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Wall Street investment bank Morgan Stanley reported its most profitable quarter since the financial crisis, boosted by higher revenue from trading bonds and equities. The bank’s trading business, like those of its main rivals, got a boost in the quarter after the Swiss central bank scrapped a cap on the franc, the European Central Bank announced its quantitative easing programme and the US Federal Reserve took steps toward tightening monetary policy. Global stocks also generally performed strongly. Morgan Stanley capped mostly a strong quarter for the big US banks with its 60 per cent rise in net profit, followed by Goldman Sachs Group, whose profit jumped 41 per cent. “We did not dial up risk to generate these earnings,” chief executive James Gorman described the bank’s “strongest quarter in many years”.
Light And Wieldy
General Electric is said to be in early-stage talks with Wells Fargo for selling its entire $74-billion US commercial lending and leasing (CLL) portfolio to the bank. The discussions with Wells Fargo started recently and other parties may also hold talks with GE for buying the entire US CLL portfolio, according to a source. GE is also exploring selling the US CLL portfolio piecemeal and could decide to break the business up. The talks with Wells Fargo underscore GE’s urgency in looking to dismantle its GE Capital business and free itself from the financial regulatory pressures that come with it. GE earlier in April unveiled plans to exit the bulk of GE Capital over the next few years to focus on industrial manufacturing.
Running out of options to keep his country afloat, Greek Prime Minister Alexis Tsipras ordered local governments to move their funds to the central bank. With negotiations over bailout aid deadlocked, Tsipras needs the cash for salaries, pensions and a repayment to the International Monetary Fund. The order was questioned by local officials and slammed by the leading opposition party. The decree to confiscate reserves now held in commercial banks and transfer them to the central bank could raise about $2.15 billion, according to sources. It shows how time is running out for Tsipras, a point made by European officials, who addressed the matter at IMF meetings in Washington in recent days.
Teva Pharmaceutical made an unsolicited $40 billion offer for smaller rival Mylan, a bold bid for growth as its lucrative Copaxone drug faces generic competition. The offer followed weeks of speculation that Israel-based Teva would soon target Mylan. Analysts agreed that Teva would need to sweeten its bid to the $90 per share range. S&P Capital analyst Jeffrey Loo said a viable offer would be $92, about 22 times Mylan’s 2015 expected earnings.
German sportswear firm Adidas is teaming up with Parley for the Oceans, an initiative to clean up the world’s oceans, with a plan to develop materials made from marine plastic waste that can be used in its products. Adidas also said it would phase out the use of plastic bags at its 2,900 stores. Big fashion brands are jostling to highlight their ethical credentials as protest groups like Greenpeace pressure them to cut their environmental impact and improve factory conditions. Swedish retailer H&M, for instance, has pledged to triple the amount of products made of recycled fibres by the end of 2015.
The European Union is hoping that future gas imports from Iran can break its dependence on Russia as prospects grow for a nuclear deal that would include lifting sanctions on Tehran. The EU is betting on so-called Southern Corridor pipelines to supply gas to southern Europe via Turkey from fields in Azerbaijan and nearby countries, including Iran. “It’s one of our priorities,” EU commissioner for Climate Action and Energy Miguel Arias Canete said. Due to be operational in 2019, the project is expected an initial stage to deliver 10 billion cubic metres of gas per year to Bulgaria and Greece.
New Silk Route
Beijing and Islamabad launched a plan for energy and infrastructure projects in Pakistan worth $46 billion, linking their economies and underscoring China’s economic ambitions in Asia and beyond. The plan is aimed at establishing a Pakistan-China Economic Corridor between Pakistan’s southern Gwadar port on the Arabian Sea and China’s western Xinjiang region. The plan, which would eclipse US spending in Pakistan over the last decade or so, is part of China’s aim to forge ‘Silk Road’ land and sea ties to markets in the Middle East and Europe.
Shanghai GM, a joint venture between General Motors and China’s SAIC Motor, is planning to spend $16 billion over the next five years developing new vehicles, Shanghai GM president Wang Yongqing said. The automaker will use the money for 10 new or upgraded models a year until it has roughly 40 product lines, as it tries to corner at least 10 per cent of the Chinese market, Yongqing said. Both Buick and Chevrolet brands will surpass 1 million in annual sales by 2020, Wang said.
Japan’s faded economic prowess received a boost after a magnetic-levitation train operated by Central Japan Railway set a new world speed record of 603 km per hour on a test run in Yamanashi Prefecture just outside of Tokyo. Whether any of this makes a shred of economic sense is another matter. “It’s good for growing, developing countries, but not for Japan that’s decreasing in population,” said Edwin Merner, president of Atlantis Investment Research in Tokyo.
(This story was published in BW | Businessworld Issue Dated 18-05-2015)