US strong-arms SWFs to share Citi pain 27 Feb 2009 Singapore s sovereign fund and others are swapping convertible preferred shares into common stock. The carrot is, they get more Citigroup shares than they would have done. But the stick is stronger: if they don't participate, they lose their dividends. They had little choice.
Citi becomes United Nations of banking system 27 Feb 2009 Uncle Sam gets the biggest chunk of Citi. It isn't nationalisation, but fold in Singapore, Kuwait and a Saudi prince and you have a quasisovereign group controlling what was formerly the biggest US bank. This multinationalisation may not be so bad for Citi s business.
Is the third time the charm for Citi? 27 Feb 2009 The latest round of US government intervention boosts the bank's common equity, saves cash and puts more investors in the same boat. But it doesn t address lingering concerns about toxic assets and manageability. Given Citi s track record, scepticism is likely to persist.
Blackstone heralds private equity’s day of reckoning 27 Feb 2009 The firm s abysmal fourthquarter earnings and plummeting asset values reflect the wider industry s woes. But Blackstone s diverse business strategy may allow it to ride out the storm better than its rivals. That bodes ill for other buyout shops.
Are Berkshire Hathaway shares oversold? 27 Feb 2009 They lost more than 30% in 2008 and more since. Yet even in Buffett's worst year ever, the company's portfolio fell a notsobad 10%. The Sage of Omaha doesn't focus on the share price. But he says risks are now being overstated. As that corrects, the shares could benefit.
India can’t afford junk rating 27 Feb 2009 India relies less on foreign cash than other Brics, so its credit rating shouldn t make much difference. But imported capital has kept growth up. And populist politicians are likely to build even bigger deficits. A threatened downgrade to junk would make them harder to finance.
Higher base salaries not the answer for bankers 27 Feb 2009 Bonus has become such a dirty word that UK regulators are now encouraging higher base salaries for bankers. This is the wrong sort of reform. It will mess up the industry s business model. Much better to focus on linking bonuses to genuine performance and profits.
Dire US GDP figures may have silver lining 27 Feb 2009 The GDP growth revision from minus 3.8% to minus 6.2% looks bad. But while it rules out mild recession it may also rule out a 1990s Japan scenario. The US could be approaching the bottom, wherever it is. Also, banks with 4Q profits or modest losses may be stronger than they seem.
GE’s Immelt should ask the Drucker question 27 Feb 2009 In 1981 the management guru challenged then GE boss Jack Welch to ask: If you weren't already in a business, would you enter it today? Apply that now to GE Capital and the answer would be no. Current CEO Jeff Immelt should prepare shareholders for a divorce from finance.
Credit Suisse veterans could nest in Grübel’s UBS 27 Feb 2009 New UBS boss Grübel will want to stamp his mark on the bank by recruiting fresh blood. The exCredit Suisse CEO could face hostility by raiding his old employer for top talent. But that shouldn t stop him from hiring some of his former colleagues to create a trusted inner circle.
HBOS losses give clue to Lloyds’ bad-bank terms 27 Feb 2009 Lloyds has rightly delayed saying how it will use the UK government s toxicasset insurance scheme. It s not ready. But fresh detail on losses from its HBOS takeover suggest the bank will have to pay more to use the scheme, with a higher policy excess, than rival RBS.
UK’s bad bank finally looks credible 26 Feb 2009 Last month s false start sent bank shares and sterling into a downward spiral. But the government s more detailed scheme looks capable of regenerating the industry without putting too big a strain on the public finances. Barclays and Lloyds should follow RBS in accessing it.
Prop trading should survive FSA attack – just 26 Feb 2009 The UK regulator wants banks to hold substantially more capital against trading activities. That would sharply lower returns, and could accelerate the migration to hedge funds. But there should still be room for disciplined and cautious bank prop desks.
JPMorgan adds a chink of light to doom and gloom 26 Feb 2009 It slashed the dividend and boss Jamie Dimon is managing the bank for a worsening economy. But executives are also seeing tentative signs that the pace of the housing crisis may be slowing. Of course, it s one of the few banks that can afford to be both cautious and optimistic.
RBS gets recession armour-plating 26 Feb 2009 The state isn t just providing a massive £325bn insurance policy on its toxic assets. It is also injecting £13bn in new capital all on moderately favourable terms. RBS s higher core tier 1 ratio will hopefully draw a line under its agony and help it function properly again.
GM’s ghastly results shorten road towards bankruptcy 26 Feb 2009 Losing $30.9bn in a year is astonishing. True, the US car maker has done worse it lost nearly $40bn in 2007. But that figure reflected tax losses. This year s losses truly capture GM s sick state. A Chapter 11 filing is the correct medicine.
EU report goes right way in regulation 26 Feb 2009 The de Larosière commission has called for two new panEuropean regulators, one to ensure macro stability and one to supervise financial institutions. The idea of a new level of supervision may grate in some national capitals. But the plan ought to be welcomed, even in London.
Bigger US budget problems to come after year one 26 Feb 2009 President Obama's budget combines a huge deficit in 2009 with ambitious plans to reduce it sharply by 2013, as well as major new government programmes. It's a very high risk strategy, requiring the economy and markets to be as responsive as its people to Obama's magic.
Bank insurance premiums shouldn’t be pro-cyclical 26 Feb 2009 The US Federal Deposit Insurance Corporation plans to raise premiums it charges to insure retail bank accounts. Though they re admittedly cheap, that s bad timing. Like procyclical capital ratio requirements, the insurance premiums should be rethought once the crisis has passed.
Grübel lands at UBS with Obama-size expectations 26 Feb 2009 The former Credit Suisse boss is exalted in Switzerland for rescuing one of its national treasures. Now Grübel must do the same for UBS. The new CEO has gravitas and restructuring savvy. But he can t quickly undo the bank s many missteps, or turn the economy around.
Harassed funds triumph in Accor civil war 25 Feb 2009 Colony Capital and Eurazeo own only 30% of the French hotel group, but that was enough to oust the chairman. Six outside directors resigned in protest. The funds, hit hard by margin calls, may use their control to squeeze out cash. Too bad for the other 70% of the holders.
US needs to get tough with AIG 25 Feb 2009 The insurer always seemed like a black hole. Now hopes for asset sales are fading and the government may be considering swapping debt for shares. Taxpayers look like the losers in the $150bn bailout. Even if AIG is too big to fail, other creditors need to share the pain.
Japan’s export drop is not just its own problem 25 Feb 2009 Its 46% fall in exports in January does not reflect just its own weakness; other Asian countries' exports were down comparably. One hopeful possibility is that the US has outsourced its recession's inventory overhang. Or it could foreshadow a more severe global trade decline.
Cadbury looks sweet in sour times 25 Feb 2009 Nelson Peltz should be pleased. The activist s demand that the UK confectioner focus on sweets looks increasingly smart. Cadbury has joined a dwindling band of companies still able to give forecasts. Moreover, clever hedging should allay concerns about high cocoa prices.
Hedge fund slump brings office cost silver lining 25 Feb 2009 Especially in London, where West End rents fell so hard last year that Hong Kong and Tokyo have knocked the district off its world s priciest perch for the first time in nine years. It isn t pretty for property investors, but for the few looking for space it s a buyers market.
HSH Nordbank may need further running repairs 25 Feb 2009 The world s biggest shipping bank has sprung some leaks of late. An E3bn capital injection and E10bn loanguarantee scheme from its statebackers plugs a few gaps. But exposure to real estate, structured credit and its sinking core market mean further help can t be ruled out.
Microsoft gets selective with Great Depression lesson 25 Feb 2009 Boss Steve Ballmer rightly says hard times are no time to cut R&D budgets. He points out RCA s research in the 1930s led to decades of dominance in television. Curiously, he neglects to mention RCA s massive legal campaign against TV s inventor.
US banks left with chances to game stress tests 25 Feb 2009 The same watchdogs that have been repeatedly blindsided by banks woes now plan in just two months to analyse how their charges will weather further economic trouble. But they'll rely on bankers forecasts. They'll have to be vigilant referees to minimise the risk of sneaky play.
Tui shipping sale creates E4.5bn albatross 25 Feb 2009 The German group is still set to close a sale at the agreed value. But the buyer, a Hamburg consortium, can t come up with enough money. Tui may have to keep up to half the business and provide credit. But it's not clear there was a better alternative.
Obama tests limits of rhetoric 25 Feb 2009 If heartening talk could make the US economy better, recovery would be well on the way. The president s speech to Congress didn t dodge the dire current news, but focused on a rosy American future. It will take sacrifices to get there more than Obama cared to recognise.