Financial life in a big town

Royal Bank of Canada capped off the big banks' second-quarter earnings season with a net loss of $50 million after recording a $1 billion charge to reflect the eroding value of its international banking business.

Canada's biggest bank said its net loss for the three months ended April 30, 2009 amounted to 7 cents per diluted share. That compared to a net profit of $928 million, or 70 cents per share, for the same 2008 period.

The main culprit for the sharp slide was a previously announced goodwill impairment charge for RBC's American operations. In April, the bank announced it would take an $850 million (US) non-cash charge, noting the economic turmoil south of the border had taken a toll on its operations there.

The bank's quarterly results, however, were also hurt by "market environment-related losses" that took a $296 million bite out of its bottom line, along with fatter provisions for credit losses.

RBC set aside $974 million (Cdn) for soured loans, a $625 million increase from the $349 million it earmarked for those provisions a year earlier instant payday loan.

"The environment remains challenging, but our company is strong and we are taking advantage of opportunities in the marketplace," said president and CEO Gordon Nixon in a release.

John Aiken of Dundee Capital Markets said he was maintaining a "sell" rating on RBC's stock partially because credit deterioration was "material" in the quarter.

In a research note to clients, he also noted the bank's valuation doesn't reflect "the risk it faces in terms of additional provision growth."

RBC's stock lost $1.42, or 3.12 per cent, to $44.08 during morning trading on the Toronto Stock Exchange, wiping away the bulk of yesterday's gains.

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The number of U.S. workers filing new claims for jobless benefits dropped by 13,000 last week, the Labor Department reported on Thursday, but so-called continued claims hit a new record as the recession took a further toll on job prospects.

Initial claims for state unemployment insurance benefits declined to a seasonally adjusted 623,000 in the week ended May 23 from a revised 636,000 in the prior week. It was the second straight week in which initial claims fell.

Analysts polled by Reuters had forecast 630,000 new claims for benefits last week compared with a previously reported 631,000 in the preceding week.

Some 5.7 million U.S. jobs have been scrubbed from payrolls since a severe recession began in late 2007, battering labor markets as companies cut current employees and hold off on hiring no faxing payday loan.

The number of people staying on benefit rolls after drawing an initial week of aid increased by 110,000 to a higher-than-forecast 6.79 million in the week ended May 16, the most recent period for which the data was available. Analysts had estimated continued claims would be 6.74 million.

Continued claims have set new records in every week since Jan. 24 and now are more than double the level they were at a year ago. 

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NEW YORK — Target Corp. is going bananas to keep up with Wal-Mart Stores Inc.

The discounter has long sold groceries. But it is barely holding onto its customers while its chief rival, Wal-Mart, is rapidly picking up new shoppers as its powerful low-cost message resonates in the recession. So Minneapolis-based Target plans to stock more fresh food — including bananas — and play up its low prices.

Meanwhile, Wal-Mart, the world’s largest retailer, is expanding its selection of nonessentials like home furnishings, while improving the quality of its store-brand food like thin-crust pizza and ice cream.

Facing criticism from Wall Street analysts who believe it’s been late to respond to the recession, Target — which is about one-sixth the size of Wal-Mart — is becoming more vulnerable. But New York-based retail consultant Walter Loeb says Target has "plenty of opportunities to get better," particularly in groceries, and is making the right moves.
Target’s cheap chic mantra — its advantage in boom times — became a drag in late 2007 as the recession began and shoppers focused on basics. At the same time, Wal-Mart, based in Bentonville, Ark., found a balance of merchandise and marketing to enhance its renewed focus on price.

Target’s same-store sales — the comparison of sales at stores open at least a year and a key indicator of a retailer’s health — has lagged Wal-Mart’s since late 2007 car insurance quotes. In the most recent quarter, sales at established Target stores dropped 3.7 percent, while the indicator rose 3.7 percent at Wal-Mart, excluding fuel.

"Consumers are buying what they need to have, so Target is stuck where they are, because that’s the mouse trap they built," said Howard Davidowitz, chairman of retail consulting and investment banking firm Davidowitz & Associates. "Wal-Mart is pounding away at its price message relentlessly."

While Target wants to keep its innovative edge, for growth, it is clearly turning to groceries, including the introduction late last year in some of its general merchandise stores — as opposed to its supercenters — of prepackaged perishables like bananas and bagged lettuce. It plans to expand the concept to 100 new or remodeled stores by year’s end.

Target also is testing a "low-price" promise in advertising for certain locations. It’s also relaunching its store-label Target Brand as Up & Up, to span 40 categories such as health and beauty items by summer when new marketing begins.

But Wal-Mart keeps rolling out new programs too. Wal-Mart relaunched its Great Value food brand in March with an improved selection and reformulated recipes, and it is revamping its electronics aisles and adding exclusive home furnishing brands.

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Monsanto Co. said 2009 earnings will be at the low end of its forecast because of competition in its Roundup herbicide business.

The Creve Coeur-based company expects to earn $4.40 a share for the fiscal year ending in August compared with a previously forecast range of $4.40 to $4.50 a share. Analysts surveyed by Bloomberg expected $4.59 a share.

Monsanto shares fell $4.40, or 5 percent, to $80.85 in composite trading this morning on the New York Stock Exchange.

The company had predicted that gross profit from Roundup weed-killer would peak at $2.4 billion in 2009 before competition from less expensive and generic glyphosate-based herbicides eroded market share. That competition came sooner than expected, and profit from the herbicide business will fall $400 million short of expectations, Chief Executive Hugh Grant said in a statement easy payday loans.
Cooler, wetter weather in some parts of the Corn Belt has also delayed application of Roundup this spring, the company said.

Monsanto said improved seed sales and lower marketing and administrative spending is helping offset the decline in Roundup profit, and will enable the company to meet the lower range of its earnings forecast.

"Even in the face of a $400 million decline in our expected gross profit from Roundup, we can see a path to our fifth consecutive year of 20 percent of greater earnings growth," Chief Executive Hugh Grant said in a statement.

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OTTAWA–Alberta and British Columbia residents led the way as 681,400 Canadians received regular Employment Insurance benefits in March – 65,300 or 10.6 per cent more than in February.

Statistics Canada reported that the increase has been the largest since the labour market started to deteriorate last October.

The number of regular EI beneficiaries has climbed by 36.2 per cent since October.

The number of initial and renewal claims edged down 1.9 per cent.

In March, the number of regular beneficiaries in Alberta climbed by 32 cash loan.1 per cent to 42,200 – the province’s fastest monthly increase since comparable record-keeping began.

The number of people receiving regular benefits in British Columbia increased 26.7 per cent to 82,200; a record for the province.

The Canadian Press

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The Japanese government raised its assessment of the economy for the first time in three years on signs the worst of the recession may be over.

“While the economy is in a difficult situation,” the pace of deterioration has “become moderate,” the Cabinet Office said in its monthly report released in Tokyo today, the first upgrade since February 2006. The government last month said the economy is “worsening rapidly while in a severe situation.”

The Bank of Japan also raised its assessment last week and Governor Masaaki Shirakawa today predicted the economy will resume growing this quarter after shrinking at a record pace in the first three months of the year. The government said it was more optimistic about exports and industrial production after companies said they plan to increase output to replenish stockpiles.

“We don’t expect the economy to keep deteriorating at the pace already seen,” said Fumihira Nishizaki, director of macroeconomic analysis at the Cabinet Office. “The economy will be supported by some improvement in overseas demand, inventory adjustments and stimulus packages.”

The Nikkei 225 Stock Average has risen more than 30 percent since it fell to a 26-year low on March 10. Sentiment among households and merchants improved for a fourth month in April.

Export Slump

The export slump probably eased and production rose for a second month in April, economists surveyed by Bloomberg expect reports to show this week cheap payday loans.

Japan’s Economic and Fiscal Policy Minister Kaoru Yosano said that bright signs had started to emerge in various industries since April and the economy’s worst period would be in the first quarter of this year.

“We shouldn’t be too optimistic as there are various downside risks to the economy,” Yosano, also the nation’s finance minister, said at a press conference in Tokyo today after the government released its assessment. Still, he said “the worst may be over” for Japan, judging from the overall economy

The government said it isn’t expecting a full-fledged recovery because unemployment is rising.

“The employment situation is severe and worsening rapidly,” the government said in today’s report, downgrading its assessment for labor conditions.

The jobless rate surged to 4.8 percent in April from 4.4 percent, the biggest gain since 1967, and economists expect a report this week to show that unemployment climbed to a five- year high in April.

“The downward pressure on the labor market will continue to be a downside risk,” Nishizaki said. “The economy is likely to remain in a severe state.”

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Boeing Co. leaders say that the U.S. military’s airlift needs are growing and that a Pentagon proposal to halt future orders for the C-17 Globemaster III cargo plane is premature.

Boeing, whose defense unit is headquartered in St. Louis, is trying to rally support for the C-17 on multiple fronts — arguing that ceasing production would erode the U.S. industrial base, costing thousands of jobs at Boeing plants and those of its main suppliers. But Boeing officials also emphasize the plane’s strategic value.

"Right now, since 9/11, the airplane has been flying at about a 15 percent higher rate than was anticipated," said Donald A. Anderson, Boeing’s C-17 program manager in St. Louis. "In addition, they’re talking about rebasing troops in the United States. They’re talking about an increase in the size of the Marines Corps and the Army.

"So it seems like the airlift requirements are growing. And you need airlifters to meet those needs."

Starting with Secretary of Defense Robert Gates’ announcement in early April and continuing through last week, the Pentagon has said it can get by with the 205 C-17s that are either in service or on order. The Air Force also uses the Lockheed Martin C-5 Galaxy to transport weapon systems, cargo and personnel to overseas locations.

Republican Sen. Christopher "Kit" Bond and Democratic Sen. Claire McCaskill, both of Missouri, have written letters supporting more orders of the C-17, and Machinists Union officials have traveled to Washington to show their support for a program that supports 900 jobs in St. Louis.

"This is high political theater," said analyst Richard Aboulafia of The Teal Group in Fairfax, Va. "The bottom line is I don’t think the line is threatened. But it is up to everybody from Department of Defense to Congress to Boeing to the unions to make it look as though it were."

The Defense Department has not sought funding for the C-17 in the last three years. But Congress has stepped in to add funding for more of the $202 million planes through supplemental defense appropriations bills.

Bond and Boeing officials have asked why Gates would halt C-17 orders while there is a study under way into the military’s future air-mobility needs. The results are expected this fall.

"But yet we’re making that decision now to stop the airplane," Anderson said. "So it seems somewhat premature free credit score online."

Bond said shutting down production of the C-17 is a "dangerous gamble" and warned that the U.S. can’t afford to "lose the capability to transport safely our troops and equipment to anywhere in the world."

In a letter to President Barack Obama, McCaskill said the U.S. is "literally flying the wings off these planes," and added "this is not the time to end its production, especially in light of projected global mission sets for the U.S. military."

Both legislators also have gone to bat for Boeing’s St. Louis-built F/A-18 Super Hornet, whose future was placed in limbo under the latest Pentagon spending plan.

The C-17 is assembled at a plant in Long Beach, Calif. But the cargo door, cargo ramp, landing-gear pods, nose and engine pylons are built in St. Louis.

A November 2008 report by the Government Accountability Office recommended "careful planning to avoid shutting down the C-17 line prematurely." Both Boeing and the Air Force believe shutting down and restarting production "would not be feasible or cost effective," the report found.

The GAO cited the high costs of hiring and training a new work force, reinstalling equipment to proper working condition and re-establishing a supplier base.

Boeing has delivered the C-17 to other countries, including Australia, Canada and the United Kingdom. The United Arab Emirates has announced its intent to buy four of the planes, and Qatar has ordered two and exercised an option on two additional C-17s.

But Anderson said international sales alone are not enough to sustain the C-17 line. Boeing officials say maintaining C-17 sales to the U.S. Air Force is necessary to keep the price of the planes competitive in the international market.

Defense analyst Loren Thompson of the Lexington Institute in Arlington, Va., said the C-17 is the best strategic airlifter ever built and "a very cogent case" can be made that terminating production at 205 planes would be too early. At the moment, he said, its future will be dictated by Congress.

"Here’s the bottom line to C-17," Thompson said. "If Congress doesn’t add money, there won’t be any more."

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Ford Motor Co. said Friday that it is giving its hourly workers five more weeks to decide whether they want to accept the company’s buyout and early retirement offers.

The original deadline was Friday, but Ford spokeswoman Angie Kozleski said the company is extending the date to June 26. "We extended the deadline so that we could allow our employees a little more time to consider the buyout packages," she said.

Kozleski wouldn’t say how many of Ford’s 42,000 hourly workers have accepted the offers so far, but the extension could be an indication that the company hasn’t gotten as many takers as it would like.

The automaker’s latest round of buyout and early retirement offers aren’t as lucrative as those made in the past, but they’re better than those offered earlier this year by General Motors Corp. and Chrysler LLC.
Retirement-eligible skilled trade workers can get up to $40,000 to leave, while retirement-eligible production workers would get $20,000. The company is offering $50,000 in buyouts for those not eligible to retire who have at least one year of seniority. Most would also get a $25,000 voucher to buy a car or a $20,000 cash payment.

There also is an option to leave the company and get benefits and payments for education pay day advance.

Dearborn, Mich.-based Ford is the only major U.S. automaker that hasn’t accepted government loans, but it is undertaking efforts to cut costs and reduce its work force.

Ford’s buyout and early retirement offers are part of a series of contract concessions the United Auto Workers union agreed to in February. Other concessions included suspension of cost-of-living pay raises, lump-sum performance bonuses and end-of-the-year bonuses. The union also agreed to take as equity 50 percent of the payments Ford is required to make into a union-run trust fund that will take over retiree health care expenses next year.

The Ford deal served as a template for similar agreements at Chrysler last month and at GM, which reached a tentative deal with the UAW on Thursday.

Ford has said its new agreement reduces annual labor costs by more than $500 million, but it may call the UAW back to the bargaining table to get additional concessions contained in the Chrysler and GM deals.

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DETROIT — The United Auto Workers struck a deal with General Motors and the federal government Thursday to cut labor costs, close factories and change the way retiree health care is funded.

The agreement could ease one of GM’s biggest problems: The cost of its work force. But the automaker is still struggling with a crushing debt that may drive it into a Chapter 11 bankruptcy reorganization.

General Motors Corp., which has received $15.4 billion in federal loans, faces a government-imposed June 1 deadline to finish a major restructuring or be forced into bankruptcy protection.

The government has told the automaker to cut costs, close factories, shed dealers and brands, and persuade at least 90 percent of its bondholders to sign on for the stock-for-debt exchange. But thousands of bondholders are expected to shun the company’s offer to take 10 percent of its stock to wipe out $27 billion in unsecured debt.

Harlan Platt, a professor at Northeastern University in Boston who teaches corporate turnarounds, said the UAW deal could be the catalyst for more bondholders to accept GM’s offer.

GM shares rose more than 32 percent on Thursday — an increase that Platt says indicates that investors see value in the company. Platt believes the stock could climb to around $4 because GM will be able to restructure out of court, emerging with far less debt, lower costs, fewer brands and factories, and a rejuvenated vehicle lineup affordable health insurance.

GM has offered bondholders 225 shares for every $1,000 of debt.

"If you’re getting 225 per $1,000 and the stock goes to $4, which I think it will, you’re getting all your money back," he said. "This is going to be significantly more than they will get in a bankruptcy."

But Douglas Baird, a University of Chicago law professor who specializes in bankruptcy cases, said the bondholder obstacle is nearly insurmountable.

"There’s a collective action problem," he said. "There are a lot of these bondholders. Even if there are a lot of them on board, that’s not the same as 90 percent on board."

Still, the UAW deal could help shorten the length of time GM stays in bankruptcy protection, Baird said, making it easier for the court to concentrate on remaining matters such as the bond debt.

The UAW was withholding details about the deal until plant-level union officials were briefed. The union summoned local officials to Detroit on Tuesday for the explanation, and local union leaders expected voting to end late next week.

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Delta Air Lines Inc., Air France and KLM signed a deal Wednesday to combine two separate joint venture agreements into one to create a trans-Atlantic powerhouse expected to generate $12 billion in annual revenue, provide better travel options for customers and more closely align the carriers’ operations without a formal merger.

Passengers get more nonstop flights between major cities in the U.S. and Europe, while competition and the weak global economy likely will mean fares won’t be affected too much.

The airlines aren’t merging, and no subsidiary will be created, but airline consultant Darryl Jenkins said the equal sharing of revenue and costs regardless of who is flying the plane means the carriers essentially will act as one airline on certain routes savings account payday advance.

"This is a very big deal," Jenkins said.

No new routes were announced beyond what the two previous agreements provided.

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