Top UBS shareholder pins rebound hopes on private wealth

LONDON (Reuters) - UBS's wealth management business will help it bounce back from a $1.5 billion rap for rigging interest rates, one of its largest investors said, although fears of costly civil lawsuits could cast a pall over its shares for some time.
Paras Anand, European equities head at Fidelity Worldwide Investment, said legal action sparked by the Libor scandal posed an unpredictable threat to the bank's near-term earnings, even if its core private banking franchise escaped permanent harm.
"The big unknown factor is the civil litigation that could follow on as a result of this...That is one thing at the back of our minds that we have to be cognizant of," Anand said in an interview with Reuters.
"The issue for shareholders is the challenge of pricing that risk in. The potential costs are too unquantifiable and indeed, it's unclear as to whether they will actually manifest or not."
Switzerland's largest bank was hit with the fine on Wednesday after admitting to fraud, paying bribes to brokers and "pervasive" manipulation of global benchmark interest rates by dozens of its staff.
UBS shares were trading 1.3 percent higher at 9:01 a.m. ET, as investors looked forward to the end of a scandal-filled chapter in the bank's history and a renewed focus on managing cash on behalf of rich clients, rather than so-called 'casino' investment banking.
"There's clearly been a backlash against big faceless financial entities but a private bank has big personal relationships with its customers ... These kinds of institutions are surprisingly resilient," Anand said.
"We have seen some awful scandals in businesses much weaker than UBS and they manage to survive," he added.
Fidelity owns around 45 million shares in UBS, equivalent to around 1.2 percent of the bank, and is its fifth largest institutional owner excluding sovereign wealth funds, according to Thomson Reuters data.

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Top UBS shareholder pins rebound hopes on private wealth

LONDON (Reuters) - UBS's wealth management business will help it bounce back from a $1.5 billion rap for rigging interest rates, one of its largest investors said, although fears of costly civil lawsuits could cast a pall over its shares for some time.
Paras Anand, European equities head at Fidelity Worldwide Investment, said legal action sparked by the Libor scandal posed an unpredictable threat to the bank's near-term earnings, even if its core private banking franchise escaped permanent harm.
"The big unknown factor is the civil litigation that could follow on as a result of this...That is one thing at the back of our minds that we have to be cognizant of," Anand said in an interview with Reuters.
"The issue for shareholders is the challenge of pricing that risk in. The potential costs are too unquantifiable and indeed, it's unclear as to whether they will actually manifest or not."
Switzerland's largest bank was hit with the fine on Wednesday after admitting to fraud, paying bribes to brokers and "pervasive" manipulation of global benchmark interest rates by dozens of its staff.
UBS shares were trading 1.3 percent higher at 9:01 a.m. ET, as investors looked forward to the end of a scandal-filled chapter in the bank's history and a renewed focus on managing cash on behalf of rich clients, rather than so-called 'casino' investment banking.
"There's clearly been a backlash against big faceless financial entities but a private bank has big personal relationships with its customers ... These kinds of institutions are surprisingly resilient," Anand said.
"We have seen some awful scandals in businesses much weaker than UBS and they manage to survive," he added.
Fidelity owns around 45 million shares in UBS, equivalent to around 1.2 percent of the bank, and is its fifth largest institutional owner excluding sovereign wealth funds, according to Thomson Reuters data.

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Drugs group Lundbeck's shares hit by profit warning

COPENHAGEN (Reuters) - Shares in Danish drugs firm Lundbeck fell to their lowest level in over 12 years on Wednesday after it cut its profits forecast for the next two years as European sales slow and spending on new products rise to combat generic competition.
The company has already warned that earnings would stall until 2015 due to cheap generic competition for its existing drugs, meaning new products will be vital for future earnings.
But Chief Executive Ulf Wiinberg said on Wednesday that the negative impact on revenue from healthcare reforms in Europe had also been bigger than expected in the last two years and that slowing European sales and generic competition were hurting.
As a result the company said operating profits would fall further than previously forecast in 2014 as it increases investments in its late-stage drugs development pipeline and product launches.
Lundbeck is working to find new drugs to replace lost revenue from products coming off patent protection such as its antidepressant Cipralex, which is sold as Lexapro in the United States and Japan, and Alzheimer's drug Ebixa.
Wiinberg said 2014 would be the company's peak investment year for the new products pipeline, offering it a solid foundation for growth starting in 2015.
"You only get one chance to launch a product and we have to do it well," Wiinberg said at a briefing for investors.
He was commenting after the company warned in a statement that it now expects revenue in 2014 of about 14 billion Danish crowns ($2.5 billion) and an operating profit of between just 0.5 billion and 1 billion crowns.
Analysts have on average been forecasting a profit of over 2.5 billion crowns for 2014 on turnover of over 14.7 billion crowns, according to Thomson Reuters I/B/E/S Estimates.
Two years ago Lundbeck predicted its annual revenues over the period 2012-2014 would exceed 14 billion crowns a year while earnings before interest and tax (EBIT) would exceed 2 billion crowns a year.
Next years' revenue is now forecast to be in the range of 14.1 billion and 14.7 billion crowns to produce an operating profit of 1.6 billion to 2.1 billion crowns, with no change to the company's forecast for 2012.
Analysts' forecasts for this year are for operating profit to drop 41 percent to 1.99 billion crowns on revenue down 8 percent at 14.7 billion crowns, while for 2013 they predict a profit of 2.26 billion crowns on revenue of 14.5 billion crowns.
Lundbeck's shares were trading down 17 percent at 79.90 crowns at 12.44 p.m. British time, dropping below 80 crowns for the first time since April 2000.
"In the short term, earnings are under pressure," Sydbank analyst Soren Hansen said.
Lundbeck said that it expects a dividend payout ratio of about 35 percent of net profits in the 2012-14 period. Last year it paid 3.49 crowns on basic earnings per share of 11.64 crowns, a payout ratio of 30 percent.
Analysts have been predicting a 27-30 percent cut this year to 2.53-2.28 crowns, according to Thomson Reuters StarMine data.
But a number of analysts doubt that revenue from new products will be enough to secure revenue growth in 2015, compensating for lost revenue from Cipralex, Lexapro and Ebixa which together accounted for about 70 percent of group revenue in 2011.
Lundbeck is working on new products such as antidepressant Brintellix in Europe and the United States for launch at the end of next year or start of 2014, as well as alcohol dependency treatment Selincro in Europe in mid 2013.
"It is difficult to see revenue from the smaller products compensating for the large products," said Hansen.

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New Mauritius Hotels posts 25 pct drop in full-year profit

PORT LOUIS (Reuters) - Luxury hotels group New Mauritius Hotels (NMH) reported a 25 percent fall in full-year pretax profit, citing higher finance costs and fewer tourists, and forecast a 15 percent drop in first-quarter earnings.
Ranked among the Indian Ocean island's most-traded stocks, NMH said on Wednesday that pretax profit for the year to September 30 fell to 603 million Indian rupees, with earnings per share down 20 percent at 3.60 rupees.
The hotels group said that it won't pay a dividend this year, given the difficult conditions in the local tourism industry. Last year it paid a dividend of 2.50 rupees per share.
Shares in the group, which owns eight hotels in Mauritius and one in the Seychelles, closed unchanged at 52 rupees before its results were released.
Tourism, a traditional cornerstone of the Mauritius economy, has been forecast to account for 7.9 percent of domestic product in 2012, down from 8.4 percent last year. The downturn in tourism has been caused largely by economic turmoil in the euro zone - the sector's key source market.

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FedEx: cost plan can counter sluggish growth

NEW YORK (AP) — FedEx is more pessimistic about the U.S. economy than it was three months ago, but more assured of its own ability to grow earnings.
The world's second-largest package delivery company lowered its economic forecast for the U.S., saying that there remains a lot of uncertainty for the company and the country.
Its forecast for the current quarter, which incorporates the critical holiday season, falls short of Wall Street expectations.
But FedEx maintained its forecast for the full fiscal year ending in May, counting on a massive cost reduction plan and a slightly more optimistic view of growth overseas. Shares rose 2.6 percent in afternoon trading.
FedEx Corp. posted earnings of $438 million, or $1.39 per share for the quarter that ending in November, compared with $497 million, or $1.57 per share, a year ago. That was below the $1.41 per share that Wall Street was expecting, according to a poll of analysts by FactSet.
Revenue rose to $11.1 billion from $10.6 billion previously, as the company scaled back its operation to better match demand and some of its raised rates. Analysts forecast revenue of $10.84 billion.
Growth in the company's freight and ground operations boosted results, but FedEx reported "persistent weakness" in its core express network. Operating income in that segment fell 33 percent. FedEx and its larger rival UPS Inc. have both seen consumers and businesses opt for slower shipping options to cut costs.
FedEx said on Wednesday that it expects earnings will be between $1.25 and $1.45 per share in the third quarter. Analysts that follow the company were predicting per-share earnings of $1.45.
The company, based in Memphis, Tenn., also said it expects to earn between $6.20 and $6.60 per share for the year ending in May, excluding any charges from the company's buyout plan. Wall Street is looking for $6.34.
Earlier this month FedEx said it will offer some employees up to two years pay to leave, starting next year. The voluntary program is part of an effort to cut annual costs by $1.7 billion within three years. The plan also includes cutting aircraft and underused assets.

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Maintenance deals drive Micro Focus earnings beat

LONDON (Reuters) - Information technology company Micro Focus International  posted better-than-expected first-half core earnings after it moved towards more lucrative maintenance contracts, with fewer low-margin consultancy deals.

The British mainframe software specialist posted a 3 percent rise in adjusted core earnings of $92.2 million on Thursday, ahead of analysts' average forecasts of about $86 million.

Revenue at the business, which works on the large computers that crunch data for banks and retailers, slipped 5 percent to $207.3 million, broadly as expected by the market.

Executive Chairman Kevin Loosemore said it was a "solid" performance against a backdrop of weak demand in markets like Spain, Italy and Japan.

"We are cautious about the macro stuff, but not to the point where we think it will cause any great downturn," he said in an interview.

He said revenue in the second half would likely be similar to the first.

The target for the core earnings margin, however, was increased to 40-45 percent, from a previous range of 37-42 percent, reflecting the changed product mix.

Loosemore has repositioned the business to drive cash returns for shareholders rather than chasing high revenue growth.

A total $313.9 million was returned to shareholders in the previous 12 months, he said, and the board intended to return more cash in November next year and in 2014.

It also increased its interim dividend by 45 percent to 11.9 cents.

Shares in the group, which have risen by 29 percent in the last six months, were flat at 570.5 pence at 1010 GMT.

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Rona says looking to sell non-core assets

(Reuters) - Canadian home-improvement retailer Rona Inc , the target of a C$1.8 billion takeover proposal by U.S.-based Lowe's Cos Inc  earlier this year, said it expects to dispose of non-core assets and redeploy capital to leverage core assets.

The company wants to improve its retail EBITDA (earnings before interest, tax, depreciation and amortization) margin in line with industry standards under the leadership of acting Chief Executive Dominique Boies, who joined Rona in 2011, the company said in a statement.

Lowe's withdrew its unsolicited offer buy Montreal-based Rona in mid-September in the face of stiff opposition from Quebec province politicians and many of the company's independent dealers.

Rona's longtime chief executive, Robert Dutton, stepped down last month following disappointing results, prompting speculation that the company could be back in play.

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Exclusive: U.S. likely to extend Iran sanction waivers-sources

WASHINGTON (Reuters) - The United States is likely to exempt India, South Korea, Turkey and others from Iranian financial sanctions for another six months on Friday as a reward for reducing crude purchases from the Islamic republic, two U.S. government sources said.

Oil shipments by Iran have more than halved in 2012 in the face of U.S. and European Union sanctions aimed at cutting Tehran's foreign exchange earnings and funding for a nuclear program they suspect is designed for a military purpose. Iran denies that the program is for nuclear weapons.

The U.S. sanctions, which target financial transactions, have gradually tightened the noose on Iran's crude sales. But exports took a deep hit in July when EU sanctions kicked in, largely because they effectively, overnight, banned insurance cover on ships carrying Iranian crude.

The sanctions have sharply curtailed the market for Iranian crude, with Asian buyers and Turkey the only customers this month, according to shipping sources. EU sanctions included a ban on members from buying Iranian crude.
The International Energy Agency (IEA) estimates that Iranian oil exports dipped below 1 million barrels per day (bpd) over the summer as Western sanctions on Tehran tightened.

According to official Iranian government data available through the Joint Oil Data Initiative (JODI), Iran exported an average of just over 2 million bpd in 2011.

On June 11, a number of countries received their first round of reprieves from U.S. sanctions that President Barack Obama signed into law a year ago. The waivers are issued by the State Department.

Under the law, banks in countries that buy oil from Iran can be cut off from the U.S. financial system unless their purchases are reduced.

The architects of U.S. sanctions legislation, Democratic Senator Robert Menendez and Republican Senator Mark Kirk, have urged the White House to require oil importers to reduce purchases by 18 percent or more to qualify for further exemptions.

U.S. waivers for China, the top consumer of Iran's oil, and Singapore are due to expire on December 25, 180 days after they were issued. Both countries are expected to get waiver extensions because they have reduced oil purchases from Iran. Those waivers could also be issued on Friday, one of the government sources and an oil industry source said.

"There's nothing in the sanctions law that says the U.S. has to wait a full 180 days to announce exceptions for China," said the government source, who asked not to be named because of the sensitive nature of the matter.
Japan and 10 EU countries received six-month sanction reprieves from the United States in September.
SANCTIONS HIT
The West suspects that Iran's nuclear program is enriching uranium to levels that could be used in weapons. Tehran has said that the program is for the generation of electricity and medical purposes.
David Cohen, undersecretary for terrorism and financial intelligence at the U.S. Treasury Department, said this week the mix of sanctions was costing Iran up to $5 billion a month.

The United States and the EU say the sanctions are targeted at the government and not ordinary citizens, although the rial has dropped sharply in value and forced up food prices so that Iranians can not always afford even basic items.

Still, the West has been ramping up sanctions further as worries mount about Tehran's nuclear intentions and to try to calm concerns in Israel, which has threatened to attack Iranian nuclear installations if a peaceful solution is not found.
Shipping sources say Iran's crude exports are set to drop by about a quarter in December from November and to the lowest level since the sanctions were imposed this year, representing a loss of about $800 million at current prices.
EU sanctions mean that major buyers China, South Korea and India ask Iran to ship the oil to them because they are unable to secure insurance cover for vessels.
Delivery has often been delayed because the Iranian fleet is severely stretched, with an increasing number of its tankers being used as floating storage for unsold oil.
The sanction will leave Asia's 2012 Iranian crude imports at just over 1 million bpd, down roughly a quarter from a year ago, Reuters calculations show.

As Iran's biggest buyers of Iran crude, Asian countries lobbied hard for exemptions to the sanctions for fear that a loss of the crude would force prices higher and undermine economic growth. Many Asian refiners are also designed to handle Iranian crude, and would require costly reconfiguring if they were to give up the grade substantially.

China, the world's second-largest oil consumer, has also repeatedly voiced its opposition to unilateral sanctions, such as those imposed by the United States. It says measures should be multilateral and agreed through the United Nations.

Still, China's imports have fallen in recent months as Iranian tankers struggled to ship even the reduced volumes requested by importing countries. Earlier this year, China slashed imports by as much as half as the country wrangled over annual contract terms with Tehran.

China's imports from Iran are down 22 percent on the year to 426,000 bpd in January-October, the months for which official data is available.

South Korea has reduced purchases 39 percent to 148,000 bpd and Japan 41 percent to 188,000 bpd over the same period. In contrast, India has raised imports to 328,000 bpd, up 7 percent.

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Aetna reaches $120 million settlement over reimbursements

(Reuters) - Aetna Inc , the third-largest U.S. health insurer, has agreed to pay as much as $120 million to settle nationwide litigation over how it reimburses members for out-of-network medical services.

The accord calls for Aetna to pay $60 million into a general settlement fund, plus as much as $60 million more, depending on how many people submit claims.

Aetna said it will take a $78 million after-tax charge in the current quarter for the settlement, and that the charge will not affect operating earnings. It expects to pay for the settlement over the next one to two years.

Patients and doctors accused Aetna of using databases provided by Ingenix Inc, a unit of UnitedHealth Group Inc , to systematically underpay claims involving services and supplies from out-of-network providers.

The Hartford, Connecticut-based insurer was also challenged over how it calculated out-of-network reimbursement rates, and over its disclosures about those calculations.

"It continues to be a problem that insurers use improper bases to pay low reimbursement rates," said Joe Whatley, a lawyer for the out-of-network providers, in a phone interview. "We hope this settlement will deter similar conduct."

In a joint court filing on Friday, the plaintiffs and Aetna said the accord was "adequate, fair and reasonable."

It would cover patients who used out-of-network providers from March 1, 2001, to the present, and cover out-of-network providers from June 3, 2003, to the present. The litigation began in July 2007.

"We are pleased that we were able to reach a favorable agreement," James Cecchi, lead lawyer for the plaintiffs, said in a phone interview.

The settlement requires approval by U.S. District Judge Stanley Chesler in Newark, New Jersey. Aetna said it expects approval in the middle of 2013, and that it may void the settlement if too many people decide not to participate.

On January 13, 2009, UnitedHealth and Aetna agreed to stop using the Ingenix database and to help fund a new independent database to calculate rates, under agreements with then-New York attorney general, Andrew Cuomo, who is now the state's governor.

Two days later, UnitedHealth agreed to pay $350 million to settle lawsuits over its out-of-network reimbursements.

In early afternoon trading, Aetna shares were up 1.9 percent at $44.24 on the New York Stock Exchange.

The case is In re: Aetna UCR Litigation, U.S. District Court, District of New Jersey, Nos. MDL-2020 and 07-03541.

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Scotiabank profit rises 31 percent on wholesale banking

(Reuters) - Bank of Nova Scotia  capped off the fourth-quarter earnings season for Canadian banks with a slightly stronger than expected 31 percent profit gain on Friday, as strong wholesale banking income made up for more sluggish international growth.

Following the trend of most of its peers this quarter, profit gains were driven by trading and investment banking income, while domestic loan growth was steady despite worries that a cooling housing market will dry up demand.

The bank, Canada's third-largest, earned C$1.52 billion ($1.54 billion), or C$1.18 a share in the fiscal fourth quarter ended October 31. That compared with a year-before profit of C$1.16 billion, or 97 Canadian cents a share.

Excluding a charge for amortization of intangibles, the bank earned C$1.21, coming in slightly ahead of analysts' expectations of a profit of C$1.18 a share.

The bank's shares ended the session down 3 Canadian cents at C$55.53 on the Toronto Stock Exchange.

Toronto-based Scotiabank boasts operations in more than 50 countries, with the heaviest weighting in Latin America and a growing presence in Asia.

Scotiabank's international consumer banking segment posted a 22 percent gain in profit to C$453 million, helped by the acquisition in January of Colombia's Banco Colpatria.

Compared with the third quarter, however, international profit rose only 2.5 percent and net interest income retreated. The result was also little changed from the second quarter, raising concerns about growth in the bank's most high-profile segment, said Barclays Capital analyst John Aiken.

"Ultimately, the investment thesis for Bank of Nova Scotia at 30,000 feet is growth in its international segment, and this has not happened for two quarters in a row," he said.

The bank acknowledged in a statement that economic momentum in major emerging markets is moderating, but said those markets should remain the major drivers of global growth through next year and beyond.

ACQUISITIONS

Scotiabank has made dozens of small transactions in the wake of the 2008 financial crisis, the bulk of them international and valued at less than C$1 billion.

Speaking on a conference call, company officials said they plan to make more "tuck-in" acquisitions for the global wealth management division.

However, they could were unable to offer any hints as to when their much-delayed acquisition of a 20 percent stake in China's Bank of Guangzhou would be finalized.

Scotiabank had initially expected to close the C$719 million deal last year, but the process has dragged on as the bank deals with multiple layers of government approval.

Brian Porter, who was head of the bank's international banking division before taking over as president last month, noted the municipal government of Guangzhou recently changed, but said he believed the company was in good stead with the local regulator.

"These things take time in China and I can't forecast whether it's going to be Q2 or Q4, but we're making headway," he said.

MARKETS STRONG

Profit at the bank's global banking and markets division, its wholesale banking unit formerly known as Scotia Capital, jumped 63 percent to C$396 million as trading and investment banking improved from a relatively weak result in the fourth quarter of 2011.

The Canadian banking segment earned C$481 million, up 15 percent, driven by an 8 percent rise in residential mortgages, and largely bucking the trend of narrower loan margins that pinched results at Scotiabank's rivals.

The bank scored a coup in August when it won a bidding war for the Canadian online banking arm of Dutch lender ING Groep , adding C$40 billion in assets and C$30 billion in deposits in a segment where significant market-share gains are hard to come by.

Canadian banks expect to struggle to increase loan volumes in 2013 as Canada's hot housing market has shown signs of cooling, while Canadians, who are already dealing with record personal debt levels, are expected to take a more cautious approach to borrowing.

($1 = 0.9894 Canadian dollars)

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