Bad News

Zara owner Inditex shakes off chill with strong second quarter start

MADRID (Reuters) - Zara owner Inditex bounced back from a weak start to 2019, when unseasonably cold weather in southern Europe stifled sales for the Spanish fashion group, with a strong performance in the first weeks of the second quarter. 

This contrasts with how others in the struggling apparel sector are faring, with mid-market clothing retailer Ted Baker posting a profit warning on Tuesday after Britain had its biggest fall in retail sales on record in May. 

“This is particularly impressive in our view, notably in context of industry data we have so far for May,” JP Morgan said in a research note following Inditex’s results on Wednesday. 

Shares in the Spanish group rose 1.1% to trade at 25.57 euros ($28.96), whereas Boohoo’s fell, despite the online British fashion retailer reporting robust sales, as lower margins disappointed investors. 

Inditex, the world’s biggest clothing retailer and owner of Massimo Dutti, Bershka and Oysho reported net profit of 734 million euros for the three months from Feb. 1 to April. 30, on sales up 5% at 5.93 billion euros. 

The apparel sector has been hit by out-of-season sales as savvy shoppers expect discounts and hunt for online bargains. 

Sales at constant exchange rates for the first six weeks of the second quarter were up 9.5% as shoppers snapped up items like jewel-toned blazers and long printed dresses from Zara’s spring collections. 

Inditex maintained its full-year guidance of 4-6% growth for like-for-like sales. RBC Capital Markets estimated it had booked like-for-like sales of around 6.5% during the first weeks of the second quarter, against around 2% in the first quarter. 

Gross margin grew 6% year-on-year to 59.5% in the quarter, as foreign currency effects moved back into favor after two years of nibbling away at profitability. 

Inditex generates more than half of its sales in other currencies that have to be converted back into euros when it reports. Those currencies have strengthened slightly against the euro compared to a year ago, on average, helping reported sales. 

Societe Generale and Credit Suisse estimated sales at Inditex were reduced 3.5% last year by this effect, moving to a positive effect this quarter. 

With the adverse foreign exchange effects removed, Inditex is under pressure to show it can deliver strong like-for-like sales without the margin dilution that has affected others. 

“With less impact from foreign exchange, this will be an important year to prove the concept,” UBS said in a note.

China will further open banking, securities and insurance sectors

SHANGHAI (Reuters) - China’s top banking and insurance regulator said on Thursday the country plans to further open up its banking, securities and insurance sectors. 

Guo Shuqing, head of the China Banking and Insurance Regulatory Commission (CBIRC) told a financial forum in Shanghai that China especially welcomes experienced global asset managers.

Hong Kong leads Asian stocks lower, oil near five-month lows

TOKYO (Reuters) - Asian shares were led lower on Thursday as the Hong Kong market fell for second consecutive session following a day of massive street protests, while oil prices flirted with five-month lows due to higher U.S. crude inventories and a bleak demand outlook. 

Hopes that the United States and China will clinch a deal on the sidelines of a Group of 20 summit meeting in Osaka on June 28-29 have been fading, also hurting sentiment and driving bond yields down. 

“There’s not even a plan of ministerial-level bilateral meetings ahead of the G20 summit. You can’t expect any major agreement,” said Hirokazu Kabeya, chief global strategist at Daiwa Securities. 

MSCI’s broadest index of Asia-Pacific shares outside Japan fell as much as 1%, as Hong Kong’s Hang Seng Index dropped 1.5% following Wednesday’s 1.7% fall. 

The selling pressure in Hong Kong came after a mass demonstration against legislation that would allow citizens to be extradited to China triggered a mass protest and some of the worst unrest seen in the territory since Britain handed it back to Chinese rule in 1997. 

Japan’s Nikkei lost 0.8% while U.S. stock futures lost 0.3% in Asia, following small losses the previous day when the S&P 500 shed 0.20%. 

Oil hovered near five-month lows, pressured by another unexpected rise in U.S. crude stockpiles, as well as the bleaker outlook for demand posed by prospects of a protracted trade war between China and the United States. 

Brent crude futures barely moved at $60.06 in early trade after a 3.7% slide on Wednesday to $59.97 a barrel, the international benchmark’s lowest close since Jan. 28. 

U.S. West Texas Intermediate crude futures stood at $51.12 per barrel, compared to the previous day’s close of $50.72 a barrel, its weakest settlement since Jan. 14. 

“It is a bit of mystery that oil prices are so low when global stock prices remain relatively supported. But one thing is certain. Weaker oil prices will curb inflation and boost rate cut expectations,” said Daiwa’s Kabeya. 

Government data showed on Wednesday U.S. consumer prices barely rose in May, with the core annual inflation slowing to 2.0%, compared to a peak of 2.4% last July, adding to the growing expectations of a Federal Reserve rate cut in coming months. 

Investors will be looking to what Fed policymakers will say after its next policy meeting on June 18-19, with Fed Funds rate futures pricing in a 25-basis-point rate cut for the subsequent policy review on July 30-31. 

The 10-year U.S. Treasuries yield dipped to 2.103 percent, near Friday’s 2.053 percent, its lowest level since September 2017. 

Bond yields fell in Asia. Long-dated Japanese government bond yields hit their lowest levels since August 2016, with 20-year yield down 2.5 basis points at 0.220 percent. 

In Australia, long known for its high-yield currency, yields fell to record lows, with three-year yield now slipping below 1 percent. 

In the currency market, the yen gained 0.25% to 108.25 to the dollar as risk sentiment soured while the Australian dollar dropped 0.2% to $0.6913. 

The euro stood little changed at $1.1293, having taken a hit on Wednesday after U.S. President Donald Trump said he was considering sanctions over Russia’s Nord Stream 2 natural gas pipeline project and warned Germany against being dependent on Russia for energy. 

The British pound is on the back foot after British lawmakers defeated an attempt led by the opposition Labour Party to try to block a no-deal Brexit by seizing control of the parliamentary agenda from the government. 

Sterling fetched $1.2688, not far from this week’s low of $1.2653.

Gabon stops looting of natural resources

Gabon hopes to lead by example in stamping out illegal logging of the world's tropical hardwoods, a prominent British conservationist said on Tuesday after being named the central African country's new forests minister. (Reuters)

Lee White, who ran the U.S.-based Wildlife Conservation Society's Gabon programme for nearly two decades, was appointed late on Monday after his predecessor was fired over a scandal in which tonnes of illegally felled rare kevazingo wood went missing.

"In forestry we've been going through a bit of a turbulent time," White - who has dual British-Gabonese citizenship - told Reuters in an interview. "One of the first priorities is to get that straight."

Gabon's President Ali Bongo has cast himself as an environmental crusader, delighting conservation groups by banning raw wood exports, enlarging protected areas and demarcating 13 new national parks since he took power after the death of his father, Omar Bongo, in 2009.

Despite those efforts the country remains a target for the illicit wildlife trade and illegal loggers. Tackling the destruction of forests is seen by environmentalists as crucial in preventing runaway climate change.

White, most recently head of Gabon's National Parks Agency, said illegal activity in Gabon's forests emitted 15 million tonnes of carbon dioxide a year.

"We are trying to lead by example. If we don't mitigate the impacts of climate change, it's going to result in untold strife, and we don't have that much time," he said.

The president has promised to punish anyone implicated in the disappearance of a cache of 392 containers of kevazingo, which were seized at the port of Owendo in February and March. "It's been a wake-up call," White said.

Two Chinese nationals are being held, as is the head of customs, Dieudonne Lewamouo, and authorities have recovered 200 containers.

Although illegal logging is ravaging the forests of West and equatorial Africa, most of it driven by Chinese demand, the region's governments have rarely taken action.

There is high demand in Asia for wood from the kevazingo tree, which can take 500 years to grow to its full height of 40 metres (130 feet). While forestry is a major industry for Gabon, the kevazingo is protected by law.

White said Gabon will require all logging companies to be certified by the Forest Stewardship Council (FSC) - the only universally recognised certification scheme - by 2022.

Bongo, whose family has been in power for five decades, suffered a stroke in October while abroad, returning home in March.

Secrecy surrounding his health during his five-month absence has fuelled instability in a country where declining oil revenues and widespread poverty have dented his popularity.


Blockhomes Burundi has engaged in a conference to encourage young entrepreneurs. The conference discuss the future of sustainable entrepreneurship, but it also contain a contest in which 10 young entrepreneurs and their business ideas will be selected for start-up finance. 

Recent data on youth employment in Burundi indicate high unemployment rates among young people aged between 15 and 35 years old, up to 65 % in the capital Bujumbura. In addition, an inventory study on youth employment in Burundi shows gaps in job access by region, socio-demographic characteristics, level of education, etc. This is a worrying situation leading young people to feel and realize they have no alternative other than taking own responsibility and measures of self-reliance.

- It has been proved that entrepreneurship centered on youth is necessary in the fight against poverty. Youth are therefore called to do business at all costs since entrepreneurship is not only an alternative to unemployment but it can also be a real solution to socioeconomics development in Burundi, say Mr Janvier Nsengiyumva, board member of Blockhomes Burundi

Thus the Municipal Youth Council in the City of Bujumbura organize a Conference of young entrepreneurs to change the mentality according to which the Government or a third person should provide exclusively for their employment. They must be creative and initiate sustainable income activities.

The participants are 130 young graduates (university or higher technical level) with an entrepreneurial vision, together with 20 young entrepreneurs who have already a start-up business project or who have successful entrepreneurial experiences to share.

The number of young graduates continues to increase in urban areas. As matter of fact, most of the legally registered universities in Burundi are located in the Capital Bujumbura. After graduation, the laureates often stay in search of employment in the public or in private field rather than thinking about how to create jobs. The job search adventure for young people will take quite a long time up to many years and often will end in failure and frustration.

In recent years, provisions for young people have been implemented by entrepreneurship promoting agencies, Non-Governmental Organizations as well as by specialized Government institutions. However, their impact remains limited with fewer encouraging initiatives. The National Youth Council operates as an advisory body of the Ministry of Youth, Posts and Information Technologies, and contributes in initiatives that provide capacity to young people with regards to job creation abilities.

- The General or global objective of this conference is to actively contribute to the eradication of poverty in our society by transforming young graduates seeking employment into job creators, say Janvier Nsengiyumva, board member of Blockhomes Burundi

Africa50: an innovative African solution to an African challenge

Carole Wainaina, COO Africa50, talks about how Africa50 is building a team to support its mission and describes some of its priority projects

(African Business)

Your career has centred around work that mainly involved strategy, people, transformation and development. Why did you decide to join Africa50?

I often get asked this question given that I don’t have an infrastructure background. My leadership and business experience across different organisations, sectors and geographies has taught me that, regardless of the entity’s mission, people, organisation and partnerships are key success factors.

I therefore consider my “toolbox”, which contains diverse experiences, capabilities and networks, not only highly transferable but complimentary and much needed in any organisation today.

Africa50 was particularly attractive because it came at a time when I was feeling more called to play a bigger role in contributing to the transformation of Africa.

The opportunity to help build a more innovative organisation to develop and invest in infrastructure on the continent that had both a commercial and a developmental mandate was exciting. I was also inspired by the fact that Africa50 is an African solution to an African challenge. 

How are you building the team at Africa50 to support this mission?

The journey of building a world-class pan-African organisation is going well. We are up to almost 40 employees now, covering the gamut of project development and finance expertise, backed up by investor relations, communications, and other support teams.

We’ve been able to attract recognised experts in finance and development who combine outstanding academic backgrounds with extensive and diverse experience. 

Many come from the private sector and have been attracted to Africa50 by our innovative business mode, the opportunity to grow professionally and also because they are firmly committed to making a positive impact on the continent.

While 80% are African nationals, the others hail from Europe, Asia and North America. Such diversity is not only our goal, it is also a great asset to helping us accomplish our mission.

We hear a great deal about the fourth industrial revolution, a global mega-trend affecting the way people live and work. How does infrastructure investment and the work of Africa50 fit into that?

Infrastructure is essential for development and affects industrialisation at all levels, be it building up traditional manufacturing, which is a priority, to the fourth industrial revolution based around ICT and innovative technologies.

It helps diversify production, expand trade, raise productivity, and lower costs. Road, airports and ports open and connect markets; telecommunications enable information and services; water and sanitation improve health; and electricity binds it all together.

In many African countries expansion of traditional infrastructure is unlikely to keep pace with technological advances, so innovative technologies, mostly in ICT, must bypass existing constraints by leveraging alternative forms of tech-enabled infrastructure.

ICT (along with power, transport and midstream gas) is one of the key sectors covered by Africa50’s mandate to help reduce the infrastructure funding gap on the continent.

Through close engagement with our 27 African government shareholders we act as a bridge between the innovators, the investors and government stakeholders to finance and implement projects.

We also benefit from having an integrated approach, with the ability to deploy capital for both project development and project finance. This enables us to function like a one-stop shop throughout the lifecycle of a project, including during the crucial early development phase. 

Africa50 has selected ICT as one of its priority sectors. How do you reconcile the rapid progress across Africa in digital business, mobile banking, and similar services with the wider lack of connectivity?

The internet and the digital economy that depends on it is one of the most powerful tools to positively impact and transform lives, bringing great benefits in most sectors of human activity. 

Indeed, Africa is already tapping into many of the opportunities unlocked by the mobile revolution but it must do more to fully engage in the digital economy.

Although the continent has the fastest growing proportion of internet users in the world, it still has the lowest levels of internet access, with 75% of the population offline, including two thirds in rural areas. 

The lack of connectivity infrastructure, including reliable electricity, is a major barrier to increased access, along with high cost, and lack of appropriate local content.

On the supply side we need to significantly ramp up electricity generation, the continent’s most pressing need, and find alternative ways of expanding ICT networks to remote areas.

On the demand side we must improve ICT literacy and skills and stimulate interest by providing relevant local content and services. And, most of all, we need to make all this affordable for everyone.

Much depends on what is commonly known as “last-mile” connectivity. We must reach not only the millions of Africans living in large urban cities, but also those far from roads and electricity. This is possible.

Africa’s international internet bandwidth has tremendously increased over the past decade. Almost 55% of the population in sub-Saharan Africa now lives within reach of an operational fibre optic network node, compared to about 42% in 2013. If these growth figures can be maintained – and I believe they can even be accelerated – soon the vast majority of Africans will have high-speed internet connectivity, allowing the fourth industrial revolution to really take off.

Africa50 recently launched its first innovation challenge, how will that contribute to reducing Africa’s connectivity gap?

As a pan-African investment platform, we are committed to contribute to our continent’s most critical and pressing development challenges. Internet connectivity is a key driver for inclusive growth, provided it is accessible, affordable, easy-to-use and adapted to people’s needs. 

We just launched the first edition of the Africa50 Innovation Challenge at the 2019 Transform Africa Summit in May 2019. Through this initiative, Africa50 will crowdsource innovative solutions to help increase access to high-speed internet in under-served areas in Africa.

The call is open for ICT developers, innovators, engineers, entrepreneurs to submit workable solutions, via an online platform, to be assessed by the Africa50 investment team and its partners.

The winning solutions will receive cash prizes or be considered for project development funding.

Projects will be rolled-out in Rwanda as the pilot country, with the objective to scale them up to other countries in Africa. This Challenge is an exciting opportunity for us to engage with the most creative minds to find novel solutions that can help address last mile connectivity in a holistic and sustainable manner. 

What is possible, if Africa has full connectivity and internet for all?

The impact of improved connectivity and the technologies and infrastructure that come with it is already having a significant positive impact on Africa and its people, and this is only the beginning. Even some of the most advanced technologies can be applied in many parts of Africa, much like cellphones broke new ground in the face of some scepticism two decades ago.

Disruptive technologies such as AI, robotics, and drones can help countries in Africa leapfrog hurdles in health, education, manufacturing, and transport infrastructure, among other areas as it has already done in financial services.  

One possibility that is dear to my heart as an African mother, is the opportunity for Africa’s youth to become key players in the digital economy with the right skills and capabilities to help drive the economic and social development of our continent and, indeed, the world. 

Retailers Need To Redefine "The Good Life” to align with the new Sustainability Tide

There was a time not so long ago when news about finding a plastic shopping bag six miles below the surface of the ocean would have landed in the section labeled “Odd and Improbable.” Not anymore. (Forbes)

At the end of April, a manned submersible vehicle spotted a shopping bag and candy wrappers at the bottom of the Mariana Trench, a huge deep canyon in the middle of the Pacific Ocean. It is the third such sighting in two years and became a leading news item. That’s compelling evidence that we’ve passed the tipping point in consumer awareness about sustainability,  which means retailers will have to adapt and anticipate … or pay the penalty.

It reminds one of the famous speech by Patrick Henry, Virginia’s first governor, in which he uttered the words, “Give me liberty, or give me death!” Today the call to action might begin, “Give us sustainability,” as 2019 is shaping up as the year when consumers really begin to put their wallets where their hearts are. And those wallets will only become more powerful in the years ahead.


The Baby Boomers who once made up the largest segment of the purchasing public are retiring, and their impact on consumption is shrinking even as Millennials are entering their prime consumption years. A recent Pew Research Center study reported that voters aged 22 to 37 are considerably more liberal than older Americans. Further, they represent 28 percent of adult Americans and, according to Pew, are much more likely to support climate action and the political candidates who talk about it.

“These young people are poised to have an outsized impact on political races—this year and subsequently,” according to Pew. That means they will have an even bigger impact on the economy and especially on the retail sector. The message for retailers is parallel to the message Patrick Henry delivered in 1775: “The battle…is to the vigilant, the active, the brave.”

That battle is now on, in earnest. Next week in Detroit, brand consultant and media company Sustainable Brands is hosting a conference that includes a session titled, “What Constitutes The Good Life in the Eyes of Consumers.” Presenters will be researchers who have been examining what consumers expect from brands, and what earns their loyalty and drives their purchases.

San Francisco-based Sustainable Brands reports it commissioned a Harris Poll that found consumers are “shifting away from the pursuit of money, status and personal achievement, focusing instead on…the environment as a foundation of a ‘Good Life.’” The poll found that a whopping 80% of consumers say they will financially support brands who help them live a Good Life. This issue is, as Patrick Henry said when the American Revolution became inevitable, “one of awful moment [momentous] to this country.”

According to Sustainable Brands (SB), attendees at next week’s session will learn what researchers found out about “how consumers define The Good Life, what they believe about sustainability, what they expect from brands.” Data and data mining have never been more important to the retail trade than they are now as the Baby Bulge of millennials begin to drive the economy.

According to SB, brands need to learn “how to incorporate the concepts of ‘balance,’ ‘simplicity’ and ‘moderation’ that consumers now crave. They can use science, technology, storytelling and unlikely partnerships to meet the underlying demand for The Good Life and ultimately win in the market.”

Meanwhile, other research has identified sustainability as a top concern among consumers in the retail fashion industry. An report last year, based on social media mentions, found that sustainability was the fourth most-frequent positive comment about fashion brands, after design, fit, and price. It’s worth noting that quality didn’t make that list as it would have a few years ago.

More evidence: The luxury resale market is booming, with marquee brands like Neiman Marcus jumping on the bandwagon. Consulting firm Bain & Co.recently reported that the resale market hit $6 billion in sales last year. Furthermore, this secondary market not only does not hurt demand for luxury goods, but actually boosts it.

As a recent report by CB Insights Luxury Trends noted, “Luxury shoppers selling their used luxury goods get more money to spend on first-hand goods.”, a consumer website featuring luxury handbags, reports that the demand and price of a pre-owned Hermès Birkin bag “has skyrocketed over the past 35 years, generating an annual return of 14.2%.”

At a time when physical retail seems to be shrinking (although that is still open to debate), the next wave of consumers is driving the conversation and those companies that listen and are agile enough to adapt will live. Those which don’t give us sustainability are likely, to complete the Patrick Henry parallel, to die.

Eastern Congo has the world’s largest quinine plantations

A region known for misery also saves lives. The kivu provinces in the east of the Democratic Republic of Congo have a tragic reputation. Armed militias rape and plunder. Ebola, a virus, has infected more than 2,000 people. But the region has also saved millions of lives. North and South Kivu are home to the largest cinchona forests in the world. The bark of these trees, which were introduced by the Belgians, contains quinine, a drug that cures malaria.

(The Economist)

Near the edge of a plantation is one of just five quinine-extracting factories in the world. The operation, which has been running since 1961, produces about 100 tonnes of processed quinine a year, or about 30% of global demand. “First we address the country’s needs, then we export the rest,” says Etienne Erny, the managing director of Pharmakina, the firm that owns the factory.

Just under half the quinine is sent abroad. A third of this is turned into tonic water and the rest into medicine. It is a tragic twist of fate, therefore, that despite the abundance of quinine in Congo, it still has the second-highest rate of malaria deaths in the world. In 2017 some 435,000 people died from the disease. Many cannot afford to pay the $2 for a course of 21 pills or do not diagnose the malady in time.

While conditions in the Kivus (most notably altitude and humidity) are ideal for cultivating trees, the region’s never-ending skirmishes are not. Some of Pharmakina’s forests stretch into an area which is overrun with dozens of rebel groups that call themselves “Mai-Mai” and claim to have magical powers in battle. They regularly kidnap and kill. Now and then they send letters to Pharmakina demanding cash and threatening to abduct its workers. “You don’t pay, but you have to talk to them,” says Michael Gebbers, another director. Discussions take time and frightened employees do not dare turn up at the plantations. Moreover, during Congo’s two bloody wars, which ran for a total of six years between 1996 and 2003, great swathes of the forest were unreachable and the company’s output dwindled.

The problems of running a business in Congo extend beyond insecurity. Because there is no reliable supply of electricity, the factory is often powered by expensive generators. The chemicals used to process quinine are costly and come by lorry from Tanzania.

As if this weren’t enough, the firm also has to deal with growing competition. Indian traders have begun buying cinchona bark and shipping it to Delhi, where the cost of processing is lower. Demand has also fallen since the discovery of synthetic quinine and artemisinin, another plant-based anti-malaria drug. Still, people hoping to give Congo’s economy a tonic can do their bit to drive up demand each time they raise a glass.

Fintech revolution in India

Indians are switching to digital payments in droves as payment fintechs are better integrated with banks in India than elsewhere. (The Economist)

The alleys of the 150-year-old Chor (Thieves’) Bazaar, a colourfully named flea market in Mumbai, are crammed with goats, used tyres, speakers, drills and other assorted ephemera. But even in this unlikely place, modern payment methods are gaining a foothold. In stalls abutting the market, bags of sand can be paid for by providing a phone number or scanning a qr(quick response) code. Many countries have seen digital payments take off in the past few years; in India, where little over a decade ago a cheque could take more than two weeks to clear, it feels like a revolution.

It is one that has been shaped, not always intentionally, by government policies. September 2010 saw the arrival of Aadhaar, a system of biometric ids that could be used to open a bank account. After becoming prime minister in 2014, Narendra Modi chivvied bankers to open accounts for everyone. Around 360m basic “Jan Dhan” (people’s wealth) accounts were opened, adding to the 243m accounts already in existence. But many sat empty, or held just a rupee or two put in by banks under government pressure to reduce the number of zero-balance accounts.

Two further developments gave those unused accounts a purpose. The first was the launch in 2016 of the Unified Payments Interface (upi), an interbank money-transfer system. The second was “demonetisation” later that year, when 86% of banknotes in circulation were recalled. That caused economic carnage—but also gave digital payments a galvanic boost. Paytm, India’s largest digital-wallet firm, took out ads thanking Mr Modi for the move.

Paytm now claims 371m users. PhonePe, a subsidiary of Walmart-owned Flipkart, claims more than 150m, and bhim, run by a government-led bank co-operative, 46m. The value of digital transactions has risen more than 50-fold in the past two years, with many more smaller payments (see chart). Even the drivers of Mumbai’s three-wheeled auto-rickshaws have begun accepting payments that go through upito their (presumably new) bank accounts.

China’s giant payment apps, WeChat and Alipay, send transfers between their digital wallets, going through an official clearing house. Cryptocurrencies, which some tout as a possible future for digital money, touch the regulated financial system only when they are bought and sold. By contrast India’s pioneers, which started with digital wallets, are fast becoming interoperable with upi, which sends money directly between bank accounts. The result is both well integrated with the banking system and flexible enough to allow innovation in serving customers.

Regulators are happy with the system, says Saurabh Tripathi of bcg, a consultancy, since it protects deposits, increases financial inclusion and cuts tax evasion from unreported cash deals. It also suits banks, since they get fine-grained information on transactions that can be used for credit analysis and product customisation.

The global tech giants like the look of it, too. Google Pay is already available in India and Amazon Pay plans to launch soon. WhatsApp, which has 300m Indian users, has run a trial of a payments service with 1m of them, though the government’s requests regarding privacy and data-localisation are delaying it going nationwide. The success of other dominant chat apps that have moved into payments, such as WeChat Pay in China and Kakao Pay in South Korea, suggests that whenever its launch happens, it will go with a bang. 

Former Deutsche Bank co-CEO included in cum-ex probe: paper

FRANKFURT (Reuters) - German prosecutors are probing former Deutsche Bank co-Chief Executive Anshu Jain and 78 other current and former bank officials as part of an investigation into a dividend tax-stripping scheme, German daily Handelsblatt reported on Friday. 

Investigators suspect managers at Deutsche and other banks of helping to exploit a loophole which allowed two parties to claim ownership of the same shares, making it possible to claim dividend tax rebates running to billions of euros. 

The scheme, called “cum-ex”, involved several other global banks. 

The Cologne prosecutor’s office is also probing Garth Ritchie, the head of Deutsche Bank’s investment banking arm, as part of the investigation, Sueddeutsche Zeitung reported on Thursday, citing unnamed sources. Ritchie, through a Deutsche Bank spokesman, declined to comment. 

Jain, through a personal spokesman also declined to comment. Deutsche Bank declined to comment on whether Jain, who was co-CEO from June 2012 to June 2015, was included as part of the probe. 

The scam, which for years operated in a legal gray area until prosecutors declared it to be fraudulent, is being investigated by several prosecutors’ offices including by officials in Cologne. 

The Cologne prosecutor could not be reached for comment. 

In a statement, Deutsche Bank confirmed that current and former managers were under investigation, but did not say who they were. 

Deutsche Bank said that the Cologne prosecutor had been investigating two former employees since 2017 in connection with cum-ex transactions on behalf of former clients. 

Deutsche Bank said the lender was not directly involved in the tax scheme. 

“Recently, the prosecutor has initiated investigations against further former and current employees and management board members,” it said in a statement. 

It said the change in approach by the Cologne prosecutor was linked to procedural issues related to the statute of limitations, and did not imply that the prosecutor had changed its view on the facts of the case. 

“This has also not changed the Bank’s assessment of the facts of the case. Deutsche Bank did not participate in an organized cum-ex market, neither as short seller nor as cum-ex purchaser,” Deutsche said. 

Deutsche Bank acted as a leverage provider to clients who were involved in the scam, Handelsblatt reported.

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