BMW profits driven by strong demand

German carmaker BMW has reported a surge in profits, thanks to a recovery in global markets, demand from China and strong sales of new models.

The firm made 834m euros (£692.8m; $1.1bn) between April and June, up from 121m euros a year earlier. Sales climbed by 18.3% to 15.35bn euros.

The results impressed investors, pushing the firm's share price up by 3.4% in morning trading.

BMW had already raised its 2010 sales and earnings forecasts last month.

Chief executive Norbert Reithofer confirmed the company aimed to boost full-year sales by about 10% to more than 1.4 million vehicles.

"We are aiming to achieve significantly higher group earnings in 2010 than in 2009," he said.

Asian growth

The number of BMW, Mini and Rolls-Royce cars sold rose by 12.5% in the quarter.

This included a 3.6% growth in Europe and a 5.6% rise in the US.

The most spectacular growth was seen in Asia, where quarterly sales were up by 59.4% at just under 70,000 cars.

More than 45,000 of these sales were in China and Taiwan - almost double the volume seen in the same period in 2009.

"Sharp sales volume growth on major markets and a high-value model mix are the main reasons for the strong second-quarter performance," Mr Reithofer said.

He added that improved economic conditions had allowed it to charge more for its cars, which had bolstered profits.

(From BBC)

US gets tough on ratings agencies

US credit rating agencies will face tighter supervision under new rules adopted by the US financial watchdog.

The Securities and Exchange Commission (SEC) said agencies must disclose more information on past ratings to help investors make informed judgements.

The agencies, which give firms ratings to determine how safe an investment they may be, have been criticised for their role in the financial crisis.

The dominant agency firms include Standard & Poor's, Moody's, and Fitch.

'Flash trading' moves

Head of the SEC, Mary Schapiro, said that investors' reliance on agency ratings "did not serve them well over the last several years".

Earlier this year, credit rating agencies admitted errors were made when assessing some of the financial instruments that have been blamed for the credit crunch.

The agencies have been accused of failing to spot the size and risk of the bad US housing debt that was resold around the world, causing multi-billion-pound losses.

They gave high ratings to sub-prime mortgage investment vehicles that later turned out to be incorrect.

The SEC also proposed rules to ban "flash trading" - the process where certain financial institutions gain access to trading information seconds before it is made public.

news.bbc.co.uk

Belgium wants probe of Opel sale

Belgium wants the European Union to investigate Germany's role in the sale of General Motor's European units.

GM decided to sell Opel and Vauxhall to Germany's preferred bidder, Canadian car parts manufacturer Magna.

Magna has said that it will keep all four German plants open, but it has suggested it could wind down production at a plant in Antwerp.

"I think the German government sought its own advantage," said Belgian Vice Premier Joelle Milquet.

State aid rules

Germany had been pushing for the sale to Magna, which is backed by Russia's Sberbank.

The government has already lent 1.5bn euros to Opel, and will now put up an additional 3bn euros in loan guarantees for Magna.

Belgian Foreign Minister Yves Leterme also backed calls to have the European Commission probe the deal. He said Belgium would bring the GM sale up at a meeting of EU ministers next week.

The European Commission said it was following the GM sale process "very closely".

"The Commission has underlined that the financial support must be fully compliant with all aspects of the EU's state aid and internal market rules," it said.

"In particular, state aid cannot be subject to additional non-commercial conditions concerning the location of investments and/or the geographic distribution of restructuring measures."

The EU's executive body added it will be "attentive" to the "social consequences" of the sale as it comes to a conclusion about its legality.

German guarantee

The German-led Opel Trust - containing representatives from GM, the German federal government and the German states that contain Opel plants - has controlled the European operations since GM sought bankruptcy protection in the US in June this year.

The trust's chairman, Fred Irwin, said on Thursday that they had recommended - "given the burden on German taxpayers and for the sake of German jobs" - that those guarantees be used for Opel in Germany only.

The sale to Magna is being seen as a victory for German chancellor Angela Merkel - who said she was "very pleased" about it - just two weeks before the national election.

Opel employs a total of 54,500 workers across Europe, with 25,000 based in Germany.

British unions have expressed concern about the long-term future of Vauxhall's 5,500 UK workers and its two British plants in Luton and Ellesmere Port.

Magna has also suggested shifting some production from a plant in Zaragosa in Spain back to Germany.

BBC.COM

G20 proposes curb on bank bonuses

Bankers' bonuses should be deferred in order to reward long-term success rather than short-term risk-taking, G20 finance ministers have suggested.

In a draft proposal agreed in London, ministers backed the idea from the UK as an alternative to a formal cap on bonuses sought by some countries.

Ministers also said they would continue financial support for the global economy despite some signs of recovery.

And they agreed to give emerging economies more say on the world stage.

The BBC's chief economics correspondent Hugh Pym said it appeared a consensus was emerging on bank bonuses.

He said ministers had agreed in principle that bankers' pay should be long term, with no cash bonuses up front, and that there should be greater transparency about what staff are actually being paid.

But our correspondent said the details of any plans would still need to be thrashed out before the summit of G20 leaders in Pittsburgh, Pennsylvania later this month.

'Serious mistake'

Some countries, including France and Germany, had wanted the G20 to start discussing "exit strategies" - ways of scaling back their spending on fiscal stimulus.

They are already beginning to emerge from recession and had argued that such spending was leading to dangerously high levels of state debt.

Opening the meeting, Prime Minister Gordon Brown warned that any such scaling back would be a "serious mistake" and could risk causing another "downward lurch" in the global economy.

The draft communiqué suggests his concerns were taken on board as ministers have agreed in principle to continue spending until a global recovery is firmly secured.

Britain had also opposed suggestions by France and Germany to place a mandatory cap on bankers' bonuses.

Instead, Mr Brown and Chancellor Alastair Darling backed a system of deferred bonuses which G20 ministers now appear to have accepted.

Their draft proposals contain plans to withhold bonuses for up to five years until the longer-term impact of bankers' actions is clear.

They also suggest including claw-back clauses in bonus agreements which would allow money to be recouped if decisions which seemed successful later go bad.

Bonuses would also be paid in stock options, not cash, so that individuals only benefit if their company does.

Mr Brown said earlier there could not be "a return to the past ways of governance" within the banking sector, which resulted in pay awards that were "offensive" to the public.

"Specifically, pay and bonuses cannot reward failure or encourage unacceptable risk taking," he told ministers.

More say

The third aspect of the draft communiqué concerns the representation and voting rights of emerging economies within the IMF and World Bank.

At present, for example, China has the same power as the Netherlands, despite the vast difference in the size of their economies.

The draft shows ministers have agreed to raise "significantly" the say of emerging nations' on the world stage.

The BBC's business correspondent Joe Lynam said the draft would now be turned into formal guidelines by the Financial Stability Board, which is made up of representatives of central banks and regulators from around the world.

Those guidelines will be discussed and voted on in Pittsburgh, but it will be up to individual state governments to decide whether or not to turn them into law.

The BBC

economics - Markets rise on US recovery hopes

World stock markets have risen after US central bank chief Ben Bernanke said the world's biggest economy was nearing the start of a recovery.

"The prospects for a return to growth in the near term appear good," Mr Bernanke told a conference in Wyoming.

On Wall Street, the Dow Jones index rose more than 1%, while European markets were also sent higher.

But the Fed boss said unemployment, which is expected to top 10% in the US, would fall "only gradually".

However, European Central Bank president Jean-Claude Trichet expressed concern at what he saw as premature talk of a full recovery.

After contracting sharply over the past year, economic activity appears to be levelling out, both in the United States and abroad Ben Bernanke, Federal Reserve chairman

"I am a little bit uneasy when I see that, because we have some green shoots here and there, we are already saying, 'well, after all, we are close to back to normal'," he said, speaking later at the conference.

'Slow at first'

Central bankers were speaking as data showed sales of existing US homes rose by more than 7% in July.

That was the largest monthly increase in the 10 years that the National Association of Realtors has been keeping records.

But Mr Bernanke warned that the road to recovery would be a long one.

"The economic recovery is likely to be relatively slow at first, with unemployment declining only gradually from high levels," he said.

The International Monetary Fund (IMF) has predicted that the US economy will expand by 0.75% next year, after earlier predicting no growth.

The Fed chief was also upbeat on the prospects for the world economy.

"After contracting sharply over the past year, economic activity appears to be levelling out, both in the United States and abroad," he said.

The IMF has previously said that the global economy was "starting to pull out of recession".

'Bullish'

The Dow Jones finished 156 points higher at 9,506. The Nasdaq and the S&P 500 also rose by more than 1%.

London's FTSE 100 climbed 2% to close at 4,851, while Germany's Dax index rose 2.8% and France's Cac 40 gained 3.1%.

"Bernanke was a little bit more bullish than most people were expecting," said Jacob Oubina, currency strategist at Forex.com.

"He's saying that the global economy is starting to emerge from the recession and that the fears of a financial collapse have receded substantially.

"I think the market is just taking those headlines as extreme positives for the outlook."

http://news.bbc.co.uk/

CBN Sacks Five Bank CEOs, Injects N400b

The Central Bank of Nigeria has moved to inject N400 billion into five banks in the country following the decision to remove the CEOs and executive directors of the affected banks. The affected institutions are Intercontinental Bank Plc, Union Bank of Nigeria Plc, Oceanic International Bank Plc, Finbank Plc and Afribank Plc.

The CEOs that have been sacked by the CBN are Erastus Akingbola (Intercontinental Bank); Okey Nwosu (Finbank); Sebastian Adigwe (Afribank); Mrs Cecelia Ibru (Oceanic Bank); and Bartholomew Ebong (Union Bank).

But in a pre-emptive move, Erastus Akingbola, MD/CEO of Intercontinental Bank who got wind of his impending removal called his executive directors to inform them of their certain sack by the CBN.

Akingbola was said to have rushed to Ota yesterday to elicit the support of former President Olusegun Obasanjo to intervene on his behalf and call President Umaru Yar�Adua to stop the CBN from carrying out the sack.

However, the CBN governor, Sanusi Lamido Sanusi, who made this decision known this morning at the Emergency Bankers� Committee convened by the CBN in Lagos, explained exclusively to THISDAY that the decision was being taken to safeguard the financial sector from systemic collapse.

He said following the audit exercise conducted by CBN�s examiners it was discovered that five of the banks had accumulated margin loans of N500 billion, among other loans, that had gone bad and eroded their shareholders� funds.

�Some of these banks are quite large institutions and they have been mismanaged, so we had to move in to send a strong signal that such recklessness on the part of bank executives will no longer be tolerated.�

He said the CBN had obtained the approval of the President to inject N400 billion into the affected banks to shore up their tier 2 capital to minimum acceptable levels.

Sanusi added that the funds being injected by the CBN was just temporary and does not translate to the government taking a stake in the five banks, as the interim management will be given a period to recapitalise the affected institutions, following which the N400 billion will be paid back to the CBN.

On how the CBN will prevent a run on the banks and create panic in the economy, Sanusi said the CBN intends to make it clear that the money being injected by the reserve bank as well as the decision to guarantee interbank placement should allay depositors� concerns.

The CBN, he stated, stands ready to ensure that no bank collapses in the country, but will encourage them to seek for funds to raise fresh capital and merge with stronger banks.

He said an interim management and board for the affected banks will be put in place to run the institutions until they are taken over by new management teams and owners.
( thisdayonline.com)

GM's Board Ratchets Up Pressure on New CEO

Under new Chairman Ed Whitacre, GM's board is demanding real results and growth from CEO Fritz Henderson

General Motors' recently installed CEO, Frederick A. "Fritz" Henderson, has had just one board meeting with his new slate of directors. And already they are giving him pressure to show better results.

At the new board's first meeting, which was held in Detroit on Aug. 3, some of the new group pressed him on how the company plans to build revenue, Henderson said in an interview. The conversation went further, according to one source in the meeting and another who was briefed on discussions. The board also said that GM's revised recovery plan filed on Apr. 27 isn't quite good enough. "They don't consider our viability plan to be winning," says one GM executive. "We're going to be under a lot of pressure."

Even the first board meeting shows a stark contrast from GM's old board. With a few exceptions, the previous directors showed a lot of patience with ousted Chairman and CEO Rick Wagoner. He racked up some $80 billion in losses since 2005 but kept solid backing. The old board also had to focus mostly on costs since the automaker has been in nearly constant restructuring mode for years.

Safeguarding the Bailout Money

The new board will be under pressure to scrutinize management more than the prior board, experts say. The previous board showed plenty of leniency with Wagoner; some critics say far too much. So the new directors will have to show that they are tougher than their predecessors and they are safeguarding the public funds that kept GM from failure and liquidation.

Since January, the federal government has made $50 billion available to GM, most of which has been converted to a 60% ownership position in the company. For taxpayers to break even, GM will have to eventually issue new stock and the company's value will need to reach $69 billion, more than it has ever been valued. "The public and the government will be watching very closely," says John Paul MacDuffie, associate professor of management at the Wharton School of Business. "The fact that the bailout was unpopular means that they have to have a turnaround story that overcomes the bailout story."

That's what the board is pushing for. At the meeting, new Chairman Ed Whitacre, who had previously been chairman and CEO of AT&T (T), and several other directors pressed Henderson on how the company would build revenue, strengthen its brands, and communicate the message that its new products are competitive. "All of their questions were on revenue," Henderson said, adding that they asked, "What are your metrics? How will you hold yourself accountable?"

Growth Is an Issue

One key point from the new board is that GM's revitalization plan alone isn't good enough. That plan, which cut four brands, downsized the company and its dealer network, and led the way into bankruptcy to clean up the balance sheet, only keeps GM above water. It doesn't show growth. Some directors were concerned GM wouldn't push to grow beyond the sales and market share laid out in the plan, say two sources familiar with the discussion.

That's where Henderson's challenge comes in. The plan said that GM can break even, at least before interest payments, in a car market of 10 million vehicles and market share of 19.5% this year. GM said in the plan that market share would stabilize between 18.4% and 18.9% in the next few years. GM's share through July was 19.5%, but slipped to 18.8% in July.

But keeping the share above 18% could be a challenge, analysts say. GM is either selling or ditching Hummer, Pontiac, Saab, and Saturn. Pontiac will be phased out, and GM is in the process of selling the other three. Together they account for 3% of the market. GM will need to keep some of those buyers or fall to 15% share.

www.businessweek.com

National Penn replaces CFO

National Penn Bancshares Inc., which operates banks in Pennsylvania and elsewhere, said Wednesday it is replacing its chief financial officer, effective Aug. 31.

Michael J. Hughes, 53, will become CFO. He was previously CEO at BSCV Inc. and chief restructuring officer at Boscovs Department Store, where he oversaw the company's restructuring and bankruptcy case.

He replaces Michael R. Reinhard, who will continue at National Penn as executive vice president and treasurer with responsibilities for finance and corporate planning.

Last month the company reported a second-quarter net loss after preferred dividends of $9.6 million, compared with a year-ago profit of $27.2 million, hurt by the banking sector slump and higher charges for credit losses.

newstimes.com

Fed says worst of recession over

The Federal Reserve has suggested that the worst of the US recession is over.

It said that while "economic activity is likely to remain weak for a time", it had begun to "level off".

The central bank's comments came as it decided to keep US interest rates on hold at between 0% and 0.25%, as widely expected by commentators.

The central bank added that the current low levels of interest rates will likely continue "for an extended period" to aid the continuing recovery.

Its comments came amid growing signs of an upturn in the US economy.

It is not all that surprising, it acknowledges a lot of what we have been seeing, that conditions are stabilising and the recession may be ending Mark Vitner, Wells Fargo economist

While US unemployment rose again last month, the 247,000 job cuts were far fewer than analysts had expected.

Other recent official figures showed that US consumer spending had risen in June for a second successive month, while worker productivity had increased at its fastest annual pace for nearly six years in the second quarter of 2009.

In addition, figures on Wednesday showed that US exports had risen by 2% to $125.8bn (£76bn) in June, a sign that the manufacturing sector was improving.

Analysts broadly welcomed the Fed's comments.

"It is not all that surprising, it acknowledges a lot of what we have been seeing, that conditions are stabilising and the recession may be ending," said Mark Vitner, an economist at Wells Fargo.

Stimulus measures

The Fed and the US government have carried out a number of measures to help stimulate the US economy since the end of last year.

The main two have been President Obama's $787bn economic stimulus package, which was signed into law in February, and October's $700bn Troubled Assets Relief Program for the banking sector.

In March, the Fed also announced a $1.2 trillion programme of buying government debt to boost lending and promote economic recovery - a policy known as quantitative easing.

US interest rates were cut to the current level of between 0% and 0.25% in December last year, where they have remained ever since.

Before then rates had fallen steadily from a high of 5.25% in September 2007.

The BBC

US, Swiss cement deal on secret UBS bank accounts

MIAMI – The U.S. government and Swiss banking giant UBS AG have reached an agreement in a case seeking names of some 52,000 suspected American tax evaders with billions in secret Swiss accounts, but details may remain under wraps until next week, officials said.

Lawyers for the government and UBS told a federal judge in a brief conference call they had initialed a deal after a delay last week to settle undisclosed details.

The Internal Revenue Service, which initiated the case against UBS earlier this year, said in a statement the deal "protects the United States government's interests." But the two-sentence statement from IRS Commissioner Doug Shulman added only that more details will be released when the Swiss government signs the agreement as early as next week.

UBS and the Swiss government also welcomed the news and said no terms would be disclosed until it is signed. Swiss Justice Minister Eveline Widmer-Schlumpf said the agreement "is in the interests of both states."

The IRS earlier this year asked U.S. District Judge Alan S. Gold in Miami to force Zurich-based UBS to turn over names of some 52,000 American clients believed to be hiding nearly $15 billion in assets in secret accounts.

UBS and the Swiss government had resisted, arguing that to do so would violate Swiss banking confidentiality laws that date back centuries.

The Swiss and U.S. governments announced at the end of July they had agreed in principle on major issues but released no details. They had hoped to present a final deal at a hearing Aug. 7, but resolving their differences has taken longer.

At the latest hearing Wednesday, the judge asked Stuart Gibson, the lead Justice Department lawyer in the case, whether an agreement had been reached.

"The answer is 'yes,' your honor," Gibson answered. "The parties have initialed agreements. It will take a little time for the agreements to be signed in final form."

An attorney for UBS, Eugene Stearns, thanked the judge for allowing the case to be brought to what he called a "successful conclusion."

The phone conference lasted less than three minutes.

UBS paid a $780 million penalty earlier this year and turned over names of about 300 American clients in a deferred prosecution agreement with the Justice Department. In that case, UBS admitted helping U.S. citizens evade taxes, which experts say is not a violation of Swiss bank secrecy laws.

So far, three UBS customers whose names were divulged under the prior agreement have pleaded guilty to tax charges in federal court. Hundreds of others holders of secret accounts at UBS and other Swiss banks have voluntarily come forward to the IRS under an amnesty program that requires payment of taxes and penalties but generally does not include the threat of prison.

That amnesty program ends Sept. 23.

New York-listed shares in UBS were trading 3.5 percent higher at $15.22.

[The yahoo news]

Fed not ready to use other R-word: Recovery

Suddenly, it seems, economists everywhere are starting to talk about the end of the recession.
But don't expect the economists at the Federal Reserve to join in that bullish banter when they meet this week.
"I think we're arriving at the turn," said Mark Zandi, chief economist at Moody's Economy.com. "I think we'll reach it this month, maybe September, but we'll look back and say this is the quarter the recession ended."
But Zandi and other Fed watchers say that when central bank policymakers conclude a two-day meeting Wednesday, they are likely to stay with its far more general language about expecting modest growth to return sometime in the second half of this year.
The central bank's policymakers also are virtually certain to leave the key interest rate near zero.
They also are unlikely to give many details about when or how it will start to pull back the roughly $1 trillion expansion of the Fed's balance sheet that it has used to pump money into the economy over the last year.
"I think they're going to be a little more optimistic, but not get too carried away by it," said David Wyss, chief economist for Standard & Poor's. "These are central bankers and they tend to be pessimistic by nature."
"You pull stimulus back when you see all four wheels rolling at the same time," said Kevin Giddis, managing director of fixed income at Morgan Keegan. "We still have something of a traction problem. For the Fed to declare 'game over' is way premature."

Other economists say that even though recent economic readings, such as slow job losses and rising home prices, have been encouraging, it could cause problems for the Fed be too optimistic in its outlook.
Investors and economists would take that as a sign that higher rates are just around the corner.
That belief in itself could cause the rates on Treasurys to rise.
Inflation risk
"That would slow the recovery, not accelerate it," said Lyle Gramley, a former Fed governor and now senior economic adviser for Soleil Securities. "They have to acknowledge it's doing better and turned the corner. But their expectation is for a very modest recovery."
However, if the Fed is behind the curve in recognizing the recovery, all the money it has pumped into the economy, along with the low interest rates, can themselves cause problems, such as inflation.
The $1 trillion expansion of Fed activity has included some extraordinary steps.
They include buying Treasurys, mortgage-backed securities and the debt of Fannie Mae and Freddie Mac.
The Fed also expanded its loans, moving beyond the loans to commercial banks to also lend to Wall Street firms.
And it helped finance the operations of major corporations through the purchases of commercial paper. It has also loaned money to firms so they could make autos and other consumer loans.
Fed chairman Ben Bernanke has insisted the central bank will be able to unwind its position when the time comes. But inflation hawks would like more of a timetable, fearing that maintaining the current activity too long could cause prices to soar down the road.
Wyss said Wednesday's statement could give hints about such an unwinding, but only in the most indirect way.
"They'll have some stuff about credit markets returning to more normal conditions, and perhaps something in there about a gradual unwinding of the special facilities. But there will be no promises or details," said Wyss.
Wyss said the recovery will be in a very fragile state at the start, and that the Fed therefore has to be careful not to get ahead of itself, especially since inflation remains in check.
"Things are looking good now, but we thought they were looking good last summer, too," he said.

Scrappage scheme at half-way mark

Almost 155,000 new cars have been ordered through the government's scrappage scheme since it was launched in May, official figures show.
This means that more than half of the money set aside to fund the scheme has been spent.
Almost one-fifth of the orders were made in the South East of England.
Analysts say the scheme contributed to the rise in UK car sales in July, which was the first increase in monthly sales since April last year.
'Great deal'
Announcing the news, Business Secretary Lord Mandelson said the scheme was "a great deal for manufacturers and dealers, not to mention customers".
"The scheme has contributed to a 13.5% jump in car manufacturing," he added.
UK car sales rose 2.4%, to 157,149, in July compared with the same month last year, the latest industry figures showed last week.
Car scrappage schemes have helped to boost car sales in Europe and the US
But sales so far this year are still down 22.8% on the same period last year.
Under the UK scrappage scheme, a £2,000 incentive is paid to motorists who scrap cars registered before 31 August 1999 to buy a new car.
Half of the money is paid by the government and half by the car industry.
The government put aside £300m for the scheme, enough to fund 300,000 transactions.
(The BBC)

$2B ‘Cash for Clunkers’ extension passes

The U.S. Senate voted 60-37 Thursday night to approve a $2 billion extension for the popular “Cash for Clunkers” program.

The U.S. House overwhelmingly approved the measure on July 31 after the program ran through its $1 billion fund in about a week. The measure would transfer money from other parts of the federal stimulus package.

The Car Allowance Rebate System, better known as Cash for Clunkers, offers a rebate of $3,500 to $4,500 for new-car purchases when buyers turn in older, less fuel-efficient models.

The Obama administration has expressed its support for continuing the program.

The program has been a proven success, President Obama said in a written statement after the Senate vote. “Businesses across the country — from small auto dealerships and suppliers to large auto manufacturers — are putting people back to work as a result of this program.”

Many auto dealers and manufacturers have been adding their rebates to the federal program, encouraging demand in what has been a tough two years for the auto industry.

Auto dealers report the program has greatly increased traffic on their lots.

www.bizjournals.com

Local banks face off against foreign competitors

HCM CITY — Vietnamese banks need to make further efforts to exploit all advantages available to develop in the face of severe competition from foreign banks, analysts say.

Under the 2001 Viet Nam-US Trade Agreement and Viet Nam’s WTO commitments, fully foreign-invested banks were allowed to be established since 2008.

Foreign banks offer a vast variety of services and have massive funds, modern technologies and management, and skilled workers.

Nguyen Huu Bang of the joint stock Bank for Foreign Trade of Viet Nam (Vietcombank) said foreign banks had set up six joint-venture banks and 40 branches in the country.

The Hong Kong Shanghai Banking Corporation (HSBC) has set up a fully-owned bank incorporated in the country with more on the way as branches of foreign banks convert into wholly-owned entities.

But the analysts said local banks still had advantages that would enable them to take on their foreign rivals. Most foreign banks offer retail services like cards and global money transfer.

But their business remains modest since their customers are limited, mainly foreign companies and individuals and Vietnamese high-income earners, according to Bang.

"Because operating costs for foreign bank branches as well as joint-venture banks are very high, their fees are also much higher than Vietnamese banks’ for similar services," he said.

For instance, Vietcombank charges VND100,000 for an ATM card while it is free at Agribank; foreign banks charge at least VND150,000.

At Vietcombank, the minimum balance required is only VND50,000 (US$2.8) while at foreign banks it is at least US$100.

"Foreign banks have modern banking technologies but they cannot open many branches because of their high costs and choosiness in accepting clientele," Bang said.

"As a result, half of foreign and joint-venture banks have branches either in Ha Noi or HCM City. Only four or five have branches at both places."

On the other hand, all Vietnamese banks had dozens of branches, giving them a reach well beyond the major urban centres, he said.

Agribank leads with 2,200 branches across the country, followed by Vietcombank with over 200, the Joint Stock Commercial Bank for Industry and Trade (Vietinbank) with 150, and Mekong Housing Development Bank with nearly 160.

Vietnamese banks have nearly 800 ATMs at very handy locations like major hotels, airports and supermarkets, meaning that when foreign banks seek to develop their ATM networks in future, they would find it difficult to get good locations.

"Having an understanding of people’s customs and habits is another advantage Vietnamese banks have," Bang said.

More effort needed

But to make full use of these comparative advantages, he said, domestic banks needed to tweak their business strategies, with focus on establishing close co-operation among themselves and other service providers.

He cited the instance of ATMs, saying domestic banks had a large ATM network but would make no profit if they used these only for withdrawing cash as they were doing now.

"They need to fully exploit other functions like payments and transfers if they want to earn from the ATM business," he said. "To do this, they have to co-operate with each other and with the insurance, mobile-phone and water and electricity sectors."

They should use identical software for their services activities to facilitate co-operation, reducing time and costs.

vietnamnews.vnagency.com.vn

ndia's economy is likely to grow at 5.8 per cent in the current fiscal as against an earlier projection of 6.6 per cent, a leading economic think-tank said in its latest report.

The lowering of projection was on account of a poor monsoon, particularly in the month of June and July, Centre for Monitoring Indian Economy (CMIE) said in its report.

According to CMIE, from the June 2009 quarter to March 2010 quarter, growth in real GDP is projected to improve from 4.7 per cent to 7.1 per cent.

"This implies a 5.8 per cent growth in GDP in 2009-10, much lower than our earlier expectations of a 6.6 per cent increase and 6.7 per cent growth recorded in 2008-09," the CMIE said.

The revision is entirely because of the failure of the monsoon in June and July this year, the report said.However, despite the economy clocking a 5.8 per cent growth, India is still among the handful of countries in the world with a respectable growth rate, the CMIE said.

"The growth rates remain respectable in spite of two consecutive shocks in the space of less than 10 months (global liquidity crisis in September 2008 and the failure of monsoon). It is a reflection of the resilience of the Indian economy and a tribute to its strong fundmamentals," the CMIE report said।
(http://www.business-standard.com)

First Solar's Bright Future

Amid worries of the recession's lingering effects, shares lost 15% in the week after a strong earnings report. That means it could be just the time to buy

First Solar—52-week stock price

When First Solar (FSLR), the world's largest solar panel maker, on July 30 announced the dazzling news that its second-quarter sales and earnings had doubled, its stock swooned, from 173 to 154 that day. Evidently, some Wall Street skeptics figured the results weren't sunny enough.

The stock has continued to weaken, closing at 146.47 on Aug. 7. During its heady days in August last year, First Solar traded as high as 283.

So what's going on? Some analysts worry that the recession and financial crisis have dampened business activity, and they're concerned about a big dent in future sales and earnings. These analysts also express concern over a price rebate program to stimulate sales, which they thought would hurt results in the second half.

But don't be misled, assert some First Solar bulls, who see the stock's decline as an opportunity to snap up shares at lower prices. That's because they expect further improvements in the company's fundamental outlook for the second half and beyond, despite the difficult industry environment. In fact, some analysts boosted their sales and profit estimates for 2009 and 2010 and, at the same time, raised their stock price target.

A Majority of Capacity Sold Through 2010

First Solar designs and makes solar modules using proprietary thin-film semiconductor technology to convert sunlight into electricity. In less than three hours, First Solar's process is able to transform a 2-by-4-foot sheet of glass panel into a complete solar module, according to Standard & Poor's Equity Research analyst Angelo Zino.

In 2008, the company generated 94% of revenues from customers in Europe, mainly Germany, which alone accounted for 74%. The rest comes from the U.S., where the company is trying to widen its reach. The company is targeting other markets as well, including China, India, and Australia.

"We continue to have a favorable view on the company and its long-term strategy," says analyst Al Kaschalk of investment firm Wedbush Morgan, who rates the stock outperform. (Wedbush Morgan does not do investment banking for First Solar.) He believes the company can remain very competitive globally in the current environment. With the majority of its capacity already sold through 2010, "we are confident in the company's ability to manage growth, market development, and operating results" in the ensuing years, says Kaschalk.

Based on the company's remarkable second-quarter results and his continued favorable outlook for 2009 and 2010, Kaschalk boosted his stock price target from 170 to 195। He also raised his 2009 earnings estimate to $7.15 a share from an earlier $7.06, and revenues to $2.02 billion from $1.98 billion. For 2010, Kaschalk upped his profit forecast to $8.84 a share from $8.49, and revenues to $2.66 billion from $2.58 billion. Those figures are a mighty leap from 2008 results, when First Solar earned $4.24 a share on revenues of $1.24 billion.

Regulatory Hurdles Hamper U.S. Growth

Kaschalk figures that his increased sales and earnings forecasts are justified by First Solar's "superior low-cost technology, sustainable first-mover advantage (as the first and biggest in the market) and an order backlog (mostly coming from utilities) that, he says, should result in an acceleration of solar installations in the second half of 2009, and in all of 2010 and 2011."

With gross margins of 56% and operating margins of 30%, First Solar is very competitive in the global market. Kaschalk believes that concerns expressed by the company, which noted economic headwinds, are based on current industry conditions. However, management, the analyst notes, "is likely being too conservative," considering the impressive sales and earnings results in 2009's first half.

Kaschalk acknowledges that widening First Solar's market in the U.S. may be hindered somewhat by the cumbersome regulatory process, particularly on the federal level, involved in getting permits for installations. But he is optimistic about some large-scale projects expected in areas like the Boulder City (Nev.) plant, where an existing power generation facility operates. First Solar operates production plants in Perrysburg, Ohio; Frankfurt, Germany; and Kulim, Malaysia.

Kaschalk says the worry among some investors that competition from China may hinder First Solar's growth is overblown. He doesn't expect Chinese competitors to match's First Solar's low module manufacturing costs over the next 12 to 18 months.

"First Solar is the lowest-cost solar module vendor, a substantial advantage in what looks like a fairly commoditized industry," says analyst Steven Milunovich of Bank of America/Merrill Lynch (which does banking for First Solar), who rates First Solar a buy. The stock price weakness, "combined with an attractive return on capital, makes for a good entry point," says the analyst. He concedes that First Solar's near-term outlook may be "less certain due to the rebate program." But "we are confident in the long term as the company is the clear industry cost leader and should maintain a return on invested capital of 20%."

Preparing for Further Growth in Demand

S&P analyst Zino says that although a difficult financial environment poses uncertainties in the solar markets, First Solar is well positioned to prosper in the intermediate term. "We anticipate management will execute and expand capacity as scheduled," says Zino, who recommends holding the stock with a 12-month price target of 180. He says the expected lower prices through rebates should be offset by higher volume and reduced manufacturing costs.

Zino expects First Solar's sales to jump 60% in 2009 and 16% in 2010 as the company continues to expand its capacity. "We think First Solar will continue to generate new orders and that utility pipelines will develop into substantial volume by late 2010 and beyond," says Zino.

In spite of the current nervousness on Wall Street about the recession, they don't deny the benefits that the economic recovery will bring to First Solar. Nineteen of 38 analysts recommend the stock as a buy, and 16 rate it a hold. Three rate it a sell.

For investors who believe demand for alternative energy will continue to rise, First Solar appears to be the stock to go with. "The Arizona-based First Solar remains arguably our top selection within the space," says Nils C. Van Liew, industry analyst at Value Line (VALU), an independent investment research outfit.

So if investors decide to ride with the bears and ignore the opportunity that First Solar now presents, they might indeed miss the stock's sunny days ahead।

www.businessweek.com

What's Missing in Earnings Reports: Revenue Growth

Profits are still down, and the economy is weak, but investors are celebrating second-quarter earnings season anyway. Some market watchers worry that the lack of revenue growth will make it harder for companies to boost earnings in the current quarter.

So far, second-quarter results have arrived from 83% of the Standard & Poor's 500-stock index companies, and earnings are down 28.4%, according to Thomson Reuters (TRI). Before earnings season officially began a month ago, analysts were expecting a drop of 35.6%. The S&P 500 is up about 13% since Alcoa (AA) kicked off the second-quarter earnings season on July 8 through Aug. 6.

This is the second earnings season in a row that coincided with a stock market rally. S&P 500 profits dropped 35.5% in the first quarter of 2009, but investors were apparently expecting much worse results. The market moved solidly higher in April and early May.

As a result of the recession, expectations have been very low for the last two quarters, says Uri Landesman of ING Investment Management (ING). "In each case, [results] came out a lot better than the worst people feared," he says.

Growing Optimism

Pushing stock prices higher this season weren't just better-than-expected profits, but a different tone from executives. "There were more companies seeing light at the end of the tunnel," says Peter Cardillo, chief market economist at Avalon Partners. For example, Cisco Systems (CSCO) Chairman and Chief Executive John Chambers said on Aug. 5 the economy might be at a "tipping point."

Jim Owens, Caterpillar (CAT) chairman and chief executive, said in a statement on July 21: "There is still a great deal of economic uncertainty in the world, but we are seeing signs of stabilization that we hope will set the foundation for an eventual recovery."

When reporting March quarter results, many management teams sounded as though they had "no idea what's going on," says Terry Morris, senior equity manager at National Penn Investors Trust. Now, "management is starting to be a little more optimistic—but still cautious."

Tempering the enthusiasm of both executives and investors was where better-than-expected earnings came from: layoffs and other cost-cutting measures. Companies produced profits by slashing spending, not by growing sales. While more than 70% of companies beat profit expectations, only about 35% beat analysts' revenue estimates, says Ashwani Kaul, global head of research at Thomson Reuters.

Beating Forecasts

Given the lack of sales growth, Michael Yoshikami, president and chief investment strategist at YCMNET Advisors, says: "I don't believe you can read too much into this earnings season." Without improvement in revenues, it's hard to extrapolate results out to future quarters.

The good news is, more companies beat revenue forecasts than in the first quarter. Last quarter, just 20% of companies beat revenue estimates, a sign of how weak the economy was.

Companies should be credited for cutting costs in this environment, Kaul says. "Corporations have adapted better than expected," agrees John Merrill, chief investment officer at Tanglewood Wealth Management. By cost-cutting now, companies should produce bigger profits when the economy recovers, he adds.

Many market watchers believe future earnings seasons will continue to push the stock market higher. But that depends on how high analyst and investor expectations get. If investors expect too much, they might be disappointed. "We still don't know what the slope of the recovery is going to be," ING's Landesman admits. Still, he's optimistic: "The worst is behind us. We're recovering."

Fourth-Quarter Hope

According to Thomson Reuters, analysts expect S&P 500 earnings to fall 21.9% in the third quarter, compared with the third quarter of 2008, but then to jump 183.5% year-over-year in the fourth quarter. The fourth quarter's predicted rebound is a reflection of how weak profits were in the last quarter of 2008, when S&P 500 earnings fell 67%. Despite the better-than-expected second quarter results, estimates for the third and fourth quarters have barely budged in the past month.

Merrill thinks earnings results could pleasantly surprise investors again in the third and fourth quarters, thanks to more noticeable improvements in the economy. But, he warns, companies still face large challenges in 2010. "There are just a lot of things that are unknowable right now," Merrill says. "What you can see ahead looks promising. But what you can't see after that is pretty uncertain."

Morris worries it could take a while before companies start growing sales again. "Until the consumer starts to feel a little better, we're probably not going to see the sales growth we're used to seeing."

And without a jump in revenues—driven by selling more goods in a growing economy—stocks may have some roadblocks ahead।

By Ben Steverman (businessweek.com)

7 Long Islanders indicted in mortgage scam

A mortgage scam hatched in Manhattan strip clubs and operated out of a Garden City office fell apart Wednesday with the indictment of 13 people -- including seven Long Islanders - for defrauding lending banks out of more than $100 million, prosecutors said.

A group of attorneys, bank employees and real estate appraisers participated in the scheme - persuading banks to lend money that was supposed to help people buy financially distressed properties in the metropolitan area, investigators said.

Instead, the money went into the scammers' pockets.

The indictments grew out of a 10-month investigation by Manhattan District Attorney Robert Morgenthau's office into transactions that occurred between 2004 and 2009. Principals met at strip clubs, the indictment said.

The charges ranged from enterprise corruption to grand larceny to conspiracy. Twelve other people already have pleaded guilty in the case.

Two of those indicted - Aaron Hand of Oyster Bay Cove and Eugene Culbreath of Valley Stream -- served as kingpins of the plan, investigators said. Matthew McDermott of Merrick, Kathleen Scanlon of Baldwin, Jeffrey Phelan of Smithtown, Allyson Hinds of Middle Island and Marc Zirogiannis of Levittown also were indicted. The defendants could not be reached for comment.

"These defendants were able to get away with this conduct for four years because the mortgage industry simply passed the defective loans to the secondary markets with little motivation to scrutinize the actual risks," Morgenthau said. "Industry regulators paid little or no attention."

Investigators said the scam's goal was to steal money in the form of mortgage loan proceeds funded by banks and lending firms such as Countrywide Home Loans, New Century Mortgage, SunTrust Mortgage, Saxon Mortgage Corp., Bank of America and Wells Fargo Bank. Bank representatives could not be reached.

Under the alleged scheme, AFG Financial Group Inc. of Garden City, which was also indicted, identified 19 financially distressed properties, including some in Nassau and Suffolk, and offered help to the owners. Morgenthau said the 19 properties involved transactions of more than $12 million but that the entire scam amounted to more than $100 million. The investigation is ongoing.

The Garden City operation would recruit people for $5,000 to act as phony buyers for the properties, investigators said. Banks and mortgage companies would provide mortgages for the phony sales after unknowingly receiving false financial documents.

The sellers of the properties never saw the money - instead, the scammers took it, leaving them and the banks in the lurch, investigators said.

The defendants each face up to 25 years in prison on the enterprise corruption charges.

Offshore private banking Bourne to survive

AFTER visiting his bank in Zurich, Jason Bourne, an amnesic assassin, wonders: “Who has a safety-deposit box full of money and six passports and a gun?” In the popular imagination as well as Hollywood films the answer is clear: customers of Swiss banks do.

If this reputation for skulduggery is right, Switzerland, home to about one-quarter of the world’s offshore money, is in big trouble. After nearly going bust, UBS, its biggest bank, is now being pistol-whipped by America’s Internal Revenue Service (IRS), which wants it to hand over the names of tens of thousands of alleged tax dodgers. A preliminary settlement between the two was agreed on July 31st, although its details have yet to be made public. In March Switzerland agreed to comply with an OECD tax code that will oblige it to reveal information on clients that other governments say they need to enforce their laws. Where will crooks, despots and war criminals go now? And what will Swiss private banks do when they leave?

Put those questions to Swiss bankers and they will explain—very smoothly, of course—that you are decades out of date. They are calm in part because the concessions on privacy are expected to be limited. Both the OECD code and, they hope, the UBS settlement will endorse the principle of “no fishing expeditions”. Foreign states would have to provide clients’ names and some evidence of wrongdoing before getting information on them. Even if the IRS remains on the warpath and goes beyond the OECD rules, perhaps only 5% of the $2 trillion of offshore assets in Switzerland comes from America.

For the bulk of customers, Swiss bankers claim, tax is in any case not the main draw. They marshal some surprisingly good arguments. UBS has been haemorrhaging funds, with an outflow of SFr30 billion ($28 billion) so far this year (see chart). But the country’s next four biggest listed banks, Credit Suisse among them, have had private-bank inflows of SFr31 billion. Clients have fled a bank, not a country. Perhaps one-third of offshore funds in Switzerland are from places where the wealthy may not pay much tax anyway, including Russia and the Middle East. They are mainly in Switzerland for its political stability and well-run banks.

More vulnerable are the roughly 40% of assets gathered from the traditional hunting grounds of high-tax European countries, in particular Germany and Italy. Tax relations between Switzerland and the European Union have been fairly cordial—a limited agreement on co-operation in 2004 allows client confidentiality. Things could get more fractious, though. Germany has beaten up tiny Liechtenstein over secrecy. Italy and Britain are proposing tax amnesties to attract money back home. “We are emptying the cave of Ali Baba,” says Guilio Tremonti, Italy’s finance minister. But even if money leaves Switzerland, it may not leave Swiss banks. When Italy last held a tax amnesty in 2003, an astonishing 80% of the funds taken out of Credit Suisse returned to it as clients opened accounts with its Italian operation. Today, many private banks are building up their European operations to help mitigate the impact of any new amnesties.

Finally, as Swiss bankers point out, “there is nowhere else to go”. All mainstream offshore banking centres have committed themselves to the OECD rules, as have exotic upstarts such as Liberia and Brunei. Some argue that Hong Kong and Macau may become the destinations of choice for tax evaders. They are, it is said, less likely to enforce the OECD rules or to kowtow to foreigners. But the flip side for customers may be higher political risk. The offshore centres of the future will probably be politically stable, with good legal systems and firms and a strategy of non-confrontation with big economies on tax. Stefan Jaecklin of Oliver Wyman, a firm of consultants, reckons that Singapore and Switzerland are most likely to fit the bill. Indeed, emerging-market banks continue to set up in Switzerland. Recent arrivals include firms from Brazil and China.

If a tax-related exodus from Switzerland seems unlikely, business is hardly plain sailing. Fewer people are getting very rich. Margins are under pressure as clients shy away from buying complex bull-market products. In response private banks are expanding into emerging markets and consolidating at home, says Huw van Steenis of Morgan Stanley. Zurich-based Vontobel has bought Commerzbank’s Swiss operation, for example. There are similar pressures in Germany, where Deutsche Bank is mulling taking a minority stake in Sal Oppenheim Jr & Cie.

That still leaves one outstanding thorny question: whether the modern trend to stick private banks together with riskier investment banks and hedge funds still makes sense. In theory, being a conglomerate makes it easier to meet rich people and create complex products to tempt them with. In practice, it can scare them off. The crisis has “vindicated the traditional Swiss model,” says Nicolas Pictet, a partner at Pictet & Cie. Julius Baer, another medium-sized bank, sold its institutional stockbroking arm in 2003 and is now spinning off GAM, its volatile hedge-fund operation.

Of the two giant conglomerates, Credit Suisse is in rude health and maintains its investment bank is helping to boost its private bank’s margins. By contrast, on August 4th Oswald Grübel, the boss of UBS, reported yet another loss at its investment bank and cautioned that client outflows would continue. Reputation, he said, is crucial to the private-client business. Like other Swiss banks, UBS is not keen on having assassins as customers. Amnesiacs are a different matter.
By S. Kambayashi

Merchants get punished in July

Merchants suffered their second-worst monthly sales of the year in July -- a trend that could signal that the back-to-school shopping season, the second-biggest selling period of the year, will be much weaker than expected.

Several of the nation's leading retail chains -- including mall-based specialty sellers, teen clothing chains, department store chains and even discounters -- suffered declining same-store sales last month as consumers continue to shun non-essential discretionary purchases.

Same-store sales -- an important gauge of a retailer's performance -- measure sales at stores open at least a year.

Sales tracker Thomson Reuters, which tracks monthly same-store sales for 30 chains such as Target (TGT, Fortune 500), Gap (GPS, Fortune 500) and J.C. Penney (JCP, Fortune 500) said overall July sales for the group fell 5.1%, compared to a gain of 1.1% last July.

July's slump marked the 11th consecutive month of same-store sales declines. The firm said more than half of the retailers it tracks missed their sales estimates for the month.

Last month's result was also the second worst monthly performance of the year following January's monthly same-store sales decline of 5.7%.

Cooler-than-expected weather in July combined with more parents waiting to commence their school-related shopping in August when the tax-free shopping events take place hurt sales volumes last month, said Jharonne Martis, senior research analyst with Thomson Reuters.

Among the misses, discounter Target (TGT, Fortune 500)'s sales fell 6.5% versus analysts' expectations for a 5.8% decline. Macy's (M, Fortune 500) sales slumped 10.7%, worse than analysts' forecasts for a 9.1% decline, while sales at J.C. Penney fell 12.3%, slightly better than the company's guidance for sales to decrease 13% to 16%.

Elsewhere, apparel seller Gap Inc. reported an 8% drop in its same-store sales last month while sales at teen clothier Abercrombie & Fitch tumbled 28%.

However, mid-priced department store chain Kohl's barely escaped the downdraft, posting a slight 0.4% sales increase in July, while high-end chain Nordstrom reported a 6.9% dip in its same-store sales, better than analysts' forecast for a 11.1% decline.

Martis said Wal-Mart (WMT, Fortune 500), the world's biggest retailer, likely stole sales away from many of its peers because of its value prices that continue to attract more shoppers from all income levels into its stores.

Wal-Mart no longer reports monthly same-store sales. However, the retailer is expected to report a 1.1% gain in its quarterly same-store sales when it reports its quarterly results next week.
By Parija B. Kavilanz(CNNMoney.com)