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Wednesday, 26 November 2014

BREAKINGVIEWS

Wells Fargo: first big bank simple enough to fail

26 November 2014

The $1.6 trln lender secured a provisional stamp of approval from regulators for its living will. Less credible plans from 11 other titans suggest size isn’t the issue. Wells ranks fourth in assets and first in market cap. The real problems are complexity and interconnectedness.

A city worker passes a street sign in the Canary Wharf financial district in east London

Bank misdeeds show lack of "should we"

26 November 2014

A Citi analyst settlement and a probe into an HSBC hedge fund leak aren’t about grey areas. The alleged transgressions break clear rules. As in a recent experiment reported by Nature, they betray bankers’ tendency to eschew what they should do for what they can get away with.

A BT phonebox is seen in front of the British Telecom tower in central London.

Investors can forgive BT going back to the future

26 November 2014

If the former British Telecom buys Telefonica’s UK mobile business, it will regain a unit demerged in 2001. The round-trip is unusual but forgivable. 02’s demerger delivered good returns for BT investors who kept their stock. BT refocused, and its re-entry to UK mobile is timely.

An employee poses in a showroom of the fashion retailer Zalando in Berlin October 14, 2014.

Zalando still has much to prove

26 November 2014

Europe’s biggest online fashion retailer says it might eke out an operating profit in 2014. That helped propel shares in the recent 5.3 bln euro IPO. Cost discipline is good but may come at the expense of growth, which Zalando needs to sustain its share rating.

A man walks past an AVIVA logo outside the company's head office in the city of London

Friends Life deal terms make an auction tricky

25 November 2014

The UK insurer is a bite-sized acquisition for bigger European peers. But both foreign and domestic buyers can see that Aviva has offered Friends a full price that pays away lots of synergy value. And matching Aviva’s premium could be just as tough for consolidators like Phoenix.     

Santander bank's new chairwoman Ana Botin attends the bank's extraordinary general meeting in Santander, northern Spain, September 15, 2014.

Santander takes first step to better governance

25 November 2014

The new chair of Spain’s biggest bank has replaced her chief executive and appointed three new board members. The CEO shift suggests Ana Botin is moving on from her father’s era. And a more independent board makes it more likely Santander can address its strategic challenges. 

BoE

Carney’s bonus cap workaround itself needs a cap

25 November 2014

A legal defeat on EU bonus caps has the UK calling for global rules to claw back bankers’ fixed pay too. The BoE governor’s idea to pay part of salaries in deferred bonds would achieve that. But there are limits: cut pay too far - or delay it too long – and London might suffer.

The European Commission's new President Jean-Claude Juncker rings the bell as he chairs the first official meeting of the EU's executive body at the EU Commission headquarters in Brussels November 5, 2014.

Juncker’s stimulus ambition far exceeds capability

26 November 2014

The EC president is pushing a 315 bln euro infrastructure project, using a sliver of taxpayer-funded equity. Europe’s economy needs the stimulus, but this one relies on old money and financial engineering. Investing the funds as quickly as the region needs will prove a challenge.

Houses are seen behind a residential street sign in London.

Remember the UK housing bubble?

26 November 2014

Not long ago an overheating housing market was seen by many as the big UK danger. Now mortgage approvals are dropping and house inflation is easing – even though mortgages are getting cheaper. Tighter home-loan regulation is a factor. Workers’ low earnings are the main restraint. 

Samsung

Samsung IPO offers ringside seat for restructuring

26 November 2014

The South Korean conglomerate’s de facto holding company is an odd mix. Cheil Industries operates theme parks but most of its value is in a stake in an insurer. For those seeking exposure to Samsung’s wider shake-up, the $1.4 bln IPO is a way to get close to its heir apparent.

Louis Chenevert, former Chairman and CEO of United Technologies Corporation.

United Technologies endures irrelevant CEO

25 November 2014

Louis Chenevert decamped abruptly from the $100 bln conglomerate without explanation. Unlike with many other corporate shakeups, including Sotheby’s last week, its stock hardly budged. UTC may yet be put on the defensive, but having a dispensable boss is a sign of strength.

handshake

Private equity shows signs of pre-crisis brio

25 November 2014

Canada’s Onex has bought Swiss packager SIG for up to $4.7 bln in a secondary buyout. It’s one of Europe’s biggest LBOs in five years and deploys pre-crisis levels of leverage. Private equity restlessness and a shortage of big targets created the conditions for a landmark deal.

A customer shops at a B&Q store in south London.

Kingfisher CEO exits on a helpful low

25 November 2014

Shares in the UK do-it-yourself retailer have slid on the impact of currency and exposure to the weak French economy. It’s probably not what outgoing chief Ian Cheshire wanted. But as Tesco has shown, it can be helpful to a successor to start with already lowered expectations.

BREAKINGVIEWS TV ON INSIDER

Columns

Andy Mukherjee

India in depth: Time to follow China on rates

26 November 2014

Global disinflation is creating room for the Reserve Bank to follow its counterpart in Beijing and cut borrowing costs. Unlike the People’s Republic, India doesn’t need to worry about triggering overinvestment. Monetary easing now would have few risks, and several benefits.

Rob Cox

Rob Cox: American banking has its own Tea Party

25 November 2014

Like the anti-establishment wing of the GOP, the Independent Community Bankers of America has emerged as a highly vocal opponent of all things Wall Street, including a Lazard banker’s nomination for a Treasury role. These are the plaintive cries of a dying breed of banker.

Hugo Dixon

Hugo Dixon: What to do about populism?

24 November 2014

The spectre of populism is haunting Europe. While the established political order is largely to blame, the cure of populism is worse than the disease. The best way of combatting the phenomenon is to fix the economy and put integrity centre stage in politics.

Features

Kate Duguid

Review: Congo's problems run deeper than oil

21 November 2014

Virunga Park sits on top of reserves and between hostile states inhabited by warring militias. A new documentary casts UK oil firm Soco as the park’s top threat. Unethical exploiters are just one symptom of a nation whose institutions are too weak to assure economic stability.