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Switzerland cracks down on HSBC

Feb 18: Officials are searching the bank’s Geneva offices this morning. Plus, Tim Hortons’ plans to go global, and Chinese New Year by the numbers


 

MORNING-PLAYBOOK-STORY
The scandal just keeps getting bigger for HSBC.

This morning, the Swiss prosecutor announced that the bank, Europe’s largest, is now officially the target of an investigation into money laundering, and investigators have begun searching the bank’s Geneva offices. Also in Europe, the Greek Drama continues, as reports surface that the Greek government may be willing to compromise in order to extend funding. In Canada, the new owner of both Burger King and Tim Hortons announced a more than $500-million loss in the first quarter after the deal—but revenue was up.

The S&P 500 also hit a record high yesterday, despite patchy news from the eurozone, while, this morning, oil has dipped under $53. The big events on the calendar today are the release of the latest minutes from the U.S. Fed’s deliberations on the interest rate, which are closely watched for signs of when the rate could increase. The Bank of Japan is also wrapping up the second day of a meeting, and is expected to announce whether any further stimulus is coming. We’ll also see a battery of numbers today: In Canada, there’s wholesale trade for December, and in the U.S., there are housing numbers (starts and permits), as well as industrial production, all for January.

It’s also the first day that markets in China are closed for the Lunar New Year! Markets will be closed until the 25th and, in the meantime, the country (and the Chinese community around the world) will be busy eating, drinking, travelling huge distances and spending massive amounts of money. We’ll take a look at the numbers below.

Switzerland cracks down. The search began this morning, with the prosecutor’s spokesperson telling the Financial Times, “We are looking for everything and anything we can find—documents and files.” The bank is already facing criminal investigations in the U.S., France, Belgium and Argentina. The U.K. financial watchdog is also examining the British bank, but has not launched a formal inquiry or a criminal investigation. The investigation is only the latest development in a scandal over leaked documents that allege the bank was helping wealthy clients—including dictators, musicians, drug lords, businessmen and high-profile politicians—dodge taxes and scrutiny. On the weekend, the former head of the bank quit his position as head of a financial services lobby group. Yesterday, a senior political columnist at the Telegraph also quit, alleging the newspaper has failed to cover the HSBC scandal properly for fear of hurting advertising revenue. The bank says it is accountable for past failures and has since changed its practices.

Could Tim Hortons be a global brand? The new CEO seems to think so. Daniel Schwartz, who is head of Restaurant Brands International, was on a press tour this week, touting the ultra-Canadian coffee chain’s international potential. But he cautioned not to expect any change of pace this year. The company, which also owns Burger King, bought the chain for $12.64 billion last year. The chain also announced a US$514-million loss in the first quarterly earnings report since buying Tim Hortons, which executives attributed to the one-time costs of the deal. The Brazilian private equity firm that owns both chains is known for its rapid cost-cutting, and has already announced 350 jobs will be cut at the chain.

Chinese New Year by the numbers. The holiday’s impact is already rippling around the world, as trading has been slowing since Friday in Hong Kong and workers head across China (and around the world) to spend the holiday with family. The scale of the migration, called the largest human migration in the world, is almost unfathomably huge: Bloomberg puts the number of trips made over the period at about 2.8 billion, while the Guardian puts the number at 3.6 billion (the population of China is around 1.36 billion). You can see some of this migration in this incredible map created by the Chinese social networking service, Baidu. Last year, consumer spending was at about US$100 billion, about twice what Americans spent during Thanksgiving. And the holiday also affects consumer data (not unlike how Christmas affects consumer spending and hiring), potentially skewing data for up to two months.

Greece to ask for an extension. Yesterday, Greece’s prime minister said the country would ask for an extension on the bailout for four months, but Athens would have some say about the reforms it wants. The plan was suggested by the European Commission’s economic chief earlier this week, but the new plan would also introduce a few more hiccups, including pledges by Prime Minister Alexis Tsipras to introduce laws that would conflict with the proposal. The greatest hiccup of all? While the plan may have been suggested by the Commission, the eurozone finance ministers rejected it on Monday. Greece is facing an ultimatum on their bailout deal, which comes with conditions for reform, and risks running out of cash within weeks.

Is Snapchat worth $19 billion? So says a source for Bloomberg. The app—whose sole purpose is to send photos that disappear within seconds—has already raised almost $500 million from a long list of investors, and aims to raise another $500 million, which would put its value around $16 to $19 billion, not a far cry behind the $22 billion Facebook paid to acquire the messaging service Whatsapp last year. (Incidentally, Snapchat’s founders, fortuitously, turned down an early $3-billion offer from Facebook.) Next time you send a personal photo on Snapchat, you may want to consider not only this $19-billion valuation, but a recent series of revelations that advanced spyware has been found installed in many computer hard drives, according to a Russian cybersecurity company.

Need to know:
TSX: 15,284.61 (+19.8), Tuesday
Loonie: 80.20 (+0.51 cents), Tuesday
Oil (WTI): $52.88, Wednesday morning (6:30 a.m.)


 

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