European Business News (EBN), 97-08-27

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From: The European Business News Server at <http://www.ebn.co.uk/>

Page last updated Wed, August 27 5:20 PM CET

CONTENTS

[01] Credit Suisse posts 70% jump in first-half net profit, predicts `good result' for the year

[02] Britain's trade gap worsened in June

[03] ING Barings discusses purchase of Furman Selz

[04] WH Smith swings to profit, attributing shift to recovery programme

[05] Trichet denies any link between French, German rate rises

[06] Netscape adopts Java language for Web software

[07] Spain's joblessness to drop below 2 million for first time since 1981

[08] BolsWessanen's profit gains 26% in half; firm sees 10% gain for year

[09] Bank Austria swap seen good in long run

[10] Corporate and Economic Briefs

[01] Credit Suisse posts 70% jump in first-half net profit, predicts `good result' for the year

And looking to the future, CS Group said the favourable financial market environment is 'unlikely to continue indefinitely', but the bank is nevertheless 'confident of achieving a good result for the year as a whole.'

Moreover, CS expects the synergies and new growth potential resulting from the merger with insurer Winterthur will have a further positive impact on the performance of Credit Suisse Group.

The bank said first-half net profit leapt 70% to 1.41 billion Swiss francs ($940 million) from 830 million francs the year before. The Swiss bank said all four if its business units contributed to massively higher gross earnings, which rose 27% to 8.07 billion francs in the half from 6.37 billion francs the year before.

Credit Suisse First Boston contributed 58%, or 4.82 billion francs, to the gross earnings total; Private Banking contributed 21%, or 1,78 billion francs; the company and individual clients business in Switzerland contributed 16.5%; and Credit Suisse Asset Management contributed 4.5%, or 373 million francs.

Credit Suisse also said its overall cost/earnings ratio in the first half of 1997 improved to 66.6%, compared with 68.1% in the year-earlier period.

The bank's first-half 1997 cash flow increased to 2.5 billion francs, up 22% from 2.04 billion francs the year earlier.

Meanwhile, the restructuring process of Credit Suisse Group's problem- ridden Swiss business - the unit called Credit Suisse - is proceeding according to plan, the group said. Thanks to this process, and the successful launch of a number of new products, Credit Suisse was able to reduce its pre-tax loss before extraordinary items by 357 million francs to 177 million francs, the bank said. Credit Suisse said its credit and loan loss provisions were calculated for the first time on an anticipatory statistical basis. The amount expected for the first half of 1997 was 400 million francs, and was charged to the profit and loss account, CS said. Total loan loss provisions rose to 1.02 billion francs, up 64% from 622 million francs in the 1996 first half.

Credit Suisse also said it had to make provisions worth 338 million francs for existing non-performing loans, which were offset against reserves for general banking risks. The reserves for general banking risks were worth 2.05 billion francs on June 30, 1997, the bank said.

[02] Britain's trade gap worsened in June

But sales of British goods held up despite the relentless rise of the pound.

Export volumes grew 5% in the first quarter, defying analysts' predictions that sales would fall.

'What is strange is that export volumes appear to be holding up and look unaffected by the value of the currency,' said Philip Shaw, economist at Investec. 'Exporters are clearly cutting their prices to keep going.'

Britain's merchandise trade deficit with countries outside the European Union narrowed to a seasonally adjusted £65 million in the month from £713 million the month before.

The trade gap narrowed because of a surge in erratic exports, the ONS said. The biggest single export was the sale of an oil drilling platform to Norway for just under £400 million, but there were also other erratic exports. Exports rose 11.9% on the month and imports rose 1.3%. However, the volume of exports excluding oil and erratic items fell 0.5% in July from June, showing a much weaker trend in underlying exports.

[03] ING Barings discusses purchase of Furman Selz

The board of Barings's Amsterdam-based parent company, ING Groep, is expected to vote on the proposed acquisition this week, those people said. They expect the purchase price to be close to $300 million.

Both Edmund Hajim, chairman and chief executive officer of New York-based Furman Selz, and a spokeswoman for Barings in New York declined to comment.

If approved, the deal would be ING Groep's second US acquisition in the past few months, and the latest in a string of US securities firms to be gobbled up this year by US commercial banks and foreign financial institutions.

The Dutch investment bank has been prowling for US acquisitions, is expected to make more acquisitions in the country's financial-services industry. Barings has about 1,500 employees in the US

In July, ING announced plans to pay $2.2 billion in cash and stock for life insurer Equitable of Iowa Cos. Insurance accounts for slightly more than half of ING Groep's business; the bulk of the rest is corporate and investment banking.

At the time of the Equitable announcement, ING Groep's chairman, Aad Jacobs, cited buying a US investment bank as one of the company's priorities. Barings previously held talks with a few US investment banks that have been acquired this year and was a bidder for Montgomery Securities, which NationsBank is buying for $1.2 billion.

Furman Selz would come much cheaper. With annual revenue of about $400 million, the private firm is smaller than most of the investment banks that commercial banks have gobbled up this year. But it would satisfy one of Barings's goals: to acquire a firm with strong US stock research.

Research has been a strong suit of Furman Selz since it was founded in 1973 by five stock analysts, including Roy Furman and Bernard Selz, now both vice chairmen of Furman Selz. Xerox Corp. owned Furman Selz from 1987 until 1993 as part of the copier maker's since-abandoned diversification into financial services. The managers of Furman Selz bought the firm back from Xerox in 1993 for about $100 million, Xerox reported at the time.

[04] WH Smith swings to profit, attributing shift to recovery programme

Chairman Jeremy Hardie called the earnings performance 'an encouraging start'.

Smith reported full-year pre-tax profit of £51 million ($80.58 million) after a £194 million loss the year earlier. Profit before exceptional items rose to £124 million from £89 million, slightly below analysts' forecasts of £125 million.

WH Smith left its dividend unchanged, and that news, along with negative market sentiment stemming from a lack of news on Smith's continuing boardroom battles, has put pressure on the company's stock price.

The company is currently looking to replace Bill Cockburn who resigned as chief executive in June.

The group's revenue outlook is cheery, however, with the company showing a 9% rise in sales for the first 11 weeks of the new fiscal year. Retail division sales rose 3% in the period.

However, the company added some caution to the gains saying that it is too early too say that trends will continue for the full year.

[05] Trichet denies any link between French, German rate rises

Trichet, during an interview on Europe 1 radio, said there was no 'automatic link' between France and Germany's central bank, 'but every decision in the past of the (French) monetary policy council...has been made to increase and maintain confidence.'

Some financial analysts believe any large shift in German key rates would have to be followed by a similar move in France in order to maintain investor confidence in the move toward the European currency union targeted for Jan. 1, 1999. The Bundesbank is widely expected to raise rates within six months.

Trichet also declined to rule out an increase in French rates.

Asked to comment on French Finance Minister Dominique Strauss-Kahn's remark Monday that a rise in interest rates would slow down economic growth, Trichet first answered that Strauss-Kahn had reiterated that the central bank was independent of the government.

Asked again whether higher rates could slow the economy, Trichet answered only: 'If we have the lowest market rates in Europe, we will be in the best European situation.'

[06] Netscape adopts Java language for Web software

Netscape has said it would incorporate Sun software called HotJava into a new Web browser program that is expected to ship in early 1998. Sun, in return, agreed to use the Netscape product instead of its own software in new Sun computers, including a new generation of simplified systems called network computers.

Separately, Sun, Netscape and International Business Machines said they will jointly staff a technical centre in California, that will work on improving Java's performance and ensure it is distributed more quickly and consistently.

Java, introduced by Sun in 1995, has attracted a wide following because of features such as the possibility of writing programs that run without modification on different computer systems. But Java programs often are slower than conventional software, and some users complain of incompatibilities on certain computers. Microsoft which is trying to blunt Sun's marketing thrust for Java, regularly tries to publicise those issues.

George Paolini, director of corporate marketing at Sun's JavaSoft division, said the centre would help address such problems by reducing delays between the time Sun introduces new Java technology and other companies incorporate it. 'The thing that is holding up Java is performance,' said John Biasi, an analyst at US research firm Hurwitz Group. Microsoft's opponents 'need to focus their efforts on fixing those problems.'

In Nasdaq Stock Market trading, Netscape's shares rose 43.75 cents to close at $38.875. Sun fell 81.25 cents to $50.9375.

[07] Spain's joblessness to drop below 2 million for first time since 1981

The report cited general secretary of employment, Manuel Pimentel, for the data. Pimentel also said the government will probably surpass its aim of creating a net total of 234,000 new jobs this year 'without any problem.'

In July, jobless claims in Spain fell to 12.50% of the active population from 13.06% in June.

Investors tend to watch Spain's quarterly unemployment data more closely than the monthly jobless-claims data because it includes information on everyone who's out of work, rather than just on those people who are allowed to claim unemployment benefit.

In the second quarter, Spain's unemployment rate fell to 20.94% of the active population from 21.49% in the first quarter.

[08] BolsWessanen's profit gains 26% in half; firm sees 10% gain for year

Company attributes strong growth partly to higher US dairy prices

BolsWessanen has posted a 26% rise in first-half net profit, buoyed by higher US dairy prices and increased sales volume at several of its units. The Dutch food and drinks manufacturer said that, despite an expected slowdown in profit growth in the second half of this year, full-year 1997 earnings are seen rising 10% from year-earlier levels.

In the first half of this year, BolsWessanen added, the net result was slightly damped by a rise in interest charges and taxes. The company also said that interest charges rose to 21.5 million guilders over the six-month period, compared with 15.9 million guilders in the corresponding 1996 period. Corporate taxes rose to 36.2% from 34.3% a year earlier. The higher interest charges were attributed to financing of acquisitions.

The news puts BolsWessanen stock price under pressure. At about 1150 GMT, BolsWessanen's shares were down 7.1% or 2.70 guilders to 35.40 guilders, while the AEX benchmark index of leading Dutch stocks was off 0.4%, or 3.37 points, at 900.07 points.

In a more detailed breakdown of its first half performance, BolsWessanen showed a profit drop in its food and cereals operations which accounts for 10% of sales, decreasing to 17.9 million guilders from 20.2 million in the comparative 1996 period. The drop was mainly attributed to the poor performance seen in convenience foods.

However the company said its dairy unit benefited from a 13% rise in sales, two thirds of which is attributable to the strength of the dollar. Operating profit in the unit increased 25% to 53.1 million guilders from 42.4 million in 1996.

[09] Bank Austria swap seen good in long run

Bank Austria said it would give Creditanstalt minority shareholders four Bank Austria shares for every three that they own. Preferred shares can be swapped for preferred shares, and common shares for common shares.

Based on Tuesday's closing price, the offer gives Creditanstalt preferred shareholders an 18% premium over the market price and common shareholders a 12% premium, claims Bank Austria Chairman Gerhard Randa. The two banks' shares and participation certificates were suspended from trading Wednesday in anticipation of the announcement.

For the moment, Austria's banking blue chips will rise or fall together on the Vienna Stock Exchange, and in the long-term, focusing the sector on one share should be positive, analysts said. 'I think this is not only fair, but very favourable, and very friendly towards the shareholders,' said Randa in announcing the exchange offer.

Randa said the move - part of the deal agreed when Bank Austria bought its rival from the government earlier this year - is also a step toward focusing the banking group's market presence on one share.

Roland Neuwirth, an Austrian analyst for Deutsche Morgan Grenfell in Vienna, concurred with Randa's assessment of the offer saying 'It's a fair offer, and we think the minority shareholders should accept the offer.'

'Also, in the medium term, it seems good for Bank Austria because of the management's plans to focus on one blue chip,' he said.

After buying the government's shares, Bank Austria holds a 70% voting stake in Creditanstalt and 51% of its base capital. The move created an Austrian banking group more than twice as big as its nearest domestic rival.

Randa said that since acquiring the state's shares in Creditanstalt, one of Bank Austria's goals has been to increase its stake in Creditanstalt and, in the process, focus the group's stock market presence on one share.

Gerhard Fleischer, an analyst at Bank Gutmann in Vienna, said the Bank Austria offer is attractive. 'I think they (the minority shareholders) will accept it'.

[10] Corporate and Economic Briefs

French electronics company Compagnie des Signaux said that second quarter sales jumped 48% to 879 million French francs ($142.2 million) from 594 million francs. First-half sales totaled 1.2 billion francs, up 31% from 915 million francs. On a comparable structure and exchange rate basis, however, the company said first-half sales fell 21% due to delays in client payments. For the full year, it expects sales on that basis to be down no more than 9.0%. The company, in a statement, predicted full-year 1997 sales of around 3.3 billion francs. That compares with 1.94 billion francs in 1996, a figure which doesn't include revenues from recent acquisitions.

Bic said that a New York state appeals court suspended the sale of US based Sheaffer to its management. Bic is contesting the sale, saying it signed a contract with Sheaffer's key shareholder Gefinor July 31 to buy the US penmaker for an undisclosed amount, and that it has since broken that contract. Gefinor, a Luxembourg bank with headquarters in Geneva that has owned Sheaffer since 1987, broke that agreement in favor of allowing Sheaffer's management to take over the company, Bic contends.

German hair care and cosmetics group Wella, said it will sell its French subsidiary Rene Garraud to Edda Wendig, currently managing director of Wella's Parfums Rochas. A price for the salon cosmetics company wasn't disclosed. 'The change of hands is due to the bundling of all investment by Wella in the strategically limited segment of haircare and perfumes,' Wella said. 'Increased concentration on core businesses already led to the separation one year ago of Payot, a cosmetic brand in the marginal range.'

The German government plans to grant 5 billion Deutsche marks ($2.7 billion) in European Reconstruction Program loans for company start-ups and job creation in Germany in 1997, Economics Minister Guenter Rexrodt said. Some 40% of the loans will go to eastern German companies. The ERP, or Marshall Plan, loans and equity capital mortgages run for up to 20 years, require no security, and repayments start after 10 years.

From the European Business News (EBN) Server at http://www.ebn.co.uk/

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