A round up of some of the week’s most significant corporate events and news stories.

Goldman shrugs off $5bn fine to get back in control

Harvey Schwartz, finance chief at Goldman Sachs, was in typically ebullient form this week, writes Ben McLannahan in New York.

Presenting fourth-quarter results from the Wall Street bank, he shrugged off recent market swings and a $5.1bn penalty for mis-selling mortgage-backed securities — the last piece of unfinished business from the financial crisis — saying that the bank remained focused on things it could control.

Even with those “events,” he said, Goldman had generated returns above its cost of capital for the fourth successive year. “We certainly don’t control the opportunity set,” he said. “However, we do control several things: how we build our client relationships; how we invest in our people; how we adapt to change; how we allocate our capital, manage our risks and control our costs; and finally, how we invest in the future.”

The word “control” was a popular one: Morgan Stanley chief executive James Gorman had used it several times during his presentation a day earlier, in which he reiterated a pledge to cut the bank’s struggling debt-trading business down to size.

Losses from that division — which used to account for about two-fifths of the bank’s revenues before the crisis — are still eating away at group margins after five years of restructuring. The bank hardened its main profit target, saying it aimed to hit a 9 to 11 per cent return on equity by the end of next year, rather than 10 per cent “over the medium-term”.

“As a management team, our number one priority is to control what we can control, given market realities,” Mr Gorman said.

● Related analysis: Big US banks reveal oil price damage
● Analysis: Big US bank revenue growth is flat as a pancake

Deutsche Bank incurs €6bn loss after charges and revamp

The woes of big investment banks were underlined this week by Deutsche Bank, which said it would slide to a roughly €6.7bn loss in 2015, after taking another €2.1bn of restructuring and litigation charges in the fourth quarter, writes Martin Arnold in London.

John Cryan, who has been battling to restore investor confidence in Germany’s biggest bank since becoming co-chief executive in July, described the result — Deutsche’s first annual loss since 2008 — as “sobering”.

Shares in the German bank fell sharply as investors worried that even excluding all the “exceptional” charges, it still appeared to make a €600m loss in the final quarter of last year.

Mr Cryan, who previously helped restore UBS to health after the Swiss bank flirted with disaster during the financial crisis, said the exceptional costs — which come on top of €7.6bn in charges in the third quarter — were the necessary consequences of Deutsche’s efforts to turn its fortunes round.

Meanwhile, John McFarlane, chairman of Barclays, gave a strong hint that the UK bank’s Asian operations were set for the chop last year, when he described them as “not performing — and we don’t like things that actually don’t make money”.

Sure enough, Barclays told staff this week that it plans to cut up to 1,200 jobs in its investment bank by closing many operations in Asia, Russia and Brazil and exiting precious metals trading.

About two-thirds of the cuts are expected to hit operations in Asia, where the bank is also hoping to find buyers for its wealth management business in the region, which has about $36bn of assets under management. The bank held talks with parties about selling its Asian equities trading and convertible bond trading businesses before deciding to close them.

The latest in a long string of cuts at Barclays cuts unwind much of the expansion of its investment bank across Asia, Europe and Latin America engineered by Bob Diamond, its last-but-one chief executive.

It also reflects the difficulties that many western investment banks have found in trying to build a profitable franchise in Asia.

● Related Lex note: Deutsche opportunity cost
● Video: Why big banks are cutting jobs

Pearson’s shares jump 17% on plans to cut workforce

After months of gloom, Pearson’s shares had their best day since at least 1989 on news that the world’s largest education company would cut a tenth of its workforce, writes Henry Mance in London.

The restructuring plan — the second to be announced during chief executive John Fallon’s three years in charge — is expected to remove 4,000 jobs, and reduce overheads by £350m within two years.

It comes after Pearson admitted it had misjudged its key education markets, including the US, where more youngsters were opting to enter employment rather than higher education.

In the UK, policy changes have halved the number of students taking vocational courses since 2012, while government cutbacks in South Africa mean that textbook sales have fallen 60 per cent in local currency terms within two years.

Such trends had pushed Pearson’s shares to their lowest level since mid-2009, before a 17 per cent jump last Thursday.

Analysts at Barclays said the company had removed “some layers of uncertainty”, but questioned its ability to meet its target of profit growth from 2018. “With some areas likely to decline in 2017, we cannot build confidence that enough revenue growth is achievable over those years,” said Nick Dempsey.

Pearson remains reliant on textbook sales but is seeking to build its revenues from digital materials and English language schools. With the cost-cutting “they’ve pushed back the date they need to deliver growth from 2016 to 2018”, said Claudio Aspesi, a Bernstein analyst.

● Related The Top Line column: Beware the attraction of the big jobs cull
● Lombard note: Pearson gives lessons in adversity

Shell counts cost of falling prices amid profit warning

Royal Dutch Shell led a sell-off across the energy industry after it warned that fourth-quarter profits would tumble at least 40 per cent from a year ago following a collapse in oil prices that has battered big producers, writes Christopher Adams in London.

©Bloomberg

As Brent crude slid to 12-year lows below $28 a barrel, hit by fears over China’s slowing economy and the return of Iran to the oil markets, the Anglo-Dutch group said earnings, on a current cost of supplies basis excluding exceptionals, would fall to $1.6bn-$1.9bn, below analysts’ expectations.

However, Ben van Beurden, chief executive, said in a trading update ahead of a shareholder vote on its planned takeover of BG Group that he was “pleased with Shell’s operating performance in 2015, and the momentum in the company to reduce costs and to improve competitiveness”.

Bob Dudley, BP chief executive, predicted that the oil price would recover in the second half of 2016 as demand increased from countries including China, and supply began to ease as the US shut down production.

Despite concern among some Shell investors that the group was paying too much for BG after the fall in oil prices, the company is expected to win shareholder approval for its cash-and-shares bid.

It was backed on Wednesday by Norway’s oil fund, the world’s largest sovereign wealth fund, although Standard Life, another shareholder, has labelled the deal “value destructive”.

● Related Big Read analysis: US shale’s big squeeze
● Lex note: Shell, the song remains the same
● Lombard column: BG numbers inspire pro-deal revisionism
● Video: How Iran returns to the oil market

Renault to recall 15,000 cars over emissions problems

Dieselgate shows no sign of running out of fuel, writes Andy Sharman in London.

©Bloomberg

The Renault Captur SUV

Renault this week agreed to recall 15,000 vehicles just days after it emerged that French authorities had carried out raids at several of the carmaker’s offices as part of an investigation linked to the Volkswagen scandal.

Paris-based Renault told analysts that the problem related to a production error in its Captur sport utility vehicle, specifically regarding the engine control unit that delivers information to the emissions system. It insisted that no wrongdoing had taken place.

“We’ve said from the beginning there is no cheating,” said chief executive Carlos Ghosn.

More carmakers are expected to face scrutiny next week from a French government commission, which was set up in the wake of VW’s admission that it had used defeat devices to bypass emissions tests in the US.

Meanwhile in Wolfsburg, VW’s most senior supervisory board members pledged support for Matthias Müller, the chief executive, who had drawn criticism for a bungled trip to the US.

Media reports had hinted at disquiet among employee representatives about the four-month reign of Mr Müller, who failed to return from the US with an agreed plan to recall vehicles and appeared to play down the scandal in a radio interview.

Affected customers in the US can at least expect compensation, in the form of $1,000 worth of gift cards — unlike European customers. VW stood firm in the face of requests for these customers to receive financial redress.