Business

MILAN — UniCredit, the Italian lender at the centre of speculation about consolidation in the European banking sector, on Thursday said its net profit rose in the first quarter and that it would strive to clean up its balance sheet.

Net profit jumped by nearly a quarter to 1.38 billion euros ($1.54 billion), beating the analyst consensus. 

Net profit was boosted by so-called exceptional items, such as the sale of property assets and releasing of provisions after it agreed last month to pay $1.3 billion to settle US allegations that it processed payments that violated US sanctions on Iran and other countries.

But ING credit analyst Suvi Platerink Kosonen said "the profit improvement was driven by the cost side as operating cost were down by 4 per cent year-on-year and loan loss provisions were per cent lower year-on-year".

Revenues slid 3 per cent to 4.95 billion due to a drop in commissions, but the result was better than analysts had expected.

The bank also raised its ratio of funds available to absorb possible losses, the fully-loaded CET1 ratio, to 12.25 per cent from 12.07 per cent at the end of last year.

UniCredit confirmed its targets for the year, in particular revenues of 19.8 billion, net profits of 4.7 billion and a CET1 ratio of between 12 and 12.5 per cent.

"This was the best first quarter results in a decade for the second time in a row, underpinning the success of our current strategic plan," chief executive Jean-Pierre Mustier was quoted as saying in the bank's earnings statement.

The bank also indicated it aimed to work on reducing its non-performing loans and reduce its holdings of Italian government debt.

CMC Market's UK analyst David Madden said "today's upbeat update might renew speculation about a possible tie-up between UniCredit and Commerzbank".

There has been media speculation that UniCredit could be interested in merging with Commerzbank after the German bank's failed tie-up attempt with Deutsche Bank.

In a call with analysts, Mustier declined to comment on what he called "rumours and speculation", but he did say that "mergers, especially mergers across borders, are very difficult to achieve". 

When Mustier took over the reins at UniCredit in 2016, he launched a vast reorganisation plan for the bank. It raised 13 billion from shareholders, sold off assets, cut costs and eliminated nearly 15,000 jobs as it closed over 900 branch offices.

UniCredit is due to unveil a new strategic plan later this year, but the reduction of its stake in online bank and trader Finecobank has already raised questions about which direction the lender intends to go.

"We want to understand the logic behind the sale of the Fineco stake, a gem which has brought us extremely high profits," said Riccardo Colombani, head of the First Cisl trade union. 

"We can't wait until December 3 to learn which transformations we should prepare ourselves for," he added.

UniCredit shares were trading 0.1 per cent higher nearing midday after having spent most of the morning lower. Milan's FTSE-Mib index was down nearly 0.8 per cent.

By Kate Holton and Joshua Franklin

LONDON/NEW YORK — Uber drivers in London and New York started a day of strikes on Wednesday to protest the disparity between gig-economy conditions and the sums that investors are likely to make in Friday’s blockbuster stock market debut.

Drivers and regulators around the world have long criticised the business tactics of Uber Technologies Inc., and the expected $90 billion valuation in its initial public offering on Friday is proving to be the latest flashpoint.

Unions in Britain said support for the strike was strong, with drivers staying at home and passengers using the #UberShutDown hashtag to pledge solidarity on social media. The Uber app indicated fares were higher in London during a rainy morning rush hour due to increased demand. 

“Stand with these workers on strike today, across the UK and the world,” said Jeremy Corbyn, the leader of Britain’s opposition Labour Party. 

Drivers in London were due to log off the app between 7am and 4pm local time, before counterparts in New York, Chicago, Los Angeles, San Francisco and other major cities joined in.

Uber has 3 million drivers globally, and it is not clear if the action would significantly slow service, although organisers have received widespread publicity.

Chief Executive Officer Dara Khosrowshahi, hired to help move the company past a series of scandals and manage the IPO, has promised to treat drivers better. Uber is paying more than a million drivers about $300 million in one-time bonuses, for instance, and has changed policies such as allowing riders to tip.

“Whether it’s being able to track your earnings or stronger insurance protections, we’ll continue working to improve the experience for and with drivers,” the company said.

Under pressure

Uber has steadfastly, and mostly successfully, beaten back attempts to compel it to treat drivers as employees, arguing that its main business is a platform that brings riders and drivers together. Now, the money-losing company is under pressure to cut costs.

“It is the drivers who have created this extraordinary wealth but they continue to be denied even the most basic workplace rights,” said James Farrar, chair of Britain’s United Private Hire Drivers, calling for a “digital picket line”.

Many drivers want better pay from Uber rival Lyft Inc. as well.

“I’m striking because Uber has broken their promises to drivers time and again,” said Syed Ali, an Uber driver and member of the striking New York Taxi Workers Alliance, in a statement. “They have grown and grown and gotten richer and richer, but I haven’t grown with the company. My condition as an Uber driver has gotten worse and worse.”

It was not clear how many drivers were participating in the US strikes. US representatives for Uber and Lyft did not immediately respond to calls for comment early Wednesday.

Uber and Lyft have cut back on incentives and bonuses in more established markets to attract new drivers. They have also devised more complicated formulas for determining what riders pay and what drivers earn.

Both companies recently slashed the per-mile rate drivers earn in Los Angeles and San Francisco, and some drivers estimated a loss of 10 per cent to 20 per cent in earnings. Lyft said its hourly wages have risen over the last two years and average over $20 per hour.

The company and its critics are divided over how much drivers can make. Classified as independent contractors, they lack paid sick and vacation days and must pay their own expenses, such as car maintenance and gasoline.

Uber noted that a recent study whose authors included current and former Uber employees showed driver gross earnings averaged $21 an hour. But a study by left-leaning Washington think tank Economic Policy Institute calculated that after costs, Uber drivers earned $9.21 an hour.

AMMAN —  Arab Bank has recently hosted the MENA Financial Crime Compliance Group (MENA FCCG) two-day event in Amman; seeking to further empower the combating financial crime community in Jordan and beyond, according to a statement of the Arab Bank. 

The MENA FCCG is an industry-driven, voluntary initiative, currently consisting of 13 proactive financial institutions from nine MENA countries, among which is the Arab Bank. 

Chaired by Wissam Fattouh, the initiative, seeks to bring collective action in the fight against money laundering and terrorism finance in the region. 

“MENA FCCG will continue to capitalise on its members’ collective capacity and to weave strong relationships with public and private partners, building on its record in the fight against financial crime in the MENA region.” Fattouh, who is also secretary general of the union of Arab Banks (UAB), with both UAB and Refinitiv acting as strategic partners to the group, said on the occasion.

The plenary meeting acted as a platform for participants to discuss priorities for 2019-2020 and the means to steer collective efforts towards areas in need for greater intervention, according to the statement.

BEIRUT — Employees of Lebanon's central bank on Tuesday said they were suspending a strike that has crippled the country's stock exchange and alarmed officials.

Central bank employees launched the strike on Saturday to protest feared cuts to their benefits as part of a new austerity package being studied by the Cabinet ahead of this year's budget.

On Monday, the Beirut Stock Exchange said it had been forced to halt trading "until further notice" as it could not clear and settle trades because of the strike.

On Tuesday, Abbas Awada, the head of the syndicate of central bank employees, said they were suspending the strike for three days.

The decision stemmed from "a sense of responsibility towards society and the Lebanese economy", he said, while noting that the suspension could be lifted. 

"The assembly will convene next Friday morning to... decide on whether to continue the open-ended strike or to cancel it," he said, quoted by the state-run NNA news agency.

The suspension came one day after the central bank’s governor, Riad Salame, demanded an end to the strike due to its impact on the economy and financial transactions, according to a statement from the syndicate.

On Tuesday, central bank employees received assurances from Salame that their wages and benefits would not be affected by austerity measures, Awada said.

Lebanon has vowed to slash public spending to unlock $11 billion worth of aid pledged by international donors at an April 2018 conference in Paris.

Last month, Prime Minister Saad Hariri vowed to introduce "the most austere budget in Lebanon's history" to combat the country's bulging fiscal deficit, sparking fears among public sector employees that their salaries may be cut.

In recent days, protests have also handicapped Beirut Port and the National Social Security Fund.

On Monday evening, President Michel Aoun convened a meeting with Hariri and parliament speaker Nabih Berri.

"Everybody knows there's an economic crisis," Hariri said after the meeting, according to a statement from the presidency.

"It has to be managed through austerity and reforms, without targeting one side over another."

Information Minister Jamal Jarrah said reports of wage cuts for public sector employees stemmed from "leaks" and "rumours".

"The leaked information", he said, is "incomplete, and misleads public opinion".

Lebanon is one of the world's most indebted countries, with public debt estimated at 141 per cent of gross domestic product in 2018, according to credit ratings agency Moody's.

LONDON — Core eurozone bonds yields fell on Monday as investors sought safe havens after US President Donald Trump threatened to raise tariffs on China, while PMI data pointed to anaemic growth in the eurozone.

Trump's move marked an escalation in tensions between the world's largest economies and a shift in tone from the president, who had cited progress in trade talks as recently as Friday.

Global equity markets fell, with China's main indexes down 5 per cent. Treasuries rallied after Trump said tariffs on $200 billion of goods would rise on Friday to 25 per cent from 10 per cent.

Trump also said he would target a further $325 billion of Chinese goods with 25 per cent tariffs "shortly", essentially covering all products imported to the United States from China.

Germany's 10-year government bond yield, the benchmark for the region hit a low of -0.008 per cent, turning negative for the first time since April 30. It was last down one basis point on the day to 0.01 per cent. 

"Everyone was quite optimistic that they were close to a deal…," said Daniel Lenz, rates strategist at DZ Bankit. Trump's threat "may cause the opposite action, talks might come to a stop, which is the fear everyone has".

Most other core 10-year yields in the bloc fell by up to two basis points before pulling back to trade flat on the day.

Data on Monday painted a mixed picture of eurozone economic growth. Germany's services stood out among a gloomier bloc-wide report from research firm Markit's final purchasing manager data for April. 

German services created jobs in April at the fastest rate in more than a decade, offsetting deteriorating manufacturing, the data showed. But overall, weakness in eurozone manufacturing increasingly affected the dominant services industry.

IHS Markit's Eurozone Composite Final Purchasing Managers' Index (PMI), considered a good measure of overall economic health, dipped to 51.5 in April from March's 51.6.

However, overall investor improved for the third month in a row, reaching its highest since November 2018, the Sentix research group said on Monday.

Italy in focus 

Italian government bonds underperformed the rest of the periphery. Concerns about the stability of the Italian government added to worries about global trade. 

Italian Deputy Prime Minister Luigi di Maio said on Monday a graft case involving a junior minister from the ruling League Party would trigger a government crisis only if the League itself pushed for it.

Italy's short-dated bonds were up to six basis points higher before pulling back to around three basis points up on the day. The spread of its 10-year debt over Germany's widened to nearly 260 basis points for the first time since April 30, before pulling back to 255 basis
points.

AMMAN — A trade delegation from the Republic of Korea held business meetings with representatives of Jordanian companies during a visit to the Kingdom last week, according to a statement of the Korea Trade-Investment Promotion Agency (KOTRA).

Under the theme of “Jordan-Korea Business Partnership", the two sides discussed business and investment opportunities and ways to develop and enhance cooperation.

The meetings were held in the presence of Lee Bom-yoon, ambassador of the Republic of Korea to Jordan, and Kim Sang-mok, KOTRA’s vice-president, in addition to Jordanian businessmen who have interest in the Korean products and industries. Representatives of the Iraqi Business Council were at the meetings, as well.

The delegates included representatives of Korean companies, specialised in water filtration and cooling, water treatment plants, piping and fittings, containers and prefabricated houses, total environmental solution and air pollution prevention systems, food processing and packaging machinery, according to the statement. 

OSLO — Norway's $1.1 trillion sovereign wealth fund, the world's largest, made record returns on investment in the first quarter amid a surge in tech stocks. 

Separately, the fund is assessing whether to make an investment in ride-hailing company Uber Technologies Inc., which is planning an initial public offering, its chief executive told Reuters.

The fund earned 738 billion Norwegian kronor ($84.15 billion) for the January-March period, the highest amount it has ever recorded.

When measured in terms of the fund's international currency basket, the return for the quarter stood at 9.1 per cent, beating its benchmark, it added. 

"The first quarter was an exceptionally good quarter," fund CEO Yngve Slyngstad told reporters.

Apple Inc. made the most positive contribution to the return in the first quarter, the fund said in its quarterly report, followed by Microsoft and Amazon.

The investments that made the most negative contributions were pharmaceutical firm AbbVie, bank Swedbank and US consumer services firm CVS Health.

Tech unicorns 

Overall, out of the 10 largest equity holdings in the fund, five of them are US tech companies. The top three equity holdings are Apple, Microsoft and Alphabet.

The fund participated in the initial public offerings of tech firms Lyft and Weimob in the first quarter, and in the present quarter it is examining the listings of two large companies, including that of Uber, Slyngstad said.

The fund has previously said it wished more companies, and particularly tech companies, had sought public listings, enabling the fund to invest in these fast-growing companies.

Slyngstad welcomed the recent wave of public listings by tech firms, but reiterated that they could be seeking listings at an earlier stage so the fund can capture the fruits of their growth.

"This development of these large unicorns coming to the exchanges is something we view positively," Slyngstad said in an interview on the sidelines of a news conference. 

"We are of course pleased that more companies have decided to go to the stock exchanges. We appreciate the transparency and the liquidity of the public markets.

"From our point of view, an earlier listing is better than a later listing."

BEIJING —China and the United States held "productive" trade talks in Beijing on Wednesday and will continue discussions in Washington next week, US Treasury Secretary Steven Mnuchin said, as the two try to end their trade war.

Mnuchin, along with US Trade Representative Robert Lighthizer, held a day of discussions, before Chinese Vice Premier Liu He goes to Washington next week for another round of talks in what could be the end game for negotiations. 

"Ambassador Lighthizer and I just concluded productive meetings with China's Vice Premier Liu He. We will continue our talks in Washington, DC next week," Mnuchin wrote on his Twitter account. He gave no details.

The three men appeared before cameras at the end of their talks at a state guest house in Beijing, chatting amiably amongst themselves but did not speak to reporters. 

Liu had entertained his US guests on Tuesday night just after they arrived in the Chinese capital.

"We did. We had a nice working dinner, thank you," Mnuchin told reporters at his Beijing hotel earlier on Wednesday, when asked if he had met with Liu on Tuesday. He did not elaborate.

Beijing and Washington have cited progress on issues including intellectual property and forced technology transfer to help end a conflict marked by tit-for-tat tariffs that have cost both sides billions of dollars, disrupted supply chains and roiled financial markets.

But US officials say privately that an enforcement mechanism for a deal and timelines for lifting tariffs are sticking points.

Chinese officials have also acknowledged that they view the enforcement mechanism as crucial, but say that it must work two ways and cannot put restraints only on China.

In Washington, people familiar with the talks say that the question of whether and when US tariffs on $250 billion worth of Chinese goods will be removed will probably be among the last issues to be resolved.

US President Donald Trump has said that he may keep some tariffs on Chinese goods for a "substantial period".

The United States has also been pressing China to further open up its market to US firms. China has repeatedly pledged to continue reforms and make it easier for foreign companies to operate in the country.

In comments published on Wednesday, China's top banking and insurance regulator said the government will further open up its banking and insurance sectors.

NEW YORK — American mega-investor Warren Buffett’s Berkshire Hathaway will invest $10 billion in Occidental Petroleum as the company battles to acquire rival Anadarko Petroleum, Occidental announced on Tuesday. Anadarko’s board had already approved an offer from Chevron when Occidental unveiled a higher bid last week, beginning a tug-of-war over the assets in the shale-rich Permian Basin in Texas.

“We have long believed that Occidental is uniquely positioned to generate compelling value from Anadarko’s highly complementary asset portfolio,” Vicki Hollub, Occidental’s president and chief executive, said in a statement.

“We are thrilled to have Berkshire Hathaway’s financial support of this exciting opportunity.”

Occidental’s proposed takeover valued Anadarko at $76 a share, compared to the $65 offered by Chevron on April 12. Occidental said it was disappointed that Anadarko had ignored its previous bids.

Anadarko on Monday agreed to resume talks with Occidental, after the board of directors declared that the rival offer “could reasonably be expected to result in a ‘Superior Proposal’” to Chevron’s offer.

Berkshire Hathaway is to receive $10 billion in Occidental shares, with the option to buy 80 million more at $62.50 a share, according to the Occidental statement.

But Chevron said on Tuesday it stood by its initial offer.

“We believe our signed agreement with Anadarko provides the best value and the most certainty to Anadarko’s shareholders,” a Chevron spokesman said.

But the company indicated last week it could walk away from the deal if bidding drove the price up too high.

“We can practically say Chevron will get out of the race,” Gregori Volokhine of Meeshaert Financial Services told AFP.

“It’s not that it’s hard to fight Warren Buffett but this maneuver will give Anadarko a lot of confidence to accept the offer” from Occidental, he added.

Shares in Anadarko were 0.5 per cent lower toward 15:00 GMT while Occidental had fallen an even steeper 1.7 per cent. Chevron was up 3.1 per cent.

BEIJING — US negotiators head to China on Tuesday to try to hammer out details to end the two countries' trade war, including the shape of an enforcement mechanism, the success or failure of which could set the trajectory of ties for years to come.

US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will travel to Beijing for talks beginning on April 30, followed by a visit by Chinese Vice Premier Liu He to Washington for more discussions starting on May 8. 

Both sides have cited progress on issues, including intellectual property and forced technology transfer to help end a conflict marked by tit-for-tat tariffs that have cost the world's two largest economies billions of dollars, disrupted supply chains and rattled financial markets.

Those issues are still on the table, according to the White House, but US officials say privately that an enforcement mechanism for a deal and timelines for lifting tariffs are sticking points.

Agreeing to a way to enforce a deal is one thing. Ensuring it holds up under ties strained by growing mistrust and geopolitical tensions will be another, say watchers of the relationship.

"An effective enforcement mechanism will define the deal," Tim Stratford, chairman of the American Chamber of Commerce in China (AmCham), told Reuters.

"The deal doesn't need to revamp China's economy. But it does need to provide a new methodology for dealing with our differences," said Stratford, a lawyer and former assistant US trade representative who has worked in China for more than three decades.

"This is incredibly high stakes. We have a particular window of opportunity, and a lot in the future of US-China relations rests on this," he said.

Earlier this month, Mnuchin said the two sides had agreed on establishing new "enforcement offices" to police an agreement, although he did not give specifics. On Sunday, he told The New York Times talks are entering a critical point: "We're getting into the final laps."

At a crossroads

US President Donald Trump said on April 4 that the two sides could have a deal worked out in about four weeks. On Thursday, he said he would soon host Chinese President Xi Jinping at the White House — a meeting seen as needed to cement an agreement. 

Although a final date for a deal — if there is one — remains unclear, talks have brought China and the United States to a crossroads in their fraught relationship.

China has long defined commerce as the ballast in the relationship.

Now, some warn that the two are teetering towards a new type of "Cold War", as Beijing asserts its growing military strength in Asia and Washington ramps up scrutiny of Chinese tech companies and cracks down on Chinese espionage and influence campaigns at US institutions and universities.

Beijing sees US actions as efforts to contain its development.

But years of only piecemeal economic reforms in China and continued industrial policies that US companies complain have eroded their competitive edge have weakened key US business sector support for China. AmCham said this month that US businesses could no longer be counted on as a "positive anchor" in bilateral relations. 

US officials, chagrined by what they say have been years of Chinese stalling tactics in annual economic dialogues, have been adamant that a trade deal must have teeth.

Lighthizer has suggested that some form of the tariffs Trump imposed last year on Chinese goods as leverage in the dispute should hang over a deal to ensure compliance.

Any such a mechanism would be fragile, trade experts said.

For one, it would mean continued uncertainty for already trade war-weary businesses and markets.

They also say China's record of exploiting loopholes at the World Trade Organisation suggests it will look aggressively for new areas where it can say the United States is not living up to its pledges. If Washington reestablishes tariffs weeks or months down the road, it could lead to retaliation and the collapse of the deal.

In such a case, the two sides would find themselves back at square one, this time without negotiations as a viable way to deescalate disputes. 

Because of this, one American trade consultant said: "It takes great imagination and optimism to think we can come up with an effective enforcement mechanism beyond the short term."

A durable deal? 

Another source with knowledge of the trade talks argued that if the United States triggered the mechanism, Beijing would be unlikely to "come back to the table with this president", referring to Trump. 

"As long as there is a mechanism of tariffs hanging over the deal, it won't be durable," the source said. 

Trade advisers in China appear more confident that an agreement would not fall apart quickly because both sides need it politically, particularly Trump, who is seen in China as eager for a détente as the 2020 US presidential election approaches.

Wang Dong, an expert on China-US relations at Peking University, said it would be politically difficult for both sides to return to talks in the wake of a collapsed deal. 

"I'm not saying China will end altogether future talks with the Trump administration. But it would take time to build momentum again, to say the least," Wang said.