My finance view

Deutsche Bank AG suffered its first quarterly loss in five years as global financial turmoil heaped more than $4 billion in writedowns on the bank and market ructions put a brake on earnings.

The bank said on Tuesday it had slipped to a pretax loss of 254 million euros ($398 million) in the first three months of the year from a 3 billion profit a year earlier, marking its worst quarter since the collapse of the dot-com bubble.

Deutsche had been seen as one of the winners in the crisis that forced Swiss rival UBS and Royal Bank of Scotland to turn to shareholders to raise cash. Even Europe’s top insurer Allianz SE has been affected.

But Deutsche Bank is looking increasingly vulnerable as the global crisis squeezes its most important businesses such as trading in debt products.

Revenue at Deutsche’s investment bank tumbled to 880 million euros in the first quarter from 6.1 billion a year ago.

In a conference call with analysts, finance chief Antonio di Iorio retreated from the bank’s goal of a pretax profit of 8.4 billion euros this year, saying uncertain markets made a forecast impossible.

“The issue is not the writedowns,” said Dieter Ewald, a fund manager with Frankfurt Trust, which owns shares in Deutsche Bank paydayloan. “What is worrying for me is the impact on the operating business — that’s decisive.

“Deutsche Bank is dependent on the markets. Are they in a strong position here? I would put a question mark over this.” 

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Tomorrow will mark a 10-year anniversary that the federal government won’t be celebrating.

That’s when Liberal environment minister Christine Stewart signed the Kyoto protocol at the United Nations headquarters in New York, officially committing the country to a dramatic reduction in its greenhouse gas emissions.

Canada was required to cut by 2012 its emissions to 6 per cent below 1990 levels. With four years left to go, we’ve skyrocketed in the opposite direction. In a report last week, Statistics Canada reveals that Canada’s emissions are 25 per cent above 1990 levels.

It gets worse. According to a report last week in the scientific journal Nature, the mountain pine beetle that has killed 130,000 square kilometres of coniferous forest on the west coast has also turned those trees into net emitters of greenhouse gases.

When healthy, the trees act as a carbon sink, absorbing carbon dioxide from the atmosphere and storing it in biomass. When dead, however, the trees no longer absorb CO2. In fact, the opposite happens. As the trees rot and decompose, they release methane and other carbon-equivalent gases.

The B.C. researchers who wrote the report found that the greenhouse gas emissions from these dead trees over a 20-year period would roughly equal all CO2 emissions from Canada’s entire transportation sector over five years.

"So these are very large numbers in terms of impacts to the atmosphere," said report co-author Werner Kurz, a research scientist with Natural Resources Canada.

No kidding.

But the situation isn’t hopeless. When British Columbia released its provincial energy plan last February, it announced that B.C. Hydro would consider proposals for harvesting trees infested with pine beetles for energy generation.

Vancouver-based Nexterra Energy, for example, has teamed up Pristine Power of Calgary to establish a network of small gasification power plants in B.C. that could turn infested wood into 200 megawatts of electricity. Rather than let the trees rot and release methane, which is 21 times more potent than CO2, the idea is to extract usable energy out of them that would displace dirtier electricity and clear the forest for new growth.

The key is to move fast, leaving less time for the dead trees to decay. Another, and arguably more effective, approach is to harvest the trees and convert them to char, or "biochar." Using a process called pyrolysis, the wood is essentially baked in the absence of oxygen and converted into a carbon-rich char.

This char contains about 60 per cent of the carbon in the original wood and, unlike wood, the char won’t decay – it remains chemically stable for hundreds of years, trapping the carbon permanently.

Another bonus is that char can be ground up and spread over topsoil to improve crop fertility and enhance nutrients and water retention in soil 500 fast cash. Since the carbon is bound in the char, it is effectively sequestered in the soil.

Cornell University’s Johannes Lehmann, a leading expert on biochar studies, said it’s something the B.C. government might want to look at. "It could be that a good portion of the emissions (from the dead trees) can be avoided by conversion of the damaged biomass into biochar," he wrote in an email.

The beauty with char is that you can pack it and weigh it. You know how much carbon is locked into a kilogram of char, so calculating carbon credits is easy compared to alternatives, such as guessing how much CO2 a new forest will absorb.

Perhaps some clever entrepreneur will see the potential of selling bags of pine-beetle wood char as a way of boosting the performance of residential gardens.

Even researchers at EnCana Corp., the largest petroleum company in Canada, are studying the biochar option. Chemical engineer Subodh Gupta, who co-ordinates research and development in EnCana’s oil recovery group, says carbon sequestration can’t just be about capturing greenhouse gases from the oil sands and coal plants and then pumping it underground.

An abstract of a paper to be presented in June at the Canadian International Petroleum Conference in Calgary, Gupta will argue that char creation and sequestration – what he terms "biosequestration" – needs to be recognized by industry and government as a serious option, and a complement to geological sequestration.

After all, even if we can figure out how to economically capture CO2 from power plants and oil-sands operations, it doesn’t address emissions resulting from transportation and other more distributed sources – or the dead forests of B.C. for that matter. Coming up with a way to offset those emissions is necessary, and that’s where Gupta believes biosequestration holds great promise.

He’s so encouraged by the possibilities, he plans to hold a conference in Calgary later this year dedicated to discussing the approach.

More awareness is needed, he insists. "Until the Canadian government and Alberta government recognizes it, it’s not an option. And they won’t recognize it until the public at large recognizes it."

Ten years after signing Kyoto, we need all options on the table.

Tyler Hamilton’s Clean Break appears Mondays. You may email him at thamilt@thestar.ca.

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Step inside Azim Popat’s small shop on Gerrard St. E., and you’ll see every kind of basmati rice, from the finest polished grain to the cheaper, lower-grade kernels, proudly displayed and piled in 4.5-kilogram bags.

For now, the shelves are stocked at Kohinoor, the East Indian grocery Popat has owned for nearly two decades. But already the shop owner sees signs that the growing international rice crisis may be making its way to Toronto.

The store no longer carries Sona Masuri, a premium medium-grain rice prized by the Indian community, since India stopped exporting it last year. And it’s only through personal connections with suppliers that Popat has secured his usual stock of basmati.

Basmati is the store’s best-selling item, Popat said.

"It’s not about price any more. It’s about availability," he said, noting that some customers are buying up to four times as much rice in case of a shortage.

In neighbourhood groceries and massive Asian superstores throughout the GTA, there’s some small-scale rice-hoarding going on, spurred by tales of shortages and rationing worldwide. Some stores, following the step taken by U.S. warehouse outlet Sam’s Club, have imposed caps on how much rice customers can buy.

But while it may be hard to find your favourite brand or type of rice, so far, there’s still plenty of the white stuff to go around.

At Hong Tai Supermarket, an Asian megamart in Scarborough, the soaring cost of rice hasn’t deterred customers from stockpiling eight-kilogram bags of a Thai variety considered among the best.

"We keep telling them, `two bags per family,’ but then they just come back every day and buy two bags," said store manager Ann Luong, adding that a typical family goes through one bag every two weeks.

The store set the two-bag limit a month ago after it was cut off by its supplier, she said.

"After what’s on the shelf, I don’t have any," said Luong, who estimates the bags will be gone before the weekend is through. "How soon will we get it? I don’t know."

Though there are other varieties of rice in stock, she said, customers are attached to that particular brand and won’t necessarily settle for anything else.

But their irritation at switching brands pales in comparison to the drama of a true shortage, she said.

"If we can’t get rice, I don’t don’t know what we’ll do," Luong said payday loans. "Our people, we have to eat rice. If we can’t have rice, people get angry."

There’s plenty of talk about a rice shortage at Philippine Oriental Food Market, just a few blocks from Kohinoor. But it’s not their own supply the customers worry about. It’s that of their families on the other side of the world.

"Where I’ve seen an increase in business is from people sending money to their relatives in the Philippines so they can buy rice," said Rosita Dela Cruz, the store’s owner. She said some people have been wiring twice as much cash as they normally would.

In Toronto, Dela Cruz said, demand for rice has held steady, but her store hasn’t seen any cases of hoarding. Nor is it having trouble getting rice from suppliers.

"We’ve not seen a panic yet."

Premier Dalton McGuinty said yesterday his government will "monitor the situation very carefully," but Ontario’s poorest people shouldn’t expect extra help with spiralling food and energy prices for now.

Speaking at the Green Living Show in Toronto, the Premier said his government has a "great plan" to attack poverty and guide the province through an economic slowdown, including a pledge to increase welfare rates about 2 per cent.

But some critics said that was not enough. "People on seriously inadequate incomes are going to continue to suffer," said anti-poverty activist Jacquie Maund of Campaign 2000, calling for welfare rates to be indexed to inflation.

With a file from Rob Ferguson

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Apple Inc.’s fiscal second-quarter profit jumped 36 percent on blistering sales of Mac computers, but the company forecast lower-than-expected earnings.

The Cupertino, Calif.-based company earned $1.05 billion, or $1.16 per share, in its second quarter, which ended March 29.

During the same period last year, Apple earned $770 million, or 87 cents per share fast payday loans. Revenue jumped 43 percent to $7.51 billion.

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General Electric Co (GE.N: Quote, Profile, Research) chief Jeffrey Immelt said on Wednesday U.S. capital markets have improved since the end of the first quarter but the overall U.S. economic picture is unchanged, and the company has raised its 2008 cost-cutting goal by $1 billion.

“The capital markets are a little better” than they were at the end of March, when turmoil prompted by the near-collapse of Bear Stearns Cos Inc (BSC.N: Quote, Profile, Research) made it difficult for GE to complete deals, Immelt said at the company’s annual meeting.

GE’s inability to close some financial asset sales at the end of the first quarter contributed to its unexpected drop in profit, which triggered the sharpest sell-off in its shares in two decades. Some of these deals have now been completed, Immelt said.

“The U.S. economy hasn’t gotten any worse or any better and the global economy still seems to be pretty good,” Immelt, GE chairman and chief executive, told reporters ahead of the conglomerate’s annual meeting in Erie, Pennsylvania.

GE, the second-biggest U.S instant cash advance. company by market value, has raised its 2008 cost-cutting goal to $3 billion from $2 billion, Immelt said. Last year the company cut costs by $2 billion.

GE slashed its full-year profit forecast to a range of $2.20 to $2.30 per share — meaning profit would be flat to up 5 percent — in the wake of the grim first quarter. It had previously forecast a rise in profit of at least 10 percent.

“We are in the toughest economy since 2001 and the worst housing crisis since the depression,” Immelt told shareholders, standing in front of a bright yellow GE-built hybrid railroad locomotive.

Asked about the slump in GE’s stock and questions raised about his credibility in the wake of the company’s unexpected drop in profit this month, Immelt said, “I think my track record over a long period of time with this company has been good. I expect it to be good in the future. … You don’t do a job like this if you can’t take a punch.” 

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OTTAWA–Six of 10 components rose in March as the composite leading index remained unchanged after a decline in February.

Statistics Canada reports both housing and new orders for durable goods rebounded from large declines, while overall household spending led growth and the stock market replaced manufacturing as the economy’s weakest sector.

Outlays for durable goods posted a third straight gain, as auto sales remained on a strong upward trend, as the housing index rebounded 0.2 per cent after five straight declines.

The stock market down trend deepened for a fifth month; its 1.9 per cent drop was steepest of any component.

Export demand continued to reel paydayloans. New orders rebounded 0.6 per cent, on gains for investment goods and a partial autos recovery, not reflected in higher shipments, which lowered the shipments-inventories ratio for a second straight month.

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Gunning for three board seats at Furniture Brands International Inc., a dissident shareholder on Thursday struck a conciliatory tone and tried to allay two of the company’s major objections.

The Clayton-based furniture manufacturer, trying to recover from a loss last year, has squared off in an increasingly vituperative proxy battle with Sun Capital Partners of Boca Raton, Fla. The $10 billion private investment group — the company’s No. 2 shareholder — has said it is interested in buying the company.

The two sides disagree over whether Sun’s nominees would fight for all shareholders, and whether allowing Sun to peruse the company’s books would let sensitive information leak to competitors in which Sun has stakes.

In a letter to the board Thursday, Sun Capital tried to calm things, calling the latter concern unfounded. "While it is our standard business practice to fully protect the integrity of such information, we have offered several times — and remain willing — to enter into a formal nondisclosure/confidentiality agreement that will legally preclude any transfer of information."
Under such an agreement, Sun said it would separate its professionals involved with Furniture Brands from those involved in its other furniture holdings.

Also, if Sun Capital managing director T creditreports. Scott King is elected to Furniture Brands’ board, and Sun then submits a takeover proposal, King would recuse himself from any committee formed to evaluate the proposal. Sun did not say whether King would vote at any point in the process as a board member.

Sun said its other two nominees do not work for Sun and are independent.

The group also reiterated that it remains open to alternatives to a takeover.

jmcwilliams@post-dispatch.com

314-340-8372

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Hyundai Motor Co. is recalling 393,714 Sonata passenger cars in the United States to fix a problem with the air-bag system in the front passenger seat.

The automaker said the recall affects 2006-2008 Sonatas equipped with an advanced air-bag system that disables the passenger seat’s front air bag if it detects a child-restraint system or a small child in the seat freecreditreport.

Hyundai said it received some complaints that the system was misclassifying a small adult as a child and shutting off the passenger air bag.

For more information, contact Hyundai at 1-800-633-5151.

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CHARLOTTE, N.C. — Wachovia Corp. will slash its dividend and raise $7 billion in a share sale after reporting a surprising first-quarter loss on Monday of $393 million.

"I’m deeply disappointed with our first quarter results," Chief Executive Ken Thompson told analysts on a conference call. "I know these actions aren’t without cost. I wish they weren’t necessary, but they are."

The first-quarter loss for the Charlotte-based bank works out to 20 cents a share. That compared with profit of $2.3 billion, or $1.20 a share, a year earlier.

Excluding merger-related and restructuring charges, the bank lost $270 million, or 14 cents a share.

Revenue fell 4.5 percent to $7.89 billion from $8.27 billion last year.

The results, tainted by exposure to credit markets, were worse than analysts anticipated. Analysts surveyed by Thomson Financial had expected Wachovia to earn 40 cents per share on revenue of $7.98 billion. The earnings estimates typically exclude one-time items.

The nation’s No. 4 bank said it will cut its dividend by 41 percent to 37.5 cents per share from 64 cents per share. The move is expected to save $2 billion in capital annually "to build capital ratios and provide more operational flexibility," the banks said.

The bank also said it plans to cut 500 jobs within its corporate and investment bank, an area that has been hit by a drop in issuance of complex securities. Since October, Wachovia has cut more than 260 jobs in corporate and investment banking, which had about 6,100 employees as of Dec. 31.

In premarket trading, Wachovia shares fell $2.96, or more than 10 percent, to $24.85.

The share sale will involve common stock and convertible preferred stock. Wachovia said it intends to use the net proceeds from the sale for general corporate purposes.

The cash infusion would be Wachovia’s second of the year payday loan. In January and early February, Wachovia added $8.3 billion in capital by issuing preferred stock and other securities to investors.

Wachovia’s troubles with the housing slump have been compounded by its 2006 acquisition of California-based Golden West Financial Corp., a $25.5 billion deal whose timing, chief executive Ken Thompson has acknowledged, "was not the best."

"With the benefit of hindsight, it is clear that the timing was poor for this expansion in the mortgage business," Thompson wrote in a letter to shareholders in February.

Golden West’s loans were concentrated in California, one of the hardest-hit housing markets in the United States. Wachovia said this month that it was considering halting the making of loans, including its signature Pick-A-Payment mortgage loans, in 17 California counties heavily affected by falling home prices and rising foreclosures.

Last week, it announced a new set of lending guidelines that appeared to be a broader step to help manage losses at the bank.

Wachovia said Monday it took writedowns of $2 billion during the quarter. The bank also set aside $2.8 billion to cover problem loans, up from $1.5 billion in the fourth quarter.

"The precipitous decline in housing market conditions and unprecedented changes in consumer behavior prompted us to update our credit reserve modeling and rely less heavily on historical trends to forecast losses," Thompson said.

Wachovia joins a long list of companies that have raised capital in the wake of problems in the mortgage market, including Countrywide Financial Corp., Thornburg Mortgage Inc., Merrill Lynch & Co., Morgan Stanley and Citigroup Inc.

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WASHINGTON–Canadians can expect lower borrowing costs as the Bank of Canada continues its efforts to invigorate the economy, the bank’s governor Mark Carney said after attending a summit on the global financial crisis.

The central bank in Ottawa slashed its benchmark rate by one-half of a percentage point to 3.5 per cent last month.

The bank has been saying that "additional policy stimulus is likely to be required in the near term and that holds true today," Carney told the Toronto Star yesterday. He and Finance Minister Jim Flaherty joined their peers for two days of talks about the economic crisis spawned by turmoil on financial markets in North America, Europe and other regions.

In a final communiqué, the group warned that world economic growth has slowed and "growth prospects for 2008 and 2009 have deteriorated."

Behind the grim outlook is a credit crunch that spread from the U.S. through world markets after confidence in subprime mortgage securities and other high-risk investment vehicles collapsed last year.

Carney warned yesterday the tightening of credit that is dragging down economic activity "is not over."

He added that the financial authorities gathering here expressed a "great deal of concern about global food-price inflation and the impact that is going to have on less developed countries."

Aid groups are blaming the problem in part on the switch to biofuels that has driven up demand – and hence, prices – for food around the world.

After the meetings, Flaherty said it’s time for banks and investment firms to come clean about the risky securities that have cost Canadian investors millions in losses payday advances.

He said Ottawa will be moving quickly to push banks, investment firms and credit rating agencies to give investors more information on the risks involved in buying complex investment vehicles like asset-backed commercial paper (ABCP).

Canada’s $32 billion ABCP market imploded in the wake of the U.S. subprime mortgage fiasco.

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