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Thursday, 31 July 2014

BREAKINGVIEWS

Spanish civil guard officers stand at the entrance of Portugal's Banco Espirito Santo office.

Shock loss at BES makes bail-in a real risk

31 July 2014

The Portuguese bank made a 3.6 bln euro first-half loss and warned of possible illegal activity. The central bank suspended key staff. BES needs capital fast. But with Angolan issues unresolved, sourcing it from private investors rather than creditors just got much harder.  

BNP Paribas bank Chief Executive Officer Jean-Laurent Bonnafe attends the presentation of the bank's 2012 annual results in Paris February 14, 2013.

Only shareholders pay price for BNP's sins

31 July 2014

The French bank has suffered its biggest-ever quarterly loss, at 4.2 bln euros, after a jumbo U.S. fine. BNP delivered a strong performance otherwise and says it has learned from the affair. And yet no one is being held accountable for the wrongdoing – or a weak valuation.

Apple's iPhone 5 (top) and Samsung Electronics' Galaxy S4 are seen in this picture illustration taken in Seoul May 13, 2013.

Line's $13 bln valuation shows chat app exuberance

31 July 2014

The Japanese chat app reported a 26 pct jump in revenue from the previous quarter, pushing up valuation expectations ahead of its planned IPO. Yet Line’s valuation hangs on an assumption that new overseas users will spend like those back home. That seems like wishful thinking.

GE's $20 bln cards IPO puts a lot on credit

30 July 2014

The conglomerate is set to spin off Synchrony at some 11 times 2013 income, a small discount to Discover. But GE’s store-branded credit card business is riskier. A rise in charge-offs, currently near lows, could hit the unit quick and hard. That makes the offering look pricey.

US GDP

U.S. GDP gyrations obscure still slow, steady growth

30 July 2014

Q2 output rebounded strongly, with 4 pct annualized growth by early estimates, after shrinking in Q1. With 2011-13 expansion smoothed and pared to 2 pct on average, the underlying message – for everything from the economy to jobs and inflation – remains one of tame upward drift.

A couple pass a street sign in Tooting in south London, July 25, 2014.

Interest rates may stay low in Freelance Britain

31 July 2014

The Bank of England is beginning to wonder why wages aren’t rising. Just delay? Or something structural? It’s both. Self-employment explains almost all the gain in jobs. Austerity cuts and recession have bitten hard. Pay, inflation and interest rates will take time to recover.   

Telephone wires

REITs and MLPs make tax inversions a diversion

30 July 2014

U.S. authorities are letting Windstream call its telecom cables real estate, qualifying them for tax breaks. And a partnership will shield Hess assets from the IRS. Politicians, though, are indignant over firms that move overseas – even when home-grown tax loopholes are costlier.

Commuters walk in to London's financial district during the morning rush hour.

BoE gives bosses new reasons to avoid UK banks

30 July 2014

UK bank regulators are mulling fresh ways to defer executive pay and clarify lines of accountability. The ideas mostly make sense, apart from clawback rules which may backfire. Yet they could worsen the already existing talent shortage at the top of British banks.

Inversions start to spin out of control

30 July 2014

A quest for tax savings has made digestible overseas targets attractive to U.S. buyers. Hospira’s potential $5 bln deal for a Danone unit highlights a fresh supply, for so-called “spinversions.” The odd combination also reflects the perverse incentives distorting corporate decisions.

BREAKINGVIEWS TV ON INSIDER

Features

Andy Mukherjee

Workers get less, central banks get a dilemma

31 July 2014

The share of rich-nation GDP going to labour has fallen, and depressed the “natural” interest rate that maximizes employment at steady inflation. But if central banks peg rates at the new level, cheap money foments financial instability. It’s a problem only governments can solve.

Columns

Edward Hadas

Edward Hadas: Not all banks are alike

30 July 2014

Ideology and intellectual laziness have led politicians and regulators to think of banks solely as profit-maximising institutions which only pretend to care about the future. History, solid analysis and the thriving of state investment banks tell quite a different story.

Rob Cox

Rob Cox: MetLife CEO should revel in his anonymity

29 July 2014

That almost no one knows ol’ so-and-so is good for shareholders. How he handles the mega-insurer’s likely designation as a systemic threat could change that. A Jamie Dimon-style fight would be foolish. Better to speak softly and keep the name Steve Kandarian out of headlines.

Hugo Dixon

Hugo Dixon: Euro crisis is sleeping, not dead

28 July 2014

The euro zone is suffering from stagnation, “lowflation,” unemployment and debt. It’s not well placed to weather shocks, such as a further deterioration of relations with Russia. A pact to boost inflation and ramp up structural reform is the best way to insure against disaster.