Wall Street snookers another commercial bank 22 Jan 2009 Financial history is littered with the disastrous consequences of commercial banks acquiring investment banks. In good times the talent sells high and waves goodbye think Credit Suisse/DLJ. Merrill s suckering of BofA shows it s no different in bad times.
Fiat’s outlook highlights need for speed in consolidation 22 Jan 2009 The Italian automaker taking a stake in Chrysler slashed its profit outlook by a third while debt ballooned. The only way forward is to reduce capacity in the industry, perhaps by merging with PSA. Fiat boss Marchionne is best placed to make this happen.
UK needs plan to bring finances back in balance 22 Jan 2009 Measures to stimulate the economy and bail out banks are being viewed as profligate. To counter that impression and avoid the risk that investors may stop buying gilts the government must come up with a credible mediumterm plan to balance its books.
Merrill’s bonus caper adds to the stench for BofA 22 Jan 2009 The Herd thundered off with bonuses just days before the bank s rescue takeover closed and news of a $15bn fourthquarter loss emerged. Worse, Merrill pay fell by a mere 6% in spite of a disastrous 2008. BofA shareholders and staff should be livid with both banks bosses.
China’s 6.8% growth isn’t as good as it seems 22 Jan 2009 While the reported fourthquarter figure looks respectable, underlying growth was probably zero. What s more, attempts to boost growth this year may only give the country a temporary fillip.
BT shows no signs of healing 22 Jan 2009 The UK telecoms group has issued a second profit warning, this time involving a £340m charge relating to its ailing Global Services Unit. Newish chief executive Ian Livingston says there could be more bad news to come. It bodes ill for BT s hefty dividend.
Microsoft and Google should gear up for yard sales 21 Jan 2009 Both onetrick ponies have used prodigious cash flows to fund outside projects with little success. A trying environment should change this. Google recently axed its print ad project and Microsoft sold its longheld stake in Comcast. A host of other distractions could be next.
Jobs leaves Apple with plenty of money spinners 21 Jan 2009 The hip gadget maker s earnings smashed expectations. They were largely driven by biggerthanexpected iPod sales and its resurgent Mac computer line. If Steve Jobs doesn t return to the helm, Apple s next chief will at least have several strong products to offer breathing room.
Red faces all round over Lloyds fiasco 21 Jan 2009 Lloyds takeover of HBOS is proving a disaster. A fairly healthy bank has been infected with a virus, where the cure could be nationalisation. The three main culprits are: Gordon Brown, who pushed for the deal; the board of Lloyds; and shareholders, who voted it through.
Geithner apologises but misses chances at clarity 21 Jan 2009 The US Treasury bossdesignate was understandably cagey about how the Obama team will pursue bank bailouts, since they re still devising their plan. But he could have been more open with senators about the rationale for past decisions if he really believes in policy transparency.
France prematurely launches bank bailout II 21 Jan 2009 President Sarkozy is keen to show his determination to keep France's banks lending. He is making a further E10.5bn available to the sector. But like the UK s second bailout, the crucial details have yet to emerge. French banks will welcome it with gritted teeth.
Prisa faces painful negotiation with banks 21 Jan 2009 The Spanish owner of newspaper El Pais faces a looming E2bn debt repayment in March. Cutting borrowings will require sacrifices. Asset sales or an equity injection have their drawbacks, but could become unavoidable.
Parsons has much to prove as Citi’s new chairman 21 Jan 2009 The former Time Warner boss built a tottering conglomerate, too. And as a Citi board member since 1996 and lead director since last summer he s part of the old guard. Parsons must prove his worth. But at least the bank is keeping the role separate from that of chief executive.
UK bank nationalisation is no easy fix 21 Jan 2009 Plunging UK bank share prices might suggest that those advocating speedy public ownership of Lloyds and/or RBS have a point. But nationalisation is not the only way to fulfil the government's aims of reviving lending. And a twotier market is rarely a good thing in any sector.
UK must clarify bad bank details ASAP 21 Jan 2009 The latest bailout has gone down like a lead balloon in part because there are no details on the crucial bad bank making it impossible to value bank stocks. The government must fill the information vacuum rapidly before more havoc is wreaked.
Blackrock could play Batman to hedge fund Jokers 21 Jan 2009 The asset manager s fourthquarter numbers weren t great, although its base of feeearning assets kept it in the black. But its unusually broad range of asset types and hybridfee model could position it well to pounce on money fleeing hedge funds and funds of funds.
Safe haven money may start flowing to Germany 20 Jan 2009 Huge projected US budget deficits may cause investors to seek a new safe haven. With a deficit below 4% of GDP and only modest stimulus plans, Germany is an excellent candidate. However, profligate southern European economies endanger the euro and reduce Germany's attractions.
Fake smiles all round as Permira calls in $918m 20 Jan 2009 Investors pledged the cash to the buyout firm in better times. Now it s payday, but cash is scarce, and the deal Permira plans to use it for is rather unappealing. Investors have to pay up but Permira is probably as unhappy about the situation as they are.
So much for hope trumping fear – in the markets 20 Jan 2009 As President Obama marched up Pennsylvania Avenue, markets turned sharply down. The Dow Jones benchmark had its worst Inauguration Day since its creation. The performance underscores Obama's challenge righting the US financial system.
Ecclestone is unwise to start F1 revenue row 20 Jan 2009 The Formula One boss has suggested that teams should receive a reduced share of the sport s profits. He may be feeling the squeeze, but giving already financiallystretched teams another reason to follow Honda out of motorracing is counterproductive.
UK bank nationalisations are not inevitable 20 Jan 2009 Public ownership of UK banks is still a huge risk. But neither the banks nor the government want it. The catalysts would be a run, or more writedowns requiring statefunded recapitalisations. But investors who see a definite floor may yet provide capital, and save themselves.
Barclays desperately needs a confidence boost 20 Jan 2009 Investors have lost faith in the UK lender s claims on capital strength. Monday s disclosure, with a promise to tell more, was a step in the right direction. But Barclays should trust shareholders with all the facts. An outside valuation of the balance sheet would also help.
GLG-Pendragon deal hints at hedge fund future 20 Jan 2009 The USlisted fund group is absorbing the smaller eventdriven firm. Sure, the deal helps GLG rebuild assets after losses and redemptions. But more significantly, Pendragon may have seen the writing on the wall for smaller funds. The deal won t be the last of its kind.
State Street bets on hope over experience, and loses 20 Jan 2009 Its stock plummeted 50% despite evidence that the $24bnodd of assets in its conduits are still performing. That may be true, but its bosses should have realized investors have little confidence in financial firms assurances. Even the most boringlooking firms can be punished.
Governments should be wary of demanding bank lending 20 Jan 2009 Efforts to incentivise banks to lend or push them outright might seem like reasonable tradeoffs for big capital infusions. But short of nationalisation, they could create the sort of dual mandates that caused Fannie and Freddie to go wrong in the US.
Plunging pound logically reflects UK’s ugly state 20 Jan 2009 The UK s latest bank bailout has sent the pound plunging. That s logical. The UK can ill afford yet more increases in government debt. But a weak pound is also the country s only hope of coming out of recession.
Fiat’s clever deal revives Chrysler’s corpse 20 Jan 2009 The Italian carmaker is to take a stake in its ailing US peer, paying in technological knowhow rather than cash. This should help Fiat sell compact cars in the US and adds crucial production volumes. It also keeps the blood flowing through at least some of Chrysler s appendages.
Geithner should still get US Treasury job 20 Jan 2009 He has two charges to answer: his reluctance to pay certain taxes, and his role in questionable bailouts to date. Set against those his capabilities and experience and the failure even by his critics to suggest anyone better. He s imperfect, but he s still the best candidate.
New York Times’ Slim deal worth its fat price tag 20 Jan 2009 The media group is paying a 14% interest rate and giving warrants on a $250m loan from the Mexican magnate. It looks expensive, but it may be cheaper than going to a bank. The deal also has fewer tripwires than a typical loan. The catch: Slim is now senior to the Sulzbergers.
UK broadcasting needs private-sector solution 20 Jan 2009 The industry is bracing itself for a shakeup as regulators outline ways to plug the funding gap caused by publicservice broadcasting obligations. More state funding, or siphoning cash from the BBC, is not the answer.