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UPDATE 1-U.S. ruling could delay Fiat's Chrysler buyout

Written By Unknown on Rabu, 31 Juli 2013 | 18.12

Wed Jul 31, 2013 4:55am EDT

* Ruling puts pressure on two sides for an agreement

* Fiat "looks forward" to resolving dispute in court

MILAN, July 31 (Reuters) - A ruling by a U.S. judge risks delaying Fiat's plan to buy up all of Chrysler unless it can reach an out-of-court settlement with a healthcare trust that is a minority shareholder in the U.S. group.

The Italian carmaker said on Wednesday it "looked forward" to solving a dispute with an autoworkers' healthcare trust in court after winning a partial victory on Tuesday in its path to buy the 41.5 percent of Chrysler it does not already own.

Delaware Chancery Court Judge Donald Parsons on Tuesday accepted the carmaker's legal positions in two pivotal disputes in its legal battle with VEBA, the United Autoworkers-affiliated healthcare trust that owns 41.5 percent of Chrysler.

However, the judge stopped short of ordering VEBA to sell 54,154 Chrysler shares to Fiat for $139.7 million, as the latter had sought, saying certain questions still needed to be answered through testimony at a trial.

"Fiat looks forward to resolving the few remaining issues in the litigation, through the discovery requested by the judge, and remains confident that those residual issues will also be resolved in its favour," Fiat said in a statement on Wednesday.

A trial is likely to take between a year and 18 months, said a person familiar with the matter. However, another person said the lengthy process makes it more likely that Fiat and VEBA will reach an out of court settlement on the dispute.

"We view the ruling as positive for Fiat and likely to help an out-of-court agreement," said UBS analyst Philippo Houchois in a research note. "We still view end 2013 as a likely deadline for an agreement as VEBA."

Fiat's lawyers will now be forced to argue in court with representatives of the healthcare trust about why Fiat should pay less than the trust is asking in a deal the latter needs to pay future benefits for retired Chrysler workers.

The UAW became Chrysler's second-largest shareholder when Chrysler emerged from bankruptcy in 2009 and the union swapped future healthcare payments owed to it for a stake in the company. VEBA is a trust that manages those healthcare benefits on behalf of the union.

Fiat already runs the two automakers as a single company, but wants to buy the rest of Chrysler to squeeze out more synergies, cut borrowing costs and access some of Chrysler's cash flow.

Fiat shares were volatile in early trade, falling 0.8 percent to 5.98 euros at 0850 GMT.

"The ruling is a step forward and is good news," said a Milan trader. "But it's not decisive and the market is not discounting it as a done deal yet."

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Bunds dip before German 30-year bond sale, Fed decision

Wed Jul 31, 2013 3:55am EDT

* Germany to sell 2 billion euros of 30-year debt

* Higher yields seen helping demand at the auction

* Post-auction focus seen on U.S. data, Fed decision

By Emelia Sithole-Matarise

LONDON, July 31 (Reuters) - German bond prices fell on Wednesday as investors made room in their books for new 30-year Bunds to be auctioned later in the day in a cautious market before a U.S. Federal Reserve policy decision.

Germany will offer up to 2 billion euros of 30-year paper which market participants expect to go smoothly with investors enticed by a 50 basis point back-up in yields from early May lows of just over 2 percent. Month-end related buying was also seen supporting demand for the sale.

German 30-year yields were last 3 basis points higher at 2.51 percent while 10-year Bund yields were up by a similar amount at 1.70 percent.

"We are seeing Bunds under a bit of pressure before the 30-year supply. It's just concession building before the auction but after that it's all about the Fed," a trader said.

Bund futures were last 39 ticks down on the day at 142.07, with other traders saying buyers were also holding off before the Fed's policy meeting, which could provide clarity on the outlook for its stimulus measures.

Investors are waiting to see whether the Fed still plans to reduce its bond purchases later this year, and for guidance on how long it will keep interest rates at record low levels. The world's biggest economy has shown signs of improving growth although unemployment remains naggingly high.

Before that, focus will be on U.S. second-quarter growth and private sector employment data that could give markets a steer on the strength of the economic recovery.

"On the U.S. GDP data, the risks are for a slightly weaker outcome which would be positive for core bonds but ahead of the FOMC the reaction might be muted," said Mathias van der Jeugt, a strategist at KBC in Brussels.

Italian 10-year yields were flat at 4.41 percent with Spanish equivalents also steady at 4.62 percent .

Italy sold all it wanted at a long-term debt auction on Tuesday as investors shrugged off concerns about an upcoming court ruling against former Prime Minister Silvio Berlusconi.

The treasury placed 6.75 billion euros ($9 billion) of five- and 10-year bonds at lower yields compared to the previous sale.

Italy's supreme court heard Silvio Berlusconi's last appeal against a jail sentence and ban from public office for tax fraud. A ruling against the former prime minister could plunge Italy's government into crisis and bring renewed uncertainty to the euro zone third's largest economy.

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Bunds cut almost all day's losses after 30-year auction

LONDON, July 31 | Wed Jul 31, 2013 6:07am EDT

LONDON, July 31 (Reuters) - Bund futures recovered most of Wednesday's losses after a 30-year German debt auction drew comfortable demand.

Bund futures were last 4 ticks lower on day at 142.41, having earlier traded as low as 141.99.


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Brazil's Itaú cuts estimate for loan book growth this year

Written By Unknown on Selasa, 30 Juli 2013 | 18.12

SAO PAULO, July 30 | Tue Jul 30, 2013 6:27am EDT

SAO PAULO, July 30 (Reuters) - Itaú Unibanco Holding SA , Brazil's No. 1 private-sector lender, on Tuesday trimmed the official estimate for growth of its loan book for this year to between 8 percent and 11 percent from a prior range of 11 percent to 14 percent.

The company reported the change in its outlook in its second-quarter earnings report.


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Greece sells state lotteries, deal clears way for OPAP privatisation sale-source

ATHENS, July 30 | Tue Jul 30, 2013 6:28am EDT

ATHENS, July 30 (Reuters) - Greece sealed on Tuesday a 190-million-euro deal with a consortium led by its gambling monopoly OPAP to run the state lotteries, a senior official involved in the talks told Reuters, clearing the way for the sale of its stake in OPAP.

The OPAP-led consortium, which includes gaming systems provider Intralot and Scientific Games, will run the lotteries for 12 years.

Wrangling over the fees OPAP will pay its partners for technology and printing services had hindered the completion of the lotteries deal and complicated the sale of a 33 percent stake in OPAP to Greek-Czech fund Emma Delta agreed in May.


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UPDATE 2-Turkish central bank, seeing higher inflation, signals more tightening

Tue Jul 30, 2013 6:31am EDT

* Cbank hikes 2013, 2014 inflation forecasts

* Lira stability a priority, but no set level

* Main policy rate set to stay on hold

* Further adjustments to rate corridor on agenda

By Asli Kandemir

ANKARA, July 30 (Reuters) - Turkey's central bank raised its inflation forecasts for this year and next on Tuesday, saying lira volatility posed a threat to prices, and signalled further interest rate rises.

In an unusually frank assessment of the bank's policy direction, Governor Erdem Basci said the main one-week repo policy rate would likely be kept on hold at 4.5 percent for a "long time".

But he said the interest rate corridor around that rate - the lending rate at the top and the borrowing rate, currently at 3.5 percent, at the bottom - would continue to be adjusted.

The bank hiked its mid-point inflation forecast for the end of 2013 to 6.2 percent from a previous 5.3 percent, and for the end of 2014 to 5 percent from 4.9 percent. It also said growth may undershoot an official forecast of 4 percent for this year.

At a news conference announcing its quarterly inflation report, Basci said core inflation was expected to rise due to exchange rate volatility. But while maintaining a stable lira was a priority, he said there was no set limit at which it would defend the local currency.

"We no longer need to hold forex-selling auctions. We are continuing with adjustments on the interest rate corridor, and we will be more flexible if necessary. We can sell forex on very stressful days," Basci said.

"The central bank will not defend a specific lira level."

The bank raised its overnight lending rate by 75 basis points to 7.25 percent a week ago in response to capital outflows that have knocked the lira down as much as 9 percent against the dollar over the past few months.

Basci said that move had been enough for now but that there would be further tightening.

He said the bank was not currently planning to make adjustments to the reserve requirements or reserve option coefficients it uses to fine tune liquidity conditions.

Markets were largely unmoved by the comments, with the lira slightly weaker at 1.9269 to the dollar than late on Monday and the yield on Turkey's 10-year bond <tTR080323TVA=IS > steady at 9.43 percent.

"I guess the message is that the central bank is not overly concerned by recent lira weakness, but (it is) classic central bank speak," said Timothy Ash, head of emerging markets research at Standard Bank.

"It is not the level but the pace of change in the currency/volatility that the central bank is concerned by."

RISKS TO GROWTH

Uncertainty over the continuation of the U.S. Federal Reserve's bond-buying programme has hit emerging markets in general, but Turkey has also been shaken by demonstrations last month against Prime Minister Tayyip Erdogan's government.

Erdogan has long championed low interest rates, fearing an economic slowdown ahead of elections beginning next year.

But the central bank has already burned through more than $6.8 billion, or about 15 percent of estimated disposable reserves, this year to try to defend the lira without raising rates, a policy which has had limited success.

Last week's rate hike came days after Erdogan met with senior members of his economic team, prompting suggestions that Basci had only acted after a government nod. But Basci asserted the bank's independence on Tuesday, saying it received approval only from monetary policy committee members before acting.

The government is targeting growth of 4 percent this year, a significant acceleration from last year's 2.2 percent gain but well below the 8.8 percent expansion of 2011, which was Europe's best. In the first quarter the economy grew 3 percent.

Finance Minister Mehmet Simsek said last week he saw risks to growth and inflation targets this year from external factors including energy prices and the health of the euro zone economy, while Deputy Prime Minister Ali Babacan has said it should be "no surprise" if the government revises down its growth outlook.

Basci said he expected loan growth still to be running at significantly above the bank's 15 percent reference level at the end of the year, but forecast it would fall to around target in the middle of 2014.

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Japan's PM may rethink tax hike; could shake markets, unsettle support

Written By Unknown on Minggu, 28 Juli 2013 | 18.12

By William Mallard

TOKYO, July 28 | Sun Jul 28, 2013 4:05am EDT

TOKYO, July 28 (Reuters) - Japan's most significant fiscal reform in years - a planned increase in the country's sales tax - could be delayed or watered down in a move that might rattle financial markets and amount to an own goal for the prime minister.

Despite holding the strongest political mandate of any prime minister in years, there are signs Shinzo Abe is seriously rethinking the plan out of concern it could derail a nascent economic recovery he has crafted with an aggressive policy mix, dubbed Abenomics.

Abe says he will decide in the autumn whether to proceed with the first part of the two-stage plan after gauging the state of the economic recovery, especially GDP data that is due on Sept 9. The tax, similar to general sales tax and value added tax in other countries, is due to rise to 8 percent in April 2014 and then 10 percent in 2015.

Abe does not want to raise the tax, given the likely economic and political repercussions, but he understands the risks of upsetting the markets by giving the appearance of backtracking on promised reform, said a person involved in crafting economic policies. At 5 percent, Japan and Canada have the lowest equivalent consumption taxes in the Organisation for Economic Co-operation and Development, OECD data shows.

The stakes in Japan are high. The tax hike was passed into law last year with the support of Abe's current coalition parties and the previous government and is meant to be the first step toward repairing Japan's tattered finances. However, the law also requires the government to judge the economic conditions before giving the final go ahead.

Reneging on fiscal reform could hit investor confidence, which has allowed Tokyo to borrow money cheaply even though its $5 trillion public debt, well over twice the nation's annual economic output, is the heaviest burden in the industrial world.

At the same time, Abe has stressed that his top priority is to rouse Japan from 15 years of deflation and tepid growth through his Abenomics programme of heavy government spending, massive monetary easing and promises of a longer-term growth strategy.

Abe himself admitted the thorny dilemma just hours after scoring a landslide win in upper house elections on July 21 that gave his ruling bloc a clear parliamentary majority.

"It will be a difficult decision," he said of the looming tax choice.

"The economy is just starting to recover and now is the best chance for Japan to emerge from deflation," Abe said. "I don't want to lose this chance. At the same time, markets are watching (our progress) on Japan's fiscal reform."

SPLIT

Despite his electoral triumph, Abe's team is split.

A small number of vocal reflationists, such as cabinet office adviser Koichi Hamada, say Abe should prioritise recovery and go-slow on raising the tax. Pitted against them, the Finance Ministry says it is vital for Japan to show markets and trading partners that it is serious about putting its fiscal house in order.

Japanese media reported on Saturday that Abe had instructed his government to study the impact on the economy and prices of four tax-hike options, including sticking with the existing plan, raising the rate 1 percentage point a year for five years and delaying the hike entirely.

Abe, speaking at a news conference on a visit to Manila, said: "I haven't yet issued any instructions to come up with several proposals."

Government officials also say they haven't received any formal orders to draw up fresh scenarios, although an advisory panel to the premier had already been mandated to study the impact of the current plan on the economy and prices.

Public opinion may play to the advantage of the reflationists.

A survey of 902 people in the Nikkei business daily, conducted just after the election, found only 11 percent supporting the existing plan, compared with 58 percent who favour "flexibility" in the timing or scale of the increase and 27 percent who oppose raising the tax at all.

History too provides a cautionary tale for Abe, who got a rare second chance at running the government in December.

Noboru Takeshita, the premier who forced the first sales tax through parliament in 1988, and Ryutaro Hashimoto, who raised it to 5 percent from 3 percent in 1997, were driven from office as their public support collapsed - although other problems also plagued both men. The decision to double the tax contributed to the defeat of Abe's predecessor, Yoshihiko Noda.

Adviser Hamada, a 77-year-old emeritus professor at Yale University and a key member of Abe's brain trust, told Reuters on July 23 that Japan needed much more evidence of a sturdy recovery before raising the tax.

The economy, which grew at an annualised rate of 4.1 percent in the first quarter - the fastest among Group of Seven industrial powers - needs to maintain similar growth for two more quarters before enduring a tax hike, Hamada said.

BOND TRADERS WATCHING

He set the bar higher still, saying he is pushing Abe to wait not only until growth picks up but until employment improves, ensuring a firmer footing for the recovery.

The government should wait until unemployment falls to 3 percent from around 4 percent now and job seekers outnumber job offers "in all regions" of the country, Hamada said.

Although the latest data shows there were 90 seekers for each 100 job offers in May nationally, only four of Japan's 10 regions have more labour demand than supply.

It is unclear how much influence Hamada has on fiscal policy, but the views of the reflationists might "have significant influence on Abe's thinking on this subject," said former Bank of Japan deputy governor Kazumasa Iwata, head of the prominent think tank, the Japan Centre for Economic Research.

Some government officials are keen to start fiscal reform, privately worried that changing the tax plan would endanger Japan's promise to halve its budget deficit - excluding debt-financing - from fiscal 2010 levels by fiscal 2015 and balance the budget five years later.

They say raising the tax in incremental steps each year could be too easily derailed, since the politically sensitive hikes would have to be approved for five years in a row - with national elections scheduled in three years.

Finance Minister Taro Aso has strongly insisted on sticking with the tax-hike plan, saying it is an international promise. Still, Aso signalled last week he is willing to soften the economic blow by offering another dollop of fiscal stimulus.

The Japanese government-bond market, which lets Abe's government borrow 10-year money for less than 0.8 percent, would be hit hard if Abe changes the sales-tax plan, said Tadashi Matsukawa, head of Japan fixed income at PineBridge Investments.

"The whole of Abenomics would basically crash under that scenario," he said, adding he thinks it unlikely Abe will change the plan.

Iwata, the former BOJ deputy governor, told Reuters that if Abe postponed the agreed tax hike, that would endanger the rest of the fiscal-reform schedule.

"If Japan can't raise the tax rate even when the economy is in good shape, that may lead to market distrust over Abe's governance," Iwata said.

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Ireland on road to recovery, but many left behind

Sun Jul 28, 2013 5:13am EDT

* Dublin, older citizens have dodged worst of economic downturn

* Countryside, younger people still at sharp end of crisis

* Broader-based consumer spending needed to maintain momentum

By Conor Humphries

MULLINGAR, Ireland, July 28 (Reuters) - Struggling cafe owner Julie Mangan rolls her eyes at talk of packed restaurants and queues for house viewings in Dublin as proof that Ireland's battered economy is finally on the mend.

With two consecutive years of growth, falling unemployment and the property market showing signs of life, Ireland is being held up by European leaders as the continent's best chance for a bail-out success story.

But data also shows inequality in employment, spending power and real estate, making the recovery increasingly dependent on a small privileged minority and leaving behind a frustrated underclass mired in debt and joblessness.

"Maybe in Dublin they've turned a corner, but it'll take a long time to trickle down to us," said Mangan, after another quiet lunch hour in the small town of Mullingar, about an hour west of the capital. "No one in this town is doing well."

The Irish government's borrowing costs have fallen steadily since they peaked in 2011, paving the way for the country to complete its 85 billion euro bailout at the end of the year. That would make it the first euro zone state to exit an aid programme, providing a much-needed success story for the European Union.

But exports continue to shrink, making the economy increasingly dependent on domestic consumers to lift growth to the annual 2.5 percent-of-GDP level that economists say is needed to lower the debt pile.

That means it needs the large ranks of its 4.6 million population who have been squeezed repeatedly by unemployment, crippling mortgage debt and higher taxes to start spending again.

An unexpected contraction in the first three months of the year that sent the country back into recession for the first time since 2009 indicated that is not happening yet.

On Mullingar's winding main street, where every second shop has windows plastered with special offers, businesses say turnover has been steadily declining over the past three years, with dips repeated every time a new austerity budget is announced.

"I can't see where the green shoots are," said Derek Monaghan, 34, who has managed a computer repair shop since losing his job at a joiners two years ago. "Sales down, footfall down - it's steadily getting worse."

NO SPARE CASH

Ireland's national statistics agency does not break down economic performance by region, age or social grouping, but a series of other indicators is showing deepening splits, with the young particularly badly hit.

Many in their 30s bought their first houses with 35-year mortgages at the height of the "Celtic Tiger" boom that ended in 2007, when property prices began falling through the floor.

Those in their 20s are struggling to find first jobs in a recession and can only dream of buying their own home.

One third of the population - and over a quarter of those working - has less than 50 euros of disposable income left once essential bills are paid, according to a survey by the Irish League of Credit unions.

That also highlights another major risk factor for Ireland's economy - property debt. One in five mortgage holders is in arrears or has had their loan restructured, and bad debts could yet force banks already bailed out once by the state to ask for more help.

"The Irish economy is an economy of contradictions," said Dermot O'Leary of Goodbody Stockbrokers.

"The younger part of the population in general has a lot of the debt and little of the wealth," O'Leary said. "And then you have the regional differences. It is clearly a Dublin-led recovery."

Across the border in the British province of Northern Ireland the economic picture is also blurred, with productivity gains in the 15 years since a peace agreement ended three decades of sectarian violence threatened by renewed outbreaks of civil unrest.

UNEVENLY SPREAD

Irish unemployment, a key cause of arrears, has started to fall and house prices rose in June for the first time since the crash, but the improvement is unevenly spread. The jobless rate is 17 percent in the midlands region, which includes Mullingar, compared with 11 percent in Dublin. Five years ago both stood at 5 percent.

Mullingar's retailers say most people spending money are older. One said young people only seem to celebrate when someone finds a job in another country.

Excluding housing costs, spending by those under 45 fell by a third in the five years to 2010 as they felt the force of the financial crisis. Those aged over 45 spent a quarter more, according to calculations by the ESRI think tank.

Regional inequalities are also growing. Richer areas of Dublin boast packed pubs, restaurants and shops and queues of people to view houses for sale. Mullingar's cafes are half deserted, shops have permanent sales and so-called "ghost estates" in the surrounding counties are pocked with empty homes.

Dublin's house prices rose 4 percent in June, and even that figure is skewed by heavy demand in its affluent southern suburbs, raising concerns about isolated price bubbles - though economists say the government could raise taxes if property inflation speeds up too much.

In the rest of Ireland, prices fell by 1 percent, further widening the gap for mortgage holders between the value of the houses they own and the debt they have to repay.

"The negative equity side is hard on a lot of people," said Frank Hanlon, who bought his Mullingar house for 200,000 euros and now watches neighbours sell for 60,000. "People feel a bit trapped.

"When you go up to Dublin, you're surprised there are still people in the shops buying, there is money out there."

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Cyprus, lenders set Bank of Cyprus bail-in at 47.5 pct, sources say

NICOSIA, July 28 | Sun Jul 28, 2013 6:37am EDT

NICOSIA, July 28 (Reuters) - Cyprus and its international lenders have agreed to convert 47.5 percent of deposits exceeding 100,000 euros in Bank of Cyprus to equity to recapitalize it, banking sources said on Sunday.

Under a programme agreed between Cyprus and lenders in March, large depositors in Bank of Cyprus were earmarked to pay for the recapitalisation of the bank. Authorities initially converted 37.5 percent of deposits exceeding 100,000 euros into equity, and held an additional 22.5 percent as a buffer in the event of further needs.

"There was an agreement concluding at a final figure of 47.5 percent this morning," a source close to consultations told Reuters.


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Fed's Lacker says exit from bond-buying programme should be quick

Written By Unknown on Sabtu, 27 Juli 2013 | 18.12

BERLIN, July 27 | Sat Jul 27, 2013 3:07am EDT

BERLIN, July 27 (Reuters) - The U.S. central bank should stop its bond-buying quickly and an end to the programme was "in sight", a senior Federal Reserve official said in an interview with a German magazine on Saturday.

Richmond Fed President Jeffrey Lacker, one of the Fed's most fiscally conservative officials, said he expected ending the process to be successful, according to WirtschaftsWoche.

"We must make our exit from the bond-buying programme quick," Lacker was quoted as saying by the German magazine.

"An end to these bond purchases came into sight at the latest Fed meeting," he said.

Fed Chairman Ben Bernanke jolted markets in late May by saying the U.S. central bank planned to ease back on its stimulus efforts once the economy improves.

Under the plan Bernanke laid out on June 19, the Fed is likely to reduce its monthly bond buys later this year and halt them altogether by mid-2014, as long as the economic recovery unfolds as expected.

Lacker pointed to relatively low inflation and said a faster-than-expected fall in the U.S. jobless rate was sufficient to start winding down the purchasing programme.

"First of all we should end the monthly purchases of mortgage bonds as quickly as possible," he said. The magazine said Lacker hoped this would force the U.S. Congress to agree more quickly on reducing debt.

"We need a sustainable solution and the sooner the better," he said.

Lacker said more needed to be done on drawing up rules to avoid future government rescues for struggling banks and said the stress tests conducted in the United States were a step in the right direction.

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Hungary to pay off IMF loans this summmer, earlier than planned-PM Orban

BUDAPEST, July 27 | Sat Jul 27, 2013 5:19am EDT

BUDAPEST, July 27 (Reuters) - Hungary will repay its loans from the International Monetary Fund this summer, months earlier than was planned, Prime Minister Viktor Orban said on Saturday.

Most of the 2.1 billion euros ($2.8 billion) that remains to be paid from the 20 billion borrowed from the IMF during the 2008/2009 global crisis matures in 2013, and the rest next year.

"Yesterday I told the Economy Minister that we will prepay the entire amount to the IMF this summer," he said in a speech at a conference in the Romanian town Baile Tusnad, broadcast by the Hungarian television channel HirTV.


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UPDATE 1-Fed's Lacker says exit from bond-buying programme must be quick

Sat Jul 27, 2013 5:58am EDT

BERLIN, July 27 (Reuters) - The U.S. central bank must end its bond-buying programme quickly and an end to the programme was "in sight", a senior Federal Reserve official said in a German magazine on Saturday.

Fed Chairman Ben Bernanke jolted markets in late May with plans to ease back on stimulus efforts once the economy improves. The Fed is likely to reduce its monthly bond purchases later this year and stop them altogether by mid-2014, as long as the economic recovery unfolds as expected, Bernanke has said.

"We must make our exit from the bond-buying programme quick," Richmond Fed President Jeffrey Lacker, one of the Fed's most fiscally conservative officials and a persistent critic of the latest round of bond buying, said in WirtschaftsWoche.

"An end to these bond purchases came into sight at the latest Fed meeting," said Lacker, who is not among the Fed policymakers who will vote on monetary policy this year.

Lacker pointed to relatively low inflation and said a faster-than-expected fall in the U.S. jobless rate was sufficient to start winding down the programme.

"First of all we should end the monthly purchases of mortgage bonds as quickly as possible," Lacker said in the interview. It was not the central bank's role to give any sector preferential support, he said.

Lacker said the United States had made hardly any progress in cutting its debt and had instead only come up with temporary solutions for several months at a time.

He said he hoped the Fed's planned scaling back of bond purchases this year and rising interest rates would force the U.S. Congress to agree more quickly on reducing debt. "We need a sustainable solution and the sooner the better," he said.

Whoever takes the helm at the Fed when Bernanke's term as chairman ends in January 2014 must find a way to exit the bond-buying programme without shocking the markets, Lacker said.

He said the quantitative easing programme had done little to boost the economy, and the U.S. economy would grow by 2 percent this year and by no more than 2.25 percent next year - lower than the 2.8 percent in 2013 and 3 percent in 2014 forecast by other Fed policymakers - as consumers remain cautious.

Lacker said more needed to be done on drawing up rules to avoid future government bank rescues and said stress tests done in the United States were a step in the right direction.

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UPDATE 1-Italy two-year debt costs fall to lowest since May

Written By Unknown on Jumat, 26 Juli 2013 | 18.12

Fri Jul 26, 2013 5:58am EDT

MILAN, July 26 (Reuters) - Italy's two-year borrowing costs fell on Friday to their lowest since May as hefty debt redemptions next week supported demand.

The treasury placed the top planned amount in the sale and drew healthy demand for its two-year bonds. It did not offer the usual inflation-linked BTPei bonds, saying it had ample cash.

"Next week almost 35 billion euros of Italian debt will come due," said a Milan trader.

The treasury sold 3 billion euros ($4 billion) of zero-coupon bonds maturing on June 30, 2015, paying a yield of 1.86 percent. That was the lowest since May - before the U.S. Federal Reserve's signal that it would begin to withdraw its massive monetary stimulus prompted a sharp sell-off in global markets.

At a similar auction one month ago, the treasury had to pay a yield of 2.40 percent to lure investors who were fretting about an end to the Fed's money-printing.

Demand on Friday was 1.56 times the offer, up from a bid-to-cover of 1.48 one month ago.

Rome will return to market on Monday to offer 8.5 billion euros of bills. On Tuesday it will put on the table up to 6.7 billion euros of five- and 10-year bonds.


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UPDATE 2-Hungary pledges firm but measured action on forex loans

Fri Jul 26, 2013 6:30am EDT

* Banks and markets bracing for mortgage relief plan

* Borrowers were duped into taking out loans: PM Orban

* He says relief scheme won't wreck financial system

* Banks are likely to carry lion's share of costs

By Gergely Szakacs and Christian Lowe

BUDAPEST, July 26 (Reuters) - Hungarian Prime Minister Viktor Orban said on Friday he will get rid of the foreign currency mortgages which, he alleged, unscrupulous banks duped borrowers into taking out, but he promised to do it without wrecking the financial system.

Orban's government, seeking re-election next year, earlier this month said it was planning relief for hundreds of thousands of borrowers who took out home loans pegged to the Swiss franc or euro, and then lost out when the exchange rate shifted.

Any measure is almost certain to cost the banks a lot of money, and risks damaging already shaky business sentiment in Hungary at a time when global investors are reviewing whether they should keep their money in the riskier emerging markets.

Speaking on public radio, 50-year-old Orban mixed withering criticism of the banks with soothing messages that seemed directed towards financial markets.

Talking about consumers who took out foreign currency mortgages, he said: "These people were fooled. The conduct of banks was careless at best, if not malicious. They tricked these people and lured them into these financial products."

"This is a situation that makes human lives and the Hungarian economy fragile. Therefore, we need to get rid of this situation," Orban said.

"NO BLITZKRIEG"

Banks in Hungary say the loan contracts were legal and they gave consumers full information.

Big foreign banks account for a large part of the mortgage business in Hungary, and they include Austria's Raiffeisen and Erste, Germany's Bayerische Landesbank and Italy's Intesa Sanpaolo.

Financial markets fear a repeat of a measure imposed in 2011 - known in Hungary as the final repayment scheme - under which borrowers were allowed to repay foreign currency loans in a lump sum at artificially low exchange rates.

The net cost to banks of that scheme was about 260 billion forints ($1.16 billion). Orban on Friday said this time around, the mortgage relief would be more nuanced.

"When you want something against which there is enormous resistance but it is important for the people, you do not need negotiations, you need a Blitzkrieg," Orban said. "The final repayment scheme was one such option."

"We are not aiming for such a solution but peaceful, calm talks ... We are proposing a solution that does not wreck the financial system but helps (borrowers) in trouble."

Orban has tangled repeatedly with big foreign institutions, from the European Commission, to the International Monetary Fund and big global firms, over policies his critics say are rash and driven by populism.

TESTING PATIENCE

So far, the holders of Hungary's hefty sovereign debt have kept faith because the country, with its good rates or return on bonds, has provided a welcome home for the "wall of money" created by the U.S. Federal Reserve's quantitative easing.

Signals from the Fed that it will print less money have reduced appetite for emerging markets, which could in turn make investors less willing to stick by Hungary.

After Orban spoke, the forint currency gained 0.5 percent against the euro, recovering from a one-month low.

Markets were reassured by the fact Orban has said the new mortgage relief would differ from the previous measure, and that the government relief would exclude people who took out mortgages to pay for items like cars or second homes.

The most likely option, people in the market said, is that the relief would still involve the banks re-setting the exchange rate at which the loans are calculated, but that unlike last time the re-payments would be spread over time.

Yet many crucial issues for banks remain uncertain, in particular what the exchange rate will be set at, and whether the government will contribute to the cost of the relief.

"The negative side is the unpredictability," Janos Samu, an analyst with Concorde Securities, a brokerage.

"To sum it up, it would be hard to mention a very, very positive impact, but it can be done in a way that could somewhat compensate the long-term negative impacts."

Whatever happens, banks will end up carrying most of the burden. Mihaly Varga, the economy minister, told news portal portfolio.hu that the state can only help "in limited terms" because EU rules keep its budget deficit capped.

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UPDATE 2-Banks shiver as UBS swallows $885 mln US fine

Fri Jul 26, 2013 6:31am EDT

WASHINGTON/LONDON, July 25 (Reuters) - UBS will pay $885 million in a settlement with a U.S. regulators over allegations the Swiss bank misrepresented mortgage-backed bonds during the housing bubble, paving the way for billions more to be paid by other banks.

The Federal Housing Finance Agency, which oversees government-sponsored housing enterprises Fannie Mae and Freddie Mac, said late on Thursday UBS must pay $415 million to Fannie Mae and $470 million to Freddie Mac to resolve claims related to securities sold to the companies between 2004 and 2007.

Other European banks, including Royal Bank of Scotland and Barclays, and U.S. banks including JP Morgan and Bank of America could face costly settlements. RBS was the worst performing of European banks on Friday, shares falling 2.5 percent by 0930 GMT.

Fannie Mae and Freddie Mac were seized by the U.S. government in 2008 as the housing crisis threatened their solvency. They have received $187 billion in taxpayer funds to stay afloat.

UBS is just one of 18 banks the FHFA pursued in 2011 for allegedly misrepresenting the quality of the collateral backing securities during the run-up to the financial crisis. The regulator is seeking to recover losses on mortgage bonds sold to Fannie Mae and Freddie Mac.

UBS is the third to settle, after Citigroup and General Electric settled for undisclosed sums. The details of the deal announced by the regulator on Friday follow a statement by UBS on Monday that said it had reached an agreement and had adequately for the payout without specifying how much was involved.

The FHFA said it "remains committed to satisfactorily resolving the remaining suits as well" and the deal may lay down a marker for how much it could cost rival banks.

Estimates on the overall sums involve vary widely.

Analysts at Credit Suisse earlier this year said European banks could take an $11 billion hit from a raft of mortgage-related litigation costs in the United States.

They estimated RBS alone could face an FHFA litigation loss of $1.6 billion, Barclays a $1.1 billion loss and HSBC could take a $900 million loss.

But another London-based analyst, Joseph Dickerson at investment bank Jefferies, said he expected RBS's losses to be "sub-$1 billion". "I would say that $4.2 billion seems to be a complete non-sequitur".

Other banks have acknowledged they could incur losses from the suits but few have said how much it could cost.

Barclays said in its last annual report if it lost the cases against the FHFA and other civil actions it could incur a loss of up to the outstanding amount of the RMBS at the time of judgment and some additional interest and costs, less the market value of the RMBS.

It said the outstanding amount was $2.7 billion at the end of 2012, and estimated the market value was $1.6 billion.

Deutsche Bank has set aside 2.4 billion euros for litigation costs after topping that up in March by an additional 600 million euros, mainly related to lawsuits over its role in selling bonds backed by U.S. sub-prime mortgages.

HSBC said in its annual report it was unable to estimate reliably the financial effect of any action or litigation, but any claims "could be significant."

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European Commission proposes rules to cut the cost of paying by card

Written By Unknown on Rabu, 24 Juli 2013 | 18.12

BRUSSELS, July 24 | Wed Jul 24, 2013 5:29am EDT

BRUSSELS, July 24 (Reuters) - The European Commission proposed on Wednesday to cap the fees that banks charge when processing credit and debit card payments.

The rules, which the Commission hopes will widen retailers' acceptance of cards, envisage limiting the fee charged by banks to 0.2 percent on the value of a debit card transaction and 0.3 percent on credit cards. The fee is now as high as 1.5 percent.

The draft legislation will also prevent companies such as airlines from imposing a surcharge when customers pay for flights using certain cards. The Commission said this will save consumers 730 million euros annually.

The cap, which is in line with measures demanded by the Commission's antitrust officials, will apply initially for cross-border transactions - for example, when an Irish card-holder uses their card in France. After 22 months, this limit would be extended to fees on domestic payments on all cards.


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UPDATE 1-Europe to cut the cost of paying by card

Wed Jul 24, 2013 6:02am EDT

* EU Commission outlines new rules to limit fees

* Law would cap interbank charges, prevent surcharges

* Retail lobby EuroCommerce says proposal too soft

By John O'Donnell and Foo Yun Chee

BRUSSELS, July 24 (Reuters) - The European Commission proposed on Wednesday to cap fees banks charge when processing card payments, potentially cutting costs for shoppers.

The draft legislation will also prevent companies such as airlines, for example, from imposing a surcharge when customers pay for flights using certain cards.

The savings from restricting such surcharges will save consumers 730 million euros ($964.94 million) annually while the broader caps on interbank fees will bring savings of 6 billion euros for retailers, the Commission said.

The rules, which the Commission hopes will widen retailers' acceptance of cards, envisage limiting the fee charged by banks to 0.2 percent on the value of a debit card transaction and 0.3 percent on credit cards. The fee is now as high as 1.5 percent.

"The interchange fees paid by retailers end up on consumers' bills," said Joaquin Almunia, the EU Commissioner in charge of antitrust enforcement, who announced the measures.

"Retailers will make big savings by paying lower fees to their banks, and consumers will benefit through lower retail prices," he said.

A roll-out of the cap could begin from around the end of next year, after the conclusion of negotiations with the European Parliament and European Union countries.

But retailers said the draft rules did not go far enough.

Ruth Milligan of EuroCommerce, a retail lobby group that has campaigned for cuts in the charges, said the fee should reflect the "tiny" actual costs involved.

"It should be a fixed fee," said Milligan. "There is no reason for it to be a percentage fee. Because the electronic system is already in place, it's a tiny cost, something like 1 cent per transaction."

"There has been a political compromise in the Commission with a lot of pressure from the banking sector and the card schemes," she said, adding that the levels of the cap had been chosen without input from merchants or consumers.

The cap, which is in line with measures demanded by the Commission's antitrust officials, will apply initially for cross-border transactions - for example, when an Irish card-holder uses their card in France.

After almost two years, this limit would be extended to the so-called interchange fees on domestic payments using all cards.

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CORRECTED-Portugal political crisis a catalogue of missteps

Wed Jul 24, 2013 6:08am EDT

(Corrects 23rd par to make clear Seguro is Socialist leader, not president)

By Andrei Khalip

LISBON, July 24 (Reuters) - Portugal's political crisis may have been papered over but the ill-timed power games have done little to help the bailed-out country's credibility abroad.

Featuring several U-turns, including an "irrevocable" resignation by a junior governing coalition partner which ultimately led to his promotion, the crisis wasted a precious three weeks and left its protagonists weakened and facing the same heap of economic problems to solve as before.

The economy is still in its worst recession since the 1970s, deepened by austerity terms attached to its EU/IMF rescue loans, and Lisbon still has to cut its fiscal deficit to ensure funds keep flowing.

"Sadly, the crisis leaves Portuguese politics facing certain third-worldish disdain from abroad," said Adelino Maltez, a political scientist in Lisbon. "Even our president said it's an unpredictable country, investors see it too and hardly like it."

The president, Anibal Cavaco Silva, showed his own lack of predictability by rejecting a government-proposed solution to an internal rift. He then went on a two-day bird-watching trip to the remote Savage Islands in the middle of the Atlantic.

His intention was to leave the main parties alone to negotiate a "national salvation" pact he had requested but he then made comments about the crisis to an army of reporters who accompanied him. Ultimately, it also left the 74-year-old president looking out of touch.

"It was a calm night and there have been no unpleasant news from Lisbon," he said on Friday morning, just hours before the opposition Socialists broke off talks with the two parties of the ruling coalition and said no deal was possible.

The Socialists' proposals showed they simply wanted to end all austerity, which would have defeated the purpose of an agreement.

Cavaco Silva wanted a cross-party pact to support the EU/IMF bailout, which requires the continuation of debt-cutting policies until the bailout programme is due to end in mid-2014, although a return to market funding is now in doubt.

Analysts say there is no choice but to stay the general austerity course, begging the question as to why this political crisis flare in the first place.

RESIGNATION THAT WASN'T

The last three weeks has featured a catalogue of self-inflicted wounds by Portugal's ruling class.

The crisis began on July 1 with the resignation of Finance Minister Vitor Gaspar - the architect of the austerity drive - who cited waning support for his strategy. One newspaper, "i", said in a widely quoted report that the last straw for Gaspar had been an angry customer in a supermarket spitting at him and his wife.

The next day, the crisis spiralled when Paulo Portas, the leader of the rightist CDS-PP junior coalition party that guaranteed the centre-right government's parliament majority, resigned as foreign minister.

He said he objected to the promotion of Gaspar's close colleague Maria Luis Albuquerque to finance minister. His "irrevocable" resignation came just minutes before Albuquerque's swearing-in ceremony, which nevertheless went ahead - without any of the three CDS-PP ministers present.

Prime Minister Pedro Passos Coelho refused to accept Portas' resignation, the two patched up their differences and agreed to preserve the coalition on the condition that Portas became deputy prime minister managing talks with the lenders.

Albuquerque, whose appointment was hailed by Brussels as a sign of continuity, remained finance minister, although now outranked by Portas.

Most of Portas' party top brass had been caught unawares by his resignation and some openly criticised the move, leading to rumours of his replacement as party leader.

"The key problem is the hypocrisy of our politics - there is no liberal right, while the so-called right is happy to defend the welfare state to get votes," Maltez said, adding that all the main leaders showed they have little control over their parties.

FOOD FOR SATIRE

With the crisis seemingly solved and Portugal's risk premiums falling back after a big jump, the president dropped his bombshell, rejecting the coalition's solution and calling for the broad political deal.

To lure the Socialists, who lead in opinion polls, he promised them an early election in 2014 if such a deal was sealed.

The events provided plenty of food for satire, which spared none of the political figures, while commentators called the situation a bad soap opera or a theatre of the absurd.

"The country deserved another political class, more adult, less given to spats and ready to put Portugal's interests above their own," business daily Diario Economico said in a recent editorial.

With the Socialists effectively demanding the bailout agreement be ripped up, no agreement was possible after six days of talks with many analysts blaming leader Antonio Jose Seguro for buckling to pressure from within his party.

The president belatedly approved the promotion of Portas and the continuation of the existing coalition.

Nicholas Spiro, managing director at Spiro Sovereign Strategy in London said the president's intervention had only exacerbated divisions between the government and the opposition.

"The politics of economic reform in Portugal have become even more treacherous," he said, warning that political support for the reforms demanded by the lenders has eroded sharply. (Editing by Mike Peacock)

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UPDATE 2-Brazil's Bradesco cuts loan growth estimate after profit miss

Written By Unknown on Senin, 22 Juli 2013 | 18.12

Mon Jul 22, 2013 6:28am EDT

* Recurring profit at 2.978 bln reais misses estimates

* Guidance cut signals cautious stance on economy

* Return on equity slumps to lowest in over four years

By Guillermo Parra-Bernal

SAO PAULO, July 22 (Reuters) - Banco Bradesco SA on Monday cut projections for lending and interest income growth for this year as an economic slowdown in Brazil that is extending into a third year led the nation's No. 2 private-sector bank to miss second-quarter profit estimates.

The Osasco, Brazil-based bank said in a statement its loan book is expected to grow between 11 percent and 15 percent this year, down from a prior range of 13 percent to 17 percent. Bradesco also signaled efforts to boost revenue in areas other than credit.

The revision underscores growing caution among Bradesco and other private-sector banks as Brazil enters a third year of below-trend economic growth.

Bradesco's second-quarter results, which fell short of expectations, may reinforce the view that profitability trends among Brazil's banks remain fragile, with performance increasingly hinging on expense cuts as credit growth stagnates.

Net income excluding one-time items, a widely used gauge of earnings known as recurring profit, totaled 2.978 billion reais ($1.33 billion), compared with the average 3.021 billion reais profit estimate in a Thomson Reuters poll of eight analysts.

Recurring profit rose 1.2 percent in a quarter-on-quarter basis as a 21 percent surge in insurance revenue and an 8.3 percent gain in fee income helped offset sinking trading-related income, lower interest income and stable bad-loan provisions.

Compared with the same period a year earlier, profit climbed 3.9 percent.

Management plans to discuss second-quarter results on a conference call later in the day.

The second-quarter profit miss came mostly in the wake of a slump in gains from trading of securities such as bonds and stocks that totaled 18 million reais - the lowest quarterly level for the item since the start of 2009. The so-called trading-related income line had gains of 197 million reais in the first quarter, and of 516 million reais a year earlier.

INTEREST INCOME, MARGINS

Interest income, or revenue from lending-related activities, fell to the lowest level in six quarters, while loan disbursements showed a 2.8 percent expansion - slightly above the 2.6 percent estimate in the Reuters poll.

Bradesco, led by Chief Executive Officer Luiz Carlos Trabuco, trimmed estimates for interest income growth this year to a range between 4 percent and 8 percent, from a prior range between 7 percent and 11 percent.

The central bank's decision to raise the benchmark interest Selic rate twice in the quarter probably helped Bradesco's net interest margin - or the average rate earned on loans - to remain stable on a sequential basis after four straight quarters of declines. The indicator, known as NIM among analysts, stood at 7.2 percent in the second quarter.

For over a year, Bradesco has reined in disbursements in riskier segments like auto loans and focused on mortgages and paycheck-deductible lending -- two segments that charge lower rates but are less likely to default.

Trabuco kept expenses in check, highlighting the industry's efforts to bolster profitability through cost efficiency.

Despite those efforts, return on equity - a measure of profitability in the banking industry known as ROE - fell to 18.8 percent on a recurring basis. While the result beat the poll's forecast of 17.4 percent, ROE slipped to its lowest level since at least the end of 2008.

Bradesco's loan book ended the second quarter at 402.52 billion reais, up 2.6 percent on a quarterly basis. On an annual basis, lending rose 10.1 percent, below the lender's revamped guidance for credit growth between 11 percent and 15 percent this year.

Loan defaults for 90 days or more, the industry's benchmark for delinquencies, posted a steeper-than-expected decline in the second quarter to 3.7 percent of outstanding credit. In the first quarter, the so-called default ratio stood at 4 percent.

Analysts in the poll expected the default ratio at 3.9 percent at the end of June.

In spite of the lower loan delinquencies, Bradesco set aside 3.09 billion reais in provisions for bad loans, or 0.5 percent less than in the prior quarter, a cautious sign over the outlook for Brazil's economy in coming months.

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Update-Moody's assigns A1.kz National Scale Rating to Chartis Kazakhstan

Thomson Reuters is the world's largest international multimedia news agency, providing investing news, world news, business news, technology news, headline news, small business news, news alerts, personal finance, stock market, and mutual funds information available on Reuters.com, video, mobile, and interactive television platforms. Thomson Reuters journalists are subject to an Editorial Handbook which requires fair presentation and disclosure of relevant interests.

NYSE and AMEX quotes delayed by at least 20 minutes. Nasdaq delayed by at least 15 minutes. For a complete list of exchanges and delays, please click here.


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Portugal PM vows to complete bailout, rebuild confidence

LISBON, July 22 | Mon Jul 22, 2013 6:45am EDT

LISBON, July 22 (Reuters) - Portugal's prime minister said on Monday the country needs to rebuild confidence dented by this month's political crisis and pledged to stick to the timetable agreed with the international lenders for Lisbon's exit from its bailout by mid-2014.

In his first speech after the president ruled out a snap election and told the government to stay and finish its term until 2015, premier Pedro Passos Coelho said the austerity course and profound reforms had to continue as they were dictated by the country's difficult circumstances.

"We will rebuild the confidence without raising any doubts about the process we are carrying out, saying 'yes, we want to complete the assistance programme on the agreed date'," he said.


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UPDATE 2-Brazil's Bradesco cuts loan growth estimate after profit miss

Mon Jul 22, 2013 6:28am EDT

* Recurring profit at 2.978 bln reais misses estimates

* Guidance cut signals cautious stance on economy

* Return on equity slumps to lowest in over four years

By Guillermo Parra-Bernal

SAO PAULO, July 22 (Reuters) - Banco Bradesco SA on Monday cut projections for lending and interest income growth for this year as an economic slowdown in Brazil that is extending into a third year led the nation's No. 2 private-sector bank to miss second-quarter profit estimates.

The Osasco, Brazil-based bank said in a statement its loan book is expected to grow between 11 percent and 15 percent this year, down from a prior range of 13 percent to 17 percent. Bradesco also signaled efforts to boost revenue in areas other than credit.

The revision underscores growing caution among Bradesco and other private-sector banks as Brazil enters a third year of below-trend economic growth.

Bradesco's second-quarter results, which fell short of expectations, may reinforce the view that profitability trends among Brazil's banks remain fragile, with performance increasingly hinging on expense cuts as credit growth stagnates.

Net income excluding one-time items, a widely used gauge of earnings known as recurring profit, totaled 2.978 billion reais ($1.33 billion), compared with the average 3.021 billion reais profit estimate in a Thomson Reuters poll of eight analysts.

Recurring profit rose 1.2 percent in a quarter-on-quarter basis as a 21 percent surge in insurance revenue and an 8.3 percent gain in fee income helped offset sinking trading-related income, lower interest income and stable bad-loan provisions.

Compared with the same period a year earlier, profit climbed 3.9 percent.

Management plans to discuss second-quarter results on a conference call later in the day.

The second-quarter profit miss came mostly in the wake of a slump in gains from trading of securities such as bonds and stocks that totaled 18 million reais - the lowest quarterly level for the item since the start of 2009. The so-called trading-related income line had gains of 197 million reais in the first quarter, and of 516 million reais a year earlier.

INTEREST INCOME, MARGINS

Interest income, or revenue from lending-related activities, fell to the lowest level in six quarters, while loan disbursements showed a 2.8 percent expansion - slightly above the 2.6 percent estimate in the Reuters poll.

Bradesco, led by Chief Executive Officer Luiz Carlos Trabuco, trimmed estimates for interest income growth this year to a range between 4 percent and 8 percent, from a prior range between 7 percent and 11 percent.

The central bank's decision to raise the benchmark interest Selic rate twice in the quarter probably helped Bradesco's net interest margin - or the average rate earned on loans - to remain stable on a sequential basis after four straight quarters of declines. The indicator, known as NIM among analysts, stood at 7.2 percent in the second quarter.

For over a year, Bradesco has reined in disbursements in riskier segments like auto loans and focused on mortgages and paycheck-deductible lending -- two segments that charge lower rates but are less likely to default.

Trabuco kept expenses in check, highlighting the industry's efforts to bolster profitability through cost efficiency.

Despite those efforts, return on equity - a measure of profitability in the banking industry known as ROE - fell to 18.8 percent on a recurring basis. While the result beat the poll's forecast of 17.4 percent, ROE slipped to its lowest level since at least the end of 2008.

Bradesco's loan book ended the second quarter at 402.52 billion reais, up 2.6 percent on a quarterly basis. On an annual basis, lending rose 10.1 percent, below the lender's revamped guidance for credit growth between 11 percent and 15 percent this year.

Loan defaults for 90 days or more, the industry's benchmark for delinquencies, posted a steeper-than-expected decline in the second quarter to 3.7 percent of outstanding credit. In the first quarter, the so-called default ratio stood at 4 percent.

Analysts in the poll expected the default ratio at 3.9 percent at the end of June.

In spite of the lower loan delinquencies, Bradesco set aside 3.09 billion reais in provisions for bad loans, or 0.5 percent less than in the prior quarter, a cautious sign over the outlook for Brazil's economy in coming months.

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Update-Moody's assigns A1.kz National Scale Rating to Chartis Kazakhstan

Thomson Reuters is the world's largest international multimedia news agency, providing investing news, world news, business news, technology news, headline news, small business news, news alerts, personal finance, stock market, and mutual funds information available on Reuters.com, video, mobile, and interactive television platforms. Thomson Reuters journalists are subject to an Editorial Handbook which requires fair presentation and disclosure of relevant interests.

NYSE and AMEX quotes delayed by at least 20 minutes. Nasdaq delayed by at least 15 minutes. For a complete list of exchanges and delays, please click here.


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Portugal PM vows to complete bailout, rebuild confidence

LISBON, July 22 | Mon Jul 22, 2013 6:45am EDT

LISBON, July 22 (Reuters) - Portugal's prime minister said on Monday the country needs to rebuild confidence dented by this month's political crisis and pledged to stick to the timetable agreed with the international lenders for Lisbon's exit from its bailout by mid-2014.

In his first speech after the president ruled out a snap election and told the government to stay and finish its term until 2015, premier Pedro Passos Coelho said the austerity course and profound reforms had to continue as they were dictated by the country's difficult circumstances.

"We will rebuild the confidence without raising any doubts about the process we are carrying out, saying 'yes, we want to complete the assistance programme on the agreed date'," he said.


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UPDATE 2-Canada rate message in tune with G20 debate-Poloz

Written By Unknown on Minggu, 21 Juli 2013 | 18.12

Sat Jul 20, 2013 12:13pm EDT

* Backs Bernanke's communication on Fed tapering

* Canada benefits from U.S. private sector recovery

* Flaherty misses G20 meeting due to illness

By Randall Palmer

MOSCOW, July 20 (Reuters) - All the talk of economic weakness during the G20 talks in Moscow does not make the Bank of Canada more inclined to keep rates low for longer than it had otherwise planned, Governor Stephen Poloz said on Saturday.

Poloz also came to the defence of the U.S. Federal Reserve, stating that Chairman Ben Bernanke's description of plans eventually to taper its bond buying was carefully communicated, as asked for in Saturday's communiqué of finance ministers and central bankers of the Group of 20 leading economies.

The G20 meeting emphasized near-term growth and job over fiscal consolidation, because of disappointing weakness especially in Europe. Finance Minister Jim Flaherty did not take part in the talks, despite travelling to Moscow, due to illness.

"Whatever we saw was consistent with what we put out just a few days ago," Poloz said, referring to the Bank of Canada's Monetary Policy Report on Wednesday.

"I came away reassured that you've got the story right ... You get to talk to your counterpart from another country and say, 'Here's what we're looking at,' and they say 'Yes, that's about right,' and that's good validation."

U.S. GROWTH

The Bank of Canada had already slightly downgraded its foreign outlook, Poloz said, "but you should remember that from a Canadian perspective the mix of global growth is actually turning more positive and that's because it's the U.S. which is disproportionately the grower.

"One dollar more growth there is a lot more valuable to a Canadian company than a dollar growth somewhere else, because it's very much more likely it's a trading partner."

He added that the mix was stronger than it looked, because it was government spending that was holding back the U.S. economy, and the private sector, which buys Canadian goods more than the government sector, was growing faster.

"So our foreign demand readings are doing better than that global story would say. But we have to acknowledge the global story has not gotten back - we have to keep watching that evolution and everybody will feel better when it is," he said in an interview with Reuters and another news agency.

Poloz's remarks about Fed tapering plans responded to complaints from emerging markets that Bernanke's announcement had caused market volatility and capital outflows from their countries.

"We see what the Fed did was careful calibration and careful communication, and I think that's exactly what we tried to do earlier this week," he said, referring to the Bank of Canada's interest rate statement on Wednesday, when it said low rates would stay in place as long as three explicit conditions were in place.

He said policymakers had learned through the market reaction to the Bernanke statement. "I would say markets were over invested a little bit in certain plays, pretty crowded trades, so when anything does change you get a certain amount of unwinding of trades," he said.

"A degree of volatility ... is inevitable. You just have to be mentally prepared for that and continue to emphasize the message and be very clear what your policy intentions are."

Poloz was the sole Canadian representative at his level to attend the G20 talks. Flaherty flew to Moscow for the meeting but ended up sick and not able to attend.

His seat was filled for at least part of the meeting by Jean Boivin, the Canadian G20 finance deputy. Flaherty has been suffering from a rare skin disease, which had people wondering whether he would stay on in the cabinet shuffle that took place in Ottawa on Monday.

His spokeswoman Kathleen Perchaluk said the reason for his sickness at the G20 was a stomach bug he had caught in Moscow.

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China's rate reform may serve to shield indebted state firms

By Wayne Arnold

HONG KONG, July 21 | Sun Jul 21, 2013 4:23am EDT

HONG KONG, July 21 (Reuters) - China's decision last week to liberalise bank lending rates, though widely applauded, has raised suspicions that it reflects official concerns over possible loan defaults and is aimed at helping out heavily indebted state firms and local governments.

China's central bank announced on Friday that banks could now lend at whatever rate they liked, enabling them to compete for new borrowers with cheaper credit at a time when the world's second-largest economy is slowing markedly.

But some investors said the move was symbolic and likely represented, in the short term at least, relief for heavily indebted state-owned enterprises (SOEs), big private-sector employers and local government financing arms.

"I'm a little sceptical of the appraisals that this is a big, big reform move," said Patrick Chovanec, managing director and chief strategist at Silvercrest Asset Management in New York and formerly a professor at Beijing's Tsinghua University.

"My concern in the short run is that what will happen is that a bunch of local government financing vehicles will get lower interest rates," he added.

The announcement by the People's Bank of China (PBOC) was welcomed by economists and came as G20 finance ministers and central bankers met in Moscow, where Japanese Finance Minister Taro Aso described it as a step in the right direction.

"We see today's announcement as a signal of the PBOC and the new leaders' commitment towards interest rate liberalization and more market-oriented reform," wrote Jian Chang and Joey Chew, economists at Barclays, in a note to clients.

However, they and other economists said that, with China's growth slowing, the banks -- including major lenders such as Industrial and Commercial Bank of China Ltd, China Construction Bank Corp, Bank of China Ltd and Agricultural Bank of China Ltd -- were unlikely to take advantage of the opportunity.

As it is, only about 11 percent of loans extended by China's biggest banks are below the just-scrapped 6 percent official rate, despite having had some leeway to stray from it. Most are in fact priced well above that.

Instead, economists say, the PBOC's move signals Beijing's determination to forge ahead with capital markets reform to remove the conditions that helped fuel China's property-led credit bubble.

In the short term, though, international bankers and investors active in China say the timing of the reform - coming roughly a month after the PBOC cracked down on lending in the shadow banking sector - may be less about banks issuing new loans than about keeping old loans from going into default.

"They're getting very concerned about the slowdown and the potential for non-performance or defaults," said a senior European banker in Singapore, who asked not to be named to avoid jeopardizing the bank's relationship with Beijing.

"The only firms that would get any kind of break are the preferred SOEs already getting discounted loans."

GUARANTEED MARGINS

Foreign bankers and investors draw parallels with Japan in the 1990s when banks avoided restructuring loans to their biggest borrowers and refinanced them at lower rates -- an "extend and pretend" policy that helped create so-called zombie companies and was blamed for Japan's two decades of economic stagnation.

Few question the need for China to liberalise interest rates. Until Friday, commercial banks were allowed to lend at rates no lower than 70 percent of the government benchmark of 6 percent, or roughly 4.2 percent. At the same time, the rate banks could pay depositors was capped at 110 percent of another benchmark rate of 3 percent, or about 3.3 percent.

The result was that banks were virtually guaranteed a 0.9 percentage point profit margin on every loan. Though designed to ensure the health of lenders, the policy fuelled unsound lending. To maximise profitability of a fixed margin, banks lent primarily to only the lowest-risk borrowers -- big state-connected companies. And with rates below the rate of inflation, depositors looked for better returns on investments elsewhere.

That has produced over-lending by banks to big companies and an explosion of unregulated non-bank lending to small and medium-sized firms. Standard & Poor's estimates China's shadow banking sector grew into a $3.7 trillion business last year.

Big companies stacked with cheap credit have begun re-lending those funds as well. Their issuance of so-called entrusted loans and bankers' acceptance notes more than doubled in the first four months of this year to 1.6 trillion yuan ($260 billion). If their borrowers default, they could in turn default on what banks have considered the country's safest loans.

This ballooning credit has created what economists and the International Monetary Fund see as unsustainable over-investment in property, infrastructure and industrial capacity. The IMF said in its latest annual consultation on China that the country needed to push through reforms to make growth more sustainable, rein in credit growth and liberalise interest rates.

The next, more difficult step to open banking to competition would be to remove caps on deposit rates, a move economists say would prompt lenders to allocate capital more efficiently, helping rebalance the economy toward less wasteful investments.

Beijing has signalled its intention to make the necessary reforms, even as it has cut its target for economic growth this year to 7.5 percent from 8 percent, which would mark the economy's slowest pace in 23 years.

China's challenge then, said Paul Gruenwald, chief economist at Standard & Poor's in Singapore, is to pull off what neither Japan, South Korea, Chile nor the United States, to name just a few, have failed to do: deflate a credit bubble and reform the economy without triggering a financial crisis.

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INSIGHT-By relying on Iran, Syria's Assad risks irrelevance

Sun Jul 21, 2013 6:11am EDT

* Support for Assad from Iran and Hezbollah

* Syrian leader risks losing autonomy to Tehran

* Hezbollah fighters used in place of elite troops

By Khaled Yacoub Oweis

AMMAN, July 21 (Reuters) - Military support from Iran and its Shi'ite ally Hezbollah has given Syrian President Bashar al-Assad new impetus in his fight against the insurgents intent on ousting him, but at a price.

Assad now risks losing much of his autonomy to Tehran and becoming a pawn in a wider sectarian war between Sunni Muslims and Shi'ites that may not end even if he is forced to step down, military experts and diplomats in the region say.

Having lost thousands of troops and militiamen from his Alawite sect as the war grinds through its third year, and anxious to preserve his elite loyalist units, Assad is now relying on Hezbollah from Lebanon and other Shi'ite militias allied with Iran to turn the tide of battle.

Alawite army units with their vast arsenal of artillery and missiles have been taking a back seat in combat, using these weapons supported by the air force to obliterate rebellious neighbourhoods and blow holes in rebel lines for Iranian-and Hezbollah-trained local militias.

In some cases men from Hezbollah, an Iranian-backed group that is one of Lebanon's most powerful military and political forces, have been doing the street fighting, according to rebel commanders and other opposition sources.

Under this new arrangement, Hezbollah and Iran have become directly involved in the command structures of Assad's forces, eroding his authority and the Alawite power base that has underpinned four decades of family rule by him and his father.

The Alawites, to which Assad belongs, are an offshoot of Islam that has controlled Syria since the 1960s.

Unlike the Shi'ites in Iraq, Iran and Lebanon, Syria's Alawites tend to be secular and lack the religious zeal that has helped motivate thousands of Shi'ite militia to come to Syria.

Security sources in the region estimate there are about 15,000 Shi'ite fighters from Lebanon and Iraq in Syria, and they have helped produce success on the battlefield, reversing gains made by rebels in two years of fighting.

When rebel fighters have held confined areas, such as the border town of Qusair, which was overrun by Hezbollah and Assad loyalists two months ago, they have put themselves at a serious disadvantage, the sources said.

Rebellious Sunni districts in Homs to the south are being hit hard and Damascus suburbs, a main concentration of the Arab- and Western-backed Free Syrian Army, are under siege as the war's death toll climbs above 90,000.

But Assad's newfound military advantage may prove short lived, despite the increasing pressure on the rebels, military experts and diplomats believe.

The fall of Qusair, and Hezbollah's triumphant rhetoric, spurred regional heavyweight Saudi Arabia into action. The kingdom, diplomats say, has assumed the main role in backing the opposition in coordination with the United States.

TRAINED MILITIAS

Signs of renewed support for the opposition are showing in the northern city of Aleppo, where a government counterattack backed by Hezbollah, which trained Shi'ite militia in the area, has stalled, according to the opposition.

Even if Assad can capture Homs, hold Damascus and overrun neighbourhoods that had fallen to rebels, such as Jobar, Barzeh and Qaboun, he would preside over a much reduced country.

Kurdish fighters are consolidating their hold on a de facto autonomous region in the grain- and oil-producing northeastern province of Hasakah that came to being after Assad's forces withdrew to concentrate on defending areas in the interior.

Hardline Islamist brigades are ruling much of two provinces east of Hasakah and they are strongly present in Aleppo. Assad is mainly left with Damascus and a corridor running through Homs to his Alawite heartland and army bases on the coast and to Hezbollah's strongholds in Lebanon.

Andrew Terrill, research professor of national security affairs at the U.S. Army War college, said the rebels will "hang on" because Assad has lost too much of the country.

"Winning battles is very different than winning wars because people who are under assault are going to recoup at some point. The rebels remain armed and remain able to strike at him," Terrill told Reuters.

"Assad may be able to win in the sense that he may stay in power and he is not overthrown directly, but I cannot imagine him pacifying the country because I just think there are too many rebels and too much resistance," he said.

Terrill said new weapons expected from Saudi Arabia are bound to redress the balance of power as well as promised U.S. arms. Salim Idriss, head of the Free Syrian Army's command, is due to visit the United States this week to press for speedy U.S. arms shipments.

Iran meanwhile, continues to supply Assad with military assistance and financing estimated at $500 million a month, according to opposition sources.

"The Iranians and Hezbollah go in and train people and if they can whip these militias into shape then Assad could increasingly rely on them and spare his crack troops," Terrill said.

Hezbollah has openly acknowledged its involvement in Syria, but Assad and Iran have not commented.

PRAETORIAN GUARD

Faced with losing large areas of Syria to mainly Sunni rebel fighters, Assad has adjusted tactics in the last few months to preserve his mostly Alawite Praetorian guard units -- the Republican Guards, the Fourth Division and the Special Forces -- and started relying on Hezbollah, especially to capture the central region of Homs, the sources said

Mohammad Mroueh, a member of the Syrian National Council, said Hezbollah and Iran have been training the militias Assad is using for street fighting in Homs and have established, together with Iranian officials, operations rooms in the city.

"When there is an area where the army and the militia encounter stiff resistance, they're calling Hezbollah to do the fighting," said Mroueh.

Abu Imad Abdallah, a rebel commander in southern Damascus, said Hezbollah fighters and Iraqi Shi'ite militia were key to capturing two areas on the south-eastern approaches to the capital -- Bahdaliyeh and Hay al Shamalneh -- in recent weeks.

"They went in after saturation bombing by the regime. They are disciplined and well trained and are fighting as religious zealots believing in a cause. If it was the army we would not be worried," he said.

But veteran opposition activist Fawaz Tello said that using Hezbollah was a sign of Assad's weakness, pointing to his inability to rely on Sunnis who form the bulk of the army.

"Remember that Assad started this conflict with about a million men under arms between conscripts and the army and the security apparatus. Now more and more he is relying on foreign troops and without them he will lose, especially if the rebels begin to receive advanced weapons," Tello said.

Assad was now becoming an Iranian proxy, Tello said, while Mamoun Abu Nawar, a Jordanian military analyst, said the Syrian leader was forced to bow to the will of Tehran.

"He can no longer call a division head and tell him to bomb the hell out of this neighbourhood or that. His command has been eroded and the command structure is now multinational," Abu Nawar said.

A diplomat in the region put it more bluntly: "Whether Assad stays or goes is becoming irrelevant. The conflict is now bigger than him, and it will continue without him. Iran is calling the shots."

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UPDATE 1-Euro zone bonds stabilise into weekend, Portugal in focus

Written By Unknown on Jumat, 19 Juli 2013 | 18.12

Fri Jul 19, 2013 4:57am EDT

* Euro zone bonds stabilize, no major data for direction

* Portugal overcomes political hurdle, Sunday deadline eyed

* German bonds seen in demand in illiquid, summer period

By Ana Nicolaci da Costa

LONDON, July 19 (Reuters) - Euro zone bonds stabilised on Friday after gaining this week on the back of healthy auctions and reassuring testimony from the head of the U.S. Federal Reserve.

They were expected to remain steady, without any major data to provide direction.

Ten-year Spanish government bond yields were 1.3 basis points higher at 4.65 percent and the Italian equivalent was down 1.3 bps at 4.41 percent. Portuguese 10-year yields were 3.3 bps lower at 7.07 percent and five-year yields were 2.4 bps lower at 6.82 percent.

But the yield gap between Portugal's 10- and five-year bonds remained close to its lowest in a year, suggesting investors were still worried about the country's credit quality.

German Bund futures were 3 ticks up on the day at 144.26, having hit its highest since late May earlier at 144.3.

"We are entering the summer period where liquidity is more difficult to find than in other periods, so with lower liquidity and probably slightly higher volatility, very liquid markets are favoured and the Bund is a very liquid market," Patrick Jacq, European rate strategist at BNP Paribas said

Investors may focus on Sunday's deadline that Portugal's Socialists and the two ruling coalition parties have given themselves to conclude crisis talks requested by the president.

"I don't really think we will see a major negative surprise over the weekend. Of course you have always got that tail risk but they will somehow find a way to keep the government for at least one more year, then we will see what happens," Christian Lenk, strategist at DZ Bank said.

Federal Reserve Chairman Ben Bernanke, meanwhile, eased some market nerves by telling the U.S. Congress this week that the central bank's plans to scale back asset-purchases later this year were not set in stone and depended on the strength of the economy.

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REFILE-UPDATE 1-G20 backs tax plan, seeks to chart recovery

Fri Jul 19, 2013 5:32am EDT

* Fed stimulus withdrawal eyed, clarity sought from China

* Backs OECD report on tax dodging

* Jobs debate puts spotlight on Europe

* Street protest after Russian opposition leader jailed

By Gernot Heller and Jan Strupczewski

MOSCOW, July 19 (Reuters) - The Group of 20 nations backed a tax plan on Friday that takes aim at the loopholes used by multinational firms and responds to anger among voters hit with higher tax bills to cover soaring national debts.

Finance ministers and central bankers gathering in Moscow were otherwise focused on charting a course towards global economic recovery, and seeking to calm financial markets worried about the impact of stimulus programmes.

The G20, a forum that took the lead in the 2008-09 financial crisis, now faces a multi-speed global economy in which only the United States appears to be nearing a self-sustaining recovery.

China, for years the engine of global growth, is suffering a slowdown amid doubts over the stability of its financial system, Japan has only recently embarked on a radical fiscal and monetary experiment, and Europe's economy is more stop than go.

Collective efforts to balance the prospect of a withdrawal of U.S. monetary stimulus against expansionary policies elsewhere evoke visions of passengers rushing from port to starboard to stabilise a listing ship.

Chairman Ben Bernanke's guidance in May that the Fed may start to wind down its $85 billion in monthly bond purchases - intended to ease the flow of credit to the economy - triggered a steep sell-off in stocks and bonds, and a flight to the dollar.

Investors were calmed by dovish testimony to Congress this week by Bernanke, who is not coming to Moscow. Yet emerging markets - especially those that depend on commodities or that have external deficits - have underperformed.

There will be some focus on central bank's giving so-called forward guidance, essentially managing market expectations. "(It is) crucial for preventing serious volatility on financial markets", Russian Finance Minister Anton Siluanov told reporters.

Negotiators working on a joint communique reconvene after a drafting session on Thursday night that sources said was less fraught than at the February G20 meeting in Moscow. Ministers review the text over dinner.

Also on Friday, the BRICS emerging markets caucus - Brazil, Russia, India, China and South Africa - was due to meet. They were unlikely to progress on joint steps, such a shared pool of forex reserves, to guard against capital flight.

JOBS COMMITMENT

The United States is beating its fiscal targets thanks to improving growth and Washington has urged the G20 to prioritise growth over fiscal consolidation sought by Europe's largest economy, Germany.

G20 labour ministers, who met on Thursday, hold a joint session on Friday with finance ministers, putting the jobs crisis in Europe - where youth unemployment is nearly 60 percent in debt-strapped Greece and Spain - at the centre of the debate.

"Getting people back to work must be top of the agenda," U.S. Treasury Secretary Jack Lew wrote in an article for the Financial Times. "In many parts of the world, such as Europe, growth is too weak to drive job creation."

Lew also urged China to speed reforms towards demand-led growth. Other G20 nations, led by Japan, are seeking greater clarity from China on how strains in its 'shadow' banking system will play out.

The European Union's employment commissioner, Laszlo Andor, shared Lew's prescription for recovery, telling Reuters that investment in jobs was vital for maintaining social peace and emerging from years of austerity.

"If in the name of competitiveness and internal devaluation you just compress wages constantly, you also kill demand and you can kill the recovery," Andor said.

The G20 released a tax action plan drawn up by the Organisation for Economic Co-operation and Development (OECD) that said the existing system didn't work, especially when it came to taxing companies that trade online.

The tax plan is one of the major 'deliverables' that will go go before the summit of G20 leaders being hosted by President Vladimir Putin in St Petersburg in early September.

PROTEST IN MOSCOW

Russia, the first big emerging nation to host the annual presidency of the G20, finds itself in an awkward political spot following the flight of former U.S. spy agency contractor Edward Snowden to Moscow.

G20 delegates arriving at Sheremetyevo airport may not have bumped into Snowden, who has requested asylum in Russia, but they run into a protest in Moscow over the jailing on Thursday of a prominent Russian opposition politician.

Alexei Navalny, who organised protests against Putin's election for a third Kremlin term last year, was sentenced to five years in prison for theft in a case that drew international condemnation as politically motivated.

Navalny was released on bail on Friday pending an appeal.

Officials checking in to the five-star Ritz Carlton hotel on Moscow's central Tverskaya Street paid little attention to thousands of Navalny supporters protesting outside, in keeping with a G20 tradition of keeping politics and policy separate.

"The rally and the traffic jams are causing meetings to be postponed," said one European diplomat. "But we fully understand the democratic right to protest."

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