Merrill thunders into history 5 Dec 2008 Its shareholders and those of Bank of America approved their marriage. Neither group had much choice, though shares of both companies have plunged since the deal was announced. Now comes the hard part achieving Ken Lewis s synergy targets while slogging through the downturn.
Jobless data suggest US labour becoming less competitive 5 Dec 2008 US employment plummeted in November as the credit crunch's toll on businesses mounted. But downward revisions to jobs figures for September and October suggest fierce global cost competition is also a factor, and one that may persist beyond a credit market recovery.
Formula 1 faces shrinking grid 5 Dec 2008 Honda is quitting the F1 racing championship. The automaker put in a dismal performance last year, despite sporting the largest budget. Its exit gives other beleaguered rivals like Toyota an excuse to make tracks. F1 needs to overhaul the economics of the sport.
Banks shouldn’t be forced to pass rate cuts to customers 5 Dec 2008 Politicians are calling for UK banks to pass on in full the latest 1% cut to customers. But increased availability of lending is more important than cheap lending. The way to achieve that is by making it more attractive for banks to lend, by letting them increase their margins.
It’s every man for himself at Opec 5 Dec 2008 With the price of oil tumbling, the temptation for the oil cartel s strained governments to cheat on production cuts is too great. The influx of speculators has also weakened Opec s power. The cartel s attempts to talk up the oil price may be in vain.
Babcock & Brown becomes banks’ plaything 5 Dec 2008 The embattled Australian investment firm secured a funding lifeline. But lenders have stopped B&B from paying dividends and interest on subordinated debt. They ve also demanded a new restructuring plan with a debtforequity swap component. It beats insolvency but not by much.
Credit Suisse finally wakes up to the new world 4 Dec 2008 Before Lehman collapsed, the Swiss bank was boasting about its countercyclical expansion plans. But after losing SFr3bn so far in Q4, it is axing jobs and hacking back its exposure to risky areas of investment banking. At least it has a plan B and can put some numbers on it.
Clarity on Swiss bank rules welcome but no panacea 4 Dec 2008 Swiss regulators are forcing UBS and Credit Suisse to hold minimum capital against total assets to absorb potential losses. Crude leverage ratios have drawbacks, and both banks are already degearing. But the new rule may help keep memories from fading as the crisis passes.
Italy gets its own Blair vs Brown show 4 Dec 2008 Cooling relations between Berlusconi and Tremonti, his finance minister, are changing the power dynamics in Italy. One of the many consequences: the government is struggling to come up with an effective response to the banking crisis.
US mortgage rate scheme may push on a string 4 Dec 2008 The Treasury thinks lower interest rates will spur demand. That may be true, incrementally. But mortgages are already cheap. The factors keeping most buyers on the sidelines are ongoing house price deflation and growing economic uncertainty.
Europe’s rate cuts testify to huge problems 4 Dec 2008 The latest drastic rate cuts by the Bank of England and the European Central Bank recognise the huge challenge the world economy faces. They also testify to two big failures: not acting sooner to combat deflation, and allowing the credit bubble to inflate in the first place.
Ukraine could become emerging market flashpoint 4 Dec 2008 The IMF s bailout cash is draining fast, as the country s divided government tries to defend its currency while battling a sharp payments deficit. If Ukraine destabilises, that will be bad for IMF credibility, Western banks and the whole region, which could suffer contagion.
Capital One light-years ahead in funding transformation 4 Dec 2008 The US credit card issuer took heat for going on the hunt for banks a few years ago, culminating in today s purchase of Chevy Chase Bank. But locking in deposits as a source of funds now looks incredibly prescient. The big question is whether it has doled out for crummy assets.
New Star’s banks make best of bad job 4 Dec 2008 The restructured asset manager s lenders have saved face. They will take a minimal loss on their £240m of loans if everything goes well. To make that more likely, New Star s top managers are getting star treatment.
Neuberger Berman triumphs over private equity with MBO 4 Dec 2008 The asset manager s executives have beaten Bain and H&F to win the auction for the business. It s an illustration of how tough things have become for private equity firms that a team of longonly fund managers can beat them at their own game.
US bank guarantee fails to eliminate credit fears 3 Dec 2008 The version of this piece published yesterday contained incorrect data on the yield on Citigroup s governmentguaranteed bond. A corrected version follows.
EDF’s costly bid to divert Constellation from Buffett 3 Dec 2008 France s stateowned electricity giant is betting $4.5bn on a move to buy the US group s nuclear energy assets. The offer values the unit at twice the price it agreed to be bought by Warren Buffett in September. EDF investors are rightly unamused.
The credit crunch in round numbers 3 Dec 2008 Annual risk premium on iTraxx index of European companies rated subinvestment grade: now a record 10 percentage points. Estimated junkrated corporate default rate next year: more than 10%. Global junk bonds sold last month: a big zero. Talk about putting the o s in gloom .
BA deals will test Willie Walsh’s negotiation skills 3 Dec 2008 The British Airways boss is weighing up airline deals with Iberia and Qantas. Both could be good transactions, although the synergies from Iberia are juicier on paper. But much depends on the terms of any combination. Walsh has some tough negotiations ahead.
UK banks face another kicking 3 Dec 2008 Lenders are planning for a doomsday scenario if they have to pay back penalty fees to customers who have gone overdrawn. The hit could be £14bn, by one estimate. That would be popular with consumers but it would undo the state s efforts at resuscitating its banking system.
TI’s unimaginative strategy re-jig may not be enough 3 Dec 2008 The highly indebted Italian telco is short on radical ideas. Instead it is meeting the slowdown with a familiar formula of disposals and job cuts. The proposed E3bn of asset sales may be tough to deliver. At least TI still has the option of a dividend cut.
Public hedge funds have it worse off 3 Dec 2008 The whole industry is hurting. But publiclytraded funds like Fortress, GLG and OchZiff must expose all of their wounds to the public. This amplifies their bad patches and flaws and adds a negative feedback loop to their risk factors.
Buyout fund investors suffer credit boom hangover 3 Dec 2008 Private equity investors are trying to sell $100bn of fund holdings at a 50%plus discount. Part of the problem is that they overcommitted to private equity funds during the boom. But many investors are rushing to the exits because they think prices are about to get much worse.
Rush for deposits won’t solve Wall Street’s problems 3 Dec 2008 Financial institutions ranging from Morgan Stanley to GE Capital are trying to beef up their deposit gathering. Goldman Sachs is even considering launching an online bank. But they may find their dash for retail dollars isn t the panacea they had hoped.
Fortis shareholders belatedly use their muscle 3 Dec 2008 They rejected the appointment of diplomat Etienne Davignon as chairman of the collapsed BelgoDutch group. It doesn t undo the vote last year to support the shambolic ABN Amro deal. But it could herald an era of greater shareholder vigilance. It should and not just at Fortis.
Falling handset sales should bring consolidation 3 Dec 2008 Research in Motion, Palm and Nokia have all slashed forecasts as cell phone revenues slow. Global sales are expected to shrink next year for the first time since 2001. Add falling prices to the mix and there s trouble ahead for handset makers. Industry consolidation may result.
Metrovacesa underscores the pain for banks in Spain 2 Dec 2008 Lenders are in talks about swapping part of a E4bn loan to Metrovacesa's majority shareholder for a stake in the E3.5bn Spanish property developer. The move follows the collapse of another developer last week. Spain's downturn is starting to cause real pain for its banks.
Qantas widens BA’s options 2 Dec 2008 The Australian carrier has tapped up its UK peer for a possible deal. Whether or not it happens depends on the terms Qantas offers. BA's option of a deal with Iberia isn t off the table, yet. And BA is also talking to American. BA must not squander these opportunities.
Detroit humbly asks for outrageous Federal largesse 2 Dec 2008 If Ford s plan, the first presented, is any indication, the automakers second turn at the trough isn't very encouraging. The bestoff of the Wobbly Three wants $9bn worth of 10year loans at the government s borrowing rates. That s outrageous.
Equity markets thwacked from all sides 2 Dec 2008 There s no single reason why stocks have retraced half of last week s megabounce. Bad news is oozing from every pore and confidence has been undermined.