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The Morning Ledger: U.S. Business Borrowing Loses Steam

10 Oct 2017 11:17 am

By Nina Trentmann

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Good morning. Despite an improving U.S. economy, the expected surge in corporate borrowing has failed to materialize, write WSJ's Rachel Louise Ensign and Christina Rexrode.

Since November -- the month Donald Trump was elected U.S. President -- the growth of loans to companies has dropped to 2.1% from 8.1%, according to U.S. Federal Reserve data. After an initial surge of optimism following the election, companies have become more reluctant to borrow, said Jeff Glazer, vice president at the Association for Finance Professionals representing corporate finance and treasury professionals. "All the turmoil and the inability to move policy through Washington set in," Mr. Glazer said.

Bankers have been predicting for months that growth would pick up. BB&T Corp. CEO Kelly King said late last year that there was "a huge pent-up demand" from companies who wanted to invest in their businesses after years of holding off.

But other industry observers say the lower growth rates are likely here to stay. Even some banks are getting less optimistic -- at least in the short-term. "This may just be the new normal," says Credit Suisse Group AG banking analyst Susan Roth Katzke.


P&G faces board vote. Procter & Gamble Co. is facing a vote by shareholders today on whether to give a board seat to activist investor Nelson Peltz.

The International Monetary Fund releases its World Economic Outlook.


GE gives activist board seat. General Electric Co. named activist investor Trian Fund Management LP's co-founder Ed Garden to its board, the latest move by new CEO John Flannery to change the direction of the struggling industrial conglomerate.

AIG predicts $3 billion in Hurricane-linked losses. American International Group Inc. said it expected to book pre-tax catastrophe losses of about $3 billion in the third quarter mainly related to hurricanes Harvey, Irma and Maria, reports Reuters.

America's retailers make changes to court millennials. Companies looking to grab a piece of America's single largest age cohort, 26-year-olds, have run into a problem: this generation is so different from previous ones that they require new products, marketing and even educational programs.

GM struggles to rightsize manufacturing footprint. Despite its drastic downsizing a decade ago under a federally funded bailout and bankruptcy restructuring, General Motors Co. again finds itself with too many U.S. factories that can turn out too many slow-selling cars. Also, the automaker on Monday said it has acquired a company that makes lidar, laser-based sensors that help autonomous vehicles navigate.

IKEA overhauls online sales strategy. IKEA has become the latest big-name retailer to radically overhaul its sales strategy in the face of online competition, launching a test to sell its flat-pack furniture through big ecommerce websites amid a fall in visitors to its out-of-town outlets, the Financial Times reports.

United Technologies hires new elevator segment leader. United Technologies Corp. has named Judy Marks, the chief executive of Siemens AG's U.S. unit, to lead its Otis elevator and escalator manufacturing business.

HelloFresh plans listing. HelloFresh, a German meal kit delivery firm competing with Blue Apron Holdings Inc., said Tuesday it plans to list in a flotation that could value the unit of Rocket Internet SE at up to EUR1.5 billion ($1.7 billion), reports Reuters.

BAE cuts jobs. British weapons maker BAE Systems PLC on Tuesday said it would eliminate almost 2,000 jobs, slow production of Typhoon combat jets, and streamline operations as its new chief executive comes to grips with a dearth of military plane orders and the need to lower costs.

Nokia cuts jobs, too. Nokia Corp. said Tuesday that it will cut around a third of its technologies unit workforce as it takes a step back from a stalling virtual-reality market and sharpens its focus on digital health. The company said that up to 310 of its 1,090 employees in the unit will be affected by the move, with the majority of jobs likely to be lost in Finland, the U.S. and the U.K.

Kobe admits falsifying data. Japan's Kobe Steel Ltd. saw its shares plummet after it said that its employees falsified data related to strength and durability of aluminum and copper products, reports Bloomberg.


EPA to withdraw power plant rules. The Trump administration on Tuesday will formally withdraw federal limits on carbon emissions at power plants, Environmental Protection Agency Administrator Scott Pruitt said, in a bid to improve the fortunes of the coal sector.

Qualcomm offers to give ground to EU in NXP deal. U.S. smartphone chipmaker Qualcomm Inc. has offered concessions in an attempt to allay European Union antitrust concerns over its $38 billion bid for NXP Semiconductors N.V., the largest ever in semiconductor industry, reports Reuters.

Apple praises French iPhone work prior to Macron tax talks. Apple Inc. Chief Executive Tim Cook singled out a small French company involved with innovative features in the latest iPhones ahead of meeting with President Emmanuel Macron, who has called for a tougher line on technology company taxes, Reuters reports.

Amazon faces additional U.S. tax bill after EU ruling. Amazon.com Inc. could be asked to pay additional taxes in the U.S. following a demand last week by the European Commission for back taxes in a crackdown on untaxed profits of nearly EUR2 billion held in Europe, reports the Financial Times.

California bill requires drug companies to justify price increases. California Gov. Jerry Brown signed a bill into law that requires pharmaceutical companies to give notice and reason for price increases of certain drugs, placing the state at the center of the national debate over costs over prescription drugs' costs.


Global economy set for a strong 2018. The global economy is set for continued strong growth into 2018, but the U.K. and Russia are likely to miss out, according to leading indicators released Monday by the Organization for Economic Cooperation and Development.

EU, U.K. disagree on Brexit. Seven months after the U.K. opened the two-year negotiating window to leave the European Union, the two sides have hit a stalemate over preliminary issues around the terms of Britain's exit.

Meanwhile, German clearinghouse Eurex Group said it is setting up a profit-sharing system with some of the world's biggest investment banks, in an unusual attempt to claw business away from the City of London ahead of Brexit.

Mexico reports record auto output, exports. Mexico produced a record number of cars and light trucks in September, backed by greater exports to the U.S., Canada and Europe. The report comes as the fourth round of North American Free Trade Agreement talks is due to start this week in Washington, with the Trump administration seeking to reduce U.S. trade deficits by redrawing rules of Nafta.

German exports up. German exports surged in August due to strong demand from the eurozone, in a sign that the region's economic recovery has continued to broaden.


Essilor International SA, a France-based optical-lens maker, announced the promotion of Hilary Halper to chief financial officer. Ms. Halper joined the company in 2016 as head of mergers and acquisitions, according to her Linkedin profile. Previously she served as director of corporate development at GlaxoSmithKline PLC. She replaces Geraldine Picaud, who had been finance chief at the company for seven years. Compensation details for Ms. Halper were not released.

The Morning Ledger from CFO Journal cues up the most important news in corporate finance every weekday morning. Ezequiel Minaya and Tatyana Shumsky contributed to today's Ledger. Send tips, suggestions and complaints to the editor: kimberly.johnson@wsj.com.

(END) Dow Jones Newswires

October 10, 2017 07:17 ET (11:17 GMT)

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