FT :EU unveils top-up of new €55bn bank rescue fund

Brussels has unveiled plans to fill up the EU's new €55bn bank rescue fund by leaning heavily on Europe's biggest banks, a system officials acknowledged will benefit Germany, whose banking system is made up of hundreds of small and medium-sized financial institutions.

Under the plans, the last major open issue in the eurozone's march towards "banking union", 90 per cent of €55bn would come from the eurozone's large banks, which European Commission officials said account for 85 per cent of all banking assets, reports Peter Spiegel and Alice Ross.

The system will prove costly for France, whose financial system is dominated by three large banks.

Small banks – defined as those with less than €1bn in assets and deposits of less than €300m – would only pay 0.3 per cent of the total rescue funds even though they account for 1 per cent of eurozone banking assets; medium-sized banks, which account for 14 per cent of assets, would pay in just 9.7 per cent.

The rules could mean that more than a quarter of Germany's army of politically-connected Sparkassen – small, regional savings banks – will be classified as "small", paying as little as €1,000 a year towards the fund.

A total of 116 Sparkassen have less than €1bn in assets, meaning that if their liabilities are also less than €300m, they will pay a flat rate of between €1,000 and €50,000 a year.

Germany's savings bank group – which includes 417 Sparkassen and seven larger Landesbanken – have a combined balance sheet of nearly €2.3tn, which is larger than Deutsche Bank, the country's biggest single lender by assets.

European Commission officials justified overweighting the eurozone's largest banks by arguing they are the most likely to need rescue cash from the bailout fund in a crisis. When it is completely filled in 2024, the new fund will amount to 1 per cent of deposits in countries participating in the EU banking union.

Michel Barnier, the EU's outgoing chief financial regulator, said:

The approach chosen is fair as each bank will contribute in proportion to its size and risk profile... It is also proportionate as the smallest banks have their own adjusted regime of contributions.

Still, some of the most spectacular bank failures of the eurozone crisis – like Ireland's Anglo-Irish, Spain's Bankia and Cyprus' Laiki – were small or mid-sized banks.

EU officials insisted many similar banks would still end up paying more since the contributions would be based on not only their size, but also how risky their balance sheet was. The riskiest banks could end up paying nearly twice what banks with large deposit bases will.

EconomyEUEuro

>>> US Gapping up

Gapping up
In reaction to strong earnings/guidance: LXK +11%, ILMN +8.8%, HOG +7.8%, WERN +4.6%, CE +4.1%, CSL +3.7%, HLX +3.6%, WAT +2.5%, TXN +2.4%, AAPL +2.3%, AOS +2.3%, MBCN +2.2%, UTX +2%, STLD +1.9%, CDNS +1.1%, TRV +1.1%, ELS +0.9%, KMB +0.9%, CP +0.8%

M&A news: ACT +1.5% (Actavis and Sanofi (SNY) may be among bidders for Omega Pharma, according to reports).

Select EU financial related names showing strength: LYG +2.7%, RBS +2.5%, ING +2.3%, DB +0.8%.

Select metals/mining stocks trading higher: X 2.3%, MT 1.8%, AG 1.5%, GFI -0.5%.

Select oil/gas related names showing strength: STO +2.7%, SDRL +2.6%, BP +1.6%

Other news: NEON +22% (signs technology development agreement with global tier one printer OEM ), SGYP +13.1% (presents positive Phase 2b study results for Plecanatide in patients with irritable bowel syndrome), SCOK +5.6% (cont momentum), NXPI +2.6% (following TXN / AAPL results), GSAT +2.6% (co reiterated value of its spectrum assets; believes Kerrisdale continues to 'distort facts in attempt to undermine the benefits of TLPS'), TKMR +2.4% (cont momentum), CRUS +2.2% (following AAPL results), ABBV +2% (announced new $5 bln stock repurchase and increases dividend), BRCM +1.9% (following TXN results), RCL +1.9% (cont strength following yday's advance), TSL +1.7% (still checking), RFMD +1.5% (following AAPL results - component supplier), ACT+1.5% (Actavis and Sanofi (SNY) may be among bidders for Omega Pharma, according to reports), MU +1.4% (following TXN results), SUNE +1.4% (still checking), CCL +1.3% (cont strength following yday's advance), MGM +1.3% (still checking), MPW +1% (announced more than $1 billion in new real estate investments; expected to be accretive to normalized FFO by $0.09 -- $0.12 per share),JEC +1% (awarded remediation task order for Eielson Air Force Base, Alaska worth ~$18.7 mln)

Analyst comments: POST +3.2% (upgraded to Buy from Neutral at Goldman), KITE +1.7% (target raised to $45 at Stifel), PANW +1.5% (target raised to $115 at Oppenheimer), COG +1.2% (upgraded to Outperform from Mkt Perform at Bernstein), HAL +1.2% (upgraded to Buy from Neutral at Guggenheim), EOG +0.5% (upgraded to Buy from Neutral at Guggenheim)

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance: GLF -8%, RMBS -6.9%, KALU -6.8%, UCTT -6.3%, ARMH -5.9%, APOL -5.4%, CMG -5.2%, XRS -3.3%, KO -3.1%, PKG -2.5%, CYS -1.6%, RCII -1.6%, LMT -1.6%, MCD -1.5%, IHG -1%, ZION -0.9%, BRO -0.9%, VZ -0.8%, .

Select Brazil related names showing weakness: OIBR -8.2%, PBR -7.7% SID -3.5%, VIV -2.8%, ELP -2.5%, GGB -2.2%, SBS -2.1%, VALE -1.7%, ABEV -1.4%.

Other news: RNO -42.8% (announces Q3 distribution of $0.05 per unit, lowered from previous quarter distribution of $0.445 per unit; co redoubling its cost cutting efforts due to weak coal markets), IBIO -20.2% (cont volatility), CVM -17.6% (announces proposed public offering of Common Stock; terms not disclosed), OMER -15% (provides update on PDE10 inhibitor program; enrollment in Huntington's Trial suspended pending further assessment of preclinical data), PT -8.3% (still checking, but Oi SA announces liquidation of assets will have no impact on the business combination with Portugal Telecom), LAKE -2.9% (cont weakness), TLLP -2% (prices upsized public offering of 20 mln common units at $57.47 per unit), SPLS -1.8% (spokesman has indicated company is investigating possible data breach, according to reports), ENTA -1.7% (provides update on its collaboration agreement with AbbVie (ABBV); co-development option on next-generation Protease Inhibitor ABT-493 Not Exercised, net sales allocations for ABT-450-containing regimens finalized), PHG -1.7% (cont weakness), REN -1.4% (provides operation update: Three Permian Basin horizontal wells averaged 1,300 Boe per day on peak 24-hour IP tests), GSK -1.3% (still checking), TRN -1.2% (late sell-off on guardrails ruling; confirms $175 mln in damages at jury trial)

Analyst comments: PHG -1.7% (downgraded to Neutral from Buy at UBS), IBM -0.7% (downgraded to Hold from Buy at Evercore; target lowered to $170 at RBC Capital Mkts), IRC -0.6% (downgraded to Underperform from Neutral at BofA/Merrill), ED -0.4% (downgraded to Underweight at Morgan Stanley)

Deutsche Telekom Chief Says T-Mobile Has ‘Self-Funding’ Future

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Deutsche Telekom Chief Says T-Mobile Has ‘Self-Funding’ Future 2014-10-21 12:11:20.965 GMT

By Sam Chambers, Brian Parkin and Nicholas Brautlecht Oct. 21 (Bloomberg) -- T-Mobile U.S. can sustain itself as a standalone business and has “great” prospects, Deutsche Telekom CEO Timotheus Hoettges says in interview. * Hoettges: DT is looking into options for TMUS * Regardless, co. has an independent and self-funding future in the U.S. * Preferable to have a combination or consolidation of smaller players to better compete with Verizon/AT&T * Preferable to have a combination or consolidation of smaller players to better compete with Verizon/AT&T</li></ul> * Full story

For Related News and Information: First Word scrolling panel: FIRST<GO> First Word newswire: NH BFW<GO>

To contact the reporter on this story: Sam Chambers in London at +44-20-7673-2021 or schambers7@bloomberg.net To contact the editor responsible for this story: James Ludden at +44-20-7673-2645 or jludden@bloomberg.net

FT : ECB has not put corporate bond buying on agenda

The European Central Bank has not yet put the issue of buying corporate bonds on the agenda for its December policy meeting, according to two people familiar with the matter.
The euro weakened and shares rose in Italy, Spain and Germany jumped after Reuters reported two sources as saying that the policy making governing council could discuss the possibility of buying the assets at its final meeting of 2014, reports Claire Jones.
While corporate bond purchases are an option that policy makers have discussed in recent months, one of the people familiar with the matter said preparations for buying the debt have not intensified in recent weeks.
However, the person said corporate bond purchases are being considered, along with other ideas, as a possible means to extend the ECB's programme of private sector asset purchases - which at the moment are confined to asset-backed securities and covered bonds - should inflation and growth in the eurozone continue to disappoint.

>>> Apple: Color on quarter

--> AAPL shares are trading higher by 2% in pre-market trading.

Apple: Color on quarter
  • Mizuho notes that AAPL intends to have iPhones available in 115 countries by the holiday season and it ended F4Q14 with below normal channel inventory. The firm's supply-side checks indicate Apple has the capability to ship 65-70 mln iPhones in the December quarter, which should help deliver upside. They believe management's outlook is based on unit shipments of 60-63 mln phones. AAPL should experience a material uptick in iPad sales from the new product launch but the category is likely to remain lackluster near-term. The firm raises its price target to $115 from $110. Buy Rating
  • Cowen said better iPhone units/ASP so early in the launch plus a desire to build more channel inventory should add nice revenue ballast for a 1H:15 that they have always felt is under-modeled by the Street. iPad #s are likely to remain weak until 12.9" launch, but Pay and Watch create new angles to the narrative and allow investors to "dream" again on where iPhone (and maybe Apple Watch) units can go as consumers buy more hardware because of these new use cases. The firm raises its target to $113 from $110 Outperform Rating.
  • RBC Capital Markets said AAPL printed material upside to sales and EPS in Sept-qtr driven by strong iPhone 6 sales in September. Furthermore, AAPL's guide for Dec-qtr was well ahead of expectations on sales and inline on gross-margins, which they think could end-up surprising investors on the upside. AAPL has seen gross-margins at or above the high-end of their guide for 6-quarters in a row. They think the magnitude of upside in Dec-qtr will be contingent on mix, f/x and improved yields of iPhone 6/6+ as demand continues to outpace supply. The firm raises its target to $115 from $114. Outperform Rating.
  • Oppenheimer notes, the results were driven by stronger-than-expected iPhone and Mac sales. iPhone 6 and 6 Plus supply has been the strongest in iPhone history but are still in shortage thus far, while Mac NB saw strength during "back-to-school" sales and in international markets. They raise their FY15E revenues/EPS slightly from $208.1B/$7.31 to $208.7B/$7.36. Reiterate Outperform with $115 PT as they see the momentum building after the strong showing.
  • Stiffel said that iPhone ship at 39.3 mln (+16% yr/yr, but w/ sell thru up an impressive 26% yr/yr), only slightly below their above consensus 39.6 mln est. (street: 37.4M). They note, Apple was skeptical that it could attain supply / demand balance in F1Q15 with current channel inventory levels below the targeted 4-6 week range They say iPad results were weak with 12.3M units falling below their 13.3M estimate, although Apple remains confident in iPad growth potential.

>>> Coca-Cola reports EPS in-line, misses on revs; sees FY14 and FY15 results be

--> KO -2.98% pre-market

Coca-Cola reports EPS in-line, misses on revs; sees FY14 and FY15 results below long term targets (lowers top line target); expands restructuring program

Reports Q3 (Sep) earnings of $0.53 per share, excluding non-recurring items, in-line with the Capital IQ Consensus of $0.53; revenues fell 0.4% year/year to $11.98 bln vs the $12.15 bln consensus. Excluding the impact of structural changes, comparable currency neutral net revenues grew 1%, reflecting 1% concentrate sales growth and 1% positive price/mix. Concentrate sales growth and unit case volume growth were in line during the quarter; global volume growth 1%.
  • Co sees 100-200 bps headwind on net rev and 200 bps headwind on operating income in Q4.
  • Company is maintaining its long-term high single-digit EPS growth target, adjusting its net revenue target to mid single-digit growth, and targeting profit before tax in place of operating income to account for increased equity income growth from its new partnership model.
    • Going forward, the co will have a profit before tax target of 6% to 8%.
  • The Company expects to be below its long-term EPS growth target in 2014 and, based on the current outlook, does not expect comparable currency neutral EPS growth in 2015 to be significantly different from 2014. Further, the Company expects fluctuations in foreign currency exchange rates to have an unfavorable impact on its results in 2015.
  • Based on current spot rates, existing hedge positions, and the cycling of 2014 rates, the Company expects a mid single-digit headwind on profit before tax in 2015.
  • Streamlining and simplifying its operating model to speed decision making and enhance local market focus. Expanding its current successful productivity program by targeting annualized savings of $3 billion per year by 2019 (via restructuring, etc).
  • Longer term, the Company intends to return to delivering against its stated growth targets.
  • Beginning in 2015, revenue growth will be added as a metric in the Company's incentive plans. The Company will adjust the relative importance of volume and price/mix in each market in order to drive the right behavior for each market type.