the lowest in 15 years.
The BDI closed at 3,005 on Thursday, Dec 31st - - a rise of 289% in 2009.
Last week, the BDI closed down 12.5%.
On Monday, the BDI dipped 103 points or 3.6% to 2,745; on Tuesday, the BDI fell 54 points or 2% to 2,691; on Wednesday, the index fell 18 points or 0.07% to 2,673.
Goodbody economist, Deirdre Ryan, comments: Economic View; Unemployment rate may peak lower than expected, but devil is in the detail - -"Live Register data for January, released yesterday, showed a monthly increase of 5,800 in the numbers claiming unemployment benefits (+3,300 in December), bringing the total on the Register to 435,000. On an annual basis the rate of increase slowed to 34% yoy, the slowest rate of increase in 18 months. Much of the monthly increase can be attributed to post Christmas layoffs, given that a similar pattern occurred last year.
This view is underlined by the fact that the increase was led by females, who accounted for 60% of the rise in January, and suggests that many services sectors reduced their headcounts post the holiday spending season. However, there are a number of other factors affecting flows on the Live Register at present which presents difficulties in being conclusive about the trends evident in the Irish labour market. For one, outward migration has been a factor, as reflected in the fact that the number of non nationals on the Register has fallen from the peak.
Added to this, there has been a significant increase in the numbers who have returned to education, which would take those people out of the labour force. For these reasons, the unemployment rate has barely moved over the past number of months, despite the fact that employment levels are probably still declining. It rose just slightly to 12.7% in January according to yesterday’s data. We will have to await until the Quarterly National Household Survey for Q4 (due next month) for more detail on the factors highlighted above to discern a truer picture of the Irish labour market, but what the Live Register data do suggest is that our peak unemployment rate forecast of 14% may be slightly on the high side at this stage."
Goodbody analyst, Eamonn Hughes, comments: Irish Financials; NAMA haircuts and timelines (drifting?) - - "Press reports this morning carry a story that the first tranche of loans being transferred into NAMA will see a haircut of up to 40%. The report indicates that impaired loans from Irish Nationwide and Anglo Irish Bank were coming out worst in the valuations being undertaken by NAMA, which would generally have been the expectation in the marketplace. In addition, the first €19bn tranche of loans going into NAMA will represent those loans associated with the country’s largest developers and, again, these would have been anticipated to be among the worst hit in the transfer. Each tranche of loans going in is likely to incur a different average haircut. But if the story proves correct, then the figures give us some comfort on our overall 33% haircut assessment for AIB and 27% for BOI.
Moving onto timelines for NAMA. The Minister for Finance spoke in the Dail (parliament) yesterday, indicating that “work in several major institutions will be finalised in respect of major lenders at the end of this month”. The expectation was always that the likes of INBS and EBS would be among the first to go into NAMA and the larger banks to follow, so the transfer process appears reasonably on schedule for the mid-February transfer start date. However, the Minister indicated that he expects the EU to rule on the banks’ restructuring plans “in the first half of the year”. He added that decisions on the recap of the banks “needs to be taken before the summer”. Previously, the Minister was quoted as indicating that the banks would be in a position to evaluate their capital needs before the end of Q1, so one gets the sense that the timelines here are starting to drift a little. He clearly gave no comment on the likely implied stakes the State could end up with, but indicated that “some banks” need capital after NAMA. We find the latter comment interesting, since he didn’t say all of them. So, does this mean he doesn’t think BOI needs any capital post NAMA? It’s obviously unclear, but our €3.3bn capital requirement assessment for BOI as much reflects its non-NAMA loans as its NAMA ones.
Elsewhere, the Minister indicated the Department of Finance is working with the EU to get “appropriate remuneration” for their preference shares and notes the earlier commentary from the Department for a preference for cash. Finally, and it is welcome to see, the Minister commented that the recent mortgage rate rise by IL&P’s bank, PTSB, reflected “commercial realities”. We have mentioned on numerous occasions that margins in Ireland need to rise materially from the current low levels to ensure a sustainable banking system."
Eamonn Hughes also commented: Irish Financials; Danske Bank reports final results - - "Danske Bank reported net profit for the year of €1.7bn DKr, up 65% yoy. In relation to the Irish business, the PBT loss widened out from –DKr552m to –DKr661m for the year. In the final quarter, the net loss was -€165m, which compared to -€155m in Q3, -€-164m in Q2 and -€177m in Q1. Total income was flat in Q4 on Q3 at DKr228m, though expenses jumped about DKr100m from the quarter run rate (our guess is goodwill impairment).
On the credit side, the loan impairment charge at DKr1,187m was consistent with the DKr1,232m in Q3. This equated to 6.2% of period-end loans, similar to the 6.3% figure in the previous quarter, so the run rate remains elevated, but not getting any worse. Looking at the Northern Ireland business, with loan losses in Q4 at 1.3% of the period end loan book, compared with 2.8% in Q3, some improvement is evident in the NI business."
