Month: April 2011

JPMorgan Chase, the second largest bank by assets in the US, beat forecasts from Wall Street analysts by reporting a 67 percent rise in Q1 profits, bringing figures to $5.56bn compared with $3.33bn in the same period last year.

The jump in results was attributed to an increased performance from the credit card group and its investment banking and trading businesses, which helped offset losses from the retail bank.

Net revenue fell 8.5 percent year-on-year to $25.79bn from $28.2bn and was blamed on lower income from mortgage fees and a decrease in securities gains.

Jamie Dimon, CEO and chairman of JPMorgan, said: “The firm’s results reflected a strong quarter across the investment bank and solid performance from card services, commercial banking, treasury & securities services, and asset management. However, this performance was more than offset by the extraordinarily high losses we still are bearing on mortgage-related issues. Unfortunately, these losses will continue for a while.”

The Russian half of the Russian-British TNK-BP joint venture is threatening to file a law suit for up to $10m against its parent company BP, saying BP breached its shareholder agreement for going straight to state oil company OAO Rosneft rather than through TNK-BP, sources said.

Rosneft and BP signed a share swap deal in January which agreed the joint development of the Russian Arctic shelf and entitled Rosneft to 5 percent in BP in exchange for 9 percent of its own shares. The deal however was blocked by AAR, the company representing the interests of four billionaires in TNK-BP, because it felt the contract with Rosneft had broken their own agreement.

TNK-BP subsequently claims losses because of BP’s actions, saying it has lost an opportunity to explore within the Russsian Arctic and will therefore be seeking damages.

The $18bn deal between BP and Rosneft was left in limbo however, after its key supporter Igor Sechin stepped down as Rosneft’s chairman on Monday. Sechin, who is also the deputy prime minister of Russia, resigned from his position after President Dmitry Medvedev ordered the removal of ministers from the board of state companies.

The COO of Renault, Patrick Pélata, resigned on Tuesday following an internal and external audit which showed ‘a chain of failures’ in the manner the car manufacturer handled a scandal which alleged industrial espionage by its employees and led to three unjust dismissals.

The audit especially blamed ‘the supervision and control of activities of management of the company’s security department’.

It is not yet clear when Pélata will leave the company or who is to replace him.

The company, which is 15 percent government owned, confessed last month it was deceived into wrongfully dismissing three executives following an erroneous company investigation which concluded they had received payments from Chinese companies through overseas accounts.

Japan compares Fukushima severity to Chernobyl
The Japanese government has increased the severity of the catastrophe at the Fukushima Daiichi power plant to level seven, the maximum level on the International Nuclear Event Scale, said the Japanese nuclear regulatory agency.

The new reassessment of the level places Fukushima on a par with the Chernobyl disaster in 1986, while rises in radiation and several earthquake aftershocks have prompted the Japanese government to broaden the evacuation area, the agency said.

The move to raise the level up two notches from five followed an admission that the March 11 earthquake and subsequent Tsunami which caused severe damage to the power plant will bring about long-term environmental damage and serious health consequences.

“In relation to the volume of radioactive materials released, our estimate shows it is about 10 percent of what was released by Chornobyl,” an agency spokesman said.

The Netherlands and Britain are planning to take Iceland to court for refusing to repay money paid to Icesave depositors following the collapse of the country’s banking system in 2008, said chief secretary of the treasury, Danny Alexander.

Icelandic voters have rejected the government backed deal to pay back to Britain and the Netherlands $5.8bn worth of losses, the government of Iceland said in a statement. This is the second time the country voted in a referendum against the payment of the money.

The referendum, which had a voter turnout of around 75 percent, indicated 59.7 percent of voters said no to the “Icesave deal”, while 40.1 percent said yes, according to the National Electorate Commission.

“The vote has split the country in two. We must do all we can to prevent economic and political chaos as a result of the outcome,” said Johanna Sigurdadottir, the prime minister of Iceland.

Gold futures traded at a new record high on Friday and silver hit $40.04 an ounce for the first time since 1980 as concerns about the dollar weakening draws investors towards precious metals.

Gold for June delivery was up $8.60 and hit a trading high of $1.468.30

SPDR Gold Trust, the world’s largest gold-backed ETF said on Thursday its holdings rose to 1.217.209 tonnes, their peak since mid-March.

The ishares Silver trust, the largest silver-backed ETF noted its holdings hit another record at 11.192.80 tonnes on Thursday.

Investors will be watching government spending developments in the US closely to see whether there could be a last minute deal between President Barack Obama and US legislators as the prospect of a government shutdown would be considered positive for precious metals.

The climb in gold price within the Euro region was limited however. Analysts believe the rates raised by the ECB on Thursday, for the first time since 2008, were generally expected and were previously factored into the price of gold.

Portugal’s caretaker government under José Sócrates last night requested an EU bailout, making Portugal the third EU member, after Ireland and Greece, to seek financial assistance.
 
The move comes after the country’s long term government bond rating was downgraded by Moody’s on Tuesday by a notch from A3 to BAA1 and the credit agency said Portugal would have to look for external help to resolve its debt crisis.
 
The decision to seek a bailout will end several months of continual pressure to resolve its increasingly weak public finances.
 
Commenting on the bailout, Sócrates addressed the nation late on Wednesday, saying: “We must all assume our responsibility. The Portuguese people know how to work in the national interest when it’s needed and this is why, in the national interest,  I tell the Portuguese people that it’s time to take that step, so that we can have the best resources for the Portuguese people and for Portugal.”

Investors are now watching to see if Spain could be next on the list but Spain’s economy minister Elena Salgado ruled out contagion.

Commerzbank, Germany’s second largest lender said on Wednesday it plans to repay 14.3bn euro in state aid by June through the sale of new shares and the use of excess capital.
 
The bank said it is to pay back €14.3bn of the €16.2bn in “silent participation”, a type of non-voting capital received by the German government at the height of the economic crisis. 
 
A total of €8.25bn is to be raised directly from capital markets and €2.75bn of the silent participation are to be converted into shares to redeem around €11bn of the government’s capital injection.
 
A further €3.27bn the bank said will be paid from surplus regulatory capital by the end of June, with the remainder to be paid back at the latest by 2014.
 
Commenting on the decision to repay the state aid, CEO Martin Blessing said: “We have returned to profitability one year earlier than expected and are keeping the promise to repay the temporary support of the government as soon as possible.”

Portugal’s long term government bond rating has been downgraded by Moody’s by a notch from A3 to BAA1, the credit agency said.
 
Moody’s cautioned that it expects Portugal to have to look for external help to resolve its debt crisis.
 
In a statement the agency said: “The limited migration of the rating to BAA1 in today’s action reflects Moody’s assessment that assistance would be provided by the other members of the Euro zone if Portugal needs financing on an expedited basis before it can obtain funds from the European Financial Stability Facility.”
 
The action, which follows comparable ratings by Fitch and S&P, moves the country closer to junk grade status and places it on review for further downgrades.
 
Moody’s said its decision to downgrade “ was driven primarily by increased political, budgetary and economic uncertainty, which increase the risk that the government will be unable to achieve the ambitious deficit reduction targets set out in the update of its stability and growth programme for 2011-2014 which put its finances on a sustainable trajectory.”

Vodafone shares opened 2 percent higher this morning after the company announced it has agreed to sell its entire 44 percent stake in French mobile phone group SFR to Vivendi for a cash consideration of €7.75bn.

The agreement includes a final dividend worth €200 which Vodafone will receive on completion of the transaction. In addition, Vodafone and SFR will enter into a Partner Market agreement which will maintain their commercial co-operation.

Following the deal’s completion in June, Vivendi will own 100 percent of SFR. Vodafone said it will continue its affiliation by entering into a partner market agreement with SFR to maintain its commercial co-operation, allowing its customers continued use of its signal when in France.

The company moreover announced that £4bn of the sale’s net profits would be handed back to shareholders through a share buy-back, with the remainder used to pay down debt. Vodafone’s holding in SFR contributed £573m last year to its operating profits.

Vodafone’s CEO Vittorio Colao said: “By returning £4bn to our shareholders, we are increasing our current buy-back programme to £6.8bn in total, equivalent to over 7 percent of Vodafone’s current market capitalisation.”

“Our board remains committed to realising maximum value from our non-controlled assets.  The sale of our stake in SFR, at an attractive multiple, represents a significant further step in the execution of this strategy”, he added.

Xstrata, one of the world’s biggest coal exporters, has come to an agreement from today to sell Australian thermal coal to Hiroshima-based Chucogu Electric Power for one year at $129.80 a tonne it was announced.

The new benchmark price contracted per tonne, which is around 30 percent up from the previous year, is an all time high for thermal coal under annual contracts and exceeds the previous 2008 record of $125.

The price for thermal coal supply in 2011 is 13 percent higher than the earlier settlement of $115 a tonne between Xstrata and Japanese utilities, and surpasses the current spot value for Australian coal of $123.20.

Original negotiations led by Tohoku Electric Power came to a halt after it sustained damage to its power plants following the damage caused by the earthquake and tsunami last month.

Analysts speculate this could be an indication that the coal market will tighten over the next few months as Japan compensates for a reduced nuclear power output by burning more coal.

It remains unclear as yet how high the volume will be under the contract.