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Fast-growing companies such as BYD, XPeng, Li Auto and Nio are increasingly favoured by consumers

China’s booming electric vehicle industry is forecast to further cement its global dominance this year, shrugging off US and European efforts to catch up and posing a threat to foreign groups reliant on the world’s biggest car market.

Chinese consumers will buy about 8mn to 10mn EVs in 2023, up from record sales of 6.5mn vehicles last year and 3.5mn in 2021, according to company and analyst forecasts. This compares with nearly 3mn in Europe and 2mn in the US.

“China is expected to have the largest overall sales with 35 per cent year-on-year growth in 2023, after two years of extremely rapid growth [ . . . ] To put this in perspective seven out of every 10 electric vehicles are now sold in China,” said Neil Beveridge, an analyst with Bernstein in Hong Kong.

The biggest winners from what is becoming a new golden age for China’s auto industry, analysts say, are a clutch of fast-growing local companies that are outperforming foreign carmakers.

BYD, the Warren Buffett-backed Tesla rival and widely considered China’s brightest EV star, expects sales of plug-in vehicles to reach 3mn units this year after selling more than 1.85mn last year, according to a management discussion with Citi bank. Citi analysts said the estimate was “conservative”. BYD declined to comment on the sales forecasts.

China remains one of the largest profit contributors for many international carmakers, leaving them particularly exposed if they cannot regain ground lost to domestic brands as the market rapidly shifts towards electric vehicles.

But groups such as BYD, XPeng, Li Auto and Nio, are now increasingly favoured by Chinese consumers. The market share of Chinese brands in the domestic EV segment edged higher from a staggering 78 per cent to 81 per cent last year. That compares with foreign groups enjoying 70 per cent market share about 10 years ago, before the massive surge in EVs and just after car sales in China overtook those in the US.

The pace of growth means China is on the cusp of hitting 50 per cent of car sales to be EVs by the end of 2025, becoming the first major economy to do so, according to Bernstein forecasts. BYD told Citi that the milestone, which compares with Beijing’s target of 40 per cent by 2030, could be hit this year.

This would also be far ahead of Europe, the next most advanced market for EVs, where the market share for battery cars is rising slowly. About a third of sales in the region were fully electric or plug-in hybrid — which China counts as electric “new energy vehicles” — in the final months of 2022.

EV sales in the US are lagging behind, with about 12 per cent of sales being electric, but growth is gaining pace following the introduction of huge subsidies under the Biden administration’s Inflation Reduction Act.

There have been some expectations of a slowdown in Chinese EV sales after a key subsidy delivering a discount of up to Rmb12,600 ($1,870) per vehicle expired at the end of 2022.

While carmakers raised prices in response, Raymond Tsang, a China auto expert with Bain, a consultancy, said Chinese companies still produced better and more competitively priced cars, and leveraged the benefits of China’s battery and resources sectors. Jing Daily, which tracks the Chinese luxury market, notes that even after Elon Musk’s Tesla slashed prices in China, bringing the price on its Model 3 down to about $33,515, BYD’s rival Seal sedan is still cheaper at $31,000.

“The Chinese homegrown EV players are really getting better in terms of their performance and the product portfolio [ . . . ] You are seeing not only that the Chinese products are cheaper, but they’re actually better in the eyes of many customers,” Tsang said.

Shenzhen-based BYD is also spearheading a wave of overseas expansion from Chinese companies. BYD told Citi that exports were forecast to grow as much as sixfold, to 300,000 units this year, with plans to build new factories in Asia, Europe and South America.

Against this backdrop, some foreign companies, including South Korea’s Hyundai and Japan’s Honda are quietly slimming their presence in China as sales fall, or are exiting the country completely, Tsang said.

Others, including Volkswagen and GM, are doubling down on decades of investment by spending billions of dollars to secure local partners for new technologies and resources they see as critical to compete.

In October, the German carmaker inked a €2.4bn investment in a new joint venture with Horizon Robotics, one of China’s leading designers of artificial intelligence chips.

The investment came days after the US unveiled new restrictions to stop American companies selling technology to China. It also followed the introduction of sweeping state support — largely mirroring Beijing’s EV-focused policies over the past decade — in the US and Europe to support local industry and counter China’s rise.

Despite foreign carmakers being caught squarely in geopolitical crosshairs, Tu Le, of Sino Auto Insights, an advisory company, said the VW deal showed that size and growth potential of the Chinese market still made “financial sense” for some of the biggest automakers — especially with economic growth forecast to slow in many other regions.

“It is like an addiction that is too hard to walk away from, even with the continued risk of IP sharing,” he said.

For China, investments in auto sector technology and resources have also been an important bright spot in the economy.

According to data provided to the Financial Times by Dealogic, despite last year’s lockdowns, M&A activity related to the EV sector held steady from the year prior at above $10bn across almost 50 deals. Outbound investment from Chinese EV-related groups has also remained steady.

In the wake of the removal of subsidies and a push to expand production capacity, Shi Ji, an analyst with CMBI, expected competition to become only more “bloody”.

First decline in 60 years set to have long-term consequences for domestic and global economies

China’s population fell in 2022 for the first time in decades, a historic shift that is expected to have long-term consequences for the domestic and global economies.

The world’s most populous country has long been a crucial source of labour and demand, fuelling growth in China and the world.

On Tuesday, the National Bureau of Statistics announced that the total population fell by 850,000 in 2022 to 1.41175bn, the first decline in 60 years.

“This is a truly historic turning point, an onset of a long-term and irreversible population decline,” said Wang Feng, an expert on Chinese demographic change at the University of California, Irvine.

The decline officially began last year, when deaths outstripped births, but some demographers argue that the trend is likely to have started before then.

China’s strict zero-Covid policy of containing coronavirus is widely seen to have accelerated the fall in the country’s birth rate, as couples delayed or decided against having children during the health crisis and economic slowdown. Last year, 9.56mn babies were born, down from 10.62mn the previous year.

The birth rate in 2022 was the lowest since records began more than seven decades ago — 6.77 births for every 1,000 people, down from 10.41 in 2019.

The decline has roots in Beijing’s one-child policy imposed in 1980, which limited the number of children a couple could have to below the average of 2.1 needed for a country’s population to remain stable.

Authorities scrapped the policy in 2016, replacing it with a two-child limit, but the number of births has fallen every year since then.

The national death rate was 7.37 per 1,000 people in 2022, the highest since 1970, and up from 7.09 in 2019.

Fuxian Yi, a demographer at the University of Wisconsin-Madison, estimated that China’s population started to fall in 2018, but the drop was obscured by “faulty demographic data”.

“China is facing a demographic crisis that far exceeds the imagination of Chinese authorities and the international community,” Yi said, noting that the trend would act as a long-term drag on the country’s property market, a crucial engine of growth.

“China cannot rely on the demographic dividend as a structural driver for economic growth,” said Zhiwei Zhang, president and chief economist at Pinpoint Asset Management. “Economic growth will have to depend more on productivity growth, which is driven by government policies.”

Some economists argue that the rise of automation will offset rising labour costs as the number of workers shrinks.

But analysts largely agree that the country’s social welfare and medical infrastructure is ill-prepared for an ageing population.

China’s sudden exit from its strict zero-Covid policy last month and the surge of infections that followed rapidly overwhelmed hospitals. Wang said this should serve as a “wake-up call for China to speed up reforms of its still highly inefficient and unequal healthcare system”.

China’s demographic turning point puts it on the same path as Japan, where the population began to decline in 2010 and has fallen every year since.

The UN has projected that China’s population will fall to 1.31bn by 2050 and 767mn by the end of the century. The 2050 estimate would make China 3.5 times larger than the US, which is projected to have 375mn people by then. It is currently 4.7 times larger than the US.

The UN’s 2022 estimates also project that India will overtake China as the world’s most populous nation this year. India’s population currently stands at 1.4066bn.

Gross domestic product misses annual target but expectations rise for recovery in 2023

China’s economy grew by just 3 per cent in 2022, underscoring the heavy costs of the government’s longstanding zero-Covid strategy before it was abruptly abandoned last month.

The country’s gross domestic product figures missed Beijing’s official growth target, which at 5.5 per cent was already the lowest in decades. Other than in 2020 at the beginning of the pandemic, when full-year GDP expanded 2.2 per cent, growth was the weakest since 1976.

Although China’s economy is expected to recover this year as it reopens to the world, Tuesday’s data highlighted the scale of the challenge that President Xi Jinping faces after growth was subordinated to a vast anti-pandemic policy apparatus for three years.

In the fourth quarter, GDP was flat compared with the third quarter and rose 2.9 per cent year on year, higher than analyst expectations of a 1.6 per cent increase. Late last year, the government tightened Covid-19 restrictions in response to multiple urban outbreaks before suddenly easing them, allowing the virus to sweep across the population uninhibited for the first time.

Economists expect growth to rebound this year compared with 2022, but policymakers face a host of challenges including Covid, a property crisis that has dragged home prices lower, a slump in exports as the global economy slows and China’s first population decline in 60 years.

“The Chinese economy is at a pivotal point, with disruptions from the protracted zero-Covid policy and its abrupt reversal likely to give way to a resurgence of at least moderate growth by Chinese standards,” said Eswar Prasad, a China finance expert at Cornell University. “Growth momentum coming out of this difficult period will depend on how much and what kind of stimulus the government employs to put the economy back on track.”

Asia-Pacific equities slipped on Tuesday following the data release, with Hong Kong’s Hang Seng index falling 1 per cent and China’s CSI 300 shedding 0.1 per cent. South Korea’s Kospi lost 0.6 per cent, and Japan’s Topix gained 0.8 per cent.

Various metrics surpassed expectations in December but reflected underlying weaknesses as estimated Covid infections soared into the hundreds of millions, straining hospitals and weighing heavily on economic activity. Retail sales dropped 1.8 per cent year on year, compared with a 5.9 per cent fall in November, while industrial output added 1.3 per cent.

Unemployment improved to 5.5 per cent from 5.7 per cent in November. Over the full year, industrial output rose 3.6 per cent, fixed asset investment rose 5.5 per cent and retail sales edged 0.2 per cent lower.

“Generally speaking, positive results have been achieved in effectively coordinating the Covid-19 prevention and control and the economic and social development in 2022,” said Kang Yi, head of China’s National Bureau of Statistics. But he added that the “foundation of the economic recovery is not solid”, citing a “complicated” international backdrop and domestic pressures.

“Data so far supports our long-held view that China’s reopening boost will be somewhat anaemic at the beginning, with consumer spending being a key laggard in the initial stages,” said Louise Loo, senior economist at Oxford Economics.

In addition to abandoning the zero-Covid constraints, policymakers have recently unveiled potential stimulus for property developers to support a sector that has been hit by a wave of defaults over the past 18 months.

Real estate investment fell by 10 per cent in 2022 as part of a property crisis that drove home sales 24 per cent lower by floor space and 27 per cent lower by dollar value.

China, Europe drive electric-vehicle expansion as U.S. gains traction

BERLIN—Electric-vehicle sales crossed a global milestone last year, achieving around 10% market share for the first time, driven mainly by strong growth in China and Europe, according to fresh data and estimates.

While EVs still make up a fraction of car sales in the U.S., their share of the total market is becoming substantial in Europe and China, and they are increasingly influencing the fortunes of the car market there as the technology goes mainstream. The surge in EV sales also contrasted with the broader car market that suffered from economic worries, inflation and production disruptions.

Global sales of fully electric vehicles totaled around 7.8 million units, an increase of as much as 68% from the previous year, according to preliminary research from LMC Automotive and EV-Volumes.com, research groups that track automotive sales.

Ralf Brandstätter, the head of Volkswagen AG’s China business, told reporters on Friday that electric vehicles would continue expanding fast and that China could soon reach a point where sales of conventional vehicles begin to permanently decline as plug-in vehicles take bigger market share.

“Last year, every fourth vehicle we sold in China was a plug-in, and this year it will be every third auto,” Mr. Brandstätter said. “We haven’t reached the tipping point yet, but we’re expecting to get there between 2025 and 2030.”

For the full year, fully electric vehicles accounted for 11% of total car sales in Europe and 19% in China, according to LMC Automotive. Combined with plug-in hybrid vehicles, which can be plugged in to recharge the battery but also have a small combustion engine, the share of electric vehicles sold in Europe rose to 20.3% of the total last year, according to EV-Volumes.com.

The U.S. lags behind China and Europe in the rollout of EVs, but last year auto makers sold 807,180 fully electric vehicles in the U.S., a rise in the share of all-electric vehicles to 5.8% of all vehicles sold from 3.2% the year before. Tesla is still the world’s dominant EV maker, but conventional auto makers are shortening its lead with new electric-model launches.

In Germany, the largest auto market in Europe, electric vehicles accounted for 25% of new vehicle production last year, according to VDA, the German automotive manufacturers association. In December, there were more EVs sold in the country than conventional cars.

New-car sales overall fell around 1% to 80.6 million vehicles, according to the LMC data, with nearly 4% growth in China helping to offset a decline of 8% in the U.S. and 7% in Europe, which was hit by the weakening global economy, soaring energy costs, supply-chain disruptions and the war in Ukraine.

Bayerische Motoren Werke AG, the German luxury-car maker, was one of many manufacturers last year to see sales of plug-in models rise even as overall sales tumbled. BMW reported a 5% decline in total new-car sales but saw EV sales more than double last year.

“We are confident that we can repeat this success next year, because we have a continued high order backlog for fully electric models,” BMW sales chief Pieter Nota, said this month, commenting on the growth in sales of electric models.

VW, Europe’s biggest manufacturer by sales, said on Thursday that overall new-car sales fell 7% to 8.3 million vehicles last year, but sales of electric vehicles rose 26% to 572,100 units. The sales figures encompass the company’s large stable of brands, including VW, sports-car maker Porsche, luxury-car brand Audi and passenger-car brands Skoda and Seat.

Other manufacturers reported a similar divide of strong growth in sales of electric cars—boosted in part by the availability of a wider array of models in addition to market leader Tesla Inc.—and weak or declining sales of conventional vehicles. Ford Motor Co., Mercedes-Benz Group AG and BMW each said their EV sales more than doubled in 2022, while their total vehicle sales declined.

European auto makers have focused their EV production and sales on home markets as they try to meet European Union emissions regulations. They also began last year to more aggressively expand their EV business in other major markets, especially China and the U.S.

In China, which accounted for around two-thirds of global sales of fully electric cars last year, domestic manufacturers are gaining ground on traditional Western auto makers and are also beginning to expand into Europe and the U.S.

Worldwide, Tesla maintained the top spot in a global ranking of manufacturers by sales of all-electric vehicles, followed by Chinese manufacturers BYD Co. and SAIC Motor Corp., and brands belonging to the VW group, according to a study published by Stefan Bratzel, director of the Center of Automotive Management, an automotive-research group in Germany.

In the U.S., Ford is the second-largest maker of EVs by sales, followed by Hyundai Motor Co. and its affiliate Kia Corp. Meanwhile, General Motors Co., VW and Nissan Motor Co. lost EV market share in the U.S. last year.

While EVs are showing signs of becoming more mainstream globally, analysts warn that repeating last year’s strong EV performance in 2023 could be difficult as economic worries weigh on consumers, and cash rebates on EVs are reduced or scrapped completely in some countries. Rising electricity prices in Europe in the wake of Russia’s attack on Ukraine have also diminished the appeal of EVs compared with gas-powered cars.

Germany witnessed a surge in last-minute EV purchases in December, as consumers rushed to take advantage of government incentives before they were cut this year. Since Jan. 1, government subsidies for the purchase of an EV with a listing price of up to 40,000 euros, equivalent to about $43,000, fell to 4,500 euros from 6,000 euros previously.

For the past couple of years, auto makers, especially in Europe, have struggled to find key components such as computer chips to maintain production in pace with demand. This mismatch between demand and supply is one reason auto makers posted lofty profits last year despite broadly weaker sales.

As the economy weakens, supply-chain problems ease and subsidies dry up, manufacturers could find it harder to maintain the high prices for new cars as they chase potentially fewer buying customers. This could result in a downward price spiral that potentially hits profits.

“Demand is likely to weaken in the coming year,” said Peter Fuss, an auto analyst with Ernst & Young. “The weak economy will cause retail and business consumers to be more reluctant. And it is possible that supply will outpace demand and we will begin to see discounts again.”

Activist investor Ryan Cohen has built a stake in Alibaba Group Holding Ltd. BABA 3.41%increase; green up pointing triangle worth hundreds of millions of dollars and is privately pushing the Chinese e-commerce giant to accelerate and further boost its share-repurchase program, according to people familiar with the matter.

Mr. Cohen, known as the meme-stock king for helping ignite explosive rallies in GameStop Corp. and others, built the stake in the second half of last year, the people said.

While the stake is small in comparison to Alibaba’s market capitalization of nearly $300 billion, Mr. Cohen has a wide following among individual investors who often follow his lead.

Mr. Cohen, with a net worth of over $2.5 billion and a portfolio of stocks including Apple Inc. as well as Wells Fargo & Co. and Citigroup Inc., first contacted Alibaba’s board in August to express his view that the company’s shares are deeply undervalued based on his belief that it can achieve double-digit sales and nearly 20% free-cash-flow growth over the next five years, the people said.

Alibaba’s shares have climbed about 67% from a multiyear low in October, with its ADRs closing at $117.01 on Friday, but are still down from a high of over $300 reached in late 2020 as technology and other shares rallied in the early days of the pandemic.

The shares have been hurt by depressed consumer sentiment in China as the country continues to grapple with Covid-19 and a sprawling clampdown on technology companies there that caused affiliate Ant Group Co. to call off its highly anticipated IPOs in Shanghai and Hong Kong.

Subsequent to Mr. Cohen’s initial communication, Alibaba in November announced its board approved expanding the company’s share-repurchase program by $15 billion, to $40 billion, while also extending it through March of 2025.

Alibaba said it had repurchased roughly $18 billion of its shares under its existing buyback plan, as of November 16.

Mr. Cohen has communicated to Alibaba’s board that the share-repurchase plan could be boosted by another $20 billion, to roughly $60 billion, the people said.

The activist investor has expressed his admiration for management’s ability to achieve earnings growth while also assembling quality assets, they added. Mr. Cohen wants to have a collaborative, long-term relationship with Alibaba, the people said.

Mr. Cohen has also conveyed his belief that Apple, in which he owns a more-than $800 million stake, could provide a road map for Alibaba, the people said. Since 2012, the iPhone maker has repurchased hundreds of billions of dollars of its shares and the stock has soared.

Share repurchases can support stocks by reducing the supply of shares traded and boosting per-share profit. Investors often take them as a bullish signal as they suggest executives are optimistic about their company’s prospects and confident in its financial position.

In August, Alibaba showed that its once-powerful growth had run out of steam, as the company failed to post revenue growth for the first time since its blockbuster 2014 U.S. listing. Revenue for its fiscal first quarter fell 0.1% from the prior year, to the equivalent of $30.7 billion, with Alibaba blaming China’s Covid-19 outbreak, which has caused disruptions to supply chains.

In its second quarter, Alibaba eked out 3% revenue growth. The company said that key categories within its commerce division, such as apparel and accessories and consumer electronics, had started to recover.

Mr. Cohen, who built his fortune on online pet retailer Chewy Inc., which he founded, has publicly shown an affinity for the Chinese economy in recent months. In June, he tweeted: “I have a crush on China.” Mr. Cohen also recently released a children’s book about his father’s travels to China for business.

Western banks struggle to exit Russia after Putin intervention

Advisers warn that Kremlin favourites could hijack sales of subsidiaries

Advisers to western banks trying to exit Russia say a law introduced by Vladimir Putin is disrupting sales and allowing deals to be hijacked by business people close to the Kremlin.

Almost a year into the invasion of Ukraine, only a handful of western banks have managed to leave Russia, albeit at steep cost, while others have made the choice to hold on to their businesses in the country.

For the majority trying to sell their Russian assets, however, hopes for a swift exit were shattered when Putin last year said foreign owners from “unfriendly” countries could not complete deals without his approval. The list of implicated companies includes 45 banks with subsidiaries in Russia.

Advisers working on deals expect the Russian president’s intervention to thwart some sales already under discussion, while fundamentally altering the terms of others.

They predict already agreed sale prices to fall by up to half as the Kremlin exerts more influence on deals. And they say would-be buyers who were originally beaten to deals have gained presidential approval and are attempting to hijack sales from rivals who lack the Kremlin’s favour.

“There are some very powerful Russians with close links to the Kremlin who are trying to use their influence to grab these entities from fleeing foreigners,” said a person involved in negotiations, one of several people who spoke to the Financial Times on condition of anonymity because of the sensitive nature of talks with the Russian government.

“We’re working on [these types of deals] every day, but it’s becoming more and more challenging all the time,” said Laura Brank, partner at law firm Dechert, who is advising western banks on selling their Russian subsidiaries.

“The situation is very fluid and rules are really not clear.”

Within days of Russia’s invasion of Ukraine, western banks that had spent decades slowly building up their Russian branches faced a stark choice about whether to sell the business quickly and swallow a heavy loss, or hold on and gradually wind it down.

The western sanctions and Moscow’s counter-sanctions made the country all but impossible to do business in for foreign banks.

Austria’s Raiffeisen Bank International, the western lender with the biggest presence in Russia and Ukraine, increased its currency hedging and cash reserves in expectation of customers withdrawing their savings as troops gathered at the border at the start of last year.

But the invasion on February 24 caught the bank’s executives — like most western bankers — off guard.

“It was one of the most shocking days in my life,” said Hannes Mösenbacher, chief risk officer at Raiffeisen.

Raiffeisen’s subsidiary is the biggest on the Kremlin’s list — with 4.2mn customers and 9,400 staff in Russia on the eve of the invasion — and the bank has yet to figure out how it will dislodge itself from the country.

Of its €22.9bn of assets in Russia at the start of 2022, only €354mn was exposed to financial institutions that came under western sanctions and €119mn to other companies hit with sanctions.

In late July, HSBC agreed to sell its Russian subsidiary to local lender Expobank in a deal that would allow it to exit a country that had become politically toxic since Moscow’s invasion of Ukraine at the start of the year.

But that sale has now been held up. HSBC said it was still working on trying to complete the transaction, but a person with knowledge of its plans said it was up to Expobank as the acquirer to secure approval from Putin.

“For us, there is no change from when the deal was signed,” said the HSBC executive. “It just needs to go through these machinations.”

One bank that managed to shift its Russian subsidiary before the presidential decree was France’s Société Générale, which agreed in April to sell its Rosbank business as well as its Russian insurance operations to an investment company founded by billionaire Vladimir Potanin.

Along with Raiffeisen and Italy’s UniCredit, SocGen had one of the largest exposures to Russia of any western bank, with €18.6bn of assets at the start of 2022. Rosbank employed 12,000 people.

SocGen was able to cut a swift deal because it sold to Potanin, one of Russia’s richest men with close links to the Kremlin, who was only sanctioned by the US last month. The French bank had also bought the business from Potanin in 2008.

“We did it very, very quickly — it helped that we sold it to somebody who knew the bank well,” said a SocGen executive. “We even got congratulatory calls from rivals saying how efficiently and orderly we were able to get rid of it.”

However, in reaching such a hasty sale, SocGen was forced to take a €3.3bn hit.

Other banks looking for a quick exit did not have a ready buyer waiting in the wings, nor were they prepared to absorb such a financial hit as SocGen took.

UniCredit’s Russian operations include 2mn customers and 3,500 staff. Chief executive Andrea Orcel even considered upping its exposure by buying Russian bank Otkritie just weeks before the invasion. By mid October its total exposure to Russia still stood at €7bn.

The Italian bank’s failure to cut ties with Russia has caused friction with the European Central Bank, the FT has reported, after Orcel said over the summer that writing off the business or selling it at a discount was “not morally correct”.

More recently, however, the bank has said it is “committed to disengaging from Russia in an orderly and decisive fashion”, which Orcel said was different to the “dump it all” strategies pursued by other banks, without naming them.

“You are dumping it to the very people you’re trying to fight,” he said at a Bank of America conference in September. “We are trying to make sure there is an orderly containment of what we have, and eventually exit, but in a way that is not a gift.”

It has, however, agreed to sell RN Bank, its Russian joint venture with Renault and Nissan, to Lada-maker Avtovaz. The deal was given the green light by Putin at the end of November.

Citigroup, whose local subsidiary is subject to the decree, has taken a different approach to dealing with its exposure, which stood at $7.5bn at the end of December.

Having failed to find a buyer for its Russian business for more than a year, the US lender has decided instead to wind the business down.

Last month the bank sold a portfolio of Russian consumer loans to Uralsib, a local commercial lender.

It also plans to close most of its institutional banking services in Russia by the end of the first quarter of 2023, though its custody operations are likely to prove harder to disentangle, according to people with knowledge of the business.

Intesa Sanpaolo chief executive Carlo Messina has outlined his intention to turn Italy’s largest lender by assets into a “zero Russia exposure bank” by winding down cross-border loans between Italian and Russian companies, which make up the majority of its business in the country.

But like the other western banks stuck in the country, the fate of its Russian subsidiary rests in Putin’s hands.

“It’s an extremely difficult situation for us as it is for most banks,” said the executive at one bank with a subsidiary on the restricted list.

“The fact of initially not being able to sell to sanctioned entities and now keeping all these banks hostage plays into what the Russian government wants. There is no incentive to make it easy for banks to leave.”

He added: “We’re in limbo, but it’s not for lack of desire to resolve it. It’s just very hard to see what the path out of this is.”

Exchanges group prepares to move financial and commodity derivatives away from French capital to Milan

Euronext has agreed a deal to move part of its clearing business from a subsidiary of the London Stock Exchange Group, reducing its reliance on its British rival in a controversial area of Europe’s capital markets.

Euronext, the biggest operator of stock markets in Europe, has agreed a €36mn termination fee with the LSE that ends a dispute between the two over the future over clearing of Euronext’s equity, derivatives and commodities business.

The group also said it was open to selling its 11.1 per cent stake in the French arm of LCH back to its British majority owner, further simplifying the complex web of cross-shareholdings between the two exchanges and their clearing houses.

Amsterdam-listed Euronext has been looking to renegotiate a 10-year deal with LCH in Paris to clear the business since it purchased Borsa Italiana for €4.4bn in 2021 from the LSE. The agreement between Euronext and LCH, which is majority-owned by the LSE, was due to expire in 2027.

The Borsa Italiana deal included the CC&G clearing house in Milan, which meant that Euronext no longer had to rely on services from the LSE.

A clearing house stands between two parties in financial transactions, helping manage adverse fallout across markets should an entity default. They have become politicised in Europe since the UK voted to leave the EU, with European politicians keen to repatriate as much business as possible to the eurozone. LCH, which has both British and French subsidiaries, is one of the world’s largest clearing houses.

As part of the agreement Euronext will begin moving the business to Italy from late 2024. Stéphane Boujnah, chief executive of Euronext, told the Financial Times that one of the “peculiarities of the situation” was that “we terminate our relationship with the clearing house of LCH SA because LCH sold us another clearing house.”

Boujnah added that “having full control of the derivatives clearing chain is changing significantly our ability to build a more ambitious derivatives strategy . . . Things that we were not able to do when we were just clients of a competitor.”

Boujnah said it was “more their option than ours” as to whether LCH Group, the umbrella company that owns LCH’s French arm, would buy back the 11.1 per cent stake from Euronext.

LSEG said that the French arm of LCH is “strategically important” to the group, “clearing the majority of the eurozone repo market and the majority of the Euro credit derivatives market, in addition to many European equity market venues.” 

Plaintiff alleges tweets about a potential deal, which never materialized, cost investors billions

Elon Musk is headed to court in a securities-fraud trial over tweets from 2018 in which he floated the possibility of taking Tesla Inc. private, with in-person jury selection poised to begin Tuesday.

The class-action case originates with an Aug. 7, 2018 tweet in which the Tesla TSLA -0.94% chief executive said, “Am considering taking Tesla private at $420. Funding secured.”

An investor, Glen Littleton, sued Tesla, Mr. Musk and members of Tesla’s board at the time, alleging that Mr. Musk’s tweets were false and cost investors billions by spurring swings in the prices for Tesla stock, options and bonds. In court filings, Mr. Musk has said he was indeed considering taking Tesla private and believed he had the support of Saudi Arabia’s sovereign-wealth fund to do so. The deal, which would have been valued around $72 billion, never materialized.

U.S. District Judge Edward Chen, who is overseeing the San Francisco jury trial that is scheduled to run through Feb. 1, has ruled that Mr. Musk’s tweets about taking the company private weren’t true and that he acted recklessly in making them.

Questions for the jury include whether Mr. Musk’s tweets were material to investors and whether he knew they were untrue.

The case is unusual in that securities-fraud cases usually resolve before going to trial, such as through a settlement, said Jill Fisch, a securities-law professor at the University of Pennsylvania. The defendants in this case face “an uphill battle” in light of the judge’s pretrial decision about the veracity of Mr. Musk’s statements, she said.

Attorneys for the lead plaintiff didn’t respond to a request for comment, nor did an attorney for Tesla, Mr. Musk and the other board members.

Mr. Musk is expected to take the stand as early as Wednesday, some two months after he did so in Delaware in a trial over his pay package at Tesla. In 2021, he also appeared before Delaware’s business-law court to defend Tesla’s roughly $2.1 billion 2016 takeover of home-solar company SolarCity Corp.

Also on the list of possible witnesses are Tesla board chair Robyn Denholm, board members Ira Ehrenpreis, James Murdoch and Kimbal Musk —the CEO’s brother. The head of investor relations, Martin Viecha, also may be called.

This week’s trial comes at a busy time for Mr. Musk, who has been scrambling to turn around Twitter Inc. after buying the social-media company last fall in a deal valued at $44 billion. His rocket company SpaceX is pushing for the first orbital launch of a new rocket Mr. Musk wants to use for deep-space missions.

Tesla, meanwhile, has slashed prices across its vehicle lineup, with some of last week’s cuts in the U.S. nearing 20%, in a bid to juice demand. The company’s stock has fallen roughly 70% since its peak in November 2021, erasing around $850 billion in market value. Mr. Musk’s personal wealth has fallen more than $200 billion in that time, according to the Bloomberg Billionaires Index.

Court proceedings involving Mr. Musk can be feisty. In the SolarCity case, for example, Mr. Musk called opposing counsel a “bad human being.”

In advance of this week’s trial, Mr. Musk asked the court to move the trial to Texas on the basis that potential jurors in San Francisco could be biased against him. Judge Chen rejected the request.

“It isn’t that hard it seems to me to find 15 people,” he said.

The court requires nine jurors and six alternates to proceed with the case. Roughly 190 potential jurors were asked to fill out questionnaires about their views of Mr. Musk and other issues. The court plans to bring in about 50 of them for further questioning Tuesday.

Opening arguments could start as early as Tuesday after the jury is selected.

The lead plaintiff is seeking damages for investor losses he alleges stemmed from Mr. Musk’s and Tesla’s statements. Tesla stock closed up 11% the day Mr. Musk initially tweeted about potentially taking Tesla private, later giving back all those gains and falling further as questions emerged about the deal.

The defendants have said the plaintiff won’t be able to prove to a jury that the statements were materially false. Mr. Musk was considering taking Tesla private, the defendants have said, even if some of his assertions about the deal may not have been literally accurate.

Defendants, in a trial brief, said Mr. Musk believed he had secured backing to take the car maker private from Saudi Arabia’s sovereign-wealth fund, the Public Investment Fund. A lawyer for the defendants said Friday that his team had chosen not to enforce subpoenas calling on fund representatives to testify. The sovereign-wealth fund didn’t respond to a request for comment.

Mr. Musk and Tesla each agreed in 2018 to pay $20 million to settle civil charges brought by the Securities and Exchange Commission over the same tweets. Mr. Musk also agreed to step down as chairman of the company, while remaining CEO. He later said in legal filings that he felt pressured to settle with the SEC. Last year, a federal judge denied Mr. Musk’s request to scrap his settlement.