Business sector forecasts slow slide to J$115 = US$1

Businesses expect the local currency to slide towards $115 to US$1 by August 2015, a slower pace than previously expected, according to a Bank of Jamaica (BOJ) report.

It signals growing stability in the financial sector which, up to mid-year, suffered from faster depreciation.

The expected depreciation would result in 3.8 per cent decline over the review period against its US counterpart. In June, respondents expected the dollar to lose 5.8 per cent of its value over 12 months.

“Relative to the survey in June 2014, respondents expected a slower pace of depreciation in the domestic currency for the three-month, six-month and 12-month period beyond the survey date,” stated the BOJ Inflation Expectation Survey prepared by the bank’s Research Services Department and which contained data from 292 respondents.

The currency lost 14.4 per cent of its value in 2013 and an additional five per cent since January. Since June 2014, the slide tapered off based on an influx of foreign currency linked to the International Monetary Fund (IMF) loan agreement. At the time, the BOJ and the IMF separately indicated that the currency gained competitiveness against the greenback.

In the survey, businesses stated that they expect inflation to dip slightly towards 10.4 per cent for the 2014 calendar year, down from 10.7 per cent expected in the previous survey.

“The results of the August 2014 survey reflected an improvement in businesses’ perception of inflation control by the authorities when compared to the previous survey. Specifically, the index of inflation control increased to 156.6 from 149.9 in the June 2014 survey. This improvement mainly reflected an increase in the number of respondents who were ‘satisfied’ with the authorities’ control of inflation,” stated the BOJ.

The survey captured the perceptions of chief executive officers, managing directors and financial controllers about the future movement of prices, current and future business conditions and the expected rate of increase in wages/salaries. The BOJ said that these responses assist it in charting future policy decisions.

– Steven Jackson

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Business sector forecasts slow slide to J$115 = US$1

Swiss bank UBS beats forecasts

BERLIN, Germany

A strong performance from the investment bank division and a sizeable tax gain helped Switzerland’s biggest bank, UBS AG, return to profit in the fourth quarter following a large loss a year earlier.

The bank said Tuesday it made a net profit of 917 million francs (US$1 billion) in the October-December period following last year’s equivalent loss of 1.9 billion francs when earnings were dragged down by litigation and restructuring costs.

As a result, the bank made a full-year profit of 3.17 billion francs compared with a loss of 2.48 billion francs in 2012.

The quarterly figures showed that the bank saw an increase in fee and commission income largely at its investment bank unit and reported a tax benefit of 470 million francs on deferred taxes.

The results were better than expected — the consensus in the markets was for a fourth-quarter net profit of 577 million francs and full-year earnings just short of 2.8 billion francs.

As a result, the bank bucked the broader stock market trend and UBS shares rose 3.6 per cent to 18.07 francs in Zurich trading.

Because of its strong performance, UBS hiked its annual dividend 67 per cent to 0.25 francs per share.

Overall, last year’s results may mark a turning point for a bank that in 2012 had to pay fines for allegedly manipulating, along with other banks, a key market interest rate known as LIBOR.

UBS and 17 other financial firms were also sued by the US government for selling some US$196 billion worth of mortgage-backed securities to housing financing agencies Fannie Mae and Freddie Mac.

For last year’s fourth quarter, UBS reported 79 million francs in provisions for litigation and regulatory expenses — far below the 2.08 billion francs it set aside a year earlier. Full-year provisions declined to 1.7 billion francs from 2.55 billion francs in 2012.

Still, chief financial officer Tom Naratil cautioned in a conference call with reporters and analysts that UBS still expects charges related to regulatory issues and other claims “to remain at elevated levels through 2014″.

For this year, UBS said uncertainty over global growth, fragility in emerging markets and unresolved issues in Europe and the US “make improvements in prevailing market conditions unlikely”.

However, it said that “despite possible headwinds, we expect that our wealth management businesses will continue to attract net new money”.

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Swiss bank UBS beats forecasts