Devil with a blue dress: A bank chief in drag, brothel rules and a dubious skit

These are stories Report on Business is following Thursday, Jan. 16, 2014.

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The bank chairman and his 'sister'
Surely there's a better way to rally your troops than by dressing up as a madam and comparing your embattled bank to a brothel in a skit riddled with sexist jokes.

Gerrit Zalm's performance would never fly in many countries, like Canada and the United States. But they laughed at it in the Netherlands. And the bank in question, ABN Amro, said its chairman's sketch fit with the Dutch sense of humour.

(I watched a video of the skit, but I put this item together from three news reports, given issues with translation.)

Mr. Zalm was performing at the Dutch bank's Cabaret 2014, which was put on for employees in several cities, including Amsterdam. The bank was clearly so pleased that it showed off a recording to reporters and posted it on YouTube.

Mr. Zalm dressed up in a striking blue dress, wig, big eyeglasses and ball gloves, coming out on stage and pretending to be his fictional sister Priscilla, a madam, giving advice to her banker brother.

"Where has 'putting the customer first' been the motto for centuries?" he said as Priscilla, according to The Financial Times.

"In my industry. Those banks have discovered it only recently."

Priscilla then went on to say that brothel values include trust, professionalism and ambition.

Which is arguably as far as he should have gone, rather than sinking into comments such as how Priscilla's business had a "good front office and an excellent back office," and how its motto is "women on top," according to Fortune.

Mr. Zalm, by the way, is also a former Dutch finance minister.

The current ABN Amro is the result of a crisis-era merger, and is now owned by the government, which plans to take it public, possibly next year.

One can only hope that Mr. Zalm acts differently during the IPO road show.

Bombardier delays C Series again
Bombardier Inc. has again delayed the entry of its crucial C Series jet.

The plane and train maker said today it is making "solid progress" on the new line, but after a review and initial flight last fall the first testing phase will need more time.

It now projects the C Series entry in the second half of next year, The Globe and Mail's Bertrand Marotte reports. A larger version will enter service about six months later.

"We are taking the required time to ensure a flawless entry-into-service," said the chief of the Canadian company's commercial aircraft unit.

"We are very pleased that no major design changes have been identified," he added in a statement, expressing confidence that "we will meet our performance targets."

This came today as Bombardier announced it won a $1.2-billion (U.S.) order for 16 C Series jets from a new airline in Saudi Arabia.

If all options are exercised by Al Qahtani Aviation Co., which operates SaudiGulf Airlines, the value of the deal rises to $1.99-billion, based on list prices.

Bertrand Marotte: Bombardier further delays C Series entry to second-half 2015

Loonie's fortunes
Several economists are weighing in on the loonie today – looking at both sides of the coin, if you will – with their takes on the good, the bad and the possibly ugly.

In one camp are observers stressing how the soft Canadian dollar will pump up the economy. In the other are those who are more about the downside.

To recap, the loonie, as the country's dollar coin is known, sank by almost 7 per cent last year, and is down a further 3 per cent so far this year, its decline largely driven by weak economic readings and the promise of a very easy-going Bank of Canada under governor Stephen Poloz.

According to a new report from Bank of Montreal today, a 10-per-cent drop in the currency could translate to a boost to gross domestic product of up to 1.5 percentage points over two years.

Obviously some are losing out from the dollar's slide, notably Canadians trying to enjoy a winter getaway in the American south.

"But there are also lots of winners," said BMO's chief economist, Douglas Porter.

"The beleaguered manufacturing and domestic tourism sectors will find the biggest relief from the weaker currency. Even some retailers will be breathing a tad easier, as the loud siren call of cross-border shopping fades for consumers with each tick down in the currency."

A lower loonie helps exporters selling their goods in the United States, and gives tourists visiting Canada and Americans doing business here more buying power.

Viewed another way, a 10-per-cent fall is equivalent to a cut in interest rates of a full percentage point under an old way of measuring such things, noted David Rosenberg, the chief economist at Gluskin Sheff + Associates.

But Glen Hodgson and Michael Burt of the Conference Board of Canada, while looking at the good side, also take an in-depth look at the flip side today, finding the erosion will "have a small net positive impact" on the economy while hurting consumers.

"A declining loonie will also hit all Canadians in the pocketbook," they said.

"It makes us all a bit poorer as consumers by increasing the prices for most of the things we import."

Mr. Hodgson and Mr. Burt pointed out that consumers have for years welcomed the "dampening effect" of a stronger dollar on everything from food to cars. If sustained, a lower currency will erase that.

"Higher prices would be expected to erode real wage gains, limiting the purchasing power of consumers and slowing real growth in consumer spending, which is the single largest component of GDP," they added.

Which is important, since consumers may be trying harder to bring down their swollen debts rather than spend more, putting the hope on the manufacturing and exporting sector to pick up the ball.

Which is what this is all about.

Both Mr. Porter and Mr. Rosenberg pointed out that the Bank of Canada can't be anything but happy with the way things have gone, because the country needs a push by its exporters.

Mr. Rosenberg goes a step further in his belief that the erosion in the currency has been engineered by Canada's finance officials and its central bank, which denies any such thing. This would come through comments and policy signals.

"I still think it pays to note that the move in the currency is not about commodity prices or a sudden loss of investor confidence," Mr. Rosenberg said.

"Not at all. It has been policy-driven and keep in mind that the 10-per-cent drop has already offered up considerable stimulus for the economy."

This is one of the reasons that markets will be watching so closely when the Bank of Canada releases its policy statement next week. There's suddenly heightened speculation that the central bank could signal a cut in its benchmark rate, though observers don't see that happening.

"The perception that the market has of Poloz wanting a weaker CAD means next week's statement could be the clear impetus everyone is hoping for to bring us through 1.100," said Stephen Gallo, BMO's European chief of foreign exchange strategy.

He was referring to the Canadian dollar by its symbol, and looking at it as the U.S. currency vs. the loonie. Viewed another way, that suggests the loonie sinking to 90.9 cents U.S.

And what he meant by "everyone" are the market players who would profit because they've been betting against the Canadian currency.

The loonie is pretty much flat today, having dipped briefly below 91 cents yesterday and then perking up to the 91.5-cent range.

Since its most recent high in September 2012, noted chief currency strategist Camilla Sutton of Bank of Nova Scotia, the loonie has now lost 12 per cent. Since its 2013 high last spring, it's down 9 per cent.

OSC unveils rules
The Ontario Securities Commission is proposing a new rule that would require companies to report annually on their policies to add more women to their boards and executive ranks, The Globe and Mail's Janet McFarland reports.

The new rules unveiled today by the regulator will also require companies to report on their term limits for directors, which would bring Canada in line with many other countries that have also required companies to disclose whether they have term limits for their boards. Proponents argue term limits help ensure there is more board turnover so new directors -- including women -- can be added to the mix.

Companies are also being asked to report on whether they have voluntarily adopted targets for women on their boards or in executive roles.

Janet McFarland: OSC plans reporting rule on companies' efforts to add women to boards

Goldman profit sinks
Goldman Sachs Group Inc. posted a drop in fourth-quarter profit today, but still topped the estimates of analysts.

The Wall Street giant earned $2.3-billion (U.S.), or $4.60 a share, compared to $2.9-billion or $5.60 a year earlier.

"Our work in advancing our client franchise and in ensuring continued cost discipline has allowed us to provide solid returns even in a somewhat challenging environment," said chief executive officer Lloyd Blankfein.

"We believe that we are well positioned to generate solid returns as the economy continues to heal and provide considerable upside for our shareholders as conditions materially improve."

Goldman Sachs profit drops 21% on lower bond trading revenue

Citigroup profit below projections
Citigroup Inc., in turn, fell shy of estimates, though its fourth quarter profit surged to $2.7-billion (U.S.), or 85 cents a share, from $1.2-billion or 38 cents.

"Although we didn't finish the year as strongly as we would have liked, we made substantial progress toward our key priorities in 2013," said chief executive officer Michael Corbat.

Citi profit misses Street as fixed-income revenue falls

U.S. consumer prices rise
The United States reversed a disinflationary trend in December, as consumer prices in urban areas rose at the fastest pace since July, our Washington correspondent Kevin Carmichael reports.

America's consumer price index increased 0.3 per cent last month from November, the biggest monthly increase since July, when the index advanced 0.5 per cent. Energy prices and shelter costs led the gain, the Labor Department said today.

On the year, the index was 1.5 per cent higher, pushing inflation to a level closer to the Federal Reserve's target of 2 per cent. It will take more than one month of data to persuade the Fed that the threat of disinflation has passed, however. The U.S. central bank also relies on another measure of inflation for a more accurate read on prices.

Saputo closer to Australian victory
One doesn't generally associate cheese with pitched takeover battles, but Saputo Inc. appears poised to win a big one.

The Canadian cheese maker has been in a struggle for control of Australia's Warrnambool Cheese and Butter Factory Holdings Co., which is bidding the equivalent of $460-million (U.S.).

As Reuters reports today, one of the stakeholders, Bega Cheese Ltd., announced it will sell its interests, which will bring Saputo close to majority at 45.2 per cent.

Saputo on cusp of control in Australia dairy war

Brazil hikes rate
Brazil's central bank unveiled a "bold" hike in its benchmark interest rate, of half a percentage point rather than the quarter-point markets were expecting.

This, noted Société Générale, despite its sputtering economy.

"The decision may strengthen the central bank's inflation fighting credentials, but it does not preclude further BRL weakness in the short term," Société Générale said, referring to Brazil's currency, the real, by its symbol.

The central bank's key rate now stands at 10.5 per cent.