Royal Mail Welcomes Agreement with CWU - March 9, 2010
[press release.]Royal Mail today welcomed the agreement reached with the Communication Workers Union on business transformation which paves the way for a strong and successful future for Royal Mail and its people and helps secure the Universal Service.
The company said it is extremely grateful to Roger Poole for his help and support in overseeing discussions with the CWU over the last three months and also thanked the union for the constructive nature of the talks.
The Agreement - Business Transformation 2010 and Beyond - means Royal Mail Letters can continue with its much-needed £2 billion modernisation, including the introduction of new automated machinery and delivery equipment and changes in the way our people work. It also ensures a fair reward for our people that reflects the vital part they play in the transformation of Royal Mail.
The three-year Agreement has the strong and unanimous backing of Royal Mail, the CWU leadership and Roger Poole. The union plans to ballot its members on the Agreement during the next few weeks.
Under the terms of the agreement basic pay and allowances for Royal Mail postmen and women will increase by 6.9 per cent over the three years from April 1st 2010. Over the same period the working week will be reduced by one hour to 39 hours.
In addition to these changes in basic remuneration Royal Mail will pay lump sums totalling £1,000 per full-time individual - linked to the introduction and delivery of the planned changes - to further reward them for their part in the modernisation of the business and to reflect the scale of the transformation Royal Mail needs to implement over the coming years. The payments will be made pro-rata to part-time employees.
Adam Crozier, Royal Mail Group Chief Executive, said: "This agreement is good for the business as it allows Royal Mail to get on with its modernisation, it’s a good and fair deal for our people, and it’s a good deal for our customers as it ensures stability over the next three years. It is a real credit to all those involved - both in the company and the union - and I’m grateful for all their hard work. I’m also grateful to Roger Poole for his help and support over the last few months."
Mark Higson, Managing Director of Royal Mail Letters, said: "This three-year agreement is an important achievement for the Letters business and its people and one which breaks new ground in our relationship with the CWU. I’d like to thank the teams in Royal Mail and the union who made it happen, as well as Roger Poole for his input and support."
"The Agreement is crucially important in allowing Royal Mail to compete successfully in the highly competitive communications market and to help counter the effect of the ongoing decline in traditional mail volumes. It enables the business to rapidly complete the introduction of the latest generation sorting technology and new delivery methods to improve efficiency. It also enables us to protect as many full time jobs as possible while at the same time giving our people the best possible tools for the job."
CWU: Deal Brings Pay And Job Security For Postal Workers - March 9, 2010
[Press Release.]The Communication Workers Union has reached a deal with Royal Mail which brings a pay rise in excess of 6.9 per cent over the next three years, reduces the working week and brings greater job security to postal workers while delivering business transformation. In addition, postal workers will receive lump sums of around 2,500 pounds and weekly basic pay supplements through consolidation of existing money worth between 2.3 and 5.9 per cent.
Dave Ward, CWU deputy general secretary, said: "It's been a long time coming, but this deal delivers on the major issues which postal workers have fought for. There's a balance of pay and operational changes which will help offset job losses and ensure our members are fairly rewarded for change.
"We have always said that we couldn't face away from change. The agreement recognises the reality of automation, competition and the financial challenges facing the company, but it does so in a way that puts the interests of CWU members at its heart.
• Both sides have committed to improving industrial relations and ensuring a more positive working relationship in the best interests of everyone at Royal Mail.
"We'd like to thank Roger Poole, ACAS and Brendan Barber for their efforts over the past months which have helped to secure this successful outcome."
"There has been a lot of talk about the future of the company in relation to competition and the pension deficit. Now that we have reached this agreement it is clear that business transformation can be delivered. As a result we're determined to address the pensions issue and establish whether the government will now finally accept its responsibilities, as the owner of the company, to find an acceptable solution."
The agreement is subject to a ballot of CWU membership for acceptance.
The agreement is over 80 pages long and covers lots of industrial detail for different areas of Royal Mail. The key areas are:
• Pay:increases to basic pay of over 6.9% over three years broken down as:
- 400 pounds for each full time employee (and pro-rata) on ratification of the agreement
- 1,000 per full time employee (and pro-rata) linked to delivery of planned changes in each workplace.
• Payments of bonus payments at their value in 2011 and 2012 - these should increase in value as transformation improves the position of the business.
• Pay: opportunities to turn allowances (and in delivery door-to-door payments) into regular additions to basic pay starting with an immediate payment of 20.60 pounds per week for delivery staff (equivalent to 5.9% pay increase) and 8 ponuds per week for mail centre staff (equivalent to 2.3%).
" Shorter working week - reduced by one hour to 39 hours gross, 35 hours 40minutes net for the vast majority of postal workers
• Job security - agreement to maintain at least 75% of workers as full-time with no forced move for any worker from full time to part time or vice versa
" Job security - improved terms are available for people moving to alternative offices as a result of the changes and a commitment to continue making changes through voluntary means.
• Improved maternity pay from 18 to 26 weeks and paternity pay from one to two weeks.
• Saturday as a normal working day for deliveries, but with opportunity for people to have more Saturdays off if they want them. A joint innovative approach to duty patterns to meet business needs and employee aspirations.
Deutsche Post DHL Exceeds Forecasts For 2009 And Targets Sustainable Earnings Improvement - March 9, 2010
[Press Release.]
Highlights:
• Underlying EBIT of EUR1.47 billion surpasses the revised guidance of at least EUR1.35 billion
• Consolidated net profit of EUR644 million considerably higher than 2008
Group presents the cornerstones of its new financial strategy - proposed dividend for 2009 unchanged at EUR0.60
• Group forecasts higher operating profit for 2010 and 2011
• CEO Frank Appel: "We have successfully managed the crisis."
• Hermann Ude and Bruce Edwards appointed to Board of Management for a further five-year term
Deutsche Post DHL generated underlying EBIT of EUR1.47 billion in the full year 2009, exceeding its November forecast of at least EUR1.35 billion. One of the key contributors to this positive development was the introduction of the 'IndEx' program at the end of 2008: It generated cost savings of EUR1.1 billion - one year ahead of the original schedule and EUR100 million ahead of the last forecast for the end of 2009. These efficiency increases also significantly helped Deutsche Post DHL to achieve its consolidated net profit target. Following a loss in 2008, the full-year consolidated net profit rose to EUR644 million in 2009. Deutsche Post DHL's 2009 capital expenditure of EUR1.17 billion also fully met expectations.
"We have successfully managed the repercussions of the economic crisis and exceeded our targets for 2009," said Frank Appel, Chief Executive Officer of Deutsche Post DHL. "Thanks to strict cost management and the consistent implementation of our Strategy 2015, we are now able to benefit overproportionally from the accelerating global economic recovery."
Outlook: Sustainable improvement of profitability
For this year, the Group foresees a moderate recovery in global transport volumes. Against this backdrop, Deutsche Post DHL expects underlying EBIT to total between EUR1.6 billion and EUR1.9 billion in 2010. In a reflection of the Group's two-pillar strategy announced last year, the DHL Divisions and the MAIL Division are to make roughly equal contributions to earnings for the first time: While the MAIL Division is expected to generate earnings between EUR1.0 billion and EUR1.2 billion, the contribution by DHL is expected to total between EUR1.0 billion and EUR1.1 billion. Corporate Center expenditures are forecast at around EUR400 million.
As a result of an anticipated significant decline in non-recurring items Deutsche Post DHL's reported EBIT is expected to be considerably above last year's level. Consolidated net profit should further improve compared to 2009. "We are optimistic about the future, even though many uncertainties remain about the strength of the economic recovery as well as about political and regulatory issues," Appel added. "We will move ahead as planned this year and sustainably improve the Group's profitability with innovative products, high service levels and the ongoing development of customer-oriented solutions." The Group expects the positive earnings trend to continue in 2011.
Business year 2009: Increase in earnings despite global economic crisis
CFO Larry Rosen: "This long-term oriented dividend policy with its focus on sustainability is an important message to the capital market".
At Deutsche Post DHL, the global economic crisis caused a significant decrease in transport volumes last year triggering a 15.2 percent drop in revenues to EUR46.2 billion. However, successful cost cutting across all businesses, substantially lower restructuring expenses as well as the planned reduction of losses from the U.S. EXPRESS business helped mitigate the impact on the Group's profitability. Reported EBIT of EUR231 million for 2009 thus substantially exceeded the EUR966 million loss incurred in 2008.
The 2009 result includes losses from the Arcandor insolvency and costs related to onerous contracts amounting to a total of EUR344 million. In addition to the operational improvements, positive effects from the Postbank sale as well as lower taxes led to an increase of the consolidated net profit to EUR644 million compared to a loss of EUR1.7 billion in 2008. As a result, earnings per share climbed from EUR-1.40 in the previous year to EUR0.53 in 2009.
Based on last year's positive results and the Group's confidence in the future, the Board of Management and the Supervisory Board will propose a dividend of EUR0.60 to the Annual General Meeting on April 28, 2010, maintaining last year's level. In addition, Deutsche Post DHL's Supervisory Board in its meeting yesterday appointed Hermann Ude and Bruce Edwards to the Board of Management for another five years starting 2011. Ude (48) will continue to be in charge of the Corporate Division "Global Forwarding, Freight" while Bruce Edwards (54) will remain in charge of the Corporate Division "Supply Chain". Both were first appointed to the Board of Management in March 2008.
Financial strategy: Focus on stability and flexibility
As in the past, ensuring financial stability and flexibility will remain a top priority for Deutsche Post DHL. As an appropriate balance sheet structure is paramount to achieving this objective, the Group's new financial strategy will predominantly focus on the firm's credit rating: Deutsche Post DHL currently holds a BBB+ rating from Standard & Poor's and a Baa1 from Moody's. The company seeks to retain these rating levels long-term. The financial strategy also includes a specific target for the long-term dividend policy: going forward, the firm plans to distribute 40 percent to 60 percent of its consolidated net profit to shareholders.
"This long-term oriented dividend policy with its focus on sustainability is an important message to the capital market, showcasing our efforts to further increase our attractiveness to investors," explained Deutsche Post DHL Chief Financial Officer Larry Rosen. "At the same time, our financial strategy will ensure that we possess the necessary financial strength and flexibility to further grow our operations and thus successfully implement our Strategy 2015."
Fourth quarter 2009: Negative revenue trend halted
During the fourth quarter, the Group was able to halt the negative revenue trend created by weakened demand and reduced transport rates. The Group increased quarter-on-quarter revenues for the second time in a row. Year-on-year, though, revenues fell by 11.6 percent to EUR12.4 billion. At EUR-283 million, the consolidated net profit was considerably better than the previous year's level. A loss of more than EUR3 billion was recorded in the final quarter of 2008. At the same time, earnings per share rose from EUR-2.64 to EUR-0.24. The loss of the final quarter in 2009 is wholly attributable to high restructuring costs, expenditures related to the Arcandor insolvency and costs related to onerous contracts.
MAIL Division: Market share maintained
During the past year, the MAIL Division not only was affected by the global economic crisis, but was also confronted with the increasing substitution of physical mail by electronic media. As a result, revenues were 4.9 percent below the previous year's level, totalling EUR13.7 billion. Thanks to its intense customer focus and its high-quality service, Deutsche Post maintained its share of this shrinking market at 87.2 percent. In addition, comprehensive cost-cutting measures cushioned the impact from higher wages and losses related to the Arcandor insolvency on the division's profitability. For fiscal year 2009, underlying EBIT fell by 14.0 percent to EUR1.4 billion. In the fourth quarter, though, it rose by 7.4 percent despite the continuing decline in revenues.
EXPRESS Division: Profitability improved
Lower volumes also impacted the EXPRESS Division. During the second half of the year, however, trade volumes began to rise sequentially. The fourth quarter saw a slight recovery of the Time Definite Domestic and Day Definite Domestic product groups outside the U.S. Nonetheless, revenues for fiscal year 2009 fell by 24.4 percent year-on-year to EUR10.3 billion.
The main causes of this decrease were the Group's exit from the domestic express business in the U.S. along with exchange rate fluctuations and lower revenues from fuel surcharges. Outside the U.S., revenues adjusted for acquisitions and exchange rate fluctuations were only 11.8 percent below the previous year's level. The smallest drop in revenues was reported by the Asia Pacific region at 6.0 percent to EUR2.6 billion.
In Europe and the EEMEA region (Eastern Europe, the Middle East and Africa), revenues fell by 15.5 percent and 10.4 percent, respectively, to EUR5.6 billion and EUR1.1 billion. In the Americas region, which includes Latin America and the Caribbean as well as Canada and the U.S., revenues decreased by 58.6 percent. Excluding the U.S., revenues in the region fell by 14.8 percent in the past year.
Unlike the revenue trend, the division's profitability climbed considerably in the past year. Thanks to strict cost management, underlying EBIT was 45.1 percent above the previous year's level at EUR238 million. A key reason for this positive development was the significant reduction in losses previously incurred in the U.S. The target of reducing the annualized loss to less than U.S.$400 million by the fourth quarter has been achieved. In the other regions, underlying EBIT totalled EUR692 million, compared to EUR1.1 billion in the previous year.
GLOBAL FORWARDING, FREIGHT Division: Positive trend
The decline in world trade levels resulted in double-digit decreases in transport volumes in the air and ocean freight markets. Nonetheless, the GLOBAL FORWARDING, FREIGHT Division was able to sequentially increase volumes each quarter during the year. Marketing and sales efforts were increasingly successful, particularly in the areas of life sciences and consumer goods. Due to the initial economic recovery, air freight volumes rose year-on-year for the first time in six quarters during the fourth quarter. In fiscal year 2009, DHL was able to maintain or even expand its market share in the international air and ocean freight markets and in European road transport.
However, as a result of the general decline in freight volumes, lower fuel surcharges and reduced freight rates, revenues in this division were 23.3 percent lower year-on-year at EUR10.9 billion. Thanks to systematic cost management including noteworthy productivity gains, the effect on the division's profitability could be cushioned. The underlying EBIT decreased from EUR403 million in 2008 to EUR272 million.
SUPPLY CHAIN Division: Market position further strengthened
Despite the difficult market conditions, the contract logistics business of Deutsche Post DHL was able to further expand its market position in 2009. Two key reasons for this positive development were new business contracts worth EUR1.1 billion and a continuing high contract-renewal rate of 90 percent. Nonetheless, revenues fell by 8.8 percent to EUR12.5 billion. This decrease resulted from substantial negative currency translation effects and the company's own decision to decline renewal of underperforming contracts or to terminate them prematurely.
With the help of cost-cutting measures, the impact of the economic crisis on the division's profitability could be held in check. While underlying EBIT was indeed EUR-121 million, this loss was exclusively related to charges totalling EUR213 million that were connected with the insolvency of Arcandor. Excluding this effect and additional one-time costs for onerous contracts, underlying EBIT in this division would have been near the previous year's total of EUR196 million.
Deutsche Post CEO: Tax Break Loss Unlawful - March 8, 2010
[Reuters.]A German parliament move to abolish tax break privileges for Deutsche Post is unlawful, the company's chief executive said in an interview.
"We see the proposed legislation as being in contradiction with applicable European law," Frank Appel told Focus magazine.
Germany's lower house of parliament on Friday voted to end the exemption to Value Added Tax at Europe's biggest mail and express delivery company, as demanded by the European Union.
Other companies offering postal services will also enjoy tax exemptions starting in July if they provide at least some general service such as continuous and comprehensive package delivery.
At the same time, many Deutsche Post services that up to now enjoyed favourable tax rates will have to apply full sales tax.
Germany's upper house of parliament, the Bundesrat, has yet to approve the legislation.
In the magazine interview, Appel criticised the idea that comprehensive delivery services for retail and business customers would be taxed differently, and argued that under EU law these should generally be exempted from value added tax.
Insurance Union Issues Petition Against Japan Gov't Postal Reform - March 8, 2010
[Kyodo.]A federation of labor unions of Japanese life insurance companies called on the government Monday to make sure its review on the nation's postal privatization process does not allow the insurance business of state-owned Japan Post Holdings Co. to become too big.
The National Federation of Life Insurance Worker's Unions issued a petition against the postal reform bill the government has been working on as the state is planning to raise the 13 million yen upper limit on postal insurance payments through legal changes.
"It is sure to deal a heavy blow to the private sector," says the petition, which has 864,260 signatures, mainly from employees of life insurance companies.
With the petition, the federation plans to request a meeting with Financial Services Minister Shizuka Kamei, who is also in charge of the nation's postal reforms.
Japan's postal privatization, the symbol of former Prime Minister Junichiro Koizumi's structural reforms, was put on hold after the Democratic Party of Japan-led government took power last September.
The current government has been working to include the increase in the upper limit on postal insurance payments into the postal reform bill.
Meanwhile, private insurance companies have been opposed to the ceiling increase, saying the move may cause a flight of money to Japan Post Insurance Co. on the back of its implicit state guarantee and impede fair competition against private companies.
Pos Malaysia Investing RM250 Million In New Mail Hub - March 5, 2010
[Bernama
.]Pos Malaysia is investing RM250 million to set up a national mail and parcel hub in Shah Alam in its effort to achieve an automation level of up to 70 per cent from 20 per cent currently.
The hub will be a processing plant and is expected to be operational by end of this year, said its group chief of strategy and planning, Jezilee Mohamad Ramli.
"This is our pilot project, we will group four of our processing centres into one plant," he told reporters after the signing of a statement of cooperation between Pos Malaysia and the Egyptian National Post Organisation (Egypt Post) here Friday.
The four centres to be closed down are at Daya Bumi, Bukit Raja, Bangi and Seremban, Jezilee said.
"Currently, we have a lot of mail processing centres, so we are trying to be more efficient and group some of the small processing centres," he said.
The RM250 million investment is inclusive of cost of the land which is about RM70 million, Jezilee said.
USPS Summer Mail Sale Returns - March 5, 2010
[Press Release.]The U.S. Postal Service did something for the first time last year, and it was so successful, they’re planning to do it again: launch a summer sale.
The 2010 Summer Sale is scheduled to run July 1 through Sept. 30 and will provide a 30 percent rebate to eligible mailers on Standard Mail letters and flats volume above a predetermined threshold. The threshold will be five percent over each participating mailer’s volume for the same period in 2009. Invitations to participate in the sale will be sent to customers in early March.
“The 2010 Summer Sale is our way of rewarding our most loyal customers and demonstrates that we value their business,” said Robert F. Bernstock, president, Mailing and Shipping Services. “We expect the 2010 Summer Sale to provide as much excitement about direct mail as the sale did last year and to generate between 300 million and 1 billion new mailpieces.”
Nearly half the 960 customers enrolled in the 2009 Summer Sale increased their mailing volumes. This resulted in approximately 1 billion incremental pieces during the sale period, producing a net revenue contribution of $24 million.
“Direct mail works, and our customers know that,” said Bernstock. “That’s why we will continue to invest in programs that promote the health of our customers’ businesses as well as our own. We very much appreciate our customers’ business, and we will compete aggressively for their advertising and promotion dollars in this highly competitive marketplace.”
To be eligible to participate in the 2010 Summer Sale, a company must have mailed 350,000 or more Standard Mail letters and flats between July 1 and Sept. 30, 2009. Approximately 3,525 customers are expected to be eligible to participate in the sale, representing 67 percent of the Postal Service’s Standard Mail volume.
The 2010 Summer Sale is a component of a broader pricing strategy that creates incentives to grow and retain volume. It was one of many solutions discussed this week at a Washington, D.C.-stakeholder event in which Postmaster General and CEO John E. Potter addressed hundreds of customers, business partners, employees and the media during a presentation: Envisioning America’s Future Postal Service. At the event, Potter outlined an aggressive plan of cost cutting, increased productivity, and an array of legislative and regulatory changes necessary to maintain a viable Postal Service.
The 2010 Standard Mail Summer Sale is subject to approval by the Postal Regulatory Commission.
Direct Marketers, Catalog Companies: We Can Adjust to 5-Day Postal Week - March 4, 2010
[Rich Thomaselli, AdAge.com.]The United States Postal Service's plan to eliminate a day of mail delivery could affect more than $1 trillion worth of business via direct marketing and catalog mailings. But for now those sectors of the industry are preparing to adjust to a new reality rather than preparing protests.
The USPS lost $2.8 billion last year after total mail volume dropped to 202 billion items, some nine billion less than in 2008.
Members of the Direct Marketing Association haven't united in one position to the proposal. "Some say they can adjust, but others say it will hurt their business model," said Jerry Cerasale, senior VP-government affairs for the DMA.
Mr. Cerasale said direct marketing accounts for $1 trillion in sales and jobs in this country, while the more than 15,000 catalog companies help drive more than $200 billion in sales, according to the American Catalog Mailers Association.
Businesses that rely on the mail might not necessarily be imperiled by the USPS plan, but they certainly will have to adjust.
Postmaster General John Potter said earlier this week he will submit a formal request to the Postal Regulatory Commission to reduce mail delivery from six days a week to five, eliminating Saturdays. Saturday is one of the lightest days, along with Tuesdays, for mail delivery.
The decision was simple, Mr. Potter said. The USPS is hemorrhaging money. The Post Office lost $2.8 billion last year after total mail volume dropped to 202 billion items, some nine billion less than in 2008.
An independent study commissioned by the Postal Regulatory Commission estimated that eliminating a day of delivery would save the USPS almost $2 billion a year. The Postal Service's own study put the cost of savings at $3.5 billion annually.
None of this will happen overnight, of course. After receiving the formal request from Mr. Potter, the Postal Regulatory Commission must hold a series of public hearings around the country before issuing an advisory opinion. And then Congress has to become involved, since having six-days-a-week mail delivery is a federal law.
Still, the likelihood of it happening is good, and businesses will have to adjust. Many companies, for instance, utilize mail-specific, or "in-home" dates, which are days specified by the mailer to have a catalog or flier delivered so it coordinates with other promotional activities.
"It doesn't do any good to have something delivered two days after the sale is over," said Hamilton Davison, president-executive director of the American Catalog Mailers Association.
An Post Fully Committed To Expanding Its Financial Services Business - March 4, 2010
[Press Release.]Postbank joint venture shareholders, An Post and BNP Paribas have taken the decision to continue the joint venture until the end of 2010 but not beyond that date.
Post office customers responded well to Postbank since its launch in May 2007, and Postbank achieved a significant business foothold within the An Post network. However the current harsh reality of the Irish banking environment and the fact that Postbank continues to be loss-making with no prospect of breaking even has led to this decision by the joint venture partners.
The expansion of its Financial Services business is central to An Post’s corporate strategy and plans for the future and there is significant potential to be realised across a broad range of retail product options.
An Post is now in active discussions with other parties regarding the development and provision of such services.
An Post Chief Executive Donal Connell said “It is most regrettable that this business will not be developed through the Postbank model but we are confident that customers will have the opportunity to avail of a similar range of financial products and services through Post Offices in the near future.
“The current economic and retail banking environment is extremely difficult but by taking this step, I believe we are better positioned to serve customers and develop the potential of our unique 1,200 strong network” he added.
Postbank’s One Direct insurance business and PostPoint payment channel continue to trade profitably and successfully.
All Postbank customer deposits are covered by the Deposit Protection Scheme and the Government Guarantee Scheme.
Q&A: What's Expected In Japan Post Privatisation Plan? - March 4, 2010
[Hideyuki Sano, Reuters.]Japan may announce next week its privatisation plans for Japan Post, the enormous state-owned financial conglomerate.
The plan, the symbol of former prime minister Junichiro Koizumi's market-friendly reforms, was put on hold after the Democratic Party-led government took power last year.
WHAT IS JAPAN POST, WHY IS IT IMPORTANT?
Postal service operator Japan Post provides retail banking and insurance services through its 24,000 post offices.
With financial assets of about 300 trillion yen ($3.4 trillion) -- more than France's GDP -- it is Japan's largest financial institution. It is also about 1.5 times the size of the nation's largest private banking group, Mitsubishi UFJ Financial Group (8306.T) (MTU.N).
That means even small changes in its portfolio or business strategy can sway financial markets and the financial industry.
It is also one of Japan's largest companies, with 240,000 employees and annual revenue of 20 trillion yen.
With the profitability of its mail service likely to slide due to increased use of e-mail and Japan's shrinking population, Japan Post's financial services are considered the golden goose.
Currently, the group has one stock-holding company and four subsidiary businesses focusing on banking, insurance, deliveries and post office services.
WHAT IS ITS INVESTMENT PORTFOLIO LIKE?
About three-quarters of the funds of its two financial arms is invested in Japanese government bonds, making the group the largest single JGB holder with about 33 percent of the market.
Most of the remainder goes to other bonds and loans, and it holds a very small amount of shares and foreign currency assets.
But a government report has said it is unrealistic for the behemoth to make a big change to its portfolio in a short time.
Japan Post could start reducing its JGB holdings in the future but it will likely move very cautiously as selling JGBs could rattle the market when the national debt is nearing 200 percent of gross domestic product.
Banking Minister Shizuka Kamei has said that he wants Japan Post to diversify and that it could buy more U.S. Treasuries, but he said on Thursday its money is important for the stability of the domestic bond market.
Japan Post tried to expand its lending business after the government began its 10-year privatisation process in 2007, but its efforts fell through and it continued to buy JGBs.
In the short-term, the privatisation plan is unlikely to have any impact on its investment strategy. However, the longer-term outlook is unclear as much would depend on how much control the government retains.
SO WILL THE GOVT PRIVATISE IT?
Not as fully as envisaged by the former Liberal Democratic Party government.
The LDP planned to spin off the two financial arms, Japan Post Bank and Japan Post Insurance, and sell two-thirds of the holding company by 2017.
A government guarantee on Japan Post deposits and insurance was lifted, and a new management team has taken charge.
Prime Minister Yukio Hatoyama, whose Democratic Party ousted the LDP in an election last August, froze the privatisation on the grounds that it ignored the needs of consumers.
The government plans to merge deliveries and post office services into the parent company and sell shares in it as well as in its two financial subsidiaries -- Japan Post Bank and Japan Post Insurance.
Hatoyama's party is considering selling possibly up to two-thirds of the shares in the three firms to list them on stock exchanges. By retaining one-third of the shares, it would allow the government to veto any major changes.
But the People's New Party (PNP), a tiny coalition partner that has strong backing from local post office chiefs, is reluctant and has called for the government to retain stake of 50 percent or more.
Kamei, who heads the PNP, has said the government will make its decision by March.
HOW WILL JAPAN'S FINANCIAL INDUSTRY BE AFFECTED?
With the privatisation plans still up in the air, the main concern for the financial industry at the moment is whether the government raises the limit on deposits.
Japan Post Bank has long had a limit of 10 million yen per person. The government could raise that to support Japan Post but it would draw heavy criticism from private banks, which complain that Japan Post still enjoys an implicit government guarantee.
Royal Mail Welcomes Agreement with CWU - March 9, 2010
Deutsche Post DHL Exceeds Forecasts For 2009 And Targets Sustainable Earnings Improvement - March 9, 2010
Insurance Union Issues Petition Against Japan Gov't Postal Reform - March 8, 2010
Pos Malaysia Investing RM250 Million In New Mail Hub - March 5, 2010
USPS Summer Mail Sale Returns - March 5, 2010
An Post Fully Committed To Expanding Its Financial Services Business - March 4, 2010
