Others

Pension liabilities: companies can expect relief

The present values of pension obligations as recognised on corporate balance sheets have risen constantly since 2009 due to falling interest rates and the discounting effect. Over the past years this has led various companies to implement capital measures to strengthen their equity. The reference interest rate for HDAX companies decreased by around 60 basis points in FY 2016. This raised pension liabilities by around 10% to EUR 480 billion and pension provisions by approximately 15% to EUR 185 million. In turn, this reduced the funding level from 62.9% to 61.6% to lie slightly above the 62.2% average since 2010. At the same time, however, it is also evident that corporate profitability and equity backing remains strong, as the equity ratio has risen to 40.3%. Looking ahead and with bond yields on the rise again, we believe this problem will now unwind. The low in terms of reference interest rates…

Why we will continue to need good research in the future

Bank research is currently facing a raft of challenges. The expectations of our clients, which include the local cooperative banks as well as institutional investors, have become much more demanding in recent years. This is also due to the greater demands placed by the end or private investors on our clients themselves. Increasing regulation impacts on almost all stages of our work, which also leads to a notable increase in the effort involved in research. At the same time, very strong competition means that clients are often quite reluctant to pay for research. However, this is about to change soon as the new „MiFID II“ provisions will require research to be offered as a reasonably priced service from next year onwards. The falling number of analysts in the big banks in recent years and increasing regulation has led some observers to assume that the sellside research that is generally provided…

Brisk consumer spending drives robust growth in Germany in 2016

In 2016, the German economy continued on its robust growth track. With a real increase of 1.9 percent, the economic output actually scored the strongest growth since 2011. Private consumer spending and public consumption expenditure rose appreciably, as they had in 2015, laying the basis for macroeconomic growth. Private households’ zest for consumer spending was supported again in 2016 first and foremost by favourable labour market trends. Gainful employment climbed sharply, and is now at a new record, while at the same time the unemployment rate in 2016 fell to a new low. As a result, as in recent years employees’ income surged. In real terms, private consumer spending in 2016 rose +2.0 percent and thus as strongly as in 2015. In this context, in the past year two “one-time effects” helped boost private consumer spending and public consumption expenditure. The low price of oil braked energy prices and the…

Japan: Tankan survey – situation improved but expectations slightly gloomier

The quarterly „Tankan“ survey of the Bank of Japan for the final quarter of the year has revealed an improvement in the sentiment readings for Japanese industrial companies. The diffusion index (from -100 to +100) recorded 10 points for the large corporates of the manufacturing sector after three consecutive quarters of in each case 6 points, and thus exceeded market expectations. The slight majority of companies which see an improvement in their business conditions has therefore risen noticeably of late. Optimism in industry has gained uplift from the slight depreciation of the yen against the US dollar in the weeks following the US presidential election, the evidently somewhat brisker export demand and the prospect of fresh orders from the government that has now started its fiscal stimulus package announced in August. In the case of the large corporates of the more domestically-aligned service sector, by contrast, the Tankan index remained…

Crisis on the Italian banking market and the consequences for Europe

Since the Brexit decision, the Italian banking sector has come under enormous pressure once again. In particular the share prices of domestic banks have recorded palpable losses, but risk premiums on bank bonds have also widened. However, multiple reports of the great efforts being undertaken by the Italian government to inject state aid into the domestic banking sector have caused some of the spreads to narrow again. The Italian government’s first request for a bail-in (i.e. capital aid without forcing bond creditors to participate in losses) was rejected by the EU Commission with the expected reference to the ban on state aid. The Italian government quickly denied any accusations that it would support its crisis-stricken banks with public funds without the approval of the EU Commission. Nor have the other rumours and press reports that the banking market might be salvaged through state or private finance been backed by further…

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