Business

Russian investment bank Troika Dialog is to be bought by the nation’s largest bank, Sberbank, for $1bn (£625m).

Terms of the widely anticipated deal will be finalised in coming months, Sberbank head German Gref said.

Under the deal, Troika Dialog will operate as a stand-alone entity for the next three years, Sberbank said.

State-owned Sberbank will buy the 63.6% stake held by Troika employees, as well as the 36.4% stake held by South Africa’s Standard Bank.

«Standard Bank Group will sell all of its shareholding in Troika Dialog for an initial cash amount [...] of $372m, and will receive an earn-out payment of about 8% of any increase in the value of Troika Dialog as at the end of 2013,» Standard Bank said in a statement.

The South African bank invested $300m in Troika Dialog in September 2009.

«We are gaining the unique opportunity to offer modern financial services to tens of thousands of Russian companies that up until now lacked such possibilities,» Mr Gref said in a statement.

Sberbank, which is 60%-owned by the state and is expected to be further privatised, has assets worth $260bn and a market value of $75bn.

«Acquiring an investment banking franchise should help Sberbank compete against [Russia's second-largest bank] VTB on the depth and diversity of product range offered to their principal corporate client base,» said Renaissance Capital analysts in a note.

The deal is expected to be completed at the end of the year.

US retail sales are growing strongly, according to official data.

Monthly sales figures showed their eighth gain in a row, with February’s up by 1%.

January’s overall figures were revised upwards, from 0.3% to 0.7%, despite severe weather that month in parts of the US.

The Commerce Department also reported that on an annual basis retail sales were 8.9% higher than they were in February 2010.

Sales totaled $387bn, up 15.3% from the low reached in December 2008.

Paul Ashworth, chief US economist at Capital Economics, said: «This is a very encouraging report.»

However, he warned that higher energy prices would start affecting household budgets in the next month or two.

The most recent figures for spending, which on its broadest measure accounts for 70% of US economic activity, show it grew at a 4.1% annual rate in the fourth quarter, the fastest for more than four years.

The data adds to the picture of an improving US economy.

Other recent data showed the jobless rate was falling, and export data healthier.

Manufacturing grew at its fastest pace in nearly seven years and the service sector expanded at its fastest pace for more than five years, according to recent figures.

But the Republic of Ireland, which at 12.5% has one of the lowest corporation tax rates in the EU and attracts the lion’s share of EU foreign direct investment, has already ruled out making any changes to that.

Enda Kenny said Dublin would resist German efforts to introduce a common corporate tax base.

Mr Kenny told the state broadcaster RTE such a move would be «a harmonisation of tax by the back door».

Countries including Germany and France regard differences in taxation and spending between eurozone members as key factors in creating the debt crisis.

Other moves to safeguard the euro include Germany’s desire to see the target of keeping government deficits to below 3% of gross domestic product (GDP) enshrined in law, something it has already done.

The latest draft of the agreement reads: «Euro area member states commit to translating EU fiscal rules as set out in the Stability and Growth Pact into national legislation.»

The EU’s Stability and Growth Pact also sets a debt limit of 60% of GDP.

The draft also includes proposals for lower labour taxes, a common corporate tax base and indexing retirement age to life expectancy.

Persistent fears about the levels of debt in some European countries, notably Greece and Portugal, have caused their cost of borrowing to again reach record levels in recent days.

Higher spending and lower taxation countries, which also include Spain, have had to pay more to borrow money than more prudent countries.

They are all making efforts to get their huge borrowings down, with Portugal announcing fresh spending cuts and tax rises on Friday and promising again that its deficit would meet its target of 4.6% this year.

The move was welcomed by the European monetary affairs Commissioner, Olli Rehn, who said these were «clear and important» steps that would help Lisbon regain control over its debt and end uncertainties.

Despite this, a note from the research firm, High Frequency Economics, pointed out that Portugal’s borrowing costs had risen to levels that would drive it to seek help from the EFSF and the IMF.

Meanwhile, Spain, one of the countries the markets fear may next need a bail-out, this week had its credit rating downgraded amid fears about the ability of the government to restore its finances and about the cost of restructuring its banks.

Eurozone leaders have reached an agreement in principle on a pact to co-ordinate economic policies, EU President Herman Van Rompuy has said.

Other elements of the package were still under discussion, he added.

Eurozone leaders are in Brussels to try to find a way out of the debt crisis that has dogged the region for more than a year.

Earlier, Greek Prime Minister George Papandreou had called for Europe to take «strong decisions».

In a message on Twitter, Mr Van Rompuy had initially said: «We have an agreement on the Pact for Euro.»

The message was later amended to: «Update from ongoing meeting: Agreement in principle on the Pact for the Euro, but still discussing the other elements of the package.»

A pact would give members a say over each other’s major economic policies – a move aimed at keeping countries under firm fiscal discipline.

Any agreement would need to be endorsed at a summit of all 27 EU states on 24-25 March.

Further afield an oil refinery near Tokyo caught fire, causing a massive blaze.

And activity at the major port in the nearby city of Yokohama has been disrupted by the earthquake, suffering a loss of power at its terminal.
Map showing where earthquake struck

«At the moment they are trying to get power back but it’s unlikely to happen today,» said Boon Lee Lur of shipping company Neptune Orient Lines.

The city of Sendai in the north of Japan, which was the worst hit by the disaster, saw fires break out and its port overrun by the tidal wave.

The cost of clearing up the damage done could run into the billions, according to HSBC Private Bank’s chief Asia strategist, Arjuna Mahendaran, and that is likely to add further to the Japanese government’s ballooning debts.

But rating agency Moody’s was more upbeat about Japan’s capacity to deal with the quake.

«In a big economy like Japan, the impact of a natural disaster can be absorbed economically by the government and private insurance, so there will be no impact on government’s finances and therefore Japan’s sovereign rating,» it said.

Capital Economics said that the timing of the current disaster «could not have been much worse» for the Japanese economy, which contracted at the end of last year.

It said a large part of the rebuilding costs would have be to paid for by the government, adding to its already large debt problem.

Its government debt is now three times the size of its GDP (economic output), and twice the level it was in 1995.

But Capital Economics added that Japan was better prepared than most countries for such disasters.

It also pointed out that although economic activity usually falls following major incidents, subsequent reconstruction work had in other cases boosted demand and helped the economy to bounce bank.

It said it expected the scale to be similar to the Niigata quake in 2004, which cost $30bn.

GDP fell by 0.4% afterwards, but then rose by nearly 1% in the following six months.

David Cohen, a Singapore-based analyst at regional economic commentators Action Economics, agreed.

«In the short term, the damage could even knock off almost 1% of the country’s GDP,» he said.

«Longer-term though, it will balance out, through the rebuilding exercise which will be positive for growth will all the construction taking place. It could turn positive in about 12 months.»

Sony, Toyota, Nissan and Honda are among firms to have closed plants.

Economists say the earthquake and tsunami could have a «profound» impact on Japan’s economy – the world’s third largest – although it is too early to make any judgements.

But they say the damage is unlikely to be as bad as the 1995 Kobe earthquake.

Macqarie Economics Research said that the epicentre of the latest earthquake was well offshore, while in 1995 it was very close to the city of Kobe.

It also suggested that the area most affected by this disaster was less important economically than Kobe, which was one of Japan’s most important ports.

Capital Economics said that Japan was now «much better prepared for this kind of disaster than it was in 1995″.

The Kobe earthquake left more than 6,400 people dead, about 300,000 homeless, and caused damage estimated at 10 trillion yen ($100bn at the time).