Hedge funds are dumping Deutsche Bank and shares are tanking

• Oscar Williams-Grut
 

• 7h
• 3,166
 
• 10

Deutsche Bank CEO John Cryan. Reuters

Hedge funds are starting to pull business from Deutsche Bank, amid mounting concerns about the struggling German lender. And one analyst this morning sent a note to investors calling the company "Douche Bank." 

Bloomberg News reported last night that about 10 hedge funds have moved to limit exposure to the bank and have withdrawn funds, fearing that the bank could collapse under the weight of aproposed $14 billion fine from the US Department of Justice. The news sent stock plummeting in the US and again this morning in Germany.

The hedge funds pulling business include $34 billion Millennium Partners, $4 billion Rokos Capital Management, and the $14 billion Capula Investment Management, according to Bloomberg. These funds clear transactions through Deutsche Bank — basically relying on it to act as a middleman for trades — but have taken business elsewhere.

These funds are just a handful of Deutsche's 800 hedge fund clients but the move will do nothing to reassure already jittery investors. Shares fell to 30-year lows earlier in the weekamid concerns over the bank's ability to withstand the proposed huge fine for misselling of mortgage-backed securities in the run-up to the financial crisis.

Deutsche Bank CEO John Cryan was forced to send a memo to staff Friday morning reassuring them that the bank is OK and published the memo publically too in a bid to reassure investors as well. He blamed "ongoing rumours" for the bank's share price woes. (You can read the full memo here.)

US shares in the bank fell over 6% to a new low after the hedge fund withdrawals story broke and shares opened down over 7% in Frankfurt on Friday morning.Investing.com

Shares fell as much as 8%, breaking the psychologically important €10 mark to hit €9.98, but have recovered slightly since Cryan's memo was published.

Here's how shares look at 10.55 a.m. BST (5.55 a.m. ET) in Frankfurt:Investing.com

Michael Hewson, chief market commentator at CMC Markets, says in an emailed statement on Friday morning: "While these firms [the hedge funds] represent a fairly small part of the banks clients, as a weather vane in the current febrile environment, it doesn’t exactly represent a vote of confidence either, and sent the US-listed shares of the bank to a record low."

Mike van Dulken, head of research at Accendo Markets, dubbed the lender "Douche Bank" in a note on Friday morning titled "Douche Bank taking a bath." (That's a reference to the French word for shower, but it has an obvious pejorative meaning in English, too.) Van Dulken says that Deutsche Bank's woes "only adds to already dampened risk appetite as investors came to realise what an OPEC ‘deal’ actually means."

Deutsche Bank provided the following statement to Bloomberg and the Financial Times in response to the story:

"Our trading clients are amongst the world’s most sophisticated investors. We are confident that the vast majority of them have a full understanding of our stable financial position, the current macroeconomic environment, the litigation process in the US and the progress we are making with our strategy."

Deutsche Bank this week reassured staff in an internal memo, obtained by Business Insider, that it has "no current plans to raise capital" and is a "much safer and stronger bank than it was before the financial crisis."

However, the eye-watering $14 billion fine the US Department of Justice has proposed for mis-selling of mortgage-backed securities is more than the bank's market capitalisation. This has led to reports in Germany that Berlin is preparing a bailout for the lender as a final backstop, although the government has repeatedly denied this.

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More: Deutsche Bank Hedge Funds Bailout US Department of Justice 

Deutsche Bank isn't the only one in trouble — Germany's second-biggest bank is cutting almost 10,000 jobs

• Jonathan Gould, Reuters

• 2h
• 1,012

Visitors arrive at Commerzbank's headquarters before the bank's annual news conference in Frankfurt Thomson Reuters

FRANKFURT (Reuters) - Commerzbank on Thursday said it would cut nearly 10,000 jobs or more than a fifth of its workforce and stop paying dividends for the time being as it restructures to become profitable on a more sustainable basis by 2020.

Germany's second biggest lender said in a statement it expected restructuring costs of €1.1 billion ($1.2 billion) as it combines business segments and cuts costs to offset the drag from low loan demand and negative European Central Bank interest rates and as it shifts to digital banking.

The revamp will come at a heavy cost for employees as Commerzbank slashes 9,600 of its 45,000 full-time positions, a more drastic reduction than at peer Deutsche Bank, which is cutting about 10% of staff but has suggested deeper cost cutting may be needed.

Commerzbank plans to merge its business with medium-sized German companies with its corporate and markets segment, while also cutting back trading activities in investment banking to help reduce earnings volatility and free up capital for investment.

That move is also expected to prompt a writedown of around €700 million in the third quarter, leading to a quarterly net loss, Commerzbank said. It expects to turn a small net profit in full-year 2016, down from €1.1 billion last year, it said.

The bank will concentrate on two customer segments in future: Private and Small Business Customers and Corporate Clients, with the restructuring expected to lift net return on tangible equity to at least 6% by the end of 2020 from 4.2% last year.

On jobs, Commerzbank said it would also aim to add 2,300 positions in areas where business was growing, which would ease the net reduction to 7,300.

Commerzbank shares are down just over 1% in Frankfurt at around 12.20 p.m. BST (7.20 a.m. ET).

(Reporting by Jonathan Gould; Editing by Victoria Bryan)

Read the original article on Reuters. Copyright 2016. Follow Reuters on Twitter.

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The EU is starting an antitrust investigation of the Deutsche Boerse-LSE deal

• Foo Yun Chee and Andreas Kröner, Reuters

• 3h
• 204

REUTERS/Toby Melville

(Reuters) - EU antitrust regulators warned on Wednesday that Deutsche Boerse's proposed $28 billion merger with the London Stock Exchange could hinder competition in key financial market activities.

The European Commission said it would investigate over the next four months whether the deal would also sharply reduce competition in German equity trade and create a near-monopoly in single stock equity futures and options based on Italian shares.

Deutsche Boerse and the London Stock Exchange, which had anticipated the EU move, are expected to offer concessions to allay the regulatory concerns, some of which go to the heart of the merger's rationale.

The Commission cited concerns about reduced competition in clearing where the merged company would combine the largest margin pool in the world, worth 150 billion euros ($168 billion), and in derivatives.

"Financial markets provide an essential function for the European economy. We must ensure that market participants continue to have access to financial market infrastructure on competitive terms," European Competition Commissioner Margrethe Vestager said in a statement.

The EU antitrust enforcer will rule on the proposed merger by Feb. 13, a deadline which would be extended once the companies submit concessions.

The merger has already triggered alarm in France, Belgium, Portugal and the Netherlands, trading locations of rival exchange Euronext.

Industrial lobbying group European Investors Association last month warned of the dangers of a quasi-monopolistic stock market which could dictate listing fees and costs and harm competition. ($1 = 0.8919 euros) (Reporting by Foo Yun Chee in Brussels, additional reporting by Huw Jones in London, Jonathan Gould in Frankfurt; editing by Philip Blenkinsop)

Read the original article on Reuters. Copyright 2016. Follow Reuters on Twitter.

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BlackBerry is giving up on making its own phones

• Rob Price
 

• Sep. 28, 2016, 7:49 AM
• 15,789
 
• 3
 

John Chen, CEO of BlackBerry. Reuters

It's the end of an era. BlackBerry is going to stop making its own smartphones.

Instead, the Canadian company will rely entirely on external companies for any future hardware projects, it announced in its quarterly earnings released Wednesday.

BlackBerry was once the undisputed king of the mobile phone world — but it was caught off-guard by the launch of the iPhone and the dawn of the smartphone era. It never recovered, and has dwindled further and further into irrelevancy ever since.

Its retreat from hardware projects has been on the cards for a while. BlackBerry's most recent phone, the DTEK50, is basically just a reskinned version of the Idol 4 from Alcatel.

And CEO John Chen had said that "if by September, I couldn’t find a way to get [to profitability], then I need to seriously consider being a software company only."

Now it's actually happening.

Here's what CEO John Chen said in a statement, emphasis ours:

"Our new Mobility Solutions strategy is showing signs of momentum, including our first major device software licensing agreement with a telecom joint venture in Indonesia. Under this strategy, we are focusing on software development, including security and applications.The company plans to end all internal hardware development and will outsource that function to partners. This allows us to reduce capital requirements and enhance return on invested capital."

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California just dealt another blow to Wells Fargo

• Bob Bryan
 

• 18h
• 9,122
 
• 11
 

Ryan Welsh/Flickr

The state of California will no longer use Wells Fargo as an underwriter for the issuance of state municipal bonds, and the bank will have no involvement in the state's banking or investment activities for the next 12 months.

California is the largest issuer of municipal bonds and the home state of Wells Fargo.

In a release, the state's treasurer admonished Wells Fargo for its recent fake-accounts scandal.

"Wells Fargo's fleecing of its customers by opening fraudulent accounts for the purpose of extracting millions in illegal fees demonstrates, at best, a reckless lack of institutional control and, at worst, a culture which actively promotes wanton greed," John Chiang, the state treasurer, said in the release.

If the bank fails to meet California's standards during the 12 months, the state could permanently sever ties with Wells, according to the release.

The release also said that the state currently has $2.3 billion invested in Wells Fargo "fixed income securities and equity."

Wells Fargo is one of the top banks for debt deals in the US. It ranked fourth in US debt capital markets activity in the year to September 23, ahead of the likes of Goldman Sachs and Morgan Stanley, according to data from Dealogic.

The bank has been embroiled in a scandal in recent weeks, after it was revealed that bank employees opened roughly 2 million accounts without the knowledge of customers between 2011 and 2015.

Since the announcement of Wells' settlement with regulators for $185 million earlier this month, CEO John Stumpf has testified before the Senate banking committee and forfeited $41 million in stock-based compensation.

Chiang said he sent the letter to Stumpf and noted that the state similarly sanctioned HSBC earlier this year. He drew comparisons among Wells, HSBC, and financial institutions that failed during the financial crisis.

"Just as Lehman Brothers and Bear Stearns learned the hard way that no bank is truly too big to fail, those banks which survived the Great Recession must now learn that they are not so powerful as to be untouchable," Chiang said in the release.

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Federal Reserve Chair Janet Yellen forgot a key measure of the job market during testimony to Congress

• Bob Bryan
 

• 20h
• 128,431
 
• 51

Alex Wong/Getty Images

Forgetting a key fact or figure is a nightmare for anyone in a business meeting, but sometimes it can be worse than others.

For Federal Reserve Chair Janet Yellen, that moment came during her semi-annual testimony to the House Financial Services Committee on Wednesday.

When asked by Rep. Frank Guinta what the labor force participation rate (LFPR), the percentage of people with a job or actively seeking a job as part of the total population, Yellen seemed to be unable to draw the number from memory and had to shuffle through papers in order to find the number.

The LFPR is one of the most important numbers released monthly during the Bureau of Labor Statistics jobs report that the Federal Reserve uses to measure the strength of the US job market. Yellen herself has brought the number up in the past.

While the unemployment rate has declined under 5%, analysts have noted that the LFPR has plummeted after the financial crisis and that may be evidence that the labor market is not as strong as it appears.

It currently sits at 62.8%, by the way.

Check out the exchange:

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Former employees file class action against Wells Fargo

• Reuters

• Sep. 24, 2016, 3:02 PM
• 452
 
• 1

Wells Fargo branch is seen in the Chicago suburb of Evanston IllinoisThomson Reuters

By David Bailey

(Reuters) - Two former Wells Fargo & Co employees have filed a class action in California seeking $2.6 billion or more for workers who tried to meet aggressive sales quotas without engaging in fraud and were later demoted, forced to resign or fired.

The lawsuit on behalf of people who worked for Wells Fargo in California over the past 10 years, including current employees, focuses on those who followed the rules and were penalized for not meeting sales quotas.

"Wells Fargo fired or demoted employees who failed to meet unrealistic quotas while at the same time providing promotions to employees who met these quotas by opening fraudulent accounts," the lawsuit filed on Thursday in California Superior Court in Los Angeles County said.

Wells Fargo has fired some 5,300 employees for opening as many as 2 million accounts in customers' names without their authorization. On Sept. 8, a federal regulator and Los Angeles prosecutor announced a $190 million settlement with Wells.

The revelations are a severe hit to Wells Fargo's reputation. During the financial crisis, the bank trumpeted being a conservative bank in contrast with its rivals.

A Wells Fargo spokesman on Saturday declined to comment on the lawsuit.

The lawsuit accuses Wells Fargo of wrongful termination, unlawful business practices and failure to pay wages, overtime, and penalties under California law.

Former employees Alexander Polonsky and Brian Zaghi allege Wells Fargo managers pressed workers to meet quotas of 10 accounts per day, required progress reports several times daily and reprimanded workers who fell short.

Polonsky and Zaghi filed applications matching customer requests and were counseled, demoted and later terminated, the lawsuit said.

While executives at the top benefited from the activity, the blame landed on thousands of $12-per-hour employees who tried to meet the quotas and were often required to work off the clock to do so, the lawsuit said.

Employees with a conscience who tried to meet quotas without engaging in fraud were the biggest victims, losing wages, benefits and suffering anxiety, humiliation and embarrassment, the lawsuit said.

Wells Fargo was aware many accounts were illegally opened, unwanted, carried a zero balance, or were simply a result of unethical business practices, the lawsuit said.

"Wells Fargo knew that their unreasonable quotas were driving these unethical behaviors that were used to fraudulently increase their stock price and benefit the CEO at the expense of the low level employees," the lawsuit said.

(Reporting by David Bailey in Chicago; Editing by Matthew Lewis)

Read the original article on Reuters. Copyright 2016. Follow Reuters on Twitter.

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