Lloyds rewards investors’ show of faith 22 Feb 2008 The UK bank kept profits growing last year despite the debt crunch and has even raised its generous dividend. That has repaid investors who have given Lloyds a premium rating. The bank looks well placed to keep up the good work, provided it maintains its discipline over deals.
Rock’s 125% mortgage U-turn signals end of an era 22 Feb 2008 Northern Rock s withdrawal of its infamous 125% mortgages is a symbolic moment in the UK housing downturn. Life is getting harder for first time buyers and existing homeowners trying to refinance. And the mortgage pain is set to get a lot worse yet.
Pipeline politics 22 Feb 2008 The Nabucco pipeline project is crucial if Europe is to reduce its dependence on Russian gas. But it will never fulfil its potential and may not get started until the EU drops its objection to importing Iranian gas.
Google’s online video ad scheme threatens broadcasters 21 Feb 2008 Americans watched over 300m videos on Google s YouTube site in December. The division s sales remain negligible. But if Google can start squeezing ad revenues from this market, broadcasters could find themselves in a bind similar to newspaper publishers.
Wall Street rehires are a mixed bag 21 Feb 2008 John Mack could be making a smart move luring a former bond supremo back to Morgan Stanley. And Merrill s John Thain could benefit from the advice of the firm s previous, lesstainted mortgages and CDO guru. But MBIA s decision to reinstall Jay Brown as chief looks a bit odd.
Kerviel concerns hang over SocGen’s rights issue 21 Feb 2008 The French bank s board report on its E5bn debacle highlights serious lapses in its control systems. Shareholders may want more than promises of change before they subscribe to the E5.5bn preferred rights issue SocGen needs after its megaloss.
Société Générale is fidgeting with the E300,000 question 21 Feb 2008 Rogue trader Jerome Kerviel was in line for a 2007 bonus five times the amount he got in 2006. The bank insists it never knew about the hidden E1.5bn in profits that he made through unauthorised trades last year. If that s the case, why the bonus?
Reed Elsevier reshape makes it attractive 21 Feb 2008 The AngloDutch publisher is no more. The decision to sell its B2B unit, and the $4.1bn cash acquisition of US risk management group ChoicePoint transforms Reed into a focused online workflow solutions provider . It might not have the same ring, but it s a smart move.
Credit spreads may be warning equities again 21 Feb 2008 Will anyone listen this time? Traders blame recordwide credit derivative index levels on technical issues tied to a glut of unwanted assets. That s probably part of it. But when credit and equity markets fell out of step last summer, equity eventually followed credit s stumble.
Ospel’s concessions to UBS investors not enough 21 Feb 2008 The UBS chairman is to be reelected every year rather than every three, and to come under greater oversight from the board. That goes some way to improving the Swiss bank s corporate governance. But it falls short of the exit he owes investors for leading the bank into crisis.
Little Liechtenstein must clean up its act 21 Feb 2008 Germany s offensive against its pocketsize neighbour represents the latest example of increased pressure on tiny tax havens. Tax evasion will never vanish. But smart financial centres understand that reputation matters and that they can thrive by respecting international rules.
New York Times chooses one battle too many 21 Feb 2008 The newspaper company recommended that shareholders not vote for activist fund Harbinger Capital s slate of board candidates. That looks foolish. Other shareholders are rooting for Harbinger. There s a good chance the Times will lose a proxy battle.
PBGC’s equities scheme threatens to boost US taxpayer risk 20 Feb 2008 The pension guarantor's increase allocation to equities is unwise. PBGC accrues liabilities in economic downturns, as companies go bankrupt, so equity investments may double its risk rather than hedging it. Chances are, taxpayers will end up writing a large cheque.
Italy’s vote creates corporate confusion 20 Feb 2008 The campaign is generating turbulence, and not only over Alitalia.It is holding up CEO appointments at the country s statedominated and newly international giants Eni, Enel and Finmeccanica. Investors are right to be worried.
Microsoft should pay cash for Yahoo 20 Feb 2008 The software giant s market capitalisation has fallen by $43bn since it offered to buy the internet company. One way to claw back some of this is to offer cash rather than equity financing half the deal with debt would generate tax savings worth around $3bn.
Australia on right track with sovereign funds 20 Feb 2008 The prime minister has introduced a new screen for investors backed by foreign governments. The approach is flexible enough to deal with the huge diversity of SWFs. While Australia is keen to protect its national interests, that shouldn t become a cover for protectionism.
Meet the private equity FIATS: Failed in America, Trying Shanghai 20 Feb 2008 US middlemarket buyout funds are fighting for deals with megafunds that have moved downmarket as big deals have dried up. So a lot of small firms are seeking their fortunes in Asia and the Middle East. But these wee dealmakers may not find pickings there any better.
Staples should have another crack at Corporate Express 20 Feb 2008 The US office supplies firm wants to expand its fastestgrowing sector by snapping up a Dutch rival. It s been rebuffed, but even a pricier offer could work out. There are big synergies in the US and Corporate Express is poorly placed to withstand much weakness in the US economy.
Global inflation goes to US core and should worry the Fed 20 Feb 2008 US inflation worsened in January, with prices outside food and energy rising. The Fed won t like it. The inflation is imported, from global commodity prices and China. A weaker dollar makes matters worse. The case for pausing on rates looks stronger. That will trouble markets.
Inflation fails to fall with economy 20 Feb 2008 Tougher times are supposed to push wages and prices down. But the German steel industry doesn t seem to have heard. It just agreed on a 5% pay rise. Neither has the oil market, which is once again flirting with $100 a barrel. No wonder US bond yields have jumped.
Credit crunch claims A&L as latest victim 20 Feb 2008 The UK mortgage bank s second half profits were dragged 60% lower by a double whammy of debt writedowns and higher funding costs classic credit crunch damage. It s now trying to cut risks, but at a cost to growth. The only surprise is that shareholders were surprised.
Caution carries BNP Paribas through the storm 20 Feb 2008 France s largest bank lost less than E1bn to the subprime crisis in 2007 and says its CIB revenue shouldn t decline this year. Conservative business ways helped BNP shine in the midst of a troubled peer group. The native caution also explains its hesitation on bidding for SocGen.
Bain’s failed 3Com deal reflects political tone-deafness 20 Feb 2008 The private equity firm teamed up with a Chinese tech group founded by a former general in the Chinese army to buy the US company. 3Com s technology helps safeguard computer networks. Bain should have expected the securityobsessed US government to object.
Covert fees add insult to injurious Northern Rock 20 Feb 2008 No one s saying exactly, but it seems bankers, lawyers and suitors of the nationalised UK lender will be paid at least £100m. It isn t clear for what. The Treasury insists the money will be recouped when the Rock is privatised. The logic is baffling and the secrecy rotten.
Falling Libor means pain for banks, reprieve for buyout firms 19 Feb 2008 The benchmark interbank rate has plummeted nearly 275 basis points in five months. That s given banks with stuck LBO loans another headache. But stretched privatelyowned companies benefit from lower debt servicing costs. Buyout firms won t be so lucky next time.
Open Skies may help Delta deal clear antitrust hurdles 19 Feb 2008 The company s merger with Northwest looks nearly certain. Now comes the hard part: convincing US regulators, which loathe consolidation. But cajoling the Feds could be easier now that the Open Skies treaty promises more competition from European airlines.
EU should keep UK honest in Northern Rock aid 19 Feb 2008 The Commission won t block the government s nationalisation of the troubled lender, but it won t let the state aid distort the banking market. Downsizing is called for. An auction of a representative slice of the mortgage portfolio would help determine the bank s real value.
Castro’s leaving, but Castronomics isn’t gone yet 19 Feb 2008 Fidel is officially retiring. Since he took over Cuba in 1959, the country s economic performance resembles much of Latin America s appalling. That s because Castro s antiYanqui socialism has too long infested the Latin American left. He still has too many followers.
Commodity inflation will strain cheap money policies 19 Feb 2008 Price rises of 65% in iron ore and 90% in wheat can t be absorbed in costs and will tend to entrench inflationary expectations. That suggests much higher consumer inflation is in store. The Greenspan/Bernanke cheap money vessel is heading for the rocks.
Why would one property fund buy shares in another? 19 Feb 2008 Because that s the cheapest way to buy UK property these days. So a New Star fund is investing some of the proceeds from asset sales in closedend funds which are going at a big discount. That may make sense, but then why should investors pay New Star a 1.5% management fee?