BoE stress tests: all you need to know

The Bank of England has released the results of its latest round of its annual banking stress tests and its semi-annual financial stability report this morning. Used to measure the resilience of a bank’s balance sheet in adverse scenarios, the stress tests measured the impact of a severe slowdown in Chinese growth, a global recession […]

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Draghi: Eurozone will decline without vital productivity growth

It’s productivity, stupid. European Central Bank president Mario Draghi has become the latest major policymaker to warn of the long-term economic damage posed by chronically low productivity growth, as he urged eurozone governments to take action to lift growth and stoke innovation. Speaking in Madrid on Wednesday, Mr Draghi noted that productivity rises in the […]

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Asia markets tentative ahead of Opec meeting

Wednesday 2.30am GMT Overview Markets across Asia were treading cautiously on Wednesday, following mild overnight gains for Wall Street, a weakening of the US dollar and as investors turned their attention to a meeting between Opec members later today. What to watch Oil prices are in focus ahead of Wednesday’s Opec meeting in Vienna. The […]

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Banks, Financial

RBS emerges as biggest failure in tough UK bank stress tests

Royal Bank of Scotland has emerged as the biggest failure in the UK’s annual stress tests, forcing the state-controlled lender to present regulators with a new plan to bolster its capital position by at least £2bn. Barclays and Standard Chartered also failed to meet some of their minimum hurdles in the toughest stress scenario ever […]

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Barclays: life in the old dog yet

Barclays, a former basket case of British banking, is beginning to look inspiringly mediocre. The bank has failed Bank of England stress tests less resoundingly than Royal Bank of Scotland. Investors believe its assets are worth only 10 per cent less than their book value, judging from the share price. Although Barclays’s legal team have […]

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Categorized | Banks

Week in Review, January 31

Posted on January 30, 2015

week in review

A round up of some of the week’s most significant corporate events and news stories.

iPhone sales push Apple profits to world record

iPhone 6©Getty

Apple reported the largest profits in corporate history this week, as sales of its iPhone overtook smartphones made by rival Samsung, pushing its stock back towards a record high, writes Tim Bradshaw in San Francisco.

Huge sales of the iPhone 6, with 74.5m units sold in the three months to December, surprised even the most optimistic forecasters when Apple reported earnings on Tuesday. Tim Cook, chief executive, said demand for the iPhone was “staggering”.

The company’s success was driven by growth in China, where sales of iPhones were twice that of the same period a year ago. With gross profit margins climbing to the highest level in more than two years, Apple reported $18bn in net income, beating ExxonMobil’s $15.9bn in 2012 as the most lucrative quarter on record.

First-quarter sales grew overall 30 per cent to $74.6bn, ahead of Wall Street’s expectations.

Corporate Person in the News: Marissa Mayer

Bloomberg's Best Photos 2014: Marissa Mayer, chief executive officer of Yahoo! Inc., looks on at the Cannes Lions International Festival Of Creativity in Cannes, France, on Tuesday, June 17, 2014. The Cannes Lions International Festival of Creativity, formerly the International Advertising Festival, attracts thousands of delegates working in the creative communications, advertising and related fields, and runs from June 15 to June 21. Photographer: Simon Dawson/Bloomberg *** Local Caption *** Marissa Mayer

Yahoo chief buys time with gift of Alibaba’s treasure

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Apple’s earnings report on Tuesday fuelled a fresh surge in the share price of what was already the world’s most valuable company. Shares in the iPhone maker touched $120 on Friday, surpassing the previous intraday high of $119.40 reached last November.

Apple’s booming sales contrasted with Samsung’s report this week of a 21 per cent fall in revenues at its mobile business. Based on those numbers, market researchers at Strategy Analytics and Counterpoint Research concluded that the iPhone overtook Samsung smartphones worldwide to put it back on top with a 20 per cent market share.

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● Related FT Alphaville blog: If Apple were a country…

● Related Short View with video: Apple rises to top of earnings tree

● Related Lex note: Apple in China — big country, big company

New McDonald’s chief  faces tough test over stalling sales

Cartons of McDonald's french fries sit at a restaurant in London, U.K., on Monday, Feb. 1, 2010. McDonald's Corp., the world's largest restaurant company, plans to increase its number of Russian outlets by 20 percent this year to capitalize on its fastest growing market in Europe. Photographer: Jason Alden/Bloomberg©Bloomberg

McDonald’s appointed Englishman Steve Easterbrook to replace Don Thompson as chief executive, as it seeks a new direction in the face of perhaps the greatest challenge in its 60-year history, writes Neil Munshi.

Mr Easterbrook, a former Watford grammar schoolboy, takes over after a rocky two-and-a-half years that have seen sales growth stall at the world’s largest restaurant chain.

Last year the company recorded its first annual drop in global same-store sales in a dozen years.

The company has been accused of being caught flat-footed in the face of fundamental shifts in the restaurant business, including rising consumer demand for fresher, natural ingredients exemplified by the massive growth of burrito chain Chipotle and upmarket burger chains such as Five Guys.

©AFP/Getty Images

Steve Easterbrook

Mr Easterbrook has turnround experience. He became the head of McDonald’s UK when that division was struggling with similar challenges, and quickly returned it to growth.

But turning round an $87bn company, and convincing key low-income customers still struggling to recover from the financial crisis to return to its roughly 35,000 stores, will be difficult — particularly in the US.

Analysts have questioned whether a nearly 20-year veteran of the company is the right person to implement the necessary fundamental changes.

As chief brand officer since 2013, Mr Easterbrook has already rolled out some of the strategies that worked in the UK on the US market, the company’s largest.

● Related Lex note: McDonald’s — big game hunter

● Related news story: Shake Shack soars to $1.7bn on debut

Plunge in crude sees slew of oil majors slash spending

Royal Dutch Shell and ConocoPhillips, two of the world’s largest energy groups, this week set out plans for billions of dollars worth of cuts in their investment programmes in response to the plunge in crude prices, writes Michael Kavanagh.

(FILES) A file picture taken on June 30, 2014 shows a flame torch at the French oil giant Total refinery in Donges, western France. The OPEC oil producers cartel meets in Vienna on November 27, 2014 for a pivotal decision on whether to reduce the amount of oil it produces, faced with a global supply glut that has massively depressed crude prices.AFP PHOTO / JEAN-SEBASTIEN EVRARDJEAN-SEBASTIEN EVRARD/AFP/Getty Images©AFP

The announcements follow indications of spending cuts by French oil major Total and by Schlumberger, the biggest oil services group, before the sector’s results season. Shell said it would “curtail” its capital spending by $15bn over 2015-17, adding that 40 projects would be delayed or cancelled.

Conoco, the largest US exploration and production company, said it planned a steeper 33 per cent cut in its capital spending this year to $11.5bn, which is $2bn less than it had suggested in previous guidance issued only last month. Occidental Petroleum, the fourth-largest US oil producer by market capitalisation, also said it would cut this year’s spending by 33 per cent.

Chevron, Conoco’s larger US-listed peer, joined the pack on Friday by saying that it would cut its exploration and capital spending budget by 13 per cent to $35bn in 2015.

ExxonMobil, the world’s biggest listed oil company by market value, is set to outline its response to a 60 per cent decline in crude prices when it issues its full-year results on Monday.

BP, the UK oil major, follows on Tuesday.

Brent crude, which earlier this month dropped as low as $45.19 a barrel, was trading just over $49 on Friday — at least showing some signs of short-term stability in price following the rout of recent months.

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● Related in depth: Oil: The Big Drop

● Related Lex note: Royal Dutch Shell — parenthood

Lower litigation provisions buoy Deutsche Bank results

Deutsche Bank reported fourth-quarter results that beat expectations thanks to lower than expected litigation charges, and a resilient performance from its investment banking arm, writes James Shotter in Frankfurt.

In the last three months of 2014, Germany’s biggest lender made a net profit of €441m, up from a net loss of €1.37bn a year earlier.

Pedestrians pass the entrance to Deutsche Bank AG's offices in London, U.K., on Wednesday, Dec. 12, 2012. Major international banks are looking to move more of their U.K. staff out of London to regional offices. Photographer: Simon Dawson/Bloomberg©Bloomberg

Analysts had forecast that it would make a net loss of €157m, mainly because they were expecting Deutsche, which is embroiled in a number of probes, to take litigation provisions of €772m.

In the event, the bank took legal provisions of just €207m, although it was also hit by a €330m charge to cover consumer loans contracts claims.

BaFin, the German finance watchdog, said that it was “routinely” looking at whether Deutsche should have released its better than expected numbers via an ad hoc statement. Deutsche declined to comment.

Deutsche Bank’s investment banking division posted strong results, with overall revenues climbing
20 per cent. Revenues at its currency and debt trading arm rose 13 per cent, while proceeds from equity sales and trading rose 35 per cent.

The run-up to Deutsche’s results was dominated by speculation that the Frankfurt-based lender could decide to spin off part or all of its retail banking operations under a strategy review, which is due to be completed in the next few months.

However, Deutsche’s co-chief executives, Anshu Jain and Jürgen Fitschen, gave few hints about how their planning was progressing.

● Related Lex note: Deutsche Bank — universal truths

And finally … the lighter side of the news


● Cats, the true masters of the internet, are staking their claim to yet more terabytes. While their antics have long been ubiquitous and the web equivalent of catnip, they are now providing privacy protection for Facebook users. A new Wickr Timed Feed (WTF) photo app offers to encrypt Facebook albums so that all snooping third parties can see are random pictures of kittens. And so the stealthy feline takeover continues.

● Who would win in a fight between Peppa Pig and Katniss Everdeen from The Hunger Games films? Ask the bean counters at Entertainment One and the plucky porker might carry the day over Jennifer Lawrence’s master archer. It seems Ms Pig’s merchandise is flying off the shelves, while box-office receipts for JLaw’s latest movie are down. Rumour has it the next instalment has been renamed The Hunger Games: Bacon Sandwich.

A customer carries cans of Carlsberg lager beer, produced by Carlsberg A/S, at a supermarket in London, U.K. on Wednesday, Aug 24, 2011. Carlsberg A/S, the world's fourth-biggest brewer by volume, is looking to expand "primarily in Asia" as it seeks further growth in emerging markets, according to Chief Executive Officer Joergen Buhl Rasmussen. Photographer: Chris Ratcliffe/Bloomberg©Bloomberg

● Historically speaking, trying to invade Russia seldom ends well. Just ask Napoleon. Now, Danish beer peddler Carlsberg is learning that even the country’s beverages market is tough to conquer: it has had to close two breweries because of falling demand. A combination of tax increases, advertising bans and sales restrictions have meant that if Russians are marching anywhere, it will be on stomachs full of vodka, not lager.

A Toyota badge at a dealership in London©Getty

● When the search engine becomes as important as its internal combustion cousin, the self-driving car in front is less likely to be a Toyota. In fact, the autonomous vehicle looming large in the rear-view video looks increasingly like it was designed by Google. No wonder analysts have said Japanese carmakers risk the same fate as the country’s electronics groups: being overtaken by fast-moving US software companies.

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