Financial Times Europe - 06.09.2019

Friday6 September 2019 ★ 11

The Financial Times Limited 2019© Week 36

An inquiry by the Japanese carmaker

into the finances and governance of

the Carlos Ghosn era has uncovered

overpayments to senior staff. Chief

executive Hiroto Saikawa, pictured,

admitted the incentive scheme was

‘different to what it should have been’.

Reporti AGE 12P

Nissan discovers excess

payments to executives

C A M I L L A H O D G S O N— SAN FRANCISCO

Facebook s launching its dating serv-i

ice in the US, betting that its in-depth

knowledge of users’ likes and habits

will help singles find love.

The world’s largest social media plat-

form, on which more than 200m people

list themselves as single, said Facebook

Dating would launch in the US to help

daters start “meaningful relationships

throughthingsyouhaveincommon”.

The company said it hoped the opt-in

service would give people “a more

authentic look at who someone is”, by

allowing users to integrate the interests,

groups, events and photos linked to

theirFacebookprofile.

The rollout of a Facebook-controlled

alternative to popular dating apps such

as Tinder and Bumble is likely to

prompt debate,as the company strug-

gles to combat rising concerns about the

wayitmanagesuserdata.

Facebook Dating,firstlaunched in

Colombia astyear,asksuserstocreateal

separate dating profile, although the

feature sits within the classic Facebook

phone app. Users choose which photos

and personal details from their Face-

book profile to include, although their

first name and age are mandatory and

unchangeable.

Daters may also add individual Face-

bookgroupsandeventstotheirprofiles,

allowing them to see other singles —

whohavedonethesameandwhomatch

their partner preferences — with the

sameplans.Friendsareneversuggested

as potential matches. But the app

includes a Secret Crush feature that

allows users to select up to nine people

from among their Facebook friends,

who will then receive a notification, if

they have opted in to Facebook Dating,

that an unnamed friend is interested in

them. If one of the chosen people adds

the original friend to their own list, both

receiveanotification.

Facebook’s entry into the $2.5bn US

online dating market pits it against

incumbents such asMatch Group,

which owns companies including

Match.com, OkCupid and Tinder; dat-

ing websiteeharmony, which launched

in 2000; and newer apps such as Hinge

andTheLeague.

Facebook looks to match up users as it

enters $2.5bn US online dating market

and down by low double digits else-

where, while fixed-income volumes

were up 6 per cent year on year globally

and investment banking revenues were

down11percent.

Investment banks, particularly in

Europe’s smaller and more fragmented

markets, are coming underincreasing

pressure rom investors as their profita-f

bility dwindles amid higher capital

requirements, increasing digitisation

andultra-lowornegativeinterestrates.

On average, the stocks of European

banks have posted double-digit falls

every year since 2016, with many of the

biggest drops at those that have main-

tainedlargetradingoperations.

tor protection have also made equities a

more challenging business, prompting

speculation that other European banks

could follow Deutsche, leaving equities

tradingtoWallStreet’spowerhouses.

Fixed-income and commodities trad-

ingalsofaredpoorlyinthefirsthalf,fall-

ing 9 per cent, partly because of lower

interest rates, while revenue from M&A

advisory and capital marketsfell 8 per

cent as cautious companies sold fewer

bondsandequitylistingsstagnated.

Christian Bolu, banks analyst at

Autonomous, said that investment

banks were seeing mixed fortunes so far

in the third quarter. Equities volumes

wereup5percentyearonyearintheUS

poor second-quarter earnings for their

markets and investment banking divi-

sions, including an 18 per cent allf in

fixed-income revenues atMorgan

Stanley nd a 32 per cent decline ina

equities revenues atDeutsche Bank,

which is in the process of shutting its

stocktradingbusiness.

Across the group, the most eye-catch-

ing fall was in equities, where revenue

dropped 17 per cent year-on-year across

all regions because of significant

declines in client demand for deriva-

tives and prime brokerage services, the

business of lending to and trading for

hedgefunds.

The Mifid II European rules on inves-

ST E P H E N M O R R I S— LONDON

L AU R A N O O N A N— NEW YORK

Revenues at the world’s topinvestment

banks lunged to a 13-year low in thep

firsthalfof2019asgeopoliticaltensions,

slowing growth and low interest rates

compounded a structural decline that

setinafterthefinancialcrisis.

The 12 biggest US and European

investment banks generated $76.8bn in

revenuefromtheirtradingandadvisory

operations during the six-month

period, down 11 per cent from 2018. It

was the slowest first half since 2006,

according to the latest data from indus-

trymonitorCoalition.

The banks had individually reported

Investment bank revenues tumble

3 First-half results at 13-year low 3 Income from equities falls 17% 3 Bond divisions suffer

Europe’s

Mifid II

rules have

also made

equities

a more

challenging

business

Companies / Sectors / People

Companies

Air France-KLM........................................ 12

Airbus............................................................. 12

Alibaba........................................................... 14

Amazon......................................................... 14

Apple............................................................... 13

Arch Coal...................................................... 19

Arrium........................................................... 12

AstraZeneca.............................................. 20

Auchan........................................................... 14

BHP................................................................. 20

Bank of America...................................... 19

Burford Capital......................................... 13

CYBG.............................................................. 20

Casino.................................................10,11,

Cevian Capital.......................................... 20

Church & Dwight.................................... 20

Citi.................................................................... 19

Control Risks.............................................. 13

Copart........................................................... 20

Dada-JD Daojia........................................ 14

Dassault....................................................... 20

Deloitte.......................................................... 14

Deutsche Bank........................................... 11

Diageo........................................................... 20

Duff & Phelps............................................ 13

EY..................................................................... 14

Eaton Vance............................................... 19

Eharmony...................................................... 11

Equinor......................................................... 20

Facebook....................................................... 11

Freshippo..................................................... 14

GFG Alliance............................................... 12

GMO................................................................ 19

GPW................................................................. 13

General Dynamics..................................... 4

Goldman Sachs......................................... 12

Greensill Capital....................................... 12

Hong Kong Exch. & Clearing.......... 10

InfraBuild...................................................... 12

Invesco........................................................... 19

J. Aron............................................................ 12

JD.com........................................................... 14

JPMorgan..................................................... 12

Juventus........................................................ 12

KPMG.............................................................. 14

Konami........................................................... 12

Kroll.................................................................. 13

La Liga........................................................... 12

Litigation Capital Management......

Malaysia Airlines...................................... 2

Mallinckrodt............................................... 20

Match Group............................................... 11

Microsoft...................................................... 10

Morgan Stanley......................................... 11

Muddy Waters........................................... 13

NMC Health............................................... 20

Nissan............................................................. 12

Nordea.......................................................... 20

Novoship....................................................... 13

Pinkertons.................................................... 13

Premier League........................................ 12

Purdue Pharma........................................... 7

PwC.................................................................. 14

Safran............................................................ 20

Samsung...................................................... 13

Sargeant Marine....................................... 13

Serie A............................................................ 12

Slack.........................................................10,

Spruce Point Capital............................ 20

Sun Art.......................................................... 14

T Rowe Price............................................. 19

Tencent......................................................... 14

UniCredit......................................................... 2

Walmart......................................................... 14

White Oak.................................................. 12

Whole Foods.............................................. 14

Wood Group.............................................. 20

Yonghui......................................................... 14

Sectors

Aerospace & Defence................4,12,

Airlines........................................................... 12

Automobiles................................................ 12

Banks..............................................2,12,19,

Basic Resources........................................ 12

Construction................................................. 3

Energy.....................................................12,

Financial Services..............................14,

Financials..........................................10,12,

Food & Beverage................................... 20

Healthcare.................................................. 20

Industrial Goods....................................... 12

Industrials...............................................10,

Mining........................................................... 20

Oil & Gas..................................................... 20

Personal & Household Goods........ 20

Pharmaceuticals...................................... 20

Retail............................................10,12,14,

Retail & Consumer.................................. 12

Support Services..................................... 10

Technology.........................10,12,13,14,

Telecoms....................................................... 13

Travel & Leisure...................................... 12

Utilities........................................................... 12

People

Agnelli, Andrea......................................... 12

Akhmedov, Farkhad............................... 13

Bogart, Christopher................................ 13

Butterfield, Stewart............................... 10

Chavez, Marty............................................ 12

Ghosn, Carlos............................................. 12

Greensill, Lex.............................................. 12

Gupta, Sanjeev.......................................... 12

Kretinsky, Daniel..........................10,11,

Koskull, Casper von.............................. 20

Moynihan, Brian....................................... 19

Mustier, Jean Pierre................................. 2

Naouri, Jean-Charles........................10,

Prince, Chuck............................................. 19

Ricci, Giorgio...............................................

Rowles-Davies, Nick............................... 13

Ruperti, Wilmer......................................... 13

Saikawa, Hiroto......................................... 12

Sargeant III, Harry................................... 13

Sibio, Carmine Di..................................... 14

Strongin, Steve......................................... 12

Tkac, Patrik...........................................11,

Vang-Jensen, Frank.............................. 20

Wiesel, Elisha............................................. 12

CzechbillionaireDanielKretinsky ash
deepenedhisinroadsintoEuropeanretail
withtheacquisitionofastakeinFrench
retailer asinoC hatmakeshimitssecond-t
largestshareholder,thetwogroupssaid
yesterday.
MrKretinsky’s4.63percentinvestment
—viahisVesaEquityInvestmentvehicle
withhisSlovakianbusinesspartnerPatrik
Tkac comesasCasinoundertakesa—
broadrestructuringanda€4.5bnasset
disposalprogramme.Itisseekingtocut
debtandfocusonkeymarketstoimprove
profitabilityandsqueezeoutthehedge
fundsbettingagainstitsstock.Casino’snet
debtinFrancestoodat€2.7bnattheend
of2018,anditistargetinglessthan€1.5bn
bytheendof2020.
InMay,Casino’spyramidofparent
companiessoughtacourt-ledcreditor
protectionprocessthatallowedthemto
freezetheirdebtsandavoidbankruptcy
forupto18monthsandrestructure.This
hasremovedsomepressureonCasinoto
payadividendupthecorporatechainto
servicethedebtsoftheseholding
companies,atatimewhenitissuffering
from amultiyearpricewarinFrance.
ThissummerMrKretinskyapproached
Jean-CharlesNaouri,Casino’schief
executiveandcontrollingshareholder,
accordingtoapersonfamiliarwiththe
discussions.MrKretinskytoldhimhehad
begunbuyingastakeinCasinothrough
thepublicmarketsandsaiditwasa
“friendlyandlong-terminvestment”,the
personsaid.Harriet Agnew, Paris
Lex age 10p

Shopping spree zech billionaire becomes second-largest Casino shareholderC

Bricks and clicksChinese retailers are

merging stores off and online— ANALYSIS, PAGE 14

DisconnectMarkets are too upbeat about

the global economy— MOHAMED EL-ERIAN, PAGE 20

Richard

Henderson

Tail

Risk

The US recession has arrived. No, not that one, but a

recessioninUScompanyprofits.

As the second-quarter earnings season draws to a close,

US blue-chips have seen a 0.3 per cent fall in their profits

on a per-share basis, according to FactSet data. The drop

means that, following a first-quarter contraction of 0.2 per

cent, companies are officially in an “earnings recession”,

definedastwoconsecutivequartersofshrinkingprofits.

Portfolio managers would be forgiven for swatting this

data aside. Earnings had a high bar to clear, after all,

following last year’s tax cut, which pushed up first-half

profits. In the past, earnings recessions have come and

gone with little fanfare, including a three-quarter stretch

of shrinking earnings to the middle of 2016. That run

occurredintheabsenceofaweakeningUSeconomy.

But this year’s fading profits come amid a string of ugly

data. US business confidence has fallen since late last year

and growth incapital expenditure as slowed. This weekh

the ISM purchasing managers’ index that tracks US manu-

facturers slipped below its 50

point break-even level, hit-

ting 49.1 for August, its worst

readingsinceJanuary2016.

Despite data like this,

stocks remain near record

highs. Yes, share prices have

swervedanddippedonevery

tweet and headline about

monetary policy and the

trade-war brinkmanship

between presidents Trump and Xi. Yet stocks have

regained their vigour. Yesterday, for example, saw arally

asthetwosidesagreedtoreturntothenegotiatingtable.

Investors have to wonder whether macro factors such as

trade have blinded the market to micro data like earnings.

Last year, US profits soared and the market fell; this year

the inverse has occurred, according to Liz Young, director

of market strategy for BNY Mellon Investment Manage-

ment.“Themarketdoesn’tseemtocare,”shesaid.

Still, strategists are trying to assess whether a second

successive quarter of falling profits is a harbinger of

genuinelydarkertimes.

“It’saworry,”saidScottClemons,chiefinvestmentstrat-

egist for private wealth management at Brown Brothers

Harriman in New York. “Third-quarter earnings season is

going to tell us whether the capex cycle is intact and how

companiesarethinkingaboutgrowthandtrade.”

A US-China truce would ease uncertainties built up over

the past year. It could calm corporate boards, reinforce

supply chains and perhaps send stocks to new highs. But

that does not appear imminent. Instead, investors are cor-

rect to anticipate further uncertainty. The combination of

deceleratingcapexandshrinkingprofitsistelling—execu-

tivesareoptingforprudenceinsteadofspendingtogrow.

“In an earnings recession, companies attempt to cut

bloated costs,” said Michael Wilson, chief US equity strate-

gist at Morgan Stanley. “But they simply can’t cut fast

enoughasdemandisalsodecelerating.”

Last year, US

profits soared

and the market

fell; this year the

inverse has

occurred

Alamy

SEPTEMBER 6 2019 Section:2Front Time: 5/9/2019- 18:59 User:alistair.fraser Page Name:2FRONT USA, Part,Page,Edition:EUR, 11, 1