Aurelia Butler

BASEL, Switzerland (Reuters) -UBS executives on Wednesday told shareholders that the bank has major concerns about the Swiss government’s recently announced plan to hit the country’s largest lender with tougher capital requirements.Switzerland’s government laid out plans two weeks ago for how to police banks deemed “too big to fail” to shield the country from a repeat of the collapse of Credit Suisse. “We are seriously concerned about some of the discussions related to additional capital requirements,” UBS Chairman Colm Kelleher said at the bank’s annual general meeting in Basel.”Additional capital is the wrong remedy.”UBS might need to find $15 billion to $25 billion in additional capital to comply with the proposed new requirements.The Zurich-based UBS acquired its long-term rival last year following Credit Suisse’s meltdown that roiled global financial markets and stirred fears that the enlarged bank could upend the Swiss economy if it ran into trouble.Shares in UBS were trading down by more than 2% on Wednesday afternoon, underperforming European peers.The takeover prompted the government to craft a plan aimed at making the banking system more robust and to prevent a possible UBS collapse, although the timeline for changes remains unclear with a long legislative process still pending.Despite this prospect of tougher capital rules, Kelleher said UBS remained committed to distributing excess capital to shareholders via dividends and share repurchases.”UBS is not too big to fail,” he said, noting that it was one of the best-capitalized banks in Europe.He said the aim is for total capital returns to exceed pre-acquisition levels by 2026.Speaking at the meeting, UBS CEO Sergio Ermotti said the merger of the Swiss entities of the two banks should occur before the end of the third quarter, and that difficult decisions still lay ahead during the Credit Suisse integration.”Despite our efforts to lessen the impact, in the short to medium term we will need to part ways with some colleagues,” Ermotti said after a weekend media report said the bank was planning five rounds of lay-offs in the coming months.Ermotti’s 14.4 million Swiss franc ($15.75 million) pay for nine months of 2023, which made him the highest-paid banker in Europe, was heavily criticized by a number of shareholders before a vote was held on the pay package.Kelleher defended the CEO’s pay.”He arguably has the toughest job in the financial services industry globally, and he has delivered,” Kelleher said. More

ANKARA (Reuters) – Turkey’s central bank will not trim its policy rate from the current 50% until the fourth quarter, a Reuters poll of economists showed.It raised the rate by 500 basis points in March, following a February pause in its aggressive tightening cycle, citing a deterioration in the inflation outlook.The bank has added 4,150 basis points to borrowing costs since June, reversing a low-rate policy championed by President Tayyip Erdogan to boost economic growth.Policymakers have said a tight stance would be maintained until a significant decline in the underlying trend of monthly inflation is observed.They will deduct 250 basis points in Q4 to put the rate at 47.5%. Next year will see further reductions and it will be 30.0% by end-2025, the poll showed.Last week, central bank Governor Fatih Karahan told a panel in Washington the rate-hiking cycle is over and inflation is on track to reach its 36% target by end-year.Economists expected inflation to average 44.2% this year, higher than 42.1% predicted in a January poll.Turkey’s annual inflation rate climbed to 68.5% in March and is forecast to peak around 70% this quarter before falling in the second half of this year and through 2025.Erdogan’s AK Party was ousted from mayoral seats in several provinces and thumped by the main opposition in Istanbul and Ankara on Sunday, its worst election loss since the AKP was founded more than two decades ago.Voters punished Erdogan and his party largely over the cost-of-living crisis, AKP officials and analysts said.Turkey’s economy was forecast to grow 3.0% this year and 3.3% next, the April 19-23 poll of 33 economists predicted. In January’s poll the respective forecasts were 2.8% and 3.5%.(For other stories from the Reuters global economic poll:) More

(Reuters) – New York Community Bancorp (NYSE:NYCB) will have to lure buyers for its commercial real estate (CRE) loans with steep discounts and diversify its revenue as it races to shore up its finances.The bank’s new management has promised to unveil a turnaround plan this month after losses on CRE loans, NYCB’s core business, sparked a rout that wiped nearly $6 billion off its market value and sparked ratings downgrades.A $1 billion investment led by former U.S. Treasury Secretary Steven Mnuchin’s Liberty Strategic Capital has shored up the bank for the short-term, but it still needs to bolster its capital and shrink its exposure to the CRE sector, which has been hammered by higher interest rates.NYCB’s future depends on the new management offloading some CRE loans and diversifying its balance sheet, said half a dozen analysts and investors. But with rivals also retreating from CRE, and private equity and other institutional buyers seeking steep discounts, good deals will be hard to come by, they said. “If you’re a hedge fund or an asset manager, you know NYCB has to sell. So, you’re going to factor that into your pricing,” said Brian Graham, co-founder of financial services investment firm Klaros Group, adding it will be difficult for the bank to find loans it can sell at a premium.Multi-family apartment blocks comprise roughly 44% of NYCB’s loans and about half of those are on buildings with controls on how much landlords can raise rents, dimming their appeal.Last month, the new management team, led by former Comptroller of the Currency Joseph Otting, said NYCB had sold a commercial co-operative loan at a gain and that non-bank bidders were interested in other loans, although it did not provide details.But with interest rates now expected to remain elevated longer than previously anticipated amid sticky inflation, NYCB’s loan books will probably have to be repriced to reflect this, said Brian Mulberry, client portfolio manager at Zacks Investment Management, which holds several bank stocks. “To attract any level of buyer interest it will necessitate bigger discounts today to offset a higher cost of refinancing in the future,” Mulberrry said, although he added that investors had mostly priced in any more potential bad news from the bank. NYCB’s shares are down 70% since the beginning of the year, their lowest level since around 1996.Depending on the size of the discount and how the loan is valued on the bank’s balance sheet, NYCB might have to take a loss on some CRE loans.A spokesperson for the bank said Otting will share his strategy, forecasts and provide a detailed picture of the CRE portfolio during first-quarter earnings. The bank has yet to say when it will report as of Tuesday.Wall Street analysts expect NYCB to report a loss, compared to a profit a year earlier. “Investors will want a clearer picture of NYCB’s underlying credit quality and capital adequacy while determining future earnings power,” said Michael Ashley Schulman, chief investment officer at multifamily office Running Point Capital. DIVERSIFICATION PUSHNon-performing CRE loans as a percentage of U.S. banks’ portfolios doubled to 0.81% by the end of 2023 from 0.4% a year earlier, the International Monetary Fund said this month. Ratings agency Moody’s (NYSE:MCO) said NYCB’s CRE concentration, which equaled about six times its tangible common equity as of Dec. 31, 2023, is the highest of the rated U.S. banks.The involvement of private-equity buyers is helpful in stabilizing capital, but long-term uncertainties around governance and strategy remain, the ratings agency added. NYCB will have to pull back from New York real estate – the bedrock of the 165-year-old bank’s business for five decades – and diversify into other lending and fee businesses. While high rates have reduced short-term demand for home loans, the bank’s Flagstar mortgage business could provide greater revenue diversity when rates eventually fall, said Fitch Ratings analyst Anthony Di Tomasso.Investors will also be looking for evidence that the bank’s existing streams of non-interest income are offsetting the CRE losses, said Mulberry. That could be by improving income elsewhere, such as from loan servicing fees or through cost savings, although the bank will also need to invest in compliance after disclosing control failures, said analysts. Investors and analysts will focus on NYCB’s progress integrating failed Signature Bank (OTC:SBNY) assets which it acquired last year, pushing its balance sheet above a $100 billion regulatory threshold that triggered tougher capital and liquidity rules. That deal aimed to diversify the bank away from CRE by adding $33.5 billion of deposits and roughly $11.7 billion of commercial and industry loans. However, NYCB warned last month that the fair value of those assets could change, underscoring the ongoing uncertainty over the state of the bank’s balance sheet.”Bank turnarounds often take years not weeks,” said Schulman. More

NEW YORK (Reuters) – If you think getting tickets to a Taylor Swift concert or the World Series is tough, try booking a hotel room in an American college town for Graduation Day.Toni Milbourne faced this before her daughter’s graduation from West Virginia University in May. Hotel room rates in Morgantown doubled before the local event. In a nearby town, prices more than tripled to $350 a night.”It absolutely feels like price gouging,” said Milbourne, managing editor for a West Virginia newspaper. “People need to be aware that companies are taking advantage of people in times that should be a celebration.”Parents of college kids frequently suck it up, and not just around Graduation Day.Whether for Family Weekends or Homecomings, smaller communities often get swarmed by visitors far beyond their ability to handle them. Meanwhile, pricing algorithms for airlines and hotels do what they were designed to do – crank up prices when demand soars.”A lot of smaller college towns might have 20,000 or 30,000 people, and maybe 2,000 hotel rooms,” said Professor Chris Anderson, who researches pricing, at Cornell University’s Nolan School of Hotel Administration.”With crazy high-demand dates, like a college graduation, all of a sudden you have 40,000 parents and guests arriving for multiple days of festivities. Now you have a real imbalance of supply and demand.”As a result, parents must pay super-high prices for hotels and flights, if they are available at all.To avoid this quandary, Shama Diegnan, a digital marketer from South Orange, New Jersey, sprung into action for Parents Weekend at a Midwestern college even before her younger son had accepted the school’s offer.”It never occurred to me that these hotels may cost more than in a major metropolitan city,” said Diegnan. She was stunned that one local hotel charged over $1,000 a night, up from its usual room rate of about $100.How can parents avoid Graduation Day nightmares? Here are a few tips.PREPARE EARLYMany hotels typically take reservations a year in advance. If your child is slated to graduate next year, start booking now. As for Parents Weekends in the fall, you should have already booked. If those dates are still not set, check the university parents’ Facebook (NASDAQ:META) group for updates.Note that for such high-demand dates, hotels may be stricter than usual, and may require prepayment for nonrefundable bookings or set a minimum number of nights, Anderson said.CHECK OUT ALTERNATIVESHotels have a fixed number of rooms, but homeowners on Airbnb or VRBO may offer extra rooms, apartments or houses on high-demand dates.For Parents Weekend, Diegnan booked a $300-a-night Airbnb 10 minutes from campus, instead of a local hotel room at $500 or more.One caveat from Anderson: Some parts of the country, like New York City, are stricter about short-term rentals, limiting homeowners’ ability to absorb huge influxes of visitors.LOOK FOR SECONDARY MARKETSParents wishing to cancel nonrefundable hotel rooms are in a tight spot. That is why options like www.gohoken.com have sprung up.”They specialize in having hotel rooms for high-demand dates, and allowing people to offload prepaid rooms that they don’t need anymore,” Anderson said. “It’s like a StubHub secondary market, but for hotel rooms.”Milbourne gave up on local hotels and plans to bunk at the home of family members instead.”I don’t think hotels should be able to jack up prices in moments like this,” she said. “Not only is my daughter graduating, but she spent four years on active duty in the Army. This is a big deal for us.” More

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Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The writer is head of global index portfolio management at Franklin TempletonChina’s stock market has certainly been battered recently, rattling both consumer and investor confidence. But we shouldn’t be too quick to categorise this disappointing phase as a crisis. Investors should tread cautiously, of course, given that Chinese consumers remain nervous about a still-shaky property market and high youth unemployment. But rather than completely writing off the growth potential of China’s domestic market — one arguably too big to ignore — here are some points to consider. The constructive summit between Presidents Joe Biden and Xi Jinping in California last year achieved some semblance of comfort over geopolitical tensions. And Xi’s recent meeting in Beijing with US business executives, including Apple CEO Tim Cook, discussing topics such as artificial intelligence, could bode well for stabilising relations.We’ve been encouraged by China’s private investment in AI, which is second only to the US. China has also made impressive progress with industrial robot installations, which have now outpaced those of the rest of the world combined. Its innovators comprise nearly half of all global patent applications filed — greater than that of the US, Japan, South Korea or Germany.And among the recent measures China has taken to stabilise its market and restore investor confidence is a tightening of the rules related to short selling in the market.We are already beginning to see encouraging co-ordination between China’s fiscal and monetary policy. Following central bank moves at the start of this year that lowered the reserve requirement ratio (RRR) for financial institutions, regulators in March noted “ample” room for further cuts, which may enable substantial liquidity to be injected into the economy. And this year, Beijing is expected to provide at least $137bn in low-cost financing to help public housing programmes.China’s remarkable development over the last few decades gave birth to a middle-class population of 500mn people who have now tasted prosperity. From 2017 to 2021, its luxury market tripled in size and should be supported by another projected 80mn middle-income earners joining the ranks of potential customers by the end of this decade. But this extraordinary pace of economic growth was always bound to hit some speed bumps and it’s important to remember that China is still undergoing a major transition from export-led growth to a more sustainable model that is increasingly driven by consumption and services.China’s passenger vehicle exports, and particularly its electric vehicle sales, are other key areas of progress to watch. Last year, China nearly surpassed Japan as the world’s largest car exporter and in January, domestic retail passenger car sales were also up 57 per cent year-over-year. China has been the envy and fear of global electric-vehicle manufacturers. With great government support, Chinese upstart automakers have eclipsed foreign rivals to develop electric cars faster and develop new smart tech features.Partly because of China’s increasing demographic troubles, there’s been much fanfare over whether India is ‘the next China’. India’s more youthful population switched places with China in April 2023 to become the world’s biggest nation. In September last year, India’s manufacturing and services PMI — already long in expansion mode — strengthened to a 13-year high, indicating a substantial rise in new business orders and improving business confidence. Notable technological and infrastructure developments were also achieved last year. However, we should also keep in mind that India is a quite different economy from China, with its own distinct merits and challenges. Unlike China, India is a noisy democracy with still-high barriers to trade. In 2022, India had one of the highest import duties globally, according to the World Trade Organization.So, perhaps only China is “the next China”. While investors do not expect a swift rebound in China’s market, some are seeing alluringly cheap valuations as an attractive entry point to the world’s second-largest economy. As of the end of February, the FTSE China RIC Capped Index was trading at a price/earnings ratio of just 9.44 times and price/book ratio of 1.15 times.Further afield, China has endeavoured in recent years to increase its influence in Latin America. Trade agreements, foreign direct investment and loans have played an important role in strengthening ties with the region. All of which means that the sheer extent of China’s global influence should not be overlooked. More

BENGALURU (Reuters) – The Bank of England will wait until next quarter to lower borrowing costs, according to median forecasts in a Reuters poll, although almost half of those surveyed said the central bank would cut interest rates in June.In either case, the BoE would be moving around the same time as peers the European Central Bank (ECB) – widely expected to move in June – and the U.S. Federal Reserve which is predicted to trim rates in September.Top BoE officials – Governor Andrew Bailey and Deputy Governor Dave Ramsden – have recently said British inflation was falling in line with the central bank’s predictions and the risk of it getting stuck too high had receded, setting the stage for a rate cut.Inflation was above the BoE’s 2.0% target in March, coming in at 3.2%, but lower than February’s 3.4% reading.The BoE raised borrowing costs by 515 basis points to a 16-year high between December 2021 and August 2023 to cool inflation that peaked at 11.1% in October 2022.All participants in the April 17-23 poll expected the BoE to hold Bank Rate at 5.25% on May 9 and median forecasts showed the first cut next quarter.However, that outlook was on a knife’s edge with almost 48%, or 30 of 63 economists, expecting a cut in Q3 while 31 forecast the first cut in June. The other two said November.”It is between June and August, we are leaning slightly towards August on the basis that one of the key things the Bank is looking at is services inflation,” said James Smith, economist at ING Financial Markets.”If services inflation is a little bit stickier, I think that tilts the balance a little bit further towards August over June, but it’s a pretty close call to be honest.” Median forecasts showed Bank Rate at 5.25% at end-Q2, 4.75% at end-Q3 and 4.50% by year-end.Markets are pricing the first rate cut in August.UPSIDE INFLATION RISKSBanks that can bid directly at government bond auctions – known as gilt-edged market makers (GEMMs) – were almost equally divided on the timing of the first cut.Of 15 GEMMs who participated, eight predicted the first cut in June while seven said August.When asked what was more likely on the timing of the first rate cut – 73%, or 19 of 26 participants who answered, said later than they expected. The other seven said earlier.”Should upside inflation risks crystallise over the coming months, akin to what we’re seeing in the U.S., the start date for rate cuts could be pushed back yet again,” noted Sanjay Raja, senior economist at Deutsche Bank.However, when asked about the chance the BoE holds Bank Rate for the rest of the year, 23 of 24 economists who responded said “low” or “very low”, one said “high”, none said “very high”.Inflation was predicted to average 1.9% this quarter and next but rise above 2.0% in Q4 and stay around that level until at least the end of 2025.Median forecasts showed inflation averaging 2.5% this year and 2.2% next.The UK economy was expected to expand 0.4% this year, but accelerate to 1.2% and 1.4% growth in 2025 and 2026, respectively.(For other stories from the Reuters global economic poll:) More

TOKYO (Reuters) – The dollar nursed its wounds on Wednesday following big tumbles against the euro and sterling, hurt by a combination of surprisingly robust European activity data and cooling U.S. business growth.However the yen remained mired near a 34-year low versus the U.S. currency, even as Japanese officials stepped up intervention warnings.The dollar index – which measures the currency against six major peers including the euro, sterling and yen – was flat at 105.64 in early Asian trading after slumping 0.4% overnight and touching the lowest level since April 12 at 105.23.The euro was little changed at $1.069975 following Tuesday’s 0.45% rally, after data showed business activity in the euro zone expanded at its fastest pace in nearly a year, primarily due to a recovery in services. Sterling also benefited from overnight data showing British businesses recorded their fastest growth in activity in nearly a year, while Bank of England Chief Economist Huw Pill said interest rate cuts remained some way off. Sterling was last steady at $1.24485 having jumped 0.79% in the previous session. By contrast, U.S. business activity cooled in April to a four-month low due to weaker demand, while rates of inflation eased slightly, suggesting some possible relief for the Federal Reserve. A major test of that will come Friday with the release of the Fed’s preferred consumer inflation measure, the PCE deflator. Markets currently price in a 73% chance of a first rate cut by September, according to the CME’s FedWatch tool.Elsewhere, the Australia’s dollar hovered at the highest since April 15 at $0.64875 ahead of consumer inflation figures, after rebounding more than 1% over the past two days following its dip to a five-month low on Friday. The dollar index reached a 5-1/2-month peak at 106.51 last week as persistent inflation forced Fed officials to signal no rush to ease policy.Despite the dollar’s broader struggles on Tuesday, it still inched up enough at one point to mark a fresh 34-year high to the yen at 154.88. This week, the pair has oscillated in an extremely narrow range between that high and a low of 154.50, with traders wary that a push above 155 could raise the risk of dollar-selling intervention by Japanese officials.Japanese Finance Minister Shunichi Suzuki on Tuesday issued the strongest warning to date on the chance of intervention, saying last week’s meeting with U.S. and South Korean counterparts had laid the groundwork for Tokyo to act against excessive yen moves.The Bank of Japan is widely expected to leave policy settings and bond purchase amounts unchanged at the conclusion of a two-day meeting on Friday, having just raised interest rates for the first time since 2007 just last month.And while Japan’s central bank is likely to signal a readiness to tighten policy again this year, its ultra-cautious, data-dependent approach has limited any strengthening in the yen.”Aside from the financial cost, there could be a significant impact on the credibility of the Japanese authorities if FX intervention fails,” Rabobank strategist Jane Foley wrote in a client note.”Historically, FX intervention is most successful if the fundamentals are coincidentally turning in favour of that currency,” she said. “USD/JPY may not turn lower until the summer, and this assumes that the Fed can cut rates in September.” More