TheChek News Flow

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Eur$ 1.1726 CNH 7.0067 CNY 7.0041 JPY 105.62 GBP 1.2848 CHF 0.9223 RUB 71.6010 WTI$ 41.50 -0.24%

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Macro :

- Hedge Fund Fees in Free Fall Is New Reality For Humbled Industry

- GOP Rolls Out $1 Trillion Stimulus to Start Talks With Democrats

- IMF Bailout May Be Half What Lebanon Sought When Aid Talks Began

Keep an eye on :

- 4BSB GY : Sparta Offers to Buy 4basebio at Expected Price of EU2/Share

- ADP FP : Aeroports de Paris First Half Ebitda Beats Estimates

- ABIO FP : Albioma First Half Revenue EU250.7 Mln

- ARCAD NA : Arcadis Second Quarter Organic Revenue -3% Vs. +2% Y/y

- ATC NA : Altice, Mediapro Sign Two Agreements on Soccer Broadcast Rights

- AUTN SW : Autoneum First Half Ebit Loss Narrower Than Estimates

- BAC US : Berkshire Bought 16.4 Million More Bank of America Shares

- BKIA SM : Bankia Books EU185m Covid-19 Provision in 2Q

- BG AW : Bawag Second Quarter Pretax Profit Misses Estimates

- BESI NA : BE Semiconductor Second Quarter Gross Margin Beats Estimates

- CHR DC ; Chr. Hansen Completes UAS Labs Acquisition, Keeps Outlook

- DHER GY : Delivery Hero Raises Guidance Following Growth During Covid-19

- DEQ GY : Deutsche Euroshop Leads Mall Owners Lower Amid Virus Spikes

- EDP PL : EDP, Galp to Assess Feasibility of Sines Green Hydrogen Project

- ELE SM : Endesa First Half Net Income Misses Estimates

- ENG SM : Enagas First Half Net Income EU236.3 Mln

- FORN SW : Forbo First Half Ebit Misses Estimates

- FPE GY : Fuchs Petrolub Sees FY Drop in Earnings in Range of 25% in 2020

- IAG LN : IAG, Air Europa Near New Deal, Price Cut By About 50%: Cinco

- NK FP : Imerys 1H Net Income Falls 41% to EU56.6m

- INGA NA : ING to Book About EU300M as Impairment in 2Q Results

- ISP IM : Italy’s Market Regulator Extends Intesa’s Bid on UBI to July 30

- MC FP : LVMH 2Q Fashion & Leather Goods Organic Sales Beat Est.

- MAS SM : Masmovil First Half Adjusted Ebitda EU277 Mln, +28% Y/y

- MERY FP : Mercialys First Half FFO EU63 Mln

- ML FP : Michelin Reports 1H Operating Profit at High End of Estimates

- MONC IM : Moncler First Half Revenue 2.3% Below Estimates

- MONC IM : Moncler’s 1H Was Tough But Year-End Will Be Crucial: Analysts

- UG FP : Peugeot Maker PSA Sticks to Financial Outlook Despite Virus Drag

- RNO FP : Nissan Is Said to Skip Annual Dividend, Seeks to Conserve Cash

- RHM GY : Rheinmetall Mulls Options for Auto Unit, Citing Gloomy Outlook

- RXL FP : Rexel Says Visibility Low in 2H, 2021; Still Withholds Guidance

- SIGN SW : SIG Combibloc Cuts Full Year Core Sales Forecast

- SNH GY : Steinhoff Class-Action Suit Dropped as VEB Supports Settlement

- STM FP : STMicroelectronics to Sell $1.5B of Convertibles in Two Tranches

- TALK LN : TalkTalk Rejected 135p/Shr Bid From Toscafund Last Year: Sky

- TIT IM : Italy Studying Plan to Create Single Broadband Network: Reuters

- TSLA US : South Korea Launches Probe on Tesla Software: SBS-CNBC

- TIF US : LVMH Will Respect Contract Signed With Tiffany, CFO Tells Figaro

- UBI IM : UBI Investors Tendered 43.5% Shares in Intesa Bid

- UBI IM : Intesa’s Offer on UBI Extended to July 30: Consob

- VOW3 GY : Volkswagen, Porsche Repay $9.5b Following Settlement With FTC

- VONN SW : Vontobel First Half Total Client Assets CHF280.2 Bln, -2.8% H/H

- WDI GY : Visa, Mastercard Fined Wirecard for Dubious Transactions

Germany fears far-right influence in police and security forces

Recipients of death threats say their names had been searched for on official databases

When it comes to threats from the far-right, leftwing German politician Martina Renner has developed a thick skin. She rattles off the various kinds of threat she has received over the years: detailed descriptions of her murder, sexual violence, or even graphic videos of assaults.

But since April, the MP for Die Linke party has received seven letters that were different. The sender, “NSU 2.0” — a reference to a neo-Nazi group from the 1990s, called the National Socialist Underground — shared personal details the public would not know. And her situation is not unique.

Last week, the interior ministry of the German state of Hesse confirmed such messages had been sent to some 27 people in recent months — most of them women, people of migrant heritage, or on the political left. At least three targets had been searched for in police databases before the threats were sent. Ms Renner and others say details in the communications — sent by email, fax or text — appeared to require access to official records, or perhaps surveillance.

“There’s a feeling we’re being threatened by the ones who should be protecting us,” she said. “We can’t rule out that police officers we speak to are feeding our information into the computer, where other policemen can just grab it.”

The reports have ignited fresh debate in Germany over the presence of far-right sympathisers inside its security forces.

The problem is not confined to the police. Just a month ago, Germany’s defence minister, Annegret Kramp-Karrenbauer, announced she would disband a company in the country’s special forces after a scandal involving far-right sympathisers.

Many countries grapple with far-right infiltration of their security forces, criminologist and police analyst Thomas Feltes said. But only now is Germany being forced to confront its own problem. “We are surprised by the fact that we might not be better than others,” he said.

The “NSU 2.0” death threats are not even new. An investigation into them has dragged on for over two years, involved 60 law enforcement officers, at least 30 witnesses, and an Interpol inquiry — and the culprits have still not been found. On Monday, Frankfurt’s public prosecutor announced that a former policeman and his wife in the southern state of Bavaria had been briefly arrested on suspicion of sending threats to MPs and others. However authorities have yet to clarify how the couple is connected to “NSU 2.0”.

The first known NSU 2.0-related threats were received in 2018 by Seda Baysal-Yildiz, a German lawyer of Turkish descent who represented one of 10 victims killed by the original NSU group. Investigators later discovered her name had been searched for in a Hesse police database.

In recent months, the emails, some signed “Der Führer”, have proliferated, targeting some of Germany’s best-known opposition politicians. Now authorities have confirmed that two other women — a leftwing politician and a comedian of Turkish descent — were also searched for in police databases shortly before receiving threats.

Hesse’s interior ministry and attorney-general declined to comment. But the head of Frankfurt’s public prosecutor’s office, Albrecht Schreiber, has said the investigation into the emails has “absolute priority”.

Some critics have asked why it is only now that police have come under pressure given how long ago Ms Baysal-Yildiz was threatened. The NSU trial she worked on, which started in 2013, also sparked concerns about racism and far-right sympathies within the police and security forces. 

New life was breathed into that debate this summer in the wake of worldwide Black Lives Matter protests. Many politicians, however, argue that charges of racism within the police undermine morale among loyal officers. Horst Seehofer, the federal interior minister, has rejected calls for an investigation into the use of racial profiling. Instead, he proposed a study into violence against police, after some were targeted during recent riots in Stuttgart and Frankfurt.

It is not clear yet what “NSU 2.0” even is, or whether some letters are copycats. In the wake of the special forces scandal last month, investigators said networks may have developed from within. Peter Beuth, Hesse’s interior minister, now says he cannot rule out the possibility of a network inside the region’s police force. 

Some targets say current police behaviour has heightened their concern. Deniz Yücel, a commentator at Die Welt newspaper, was named in another NSU 2.0 letter sent two weeks ago to Mr Beuth and other officials. Yet it was Mr Yücel’s newspaper colleagues reporting on the subject that alerted him. He was not contacted by police.

“Perhaps they assume I will dial the telephone exchange of the Hesse ministry of the interior and ask myself,” Mr Yücel joked on Twitter. “Or that potential rightwing extremist murder boys are off duty at the weekend.”

Mr Feltes estimated 15-20 per cent of Germans have far-right sympathies, but only became emboldened after 2015, when nearly a million asylum seekers arrived in the country and stoked anti-immigrant sentiment.

Today, he said, “the lines between a seriously committed network and supporters who might join this network is a very fine line, easy to be crossed”. 

Ms Renner believes it is unlikely that a broad network exists. But she worries about the risks that a few dozen well-trained and “battle-ready” sympathisers could pose. “Even just one of them is a threat,” she said.

Accenture estimates of Covid-related charges reflect riskier lending

US banks’ profits will be hit twice as hard by provisions for loan losses as a result of the pandemic than their European peers, consultants at Accenture predicted, in a study that upends the traditional wisdom of European banks’ relative weakness.

The Accenture analysis — which comes as European lenders prepare to follow US rivals in reporting massive second-quarter provisions for future bad debts — predicts loan loss charges of more than $880bn across a group of some 100 US and European banks from 2020 to 2022 in a severe scenario, as the pandemic cripples individuals’ and companies’ capacity to service debt.

The $427bn of loan loss charges predicted for 58 US banks over the three-year period equates to about 10.2 per cent of their estimated average 2020 loan books, Accenture’s data shows. The 50 European banks in the study are expected to take loan loss charges of $455bn over the same period which, by contrast, are equal to roughly 4.6 per cent of their 2020 loan balances.

Alan McIntyre, Accenture’s global head of banking, said the US loss rates were higher because American banks “tend to take more risks in areas like credit card lending, although . . . US banks also tend to get higher returns”.

US banks’ tendency to be more conservative in their assessment of future losses could also leave them with higher loan loss charges, Accenture said.

New accounting rules compelling US banks to estimate the lifetime losses of all loans are also a factor, since European banks must only consider lifetime losses once a loan deteriorates beyond a certain level.

The contrast in the two approaches is already evident. In the US, JPMorgan Chase, Wells Fargo, Bank of America and Citigroup together took loan loss charges of $33bn in the second quarter. Analysts expect the top 30 or so UK, Swiss and EU lenders will provision less in total than those four alone.

Mr McIntyre said US banks also faced more uncertainty than their European rivals, because of widespread forbearance programmes which have given borrowers the opportunity to take payment holidays without dinging their credit scores.

“It’s worse in the US because of the reliance on credit scores,” Mr McIntyre said, describing a situation where US banks are making new lending decisions without a clear picture of which potential customers may be in distress.

Still, the Accenture study is not all bad news for the Americans. The estimated loan losses will take a smaller chunk out of US banks’ capital than the Europeans’, because loans make up a smaller portion of US banks’ total balance sheets. US banks also typically have higher profitability, enabling them to make back a little more of the money they lose.

The US banks studied by the consulting firm included three with more than $1tn dollars of assets; two with $500bn-$1tn; five with $100bn-$500bn; and 48 with less than $100bn. The European banks tended to be larger: 10 of them have more than $1tn of assets, six fall in the $500bn-$1tn category, 10 in the $100bn-$500bn range and 24 below $100bn.

Lunch with the famed short-seller betting against Tesla

Jim Chanos says Elon Musk ‘has personified the hopes and dreams of this bull market’

Short-seller Chanos predicts toil and trouble 

Jim Chanos is known for throwing legendary Halloween parties. 

But as a famed short-seller who has spent three decades in one of the toughest gigs in the investment industry, few things can be as scary to him as Tesla’s stratospheric rise. 

When Chanos started betting against the electric carmaker, run by the eccentric Elon Musk, five years ago, its shares were trading around the $250 mark. Now Tesla shares are worth $1,539. That’s a six-fold increase. 

For anyone who needs a quick primer on short selling: an investor identifies a company they think is overvalued, borrows its shares from a broker and sells them in the market with the intention of buying them back when the stock price has (theoretically) dropped and pockets the difference. 

Obviously, it doesn’t always pan out that way. 

When the FT’s Harriet Agnew asked Chanos, who runs the hedge fund Kynikos Associates, about Tesla’s stock market success in this unmissable lunch with the FT, his response was: “I think Elon Musk has personified the hopes and dreams of this bull market.” 

The market is no longer driven by fundamentals — that is cold hard facts — investors are instead focused on personalities and big ideas, rather than a company’s balance sheet. 

To Chanos, Tesla is unprofitable, highly leveraged and facing increasing competition. Those observations are hard to dispute. But fans of the company see it as a pioneer in electric vehicles, in autonomous cars and even in saving the world. It’s easier to capture minds with grand ambitions than it is with numbers. 

Short-sellers such as Chanos (featured in the illustration below) are good at spotting where the numbers don’t fit the narrative. 

Chanos rose to fame almost two decades ago when he predicted the downfall of the US energy giant Enron in what became one of the biggest accounting frauds ever. It all started with a report in The Texas Wall Street Journal. Similarly, the FT’s reporting on Wirecard prompted Chanos to bet against the company, from which he has earned a tidy profit. 

Kynikos has built a good record, averaging 22 per cent a year over the past 35 years, but the last decade has been less than kind to short-sellers. Kynikos assets are down to $1.5bn from a peak of $7bn after 2008. 

Chanos thinks better times are coming for this small cohort of investors. The financial market, he tells Harriet, has “a heady witch’s brew for trouble”. 

Executives at card networks were concerned about Wirecard’s high levels of stolen card purchases, reversed transactions

Collapsed payments processor Wirecard AG WDI 15.50% miscoded gambling transactions and had high levels of stolen card purchases and reversed transactions, leading to hefty fines from card networks Visa Inc. V 0.90% and Mastercard Inc., MA 0.63% according to people familiar with the matter.

Visa and Mastercard each imposed fines exceeding $10 million more than a decade ago, and the networks remained wary of Wirecard’s business. Since at least 2015, Visa executives were concerned that Wirecard was a problem, according to some of the people familiar with the matter.

Visa asked Wirecard to cut off certain merchants and said too much of its business originated from risky areas such as gambling, pornography and unregulated health-care products known as nutraceuticals, those people said. Some of Wirecard’s clients changed names to avoid being identified as problem merchants.

Such high-risk clients were highly lucrative to Wirecard. Pornjapan, a pornography purveyor, paid 10% fees for transactions handled by Wirecard in 2017, according to internal Wirecard documents viewed by The Wall Street Journal. Mainstream merchants tend to pay 2% to 3% for U.S. credit-card purchases.

A Visa spokesperson declined to comment. A Wirecard spokesman declined to comment.

A Mastercard spokesman said it actively monitors its network for violations of law and noncompliance with its rules. “Where we see areas of potential concern, we thoroughly investigate and work with our customers to remediate any issues we identify. This may include corrective action, fines or the suspension or termination of a license under certain circumstances.”

Wirecard, which crumbled into bankruptcy last month when it admitted a $2 billion hole in its accounts, processed payments on behalf of shops and online merchants. Like other processors, it acted as a feeder of card transaction data into Visa’s and Mastercard’s vast networks, which connect to banks and handle hundreds of millions of transactions a day.

German prosecutors are investigating whether Wirecard executives used access to the financial system to launder money dating back as far as 2010. It has also charged executives for taking part in a multiyear fraud going back to at least 2015. Wirecard is also under scrutiny in the U.S. by federal prosecutors in connection with an alleged bank-fraud conspiracy that might have relied in part on Wirecard as a transaction processor and offshore merchant bank.

Visa and Mastercard watch over companies such as Wirecard that help bring payments into their networks. While the Federal Trade Commission has taken a more active role identifying card fraud—and recently brought a string of cases accusing individuals and companies of processing unsavory purchases—the industry relies in part on self regulation, especially outside the U.S.

The networks have powers to fine payment processors like Wirecard. Fines, which generally aren’t made public, can be imposed for reasons including too many disputed transactions, or for disguising the true nature of transactions. Banks and card processors can also directly terminate relationships with merchants.

Payments processors like Wirecard are supposed to play a front-line role in detecting and reducing fraud by merchants, according to Scott Talbott, vice president of government affairs at the Electronic Transactions Association, an industry body.

“Processors can go rogue and engage in fraudulent activity—either through willful blindness or by aiding and abetting fraud,” he said. “The card networks are a strong link in the chain to defend against that.”

As investigators piece together the nature of Wirecard’s activities, one focus is on its practice of managing payments for merchants other companies would avoid. Wirecard’s business leaned on servicing pornography, gambling and nutraceuticals, according to former employees and the people familiar with the matter.

Wirecard could charge higher fees to handle these types of payments, which are seen as riskier because customers often dispute the charges. Sellers of goods and services pay a merchant discount rate when they accept card payments, which include network and processor fees as well as interchange fees paid to the card issuer.

In the first quarter of 2017, internal Wirecard documents seen by the Journal show merchant discount rates averaged more than 7% for transactions done through one of Wirecard’s key business partners. Pornjapan, the pornography merchant, paid a discount rate of 10%. Wirecard used partners to process payments in countries where it didn’t have licenses.

Card payments are accompanied by a merchant category code, which describes the type of merchant where a consumer is shopping and occasionally describes specific goods or services.

In 2008, Mastercard fined Wirecard £11 million for processing gambling transactions under the wrong codes, according to a person familiar with the fine. In 2010, Mastercard wrote to Wirecard’s banking unit about fresh concerns that it was rerouting through miscoded merchants gambling transactions that banks had previously declined. Banks would then approve these payments thinking they weren’t gambling related, according to a letter from Mastercard to Wirecard seen by the Journal.

During several periods over the past dozen years, both Visa and Mastercard executives have been concerned about a high number of Wirecard transactions being disputed by cardholders, referred to as chargebacks. These transactions often involved cards being used fraudulently on Wirecard clients’ websites, according to the people familiar with the matter.

In 2009, Visa fined Wirecard’s banking unit $12 million for high chargebacks that occurred in October and November 2009, according to documents publicly disclosed in an FTC suit not directly related to Wirecard. Wirecard’s total revenue for the fourth quarter of 2009, in comparison, was about $79 million.

Visa currently considers chargebacks to be high when they exceed about 1% of purchases made at a merchant.

In October 2009, some of Wirecard’s clients had chargeback rates ranging from 2% to 15% including merchants in the nutraceutical sector, according to documents filed in the FTC suit. Chargebacks were even higher in November among the worst-offending merchants. Several were well above 100%, suggesting that disputes were higher than transactions that month. Wirecard didn’t appeal the fines, according to the documents.