The Star Online: Business
The Star Online: Business |
- U.S. not "trying that hard" on exports: GE's Immelt
- Citi posts higher earnings but warns on growth
- Industrial output up, NY manufacturing contracts
| U.S. not "trying that hard" on exports: GE's Immelt Posted: 17 Oct 2011 05:59 PM PDT NEW YORK (Reuters) - The United States is not trying hard enough as a nation to win business overseas, and that is contributing to its economic slump, said General Electric Co Chief Executive Jeff Immelt. That is a big concern since boosting exports is one of the best ways the nation can tackle the stubbornly high unemployment that is leading a growing number of Americans to question how well the economic system is working. "We're not trying that hard," Immelt told a Thomson Reuters Newsmaker event in New York on Monday. "We haven't really tried as hard as we can to compete, educate and sell our products around the world, and I think we can do better." Still, the head of the largest U.S. conglomerate and a top adviser to the Obama administration on jobs and the economy believes the United States can improve. He noted that GE expects to generate 60 percent of its sales outside its home country this year. He held out Germany -- home to one of GE's biggest rivals, Siemens AG -- as an example of a wealthy country that has been successful in pushing exports. "Chancellor (Angela) Merkel flies from Berlin to Beijing, there's 25 German CEOs that go on the plane right behind her. And they connect the dots. They play hard, they play to win," Immelt said. President Barack Obama, he added, "has been out driving and pushing to try to double exports in the next five years. I think we can compete very well. But we're not all-in the same way that the Germans are all-in." The nation's economic malaise, now in its third year, has left many Americans angry and frustrated, Immelt said, and people in power need to empathize. "Unemployment is 9.1 percent. Underemployment is much higher than that, particularly among young people that don't have a college degree," Immelt said. "It is natural to assume that people are angry, and I think we have to be empathetic and understand that people are not feeling great." A large and diverse group of protesters, who complain that the U.S. economic system is no longer working to the benefit of a large slice of the nation's population, has been a visible presence on Wall Street for a month now. The movement, known as "Occupy Wall Street," has spread around the country. The protesters complain that the billions of dollars the U.S. government spent during the recession to prop up financial companies, including GE, have allowed banks to earn large profits without benefiting average Americans. GROWTH THE ONLY ANSWER The head of the world's largest maker of jet engines and electric turbines said he regarded stronger growth as the only real answer to the rising disillusionment. "The only way to solve this specific problem is growth," Immelt said. "If unemployment comes down, people will feel better. If unemployment goes up, people will feel worse, no matter what goes on Wall Street." Immelt said the gap between the pay of CEOs and average Americans is adding to tensions. "The discrepancy is certainly one of the problems today in terms of why people feel the system is unfair," Immelt said. But he said that lowering CEO pay would do little to lower unemployment. Immelt received compensation worth $21.4 million last year, including a $4 million bonus that was his first since 2007. "If CEO pay goes way down and unemployment is 12 percent, people are still going to feel bad," he said. "It is a symptom but it is not the problem." Immelt is confident that U.S. business can compete with rivals in emerging markets such as China and also profit in developing markets. He cited Russia as a major focus over the next decade and said GE is also investing in resource-rich African countries including Mozambique, Angola, Nigeria and South Africa. GE expects to generate more than 60 percent of its revenue outside the United States this year. Analysts, on average, expect it to record revenue of $148.13 billion. SEES SLOW EUROPEAN GROWTH Concerns that Greece could default on its debt and threaten the European and U.S. financial systems have rattled the world economy in recent weeks, pushing down stocks and prompting big banks including Bank of America Corp and JPMorgan Chase & Co to begin laying off staffers. "The most likely case is that Europe has slow growth for a long period of time," Immelt said. "The process is going to have to be solved inside of Europe." Last week, the White House advisory panel Immelt heads submitted a report to the Obama administration saying that attracting more foreign capital, being more aggressive in energy policy, and investing in infrastructure could help create jobs in an economy struggling with high unemployment. Immelt, a lifelong Republican, has drawn fire from some GE shareholders for his work with the Democratic Obama administration. The CEO defended his role, saying GE executives have long had a voice in Washington. "People need to try," he said. "I'd rather be in the arena trying than not doing what I can to help." Partisanship in Washington is hurting the nation's economy by slowing efforts to reform the system, Immelt said, adding that he worried that anti-Wall Street rhetoric hurts people other than those it is aimed at. "If your first comment is Wall Street is horrible and you're in a position of leadership, you don't hurt Wall Street," Immelt said. "But there is some guy in Illinois that's not going to build a factory today because he thinks the financial system is horrible. That's my point. This is a time when leaders, people like me, should be trying to do things that are more convergent, because ultimately words count." Full content generated by Get Full RSS. |
| Citi posts higher earnings but warns on growth Posted: 17 Oct 2011 05:57 PM PDT NEW YORK (Reuters) - Citigroup Inc reported higher quarterly earnings, helped by an accounting gain, but warned that developed markets could face weak growth for years, and the bank's shares fell. The results were better than expected, but the bank's shares shrugged off early strength and ended the day lower amid broader concerns about the industry's future profitability. Wells Fargo & Co posted a steep drop in lending margins on Monday. "When you look at the (accounting gain) and the loan loss reserve releases, those stick out like sore thumbs," said Matt McCormick, portfolio manager with Bahl & Gaynor Investment Counsel. "Investors are saying they like banks to beat expectations, just they don't like how Citi did it." Like its rivals, Citigroup was hit by the European debt crisis and the sluggish U.S. economy. Investment banking fees dropped and its loan book fell 2 percent. Operating expenses rose, in part because of investments made to boost its business. Chief Executive Vikram Pandit is trying to turn the bank around after the financial crisis by focusing on emerging markets, where economies are still growing relatively quickly. The weak U.S. economy also weighed on results at JPMorgan Chase & Co last week. "In the developed markets, growth is likely to be slow for years," Pandit said in a conference call with analysts. He also said the U.S. housing market remains the "greatest risk" that domestic banks face. Chief Financial Officer John Gerspach said the bank's net interest margin is expected to decline by a few hundredths of a percentage point every quarter for the next few quarters, if the bank does not make a significant portfolio sale. Growth in the developed markets is weak, but the emerging markets, which have fueled much of Citigroup's profit gains in recent quarters, showed early signs of sputtering. For example, retail loan volume in Latin America dropped 7 percent in the third quarter from the second quarter. Citigroup, the third-largest U.S. bank by assets, reported net income of $3.77 billion, or $1.23 per share, up from $2.17 billion or 72 cents per share a year earlier. The latest results included a pretax gain of $1.9 billion, or 39 cents per share after taxes, due to the bank's widening credit spreads during the quarter. When a bank's debt weakens relative to U.S. Treasuries, it can record an accounting gain because it could theoretically profit from buying back debt. Excluding that gain, Citi earned $2.6 billion, or 84 cents per share. Analysts' average forecast was 81 cents per share, according to Thomson Reuters I/B/E/S. After rising by as much as 3.8 percent in the morning, Citi shares changed course and ended 1.7 percent lower on the day at $27.93. The bank's share price has fallen about 40 percent this year, in line with declines for other large banks. IMPROVING CREDIT Citi, which received three U.S. government rescues at the height of the financial crisis, is seeing its problem loan portfolio shrink. Nonaccrual loans fell to $7.95 billion in the third quarter from $12.46 billion a year earlier. As part of the improving credit picture, Citi also announced plans to move its retail partner card business from Citi Holdings, the unit where the bank keeps assets and operations it is shedding, into Citicorp, where it houses its main continuing businesses. Citigroup had been looking to sell the unit -- which includes $42 billion in credit card loans -- after forming Citi Holdings in 2009. But CFO Gerspach said the business now makes sense with Citigroup's on-going business, as the portfolio is now "markedly different" than in 2008 and 2009 at the height of the financial crisis. "We figured out how retail partner cards fit the broader payment strategy" for U.S. consumer, Gerspach said. The bank has no plans to take its OneMain Financial business into its Citicorp unit, he added, because it is not as good a strategic fit. OneMain makes consumer loans, typically to less-wealthy borrowers, while Citigroup is focusing its retail businesses on higher-income consumers globally. A tough dealmaking market may also be contributing to the card unit's move. Gerspach said the current market environment is "a bit daunting" for selling large loan portfolios. INVESTMENT BANKING HIT Like JPMorgan, Citigroup's investment banking business was hurt when European market turmoil made companies reluctant to buy competitors or issue securities. Revenue at Citi's continuing securities and banking business fell 12 percent excluding the debt value adjustment, to $4.84 billion. Overall operating expenses rose 8 percent from a year earlier. Operating expenses were $12.46 billion and have been hovering around that level since the fourth quarter of 2010. From the beginning of 2009 through the third quarter of 2010, quarterly operating expenses were typically closer to $11.9 billion. Full content generated by Get Full RSS. |
| Industrial output up, NY manufacturing contracts Posted: 17 Oct 2011 05:55 PM PDT NEW YORK (Reuters) - Industrial production rose in September and a gauge of manufacturing in New York State hinted at stabilization in October, suggesting the factory sector will keep supporting the economic recovery. Industrial production rose 0.2 percent last month, in line with expectations, as a gain in manufacturing offset a drop in utility output, a Federal Reserve report showed. August's reading was downwardly revised to show flat output. Manufacturing production rose 0.4 percent, with consumer durables rising 0.9 percent as production rose for automotive products and home electronics. "Despite signs of a slowdown in global economic growth, U.S. manufacturing output is still expanding at a solid pace," Paul Ashworth, chief U.S. economist at Capital Economics, wrote in a note. "The third quarter turned out to be a lot better than some feared, and the economy has a little momentum going into the fourth." The New York Fed's "Empire State" index provided a more mixed picture. The general business conditions index contracted for a fifth month in a row, though the pace moderated slightly and new orders improved. The survey of manufacturing plants in the state is one of the earliest monthly guideposts to U.S. factory conditions. NO EVIDENCE OF RECESSION While the pace of growth in manufacturing has slowed in recent months -- and in some regions contracted -- last month's broader national report pointed to a sector that will continue to boost the recovery. "A lot of people have been fearful that we're running into a new recession, and the data don't really show that here," said Scott Brown, chief economist at Raymond James, in St. Petersburg, Florida. Financial markets were little moved by the data as investors focused on the sovereign debt situation in the euro zone. The Empire State's business conditions index was up slightly in October at minus 8.48 from minus 8.82. Economists polled by Reuters had expected a reading of minus 4.0. New orders rose to 0.16 from minus 8.0. Employment gauges were mixed as the index for the number of employees rose to 3.37 from minus 5.43, but the average employee workweek index fell to minus 4.49 from minus 2.17. Even so, the outlook for the coming months worsened, with the index of business conditions six months ahead dropping to its lowest level since February 2009 to 6.74 from 13.04 last month. Graphic - U.S. industrial output, capacity utilization: http://link.reuters.com/geb54s Full content generated by Get Full RSS. |
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