Stocks and Funds
The UK bank’s first payout since 2008 is an encouraging milestone. But it’s largely symbolic. The critical valuation issue is whether Lloyds’ pledge to pay out at least half its future earnings represents a floor or a ceiling - and whether the regulator allows fatter payouts.
The Hong Kong bank grew into one of the world’s biggest financial institutions. But poor results and a furore over Swiss tax make for an unhappy 150th anniversary. A new history shows how hands-off management and breakneck M&A under former chairman John Bond are partly to blame.
The European aircraft maker pleased investors with higher-than-expected operating profit and a 60 pct dividend hike. Higher profitability was driven by a weaker euro. With that currency tailwind likely to persist, the annual results give a foretaste of future improvements.
The star investor’s acrimonious departure from Pimco caused huge outflows and hurt operating profit at Allianz, the German owner of the U.S. bond-fund firm. That obscures Allianz’s real strength. Annual results underline the insurer’s renewal under outgoing CEO Michael Diekmann.
Bids and Buyouts
The Spanish utility is paying $3 billion mostly in shares to merge its U.S. assets with much smaller listed UIL. The U.S. has greater growth potential than Spain, and the price isn’t cheap. But the small cash outlay makes this a relatively low-risk, if not transformational, deal.
The Japanese firm is buying Finmeccanica’s rail units. In Italy and across Europe, sales of high-end industrial assets to the Far East can be unpopular. But Hitachi is a credible buyer paying a full price. It helps too that the seller is eager to slim down and cut debt.
Robert Sillerman, the U.S. entrepreneur trying to roll up EDM festivals as he did concerts, is offering 37 cents on the IPO dollar for the remainder of the firm he took public less than two years ago. It’s shameful treatment of public investors. They were, however, amply warned.
The drugmaker’s pledge last year to focus on organic growth and debt reduction didn’t last long. Cost cuts and tax savings from buying Salix proved irresistible. What Valeant’s injecting isn’t clear. Salix’s numbers are fuzzy after it admitted pumping clients full of inventory.
Money and Markets
Borrowing for education has soared over the past decade, ballooning to $1.2 trln and growing far faster than GDP. With serious delinquencies at 11 pct and Washington on the hook, there’s a mess in the making. A Breakingviews calculator shows how big Uncle Sam’s exposure could get.
Athens wants to slice its primary fiscal surplus to one-third of the level agreed in its current bailout programme. That might leave debt too high for comfort – yet there is room for a compromise that Greece’s euro zone partners could afford.
Delta, United and American want trade deals changed, arguing Gulf rivals are unfairly subsidized. That’s rich, given the bailouts, antitrust exemptions and other goodies these three enjoy. Blowback from domestic peers may persuade them that whining to Uncle Sam won’t fly.
The government’s ambitious plan will require finesse in raising money. But the investment case is strong. India’s British rulers reaped huge productivity gains by building out the railways 150 years ago. Modernizing the dilapidated network could produce even better returns.