(Reuters) – Standard and Poor's on Friday downgraded the core banks of Franco-Belgian financial group Dexia (DEXI.BR) by one notch, citing difficulties in securing wholesale funding and the need for increased collateral.
The ratings agency also said it could take further action, including further downgrades or even an upgrade, depending on how a proposed restructuring panned out.
The board of Dexia, whose shares are suspended, will meet in Paris on Saturday to vote on a break-up plan after Belgium and France pledged to guarantee its financing in the face of a share-price slide.
"We expect to resolve the CreditWatch placement once we have more information about what the restructuring means for Dexia's operating banks and more details about accompanying support that the French and Belgian governments could provide," S&P said in a statement.
S&P said it had lowered ratings by one notch to 'A-/A-2' on Dexia Credit Local, Dexia Bank and Dexia Banque Internationale a Luxembourg, which together represented over 90 percent of the group's consolidated assets.
It also placed those ratings on CreditWatch with developing implications.
"We could raise the ratings on some of Dexia's operating banks if separation from the group would strengthen their financial profiles or result in greater parent or government support," said the agency.
"The CreditWatch placement also reflects the possibility of a downgrade for some or all of Dexia's operating banks if funding problems deepen or asset sales accelerate," it added.
Asset sales could weaken capital if Dexia were required to recognize in its earnings some of the group's 6.9 billion euros ($9.25 billion) of negative revaluation reserves on available-for-sale securities, said S&P.
The agency said the ratings reflect the strong support Dexia receives from the Belgian and French governments.
"(They) are likely to provide further support to Dexia --a highly systemically important bank in our view -- if necessary," said S&P.
(Reporting by Wayne Cole; Editing by Mark Bendeich)
SEOUL (Reuters) – Samsung Electronics estimated its quarterly profit will exceed the most bullish market forecasts, indicating the booming smartphone business is emerging as the South Korean company's main profit engine.
Samsung, the first major technology company to flag earnings, however underperformed the market, up 1.9 percent, as it braces for a tougher fourth quarter, hurt by depressed prices of memory chips and flat screens.
Investors are looking for signs its telecom business can sustain strong growth in the crucial year-end holiday season as its flagship Galaxy line of smartphones and tablets square off against Apple's new iPhone going on sale next week.
"Samsung's estimates are far better than expected. Its telecommunications business is seen very positive as shipments of smartphones and other high-end handsets expanded," said Park Jong-min, a fund manager at ING Investment Management.
On Friday, Samsung estimated its quarterly operating profit at 4.20 trillion won ($3.5 billion) versus a consensus forecast of 3.4 trillion won by analysts surveyed by Thomson Reuters I/B/E/S. That would be down 14 percent from a year ago but up 12 percent from the preceding quarter.
The profit estimate easily topped the most bullish street estimate of 3.95 trillion won.
The company will provide detailed earnings later this month.
"The key to Samsung's earnings recovery is the chip market. The chip market will not be worse than now, but it will not improve significantly either. Its handset earnings are seen easing when there is a traditionally inventory adjustment," Jong-min said.
Profits from Samsung's telecoms division are widely expected to top earnings from the semiconductor business at the world's biggest memory chip maker.
Analysts say Samsung is one of the best placed companies to deliver something fresh and exciting to rival Apple. It already makes the closest competitor by sales to Apple's iPad tablet.
Samsung is widely expected to report record profit from handset sales and overtake Apple as the world's biggest smartphone vendor in unit terms in the third quarter, after selling just about 1 million fewer smartphones than Apple in the second quarter.
Expectations for further momentum in its smartphone business grew after Apple's newest iPhone left investors and Apple's fans wishing for more than a souped-up version of its previous device introduced more than a year ago.
"I previously thought Apple's new iPhone would slow Samsung's handset earnings momentum, but there was no iPhone 5, and the iPhone 4S will not be a burden on Samsung in the fourth quarter," said Ahn Seong-ho, an analyst at Hanwha Securities.
Powered by its flagship Galaxy models running on Google's Android operating system, Samsung is seen as the most credible challenger to Apple's mobile devices.
But an intensifying legal battle with Apple over patents and designs threaten to derail its handset and component business. Apple is also Samsung's biggest customer, buying mainly chips and displays.
Smartphones may now account for one-third of Samsung's handset portfolio, up from 26 percent in the second quarter and 12 percent a year ago, lifting the profit margin of its overall handset business to around 14 percent, analysts said.
"I am very surprised at the (profit) numbers. I am guessing either a particular lineup of products with higher margins sold well, or cost cutting measures were aggressively implemented," said James Song, an analyst at HI Investment & Securities.
Some analysts were expecting one-off gains such as reduced provisioning costs relating to royalty payments to Microsoft Corp over smartphones and tablets using Android operating system, or cheaper won currency to boost profitability.
The South Korean won tumbled 9.4 percent against the dollar in the third quarter, making Korean producers cheaper to overseas consumers.
Chips and flat screens are underperforming as consumers delay buying TVs and computers in a slowing global economy. This has pushed down prices of key components.
Prices of dynamic random access memory (DRAM) chips used in PCs tumbled about 50 percent in the third quarter and many analysts, including those at Citi and UBS, believe Samsung was the sole profitable DRAM maker in the third quarter.
Major global technology companies from Hynix Semiconductor to LG Display and Sony Corp are expected to report operating losses from their core businesses in July-September.
(Additional reporting by Hyunjoo Jin and Jungyoun Park; Editing by Jonathan Hopfner and Anshuman Daga)
CHARLESTON, W.Va. – The U.S. Environmental Protection Agency went too far when it began reviewing individual Clean Water Act permits on mountaintop mining operations, a federal judge ruled Thursday.
In Washington, U.S. District Judge Reggie B. Walton issued a partial summary judgment in a lawsuit filed by a coal mining industry coalition against the EPA and its administrator, Lisa Jackson.
The National Mining Association had challenged a 2009 decision in which the EPA and the U.S. Army Corps of Engineers agreed to coordinate reviews of backlogged permit applications for waste disposal at Appalachia mountaintop mining operations that raise serious environmental concerns.
Walton ruled the EPA's 2009 process exceeded its statutory authority under the Clean Water Act. The process is limited to 29 permit applications in Kentucky and West Virginia.
U.S. Rep. Shelley Moore Capito, R-W.Va., praised the decision as a step re-establishing the Army Corps of Engineers' role as the primary permitting authority.
"This is a significant step in our efforts to rein in the EPA, which remains intent on rewarding a core constituency that doesn't want any coal mining, no matter the cost to West Virginia or our nation," the lawmaker added.
Last year, aides for then-Gov. Joe Manchin filed a similar lawsuit targeting EPA policies adopted since President Barack Obama took office that are designed to limit the practice of burying streams under excess rock removed while extracting coal at mines.
Critics say that practice destroys the environment. The mining industry defends it as an efficient way to produce cheap power and employ thousands in well-paying jobs.
Since Obama took office, the flow of water quality permits for Appalachian mines has slowed to a trickle.
Further arguments are scheduled later on the portion of the coal industry's lawsuit challenging EPA's water quality guidelines for Appalachian mining operations.