Tuesday World Business News 3

Fortis admits errors after 
bailout by governments 
Agence France-Presse . Brussels 

Troubled financial group Fortis admitted on Monday that past errors had triggered the crisis that required the Benelux nations to hastily hammer out a 11.2 billion euro bailout over the weekend.
  Despite assurances last week it had ample funding, Fortis was forced to turn to the Belgian, Dutch and Luxembourg governments for help late Sunday after a foreign suitor could not be found to save the banking and insurance group.
  While blaming market ‘speculation’ and ‘rumours’ for a sharp slide in Fortis shares last week, newly appointed chief executive Filip Dierckx acknowledged that strategic mistakes also played a part in the group’s woes.
  ‘I am ... not going to deny that if you look at some of the decisions that were taken in the past then you can say that probably they were done at the wrong moment,’ he told journalists and analysts in a conference call.
  ‘If you want me to say that there were some decisions that were not the best I will indeed confirm,’ added Dierckx, who took up his post after predecessor Herman Verwilst was unexpectedly moved aside on Friday.
  Dierckx, who took over after the company’s shares plummeted by 20 per cent on Friday, highlighted last year’s involvement in the buyout of Dutch group ABN Amro as a key mistake.
  ‘Clearly indeed there was bad timing in the ABN Amro deal,’ he said.
  Fortis paid 24 billion euros for its part in a consortium buy-out for ABN Amro at the height of the market, but by Sunday the figure of 10 billion euros was being mentioned as a possible selling price.
  The new Fortis chief, who admitted he hadn’t got much sleep over the weekend as the state bailout talks unfurled, said he ‘felt a very strong commitment from a lot of parties involved to solve and to come to a good solution.
  ‘I think it personally is a very good agreement.’
  Earlier Belgian Finance Minister Didier Reynders insisted that the partial nationalisation of Fortis was only a temporary measure to support the bank.
  ‘Our ambition is clearly not to remain present as shareholders,’ Reynders told public radio RTBF.
  After seeing nearly a quarter of its stock market value wiped out over the past week, shares in Fortis opened up nearly 15 per cent in Brussels on Monday but by early afternoon were down 3.85 per cent at 5.00 euros. 
UK govt nationalises Bradford 
and Bingley 
Agence France-Presse . London 

The British government announced Monday the nationalisation of troubled lender Bradford & Bingley, the latest European victim of the fast-moving global financial crisis.
  B&B’s savings business — its best asset with 20 billion pounds of savings and 2.7 million customers — will be sold to Spanish bank Santander, while its mortgage book will be nationalised, the Treasury said.
  Abbey National, the British bank owned by Santander, will pay 612 million pounds ($1.1m) in the deal.
  ‘What you’re seeing is the government taking quick, decisive action, we’re standing behind the system to stabilise it because to let Bradford & Bingley go down would have destabilised the entire system,’ finance minister Alistair Darling told BBC radio. ‘The government has got to provide stability.’
  Bradford & Bingley is the second British bank to be nationalised this year, after Northern Rock in February.
  The FTSE 100 stock market in London plunged 2.63 per cent in early morning trade, falling to 4,954.11 points as investors digested the deal as well as a massive bailout of Wall Street in the United States.
  Hours before the deal was confirmed, US lawmakers agreed on the details of an unprecedented 700 billion dollar bailout for struggling Wall Street banks in a bid to avert the worst financial crisis since the 1930s Great Depression.
  The Belgian, Dutch and Luxembourg governments also mobilised to help troubled financial group Fortis on Sunday, agreeing to inject 11.2 billion euros ($16b), Belgian prime minister Yves Leterme said.
  The Belgian government said Monday it was prepared to support Dexia, another high-street bank, after its shares nose-dived in early trading.
  In another sign of the trouble facing European lenders, Denmark’s Roskilde Bank said Monday it had been sold to Nordic bank Nordea and two regional Danish lenders, Arbejdernes Landsbank and Spar Nord Bank.
  In Britain over the weekend, officials from the Treasury, the Financial Services Authority watchdog and the Bank of England met to try to secure the future of B&B, which has also suffered from a property market downturn.
  Anto Horta-Oso, Abbey National’s chief executive, said the deal was ‘good news’ for B&B’s savings customers, adding: ‘They can be certain that their hard-earned savings are with a bank they can trust.’ 
Foreign investors eject $540m 
from Pak stock market 
Asia News Network . Karachi 

Foreign investors have ejected $540 million from the Pakistani stock market in only three months from July to September amid prolonged political uncertainty, burgeoning insecurity in the tribal belt of the country coupled with global and local economic slowdown.
  So far this month, foreign investors have withdrawn $96 million, reflecting an increase of $68 million versus $28 million outflow witnessed in a month earlier. While inflow during September was recorded at $82 million. A major outflow of portfolio investment was recorded from the investors of the US, the UK, Switzerland, Singapore, Hong Kong and Australia.
  Pakistani market has been facing turmoil for the last four months that led the market to shed around 40 per cent. In this period, many small investors have been washed out from the stock market while others are facing back to back decline despite the freeze on shares prices.
  Those closely watching the ebb and flow of Pakistani market linked the huge capital flight to deteriorating law and order situation, economic weaknesses, like dwindling forex reserves, devaluation of rupee against US dollar coupled with the unprecedented financial turmoil in the US, which sent shock waves to all other leading capital markets of the globe.
  Analysts also held the view that the imposition of floor on the market had sent a negative signal to foreign investors and those still trapped in the market were waiting for lifting of floor from the market to make an exit.
  Analysts said that as long as the tension remained in the tribal belt, which was being linked with the suicide bombings in the mega cities of the country, the foreign investments would continue to wobble and may witness further downgrading.
  Analysts said that Moody’s verdict had also dealt a severe blow to the confidence of foreign investors and local investors as well.
  The steep decline in the stock market and economic meltdown has severely hit the confidence of foreign investors, analysts added. 
Storm may hit Indian aviation, 
if steps not taken: IATA 
Press Trust of India . New Delhi 

Warning that some Indian airlines could fold up if structural changes were not carried out immediately, the IATA has asked the government to take speedy steps to enable the industry weather the ‘perfect storm’ of high costs and falling demand.
  ‘India is among the most expensive places on the planet to buy aviation turbine fuel from. In August, it was 58 per cent more expensive to buy fuel in Mumbai for domestic flights than in Singapore,’ International Air Transport Association director general and CEO Giovanni Bisignani told PTI in an interview in New Delhi.
  Observing that the Indian aviation industry was passing through a ‘fragile and delicate moment,’ he said some airlines could go bust in the coming few months if “structural changes are not carried out expeditiously.’
  As many as 25 carriers worldwide have folded up operations in the past several months due to huge losses, the latest being Italian national carrier Alitalia, leading to over 100,000 jobs in the aviation sector being lost.
  He projected a cumulative loss of $1.5 billion for Indian carriers this year, second largest after that in the US. 
Japan faces uncertainty from 
financial crisis 
Agence France-Presse . Tokyo 

Japan will likely avoid a deep slump from the global credit crisis but faces ‘considerable uncertainty’ and downside risks to growth, a top central bank official said Monday.
  The possibility of a dive on the back of the Wall Street crisis ‘is rather small,’ Bank of Japan deputy governor Kiyohiko Nishi-mura told a news conference.
  But ‘the outlook for economic activity is accompanied by considerable uncertainty and various risk factors could influence the outlook,’ he said.
  The central bank ‘is attentive to downside risks to economic growth,’ he added.
  Despite being relatively insulated from the US-born subprime crisis, Japan’s export-driven economy is teetering on recession due to a cooling global economy and tepid domestic spending. Nishimura lauded recent investments by Japanese banks that have embarked on a buying spree of US banks, which have crumbled due to massive mortgage-related losses and failure to secure funds.
  ‘Each financial institution in Japan is trying to improve its earnings and in doing that they are looking for the most appropriate way to utilise their resources,’ Nishimura said. ‘So in that sense it is desirable.’ 
Japan reaches free trade deals 
with Vietnam, Switzerland 
Agence France-Presse . Tokyo 

Japan said Monday said it had struck free trade deals with Vietnam and Switzerland, seeking to strengthen economic ties with individual countries amid a deadlock in World Trade Organisation talks.
  About 92 per cent of trade in goods between Japan and Vietnam will be duty-free within the next 10 years, Tokyo officials said.
  Under the agreement with Switzerland, Japan’s first with a European country, 99 per cent of trade will be tariff-free within a decade. Neither agreement has been formally signed yet.
  ‘Vietnam gave us a high level of liberalisation that it had never given to other countries such as China and South Korea’ under their deals with the Association of Southeast Asian Nations, a foreign ministry official said.
  Japan, Asia’s largest economy, has also already signed a separate deal with the whole of ASEAN, which includes Vietnam.
  Vietnam will get free access to the Japanese market for shrimps, durian, and okra, among other farm and marine products, while Japan will secure duty-free trade for its auto parts, steel and electronic goods, officials said. 
Citigroup to take over Wachovia 
banking assets, gives US stake 
Agence France-Presse . Washington 

US authorities said Monday they had facilitated a takeover of Wachovia’s banking operations by Citigroup Inc in a deal that gives the government a stake in one of the nation’s biggest banks.
  The Federal Deposit Insurance Corp made the announcement that further reshapes the troubled US banking sector saddled with heavy losses from the bursting of the real estate bubble.
  ‘Wachovia did not fail; rather, it is to be acquired by Citigroup Inc on an open bank basis with assistance from the FDIC,’ the government agency said.
  The government will get a stake in Citigroup in exchange for guaranteeing a large portion of the distressed Wachovia assets linked to housing.
  Citi will assume up to 42 billion dollars of losses from a pool of 312 billion dollars of loans held by Wachovia; the FDIC will absorb losses beyond that and take a stake in Citigroup for the guarantee.