Record high UK property asking prices in May

Record high UK property asking prices in May

 

LONDON – Asking prices for property in England and Wales rose to a record high in May, a survey showed on Monday, with house price inflation accelerating despite expectations for a much weaker housing market this year.

 

Property website Rightmove said average asking prices rose 2.2 per cent on a year ago between April 13 and May 10 to hit an average £242,500 (US$472,000), compared with a 1.3 per cent annual rise in the month before.

 

Prices increased 1.2 per cent on the month. The figures are not adjusted to take seasonal factors into account but suggest there may still be some momentum left in the market as it trends lower.

 

Economists are predicting falls in house prices of about 10 per cent this year and Bank of England (BOE) policymaker David Blanchflower has warned prices could dive by about a third unless aggressive, immediate action is taken.

 

However, interest rates are unlikely to come down fast given worries over inflation and, after a decade in which house prices nearly trebled, BOE Governor Mervyn King has indicated a moderation in prices is probably needed. – REUTERS

 

Source: Business Times

Unveiling of URA Master Plan

Unveiling of URA Master Plan

 

WHAT IT IS

 

THE Urban Redevelopment Authority (URA) will unveil the Draft Master Plan 2008 on Friday.

 

The new Master Plan is expected to make changes in land use, increase plot ratios as well as lay the groundwork for a much larger population of 6.5 million, which could be reached in as short a span of time as 20 years.

 

The country’s planners are drawing up future development plans for housing, recreation, land transport and the economy’s needs based on this new projection. The previous target was 5.5 million.

 

WHY IT MATTERS

 

The Draft Master Plan 2008 is the most important statutory plan used to determine land use and shape Singapore’s physical development in the next 10 to 15 years.

 

This year’s Master Plan is expected to focus on growth areas, rather than widespread upgrade in densities. Key sectors which are likely to benefit include hotels, aerospace, health care and transport.

 

Source: Straits Times

Temporary home for Tekka Market stalls

Temporary home for Tekka Market stalls

 

Brisk business at most stalls but some report fewer patrons; original market to reopen late next year after revamp

 

THE temporary home for the stalls in Tekka Market, a 10-minute walk from its original site in Buffalo Road, was officially opened yesterday.

 

The zinc structure is along Race Course Road, opposite the Banana Leaf Apolo restaurant.

 

The temporary facility houses 267 of the 538 cooked food, wet market and goods stalls which used to occupy the popular market.

 

The remaining stall owners have either shut for good, are taking a break or have moved elsewhere temporarily.

 

Tekka Market, which closed on May 1 for a $12 million refurbishment of its drainage and piping systems, will reopen late next year.

 

It will also be made more accessible to the elderly and less mobile.

 

The temporary market was declared open yesterday by Senior Minister of State for Education and Information, Communications and the Arts Lui Tuck Yew, who is also an MP for Tanjong Pagar GRC.

 

It seemed to be business as usual, with almost all the stalls open and thronging with patrons.

 

But some stall owners said they have had 50 to 60 per cent less business since moving in about two weeks ago.

 

They are blaming this on the market’s distance from its original site and its lack of accessibility. They add that with no covered walkways, customers disappear whenever it rains.

 

Drink stall owner Mubarak Ali, 45, who has operated at Tekka for 22 years, said customers were there to buy produce rather than to eat and drink at the cooked food stalls.

 

‘I hope things will improve with time,’ he added.

 

Textile shop owner S.T. Rani, in his 50s, said his customers

 

were ‘uncomfortable’ with the relocation because the new atmosphere was very different, ‘but they are gradually getting used to it’.

 

Rear-Admiral (NS) Lui, addressing these concerns, told reporters that the temporary market was still in its ‘early days’.

 

‘Improvements will be made along the way to make it more convenient for people to come here. Over time, things will pick up,’ he said.

 

He added that discussions were under way with the Land Transport Authority to build taxi stands at the market.

 

RADM Lui added: ‘Tekka Market is an icon and serves not just the people who live here but elsewhere too.’

 

Source: Straits Times

Profiteering adds to construction woes

Profiteering adds to construction woes

 

As costs of materials rise, some suppliers default on earlier contracts to make more

 

By ARTHUR SIM

 

(SINGAPORE) The last thing the construction industry needs now is another roadblock. But with the cost of materials and shortages soaring, the opportunity to inflate prices is too much for some errant suppliers and sub-contractors to resist.

 

Sources told BT that some suppliers of building materials have been opting to default on earlier contracts because the current demand and prices are so strong, they can easily secure more profitable contracts elsewhere, stock piling materials in the meantime.

 

To add to the strain, labour supply has become so tight that crane operators, for instance, are said to be commanding salaries upwards of $8,000 per month.

 

A check with the Building and Construction Authority (BCA) reveals, however, that this opportunistic behaviour is not widespread – yet.

 

A BCA spokesman also said it has not received feedback of contract defaults by suppliers of steel and other construction materials, or of any delay in construction works due to such default of contractual obligations.

 

However, BCA said: ‘We do understand that the suppliers have increased their importation and stocking up of steel rebars in view of the surging prices. Suppliers have also shortened the period of supply contract for rebars from the previous 12 months to the current six months.’

 

‘Contractors and developers have to resolve the price issue based on their business practices, relationship and understanding. For projects which adopt price fluctuation for these materials, the cost impact on the contractors will be minimal,’ added BCA.

 

Construction companies that BT spoke with had mixed reactions to the situation.

 

A spokesman for United Engineers Ltd said: ‘The industry is particularly seeing some delays in projects, either in the midst of or commencing construction, that were awarded before the construction boom as prices negotiated at that time were definitely lower compared to now.’

 

Straits Construction director Wong Chee Herng said the industry has seen some smaller suppliers defaulting on contracts and causing delays but the level is still ‘manageable’ .

 

He added: ‘Prices have moved up and there is no point lamenting . . . It’s a choice of either negotiating or just walking away.’

 

With so much uncertainty, Straits Construction is more selective about tendering for jobs. ‘If we feel we can’t deliver, we won’t tender,’ Mr Wong said.

 

Other construction companies like Hiap Hoe and Sim Lian say they are not facing any delays.

 

Giving an insight into how suppliers are also facing the same challenges, Lee Metal Group executive director Lee Heng Thiam revealed how a steel supplier for Marina Bay Sands was contracted to supply 85,000 tonnes over a two- year period at US$600 per tonne. However, the price of this steel has since risen to US$1,000. ‘It is too much for anyone to bear,’ he said. And while the particular supplier was able to renegotiate the contract, Mr Lee said: ‘I think they will still make a loss.’

 

To mitigate the risks, Lee Metal has to hedge its position. ‘In the past, the practice was to sell first and buy later; now, it’s the other way around,’ he explained. This means it keeps a stockpile of 6-8 months worth of supply to ensure it can fulfil its obligations.

 

Price fluctuation clauses are not a big help to suppliers who stockpile. ‘If prices are on a downward trend, we are in trouble,’ he explained. ‘Buying and selling needs to be managed tightly.’

 

HG Metal manages its stock on a tighter basis by maintaining 3-4 months worth of inventory amounting to as much as $200 million worth in stock at any one time. HG Metal CEO Wee Piew also said that it does not ‘lock in’ its prices. ‘Most major suppliers don’t set contracts,’ he added.

 

‘The only issue is when a big contractor wants to lock in prices. Then they have to deal with steel mills directly,’ he added.

 

These mills are usually in China but both HG Metal and Lee Metal say their supply comes from international traders instead because of the uncertain supply from Chinese mills.

 

PSL Holdings, a foundation engineering specialist contractor, says that its operators of construction cranes and other vehicles are commanding ‘very high salaries’ but it has managed to factor increasing manpower costs into its contracts. ‘The effect on our margins is minimal,’ added a PSL spokesman.

 

PSL says it has not encountered delays so far but apart from rising salaries, it is faced with rising costs due to surging diesel prices as well as shortage of personnel. PSL said: ‘We have managed to mitigate the higher costs because of the short duration of our projects.’

 

Developers that BT spoke too also say they are not facing delays.

 

City Developments Ltd (CDL) says it has not encountered any significant delays from its contractors. ‘Perhaps they have made early confirmation orders on the construction materials and are not really affected by the present rising costs of materials,’ added CDL’s spokesman.

 

Frasers Centrepoint COO Cheang Kok Kheong did say that to counter rising costs, it has had to take certain steps including continuously reviewing its plans and specifications to ensure that cost-effective construction methods and alternatives are considered. ‘In addition, we have improved and streamlined our procurement methods to get bulk pricing for construction supplies from our associates,’ he added.

 

The construction industry is perhaps beginning to show signs of strain, and may need more help.

 

To this end, BCA says it is also working with the Real Estate Developers’ Association of Singapore to encourage their member developers to make prompt payment to help ease the cashflow of the contractors.

 

Source: Business Times

Pre-sold projects lend support as developers undergo correction

Pre-sold projects lend support as developers undergo correction

 

Greater blow from weaker sales will be felt only over next few years: analysts

 

By LYNETTE KHOO

 

PROPERTY developers were mostly hit by slower residential sales in their first quarter results, and for some, they also suffered a lack of fair value gains in investment properties. But even as the residential segment undergoes a correction this year, analysts do not foresee significant earnings weakness as revenue from pre-sold projects is still lending support.

 

For developers with a large amount of pre-sold projects and are able to hold back new units to await better prices, the greater blow from the weaker home sales will only kick in over the next few years if market sentiment does not pick up, analysts say.

 

‘The earnings for this year have been locked in by the sales done in the past two to three years,’ said UOB KayHian analyst Vikrant Pandey. ‘Sales have slowed down this year, but the impact will only be felt two, three years down the line when the actual construction takes place.’

 

Investors have been greeted with a mixed bag of earnings results from property developers for the first quarter. The impact of the US housing problems and global economic slowdown was felt in terms of lower transaction volumes as developers held back new launches in a quiet market.

 

There was also the timing issue in recognising earnings from development projects on a percentage of completion basis, which added to the earnings volatility, analysts say.

 

‘Q1 is typically a slower quarter for developers simply because of the holiday season and development is slower,’ said CIMB-GK analyst Donald Chua. The recognition of earnings from developments that are at the initial stages of construction is hence slower.

 

Keppel Land reported a 3.5 per cent dip in net profit to $60.3 million due mainly to lower contribution from property trading with the completion of several projects in Singapore and overseas and a writeback on provision in its property investment segment.

 

In the absence of fair value gains, CapitaLand’s first-quarter net profit fell 59.3 per cent year on year to $247.47 million; Overseas Union Enterprise’s (OUE) net profit slipped 69.2 per cent to $23.67 million and United Engineers’ (UE) net profit slumped 90 per cent to $1.2 million. Excluding fair value adjustments, CapitaLand’s net profit would have jumped 36.5 per cent year on year, while OUE and UE would have marked smaller net profit declines.

 

City Developments, however, which adopts the policy of stating net profit at cost less accumulated depreciation and impairment losses, posted a net profit growth of 30.8 per cent to $164.97 million in its fiscal first quarter despite its revenue falling 1.3 per cent from a year ago to $758.75 million.

 

Analysts noted that the practice of booking in revaluation differences in investment properties under the Financial Reporting Standard 40 is adding to the earnings volatility. This accounting method is seen inflating developers’ bottomlines last year and cutting into their bottomlines in a poorer market condition like now.

 

But analysts added that they do not treat revaluation gains as part of core earnings and strip off revaluation gains from headline numbers before analysis. While there has been suggestions that FRS40 may not be an accurate reflection of earnings, it does provide a clearer picture of the actual values of properties owned by developers.

 

For the rest of this year, analysts do not expect developers to report fair value losses as there is room for rental upside, particularly in the office segment where new supply is not coming through yet. ‘Rentals are coming from a very low base. There’s still a lot of catching up to do,’ Mr Pandey said, pointing to the heady asking prices for some prime grade office that have shot up to $17 per square foot.

 

But developers that lack strong cashflow from pre-sold projects will likely find the going tougher in an environment of low or zero revaluation surplus and slower home sales, analysts caution. Without holding power to defer launches, they will have to slash prices for new projects and accept lower margins.

 

For this year, Mr Pandey is factoring in a 20 per cent correction in the high-end segment, 13 per cent for the mid-end segment and 5 per cent for the mass market segment.

 

Source: Business Times

Retailers expect more belt tightening at this year’s GSS

Retailers expect more belt tightening at this year’s GSS

 

By SARA LIM

 

(SINGAPORE) As Singaporeans tighten their belts amid higher inflation and concerns about a slowing economy, mass and mid-market brands are expecting to do better than their luxury counterparts in this year’s Great Singapore Sale.

 

‘With a less vibrant economic outlook, consumers are more inclined to spend cautiously at mass and mid-priced boutiques with more savings, rather than on luxury items,’ said a spokesman for Wing Tai, which distributes popular fashion brands such as Topshop and Fox.

 

While the distributor was unable to provide any figures, it is ‘conservatively optimistic’ that overall sales this year will be higher than last year’s. It expects new stores added to its mass and mid-market chains – G2000, Topshop, Dorothy Perkins, Ms Selfridge and Warehouse – to perform well.

 

On the overall retail scene, however, expectations for this year’s sale are less rosy compared with 2006 and 2007, when strong consumer confidence and economic growth kept cash registers ringing. Takings during the sale period in June and July last year totalled $5.5 billion, up from $4.9 billion for the same period in 2006.

 

‘While takings from the GSS might not necessarily fall, I would expect growth to slow compared with the same period last year, when we saw retail sales jump more than 15.4 per cent in June,’ said Citigroup economist Kit Wei Zheng.

 

Mr Kit cited the ‘artificial’ surge in purchases of big-ticket items ahead of the two-point GST hike and lower consumer confidence in July last year as reasons for his less sunny outlook.

 

He also warned: ‘Rising costs of living could continue to erode the purchasing power of households, and may be a drag on retail sales volumes.’

 

Retailers are hoping that deep discounts and other promotions available during the sale will entice more cost-conscious shoppers to hunt for bargains.

 

‘Certainly, people are understandably more cautious about their spending, but this is exactly why they should take advantage of the Great Singapore Sale for the great buys and great value, and benefit from the savings that they can achieve,’ said Lau Chuen Wei, executive director of the Singapore Retail Association.

 

Andre Lobo, senior advertising and promotions manager of mall operator Frasers Centrepoint Malls, agreed. ‘Shoppers will respond to real bargains and attractive offers which will translate into overall savings, especially with the rise in the cost of living,’ said Mr Lobo.

 

Frasers Centrepoint will offer a 7 per cent rebate in the form of shopping vouchers at its seven malls, including its flagship, The Centrepoint, at Orchard Road.

 

Mall operators in particular are pulling out all stops to draw the crowds.

 

Instead of relying on the usual lucky draw prizes to attract shoppers, CapitaLand Retail, is bringing six giant robots developed by the creators of science fiction film E T to its IMM, Junction 8 and Plaza Singapura malls.

 

CapitaLand hopes that the robots, which will appear in Asia for the first time, will ‘provide education through entertainment’ .

 

Shoppers at Frasers Centrepoint malls will be treated to stand-up comedy acts by Hossan Leong and Pamela Oei of the Dim Sum Dollies and have a chance to participate in talent shows hosted by MediaCorp artistes Kym Ng, Chen Li Ping and Pornsak.

 

As tourists dollars accounted for 40 per cent of retail sales in last year’s GSS, retailers also hope that tourists will continue to bolster demand.

 

With a total of 10.3 million tourist arrivals in Singapore last year, the Singapore Tourism Board (STB) expects the GSS to attract even more visitors. It has been focusing its marketing efforts on the Asia-Pacific and Middle Eastern markets in particular.

 

‘Even as the Singapore dollar strengthens against the US dollar, we hope visitors will continue spending at the GSS with the many promotions and exclusive tourist privileges available,’ said Andrew Phua, the STB’s director of cluster development, tourism shopping and dining.

 

Visitors will be treated to exclusive privileges, including a range of ‘Best Buys’, ‘Hot Deals’ and a privilege card which offers additional perks and free gifts.

 

Source: Business Times

Libor anticipated changes lead to sharp rate rises

Libor anticipated changes lead to sharp rate rises

 

By NEIL BEHRMANN

IN LONDON

 

US and European interest rates jumped last week on fears of inflation and concerns that there would be a change in the calculation of London Interbank Offered Rates (Libor).

 

The British Bankers Association (BBA) meets at the end of the month and bankers will discuss an advisory report which will discuss changes to Libor, the interbank benchmark for US dollar, euro, yen, sterling and other short-term interest rates.

 

Since the credit crunch began in the middle of last year, Libor has been volatile, with spreads over US Treasury bills and European government and Japanese rates tending to widen. Libor reflects the market for interbank borrowing. Rates are at a premium over government paper because participants are wary about troubled banks and the possibility of failures.

 

US three-month Treasury bills are currently on yields of 1.82 per cent, but three-month dollar Libor rates are 2.9 per cent. Interest rate experts and economists have raised questions whether those banks were providing accurate quotes. A three-month dollar rate is calculated, for example, even though banks rarely actually borrow or lend to one another at that maturity. Similarly, German three-month interest rates are 3.93 per cent, but the euro libor rate is 4.85 per cent; three-month UK treasury bills are 4.85 per cent, but three-month sterling Libor is 5.77 per cent while yen three-month treasury bills of 0.6 per cent compare with yen three-month Libor of 0.9 per cent.

 

Following months of turmoil, bankers want to change the Libor formula, which comes from the input of 16 participating banks on the grounds that the benchmark fails to adequately reflect conditions in the money market. The BBA, however, is reluctant to institute radical changes as it fears this could adversely affect nervous investors. Libor is calculated each day by the BBA not on the basis of actual deals but instead as an average of what 16 banks, which include only three US-based institutions, believe to be the cost of short-term finance.

 

The US Federal Reserve Board and other central banks are concerned that Libor is well above treasury rates and fear that the knock-on interest rate effect will continue to dampen economic growth. Central banks regard Libor as a barometer of the banking system’s health. It is the basis for rates on trillions of dollars of global corporate securities, interest rate contracts and mortgage loans

 

Source: Business Times

More analysts sanguine about US economy

More analysts sanguine about US economy

 

They cite strength of recent data, but others caution against reading too much into it

 

(WASHINGTON) A growing number of analysts are expressing confidence that the worst may be over for the US economy, even if it struggles for some time due to weak housing, tight credit and high energy costs.

 

The latest data suggests that the world’s biggest economy may have averted a calamitous downturn, and could even escape a recession, by the most common definition.

 

‘The US economy continues to labour under the adverse effects of three powerful shocks: the housing slump, the credit crunch, and the spike in energy prices,’ says Josh Feinman, chief economist of Deutsche Bank’s DB Advisors. ‘Remarkably, the economy has been able (barely) to keep its head above water despite all the negative shocks, a testament to its underlying resiliency, an aggressive policy response, and the relative strength of global growth.’

 

He predicts that the US economy, which saw sluggish growth at a 0.6 per cent pace in the past two quarters, will see a pickup to a one per cent pace in the second quarter and 2 per cent in the July-September quarter. He sees a softening to 1.5 per cent expansion in the fourth quarter and then a return to 2 per cent growth in the first quarter of 2009.

 

Some of the recent economic reports have defied forecasts of a sharp decline in US growth. Retail sales fell 0.2 per cent last month but, excluding vehicle sales, were up 0.5 per cent, suggesting resilience in consumer spending, the backbone of US economic activity.

 

‘We think the economy is beginning to recover after a sharp two-quarter slowdown,’ said Bear Stearns economist David Malpass. ‘We still don’t expect a recession. We think consumer resilience, as shown in April’s non-auto consumption and sales data, is likely, not the deeper slump assumed in recession forecasts.’

 

Spending should get a further lift as the government sends out tax rebates of about US$107 billion in the coming weeks as part of a US$168 billion economic stimulus package.

 

‘The impact of fiscal stimulus is probably the most important issue in the US economic outlook during the summer months,’ said Goldman Sachs economist Andrew Tilton. ‘A significant rebound in confidence and spending could fan hopes of a quicker recovery, while a failure of the economy to respond to the stimulus would be a significant disappointment to policymakers and the markets.’

 

New home construction starts rose 8.2 per cent last month to an annual rate of 1.032 million units. Even though the gains were in the multi-family segment and single-family homes slumped, analysts said that it was good news.

 

The labour market has also held up better than expected, and increased exports helped by a weak dollar have underpinned growth.

 

The broad US stock market has rebounded some 10 per cent since mid-March, when the Federal Reserve helped support a rescue of investment giant Bear Stearns, which was widely seen as a turning point for the credit crisis and market confidence.

 

Analysts credit the aggressive cuts in interest rates by the Fed along with efforts to boost liquidity to the troubled finance sector, as well as the government’s stimulus package.

 

Nigel Gault, economist at Global Insight, said that the US economy has shown resilience but that it ‘is still too early to turn our thoughts away from recession and towards recovery’ as the impacts of the financial turmoil on the economy will linger. Global Insight is predicting a contraction of 0.9 per cent in the second quarter. Largely due to the impact of tax rebates, it sees 2.3 per cent growth in the third quarter and overall yearly growth at a tepid 1.2 per cent.

 

Paul Kasriel, director of economic research at Northern Trust, cautions against reading too much into recent data. ‘Any blue skies you see are likely to be short-lived. The mortgage credit problems are not over. And credit problems in other sectors are just beginning as the housing recession spreads to the rest of the economy.’ – AFP

 

Source: Business Times

Sub-prime hangover lingers over US banks

Sub-prime hangover lingers over US banks

 

Earnings results show woes may extend beyond Q2

 

(NEW YORK) Financial firms that had hoped to swallow their sub-prime mortgage pain and move on are finding the hangover is lasting longer than expected.

 

Bonds of banks and insurers that have been crushed as their sub-prime losses surged still may not be cheap enough to buy.

 

The conventional wisdom last year was that companies such as Citigroup and Merrill Lynch & Co , under new leadership, would use the last quarter of 2007 as a so-called ‘kitchen sink’ quarter, to report their worst write-downs and losses, and move on.

 

That didn’t happen.

 

Earnings results from banks, bond insurer MBIA Inc and American International Group Inc show the situation is worsening and may stretch beyond the second quarter or longer. As a result, investors are mostly avoiding their bonds and stocks for now.

 

‘To say we hit some speed bumps and now we’re ready to race again, is not the case,’ said David Hendler, an analyst at research firm CreditSights. ‘This is a prolonged problem and this is not going to get better next quarter and maybe even next year.’

 

Financial shares have dropped almost 11 per cent this year, the worst performing sector year-to- date, versus a 3.7 per cent decline in the Standard & Poor’s 500 Index. Bank and brokerage debt has lost 3 per cent year-to-date, versus a 0.3 per cent gain for overall high-grade corporate debt, according to Merrill Lynch data.

 

Finance firms continue to underestimate exposure to mortgage losses, missing their earnings targets as a result. At the same time, major revenue streams are drying up, such as those from building specialised bonds like collateralised debt obligations, or CDOs.

 

Fears of systemic meltdown of the financial system have eased after a slew of Federal Reserve actions to put more money into the banking system. Yet the aftershocks reverberating with each earnings season suggest the financial crisis that gripped global markets since last year may be entering a new phase – one that now reflects declines in US consumer debt markets.

 

Bond insurer MBIA recently posted a US$2.4 billion loss and AIG, the largest US insurer, reported a record quarterly loss due to exposure to derivatives, or investments which ‘derive’ their values from other underlying securities.

 

‘The financials are going to be under pressure, and it’s all coming from derivatives, ‘ said John Tierney, a credit analyst at Deutsche Bank AG in New York. ‘Prime residential mortgages and consumer debt portfolios may be the next shoe to drop.’

 

The deterioration seen in sub-prime mortgage debt is spreading to auto loans, credit cards and home equity lines of credit, all of which were bundled into bonds and other derivatives held by banks.

 

That will make it more difficult for financial companies such as Bank of America Corp to match earnings expectations.

 

Bank of America last month posted a 77 per cent decline in quarterly profit, and said the housing market will remain weak all year as problems shift to areas such as credit cards.

 

The fallout from mispriced mortgage assets is lasting longer than expected as both banks and rating agencies miscalculated the values of bonds underwritten by the shaky mortgage securities.

 

The new cracks in consumer debt follow years of sub-prime bond sales and then severe losses that devastated Wall Street, leading to at least US$400 billion in losses so far.

 

‘Housing declines combined with increases in energy prices may force consumers to appreciably slow spending,’ said Mirko Mikelic, a portfolio manager at Fifth Third Asset Management in Grand Rapids, Michigan. ‘Then you will see more write-downs as tightening standards are already having people stop using home equity lines and tap into credit cards.’

 

Indeed, Moody’s Investors Service last Tuesday said it underestimated losses for residential mortgage debt. Moody’s said bond insurers, including MBIA and Ambac Financial Group Inc, have ‘significant exposure’ to deteriorating second-lien mortgages.

 

That means the bond insurers’ top-tier ratings may be at risk, and further earnings hits may come.

 

To be sure, Fitch Ratings estimates that global banks already accounted for 80 per cent or more of their losses. Fitch said total market losses from sub-prime mortgage debt have climbed to US$400 billion, and some estimates may be as high as US$550 billion. — Reuters

 

Source: Business Times

US property set to recover in H2: Deutsche CEO

US property set to recover in H2: Deutsche CEO

 

(ZURICH) The end of the credit crisis is getting closer and the US real estate market should recover in the second half of the year, Deutsche Bank chief executive Josef Ackermann said.

 

‘I think that we are getting closer to the end of the financial crisis,’ Mr Ackermann told the Swiss Sunday newspaper Sonntagsblick. ‘It is not fully over yet, but the signs from the United States are encouraging. ‘ He said that the pragmatic approach in the US to resolve the crisis should start to pay off soon. ‘We should feel the effects in the second half of the year already and see a strong recovery of the US real estate market,’ he said.

 

The fallout from US households’ defaulting on home payments triggered the global crisis, leading to a squeeze in credit markets in Europe and the US as banks stopped lending for fear of being exposed to the sub-prime problems.

 

Mr Ackermann urged banks to draw lessons from the crisis quickly. ‘I am worried that otherwise governments will step up regulations in a way that are harmful to our sector.’

 

In a separate interview with Germany’s Frankfurter Allgemeine Sonntagszeitung, he said Deutsche was sticking to its target of making a pre-tax return on equity of 25 per cent over the business cycle. ‘That is our goal. Even in 2007, half of which was a time of crisis, we made 26 per cent. Geograhically and with our broad range of products we are positioned outstandingly for the megatrends.’

 

Asked about possible acquisitions, he said: ‘We do not feel pressured to act. We don’t have to buy anything, so we are strong enough. We are among the best in the world in the areas where we do business, but of course that does not mean that we will let a good buying opportunity pass us by.’ Deutsche Bank has flagged its interest in the German retail banking operations being put on the block by Citicorp and in Deutsche Postbank, which Deutsche Post is in the process of selling. — Reuters

 

Source: Business Times