Deutsche Bank still lagging in capital race 31 Jul 2012 The German lender is responding to the investment banking slowdown by slashing 3 bln euros off costs. But investors have to wait until September for the vital details. And Deutsche’s new co-CEOs have missed a chance to lift the bank’s capital buffers closer to those of its peers.
Lowe’s Canadian target can’t build solid defense 31 Jul 2012 Quebec home-improvement chain Rona missed the domestic housing boom. That makes a $1.8 bln bid from Lowe’s a nice upgrade. The board can’t be blamed for putting the screws on its U.S. rival for a higher bid. But protectionist cries à la Potash and TMX don’t have much foundation.
U.S. banks loath to kick even soft crisis drug 31 Jul 2012 Community banks are pushing to extend a crisis program under which the FDIC insures $1.5 trln of deposits without limit. Yet the program helps concentrate risk, distorts funding costs and brings outsized benefits to bigger banks like JPMorgan. There’s every reason to let it die.
Silver lining tarnishes for U.S. gas drillers 31 Jul 2012 The likes of Chesapeake and Devon have long struggled with soft natural gas prices. Associated liquids like propane used to provide crucial cash for investment. But in the last year these products’ prices have tumbled by nearly half. Expect to see the companies’ earnings suffer.
Chevron’s two-state oil pact gives Africa hope 31 Jul 2012 The U.S. oil giant’s $2 bln deal with Angola and Congo is a diplomatic coup. It unites two of the largest producers on a continent gushing with resource disputes. With Africa supplying a quarter of the world’s new oil, anything that could help resolve other clashes is welcome.
NIMBYs are China’s new neighbours from hell 31 Jul 2012 Communities protesting about dirty chemical plants or waste treatment are a rich-country problem come early. Their gripes may be understandable: China faces hefty environmental risks. But appeasing rattled townsfolk drags on growth by lowering the returns from building.
Facebook costs UBS some of its new friends 31 Jul 2012 The Swiss bank worsened an already tough quarter by losing 350 mln Swiss francs on the social network’s IPO. UBS has boosted its capital and is once again attracting wealthy clients. But the risk of further nasty surprises in its investment bank casts a shadow over its recovery.
BP pain extends well beyond Gulf of Mexico 31 Jul 2012 Hobbled production at BP’s deepwater business contributed to the UK oil major’s clanger of a quarter. But it also struggled in Russia and took big write-downs on U.S. shale, refining, and an Alaska project. Even though these are mostly one-offs, the investment case looks challenged.
As steel’s lure fades China searches for gold 31 Jul 2012 Steel production was once a leading sign of industrial competence for developing economies. China bought into that story, but now the country’s huge steel industry is a drag. Olympic gold is another sign of greatness. In that domain, China still has a long way to go.
Take hope from India’s power and water failures 31 Jul 2012 Forget trivial reforms like FDI in aviation. What India needs most is improvements in chronically mismanaged infrastructure. But change is hard when the systems are working, even badly. So a huge power outage and yet another unnecessary crop shortage could prove a blessing.
Vivendi may be out of pocket on EMI by salving EU 30 Jul 2012 The French group’s Universal Music arm could sell over a quarter of its British target’s business to appease European trustbusters. Yet Vivendi still must pay 90 pct of the $1.9 bln purchase price. Lost profit and synergies could cost it much more than if the EU nixed the deal.
Pepsi owners face the Indra Nooyi challenge 30 Jul 2012 Under her stewardship, shareholder returns have lagged Coke’s. President Obama may offer the CEO the path to a graceful exit while activist investor Ralph Whitworth holds out hope for splitting soda from snacks. But Nooyi shows no signs of budging from Pepsi or breaking it up.
Superhero movie duel shows China needs new script 30 Jul 2012 Pitching Batman and Spider-Man head-to-head in theatres looks like a cynical plot to cut their audiences. That’s no way to nurture homegrown studios. Censorship may prevent China from making great films, but by playing fair it can at least learn how to make super-profitable ones.
Worst global Dodd-Frank fears start to take shape 30 Jul 2012 The Swiss are balking at new U.S. derivatives rules, the first overseas authorities to sound off about them. But U.S. watchdogs want foreign arms of domestic dealers to follow the new plan. If global regulators won’t sign up, however, it will create an unlevel playing field.
HSBC held back by developed-world headaches 30 Jul 2012 The bank’s earnings are strong enough to absorb a $2 billion charge for mis-selling in the UK and money-laundering in the U.S. After HSBC’s sub-prime woes, it’s another reputational stain. Yet the setback will only reinforce the bank’s strategic shift to emerging markets.
China’s insider culture stains CNOOC foreign bid 30 Jul 2012 The Chinese oil producer’s $15 bln bid for the Canadian Nexen isn’t directly threatened by the U.S. SEC insider trading complaint against a billionaire close to CNOOC. But the case will fortify critics who say that China has a long way to go before it can play by global rules.
Hugo Dixon: Can Super Mario save the euro? 30 Jul 2012 Mario Draghi says the ECB’s job is to bring down sovereign bond yields if fears of a euro breakup are making them rise. It’s a highly significant statement. But the ECB boss has caused dissension within his ranks. And he’ll struggle to find the tools to be able to do as he says.
China’s state-owned enterprises have cash to burn 30 Jul 2012 Oil producer CNOOC has enough cash on the balance sheet to pay $15 bln for Nexen without borrowing a penny. Such hoards are common among state-controlled companies. It’s a too cozy symbiosis with the state-controlled banks – which Beijing may now want to end.
Jamie Dimon to Sandy Weill: drop dead 27 Jul 2012 A shake-up at JPMorgan leaves investment banking boss Jes Staley the odd man out. More significantly, Dimon is lauding the idea of knitting together JPMorgan’s parts more tightly just as his former mentor reignited a push to break up big banks. Consider the fight fully rejoined.
Hopes of faster U.S. growth may be misplaced 27 Jul 2012 Q2 GDP expanded at a 1.5 pct pace. That’s uninspiring. But government shrank, housing helped a bit and the savings rate ticked up. Emergence from the 2009 recession has been sluggish yet steady. Policymakers might wish otherwise, but they need to adjust to the new normal.
Amazon and Facebook divide is a matter of faith 27 Jul 2012 Both companies’ quarterly reports showed strong sales growth, feeble earnings and heavy investment. Yet the online retailer’s stock rose and the social network’s plunged. Investors believe Amazon will stick around to reap the benefits. They may have more doubts about Facebook.
Apple puts its finger on a security gap 27 Jul 2012 The iPhone maker is buying AuthenTec, a fingerprint technology maker. The $356 mln price is only a long weekend’s cash flow for the gadget giant, but the deal is still among its biggest. It suggests Apple sees the need to fortify device defenses for growth areas like payments.
Chevron’s sputter shouldn’t dissuade investors 27 Jul 2012 The U.S. oil major’s overseas refineries helped stop the Q2 profit slide at 7 pct. Yet the growth in these less-prized assets isn’t the real story at Chevron. A heavier weighting toward oil and expected punchy output growth should narrow the value gap with bigger rival Exxon.
Enel squeezes its Latam minority shareholders 27 Jul 2012 The troubled Italian utility is using an $8 bln capital hike at its Chilean unit Enersis to grow in the region. While Enel’s Spanish arm Endesa kicks in assets to cover its 60 pct portion, minority holders must stump up cash. They may be powerless but the reaction speaks volumes.
Draghi bond-buying hints won’t end crisis 27 Jul 2012 A promise by the ECB president to defend the euro has triggered hopes of more bond buying, and driven down Spanish and Italian yields. Draghi’s words make more bond purchases quite likely, but anyone hoping for a game-changing crisis response may be disappointed.
Olympics feel good value, even if they aren’t 27 Jul 2012 The world may gloat at London’s mishaps. And for the over-extended UK, the economic wisdom of spending $14 billion on the Games is uncertain at best. Yet British spirits are high. Olympic investment is paying dividends, even if they aren’t strictly financial.
Barclays still in the mire despite strong half 27 Jul 2012 The scandal-hit bank’s shares surged as a 4.2 bln stg pre-tax profit beat forecasts. But the 10 pct ROE isn’t so juicy if you factor in regulatory changes and provisions to cover past sins. A replacement CEO is still months away. And now the CFO is under investigation.
Winner’s curse haunts banks in Asian block trades 27 Jul 2012 The banks that arranged a $720 mln quick sale for Carlyle in China Pacific Insurance look to have taken a licking on the trade. Block deals may help league table credit, especially when business is moribund. But aggressive bidding can leave a bitter aftertaste.
Miners’ journey back to normal will be a hard slog 27 Jul 2012 The sector’s software-like margins were due a reality check. Results from Vale and Anglo American confirm it has entered a period of more challenged returns. Stubborn costs will take time to ease. After a decade-long boom, reversion to the mean will be painful.
Facebook loses more friends with fizzle 26 Jul 2012 The social network’s revenue grew 32 pct in its initial quarterly report. That’s not bad. But profit and margins took a hit, even when stock compensation is ignored. Facebook is investing heavily, but investors counted on having cake and eating it. Instead, they’re going hungry.