UK banks shouldn’t panic over capital yet 23 Jul 2009 The postcrunch drive to rein in volatile bank trading books has yielded some punchy new rules. While that means more capital will have to be set aside, the impact won't be too painful for UK banks. But with the regulatory environment febrile, investors should remain cautious.
Credit Suisse finally joins the big leagues 23 Jul 2009 The Swiss group posted a second straight quarter of solid results. Trading profits pushed underlying return on equity to a sizzling 27%. Two decades after buying out First Boston, Credit Suisse is at last in the top tier. The trick will be staying there while taking less risk.
Obama’s plan a double blow for derivatives dealers 22 Jul 2009 US regulators want to oversee all firms that deal in unlisted derivatives. That makes sense and could head off future AIGlike meltdowns. Dealers won t like the scrutiny, but they re more afraid of the government s other big idea forcing derivatives to be traded on exchanges.
Money supply points to worse crunch in eurozone 22 Jul 2009 Despite the best efforts of the ECB, bank lending growth has slowed to a crawl. It s especially bad in Germany . Industrial orders are weak and deflationary pressures may worsen. No wonder the German finance minister is rumoured to be contemplating extreme measures.
S&P flip-flop worsens rating credibility problem 22 Jul 2009 The rater reversed weekold downgrades of certain structured securities. The fact that S&P is even now making modeling mistakes underlines why investors should be extra wary of structured finance ratings and why distinguishing them from others makes sense.
Blankfein chooses discretion on Tarp warrants 22 Jul 2009 Goldman has bought back its warrants for $1.1bn, the US Treasury's asking figure probably a very full price. JPMorgan's Jamie Dimon is taking a less humble tack. But then, his firm isn't under quite the same scrutiny over profits and pay as Blankfein s.
Morgan Stanley Q2 much better than it looks 22 Jul 2009 Strip out all the oneoff funnies and the Wall Street firm s results were actually tolerable. But with asset management still suffering and rivals minting far more cash in fixed income trading, the pressure is on Morgan Stanley to do better.
What’s the right structure for UK financial regulation? 22 Jul 2009 The government and the opposition have both got it halfwrong. The best approach is to give a new independent BoE committee responsibility for preventing bubbles, while leaving the FSA in charge of regulating banks and markets.
GE shrugs off some US bond guarantees 22 Jul 2009 The company has found it can fund itself in the commercial paper market more cheaply without the government s backing due to the fee charged for the insurance. That reflects an encouraging market revival but one that still partly depends on implicit US support.
Equities find a silver age 22 Jul 2009 The 9% gain in world stock markets in a sevensession rally doesn t mean the golden era of easy credit and stable growth is coming back. But with stocks still 40% below the peak, valuations look reasonable. This rally could last, if central banks and the economy cooperate.
Fiat’s Marchionne moves into reverse 22 Jul 2009 The Italian automaker s boss thinks big, but after failing to get Opel, Marchionne is backtracking on his rhetoric. Restraint fits with Fiat s modest quarterly trading profit and the big challenges the company still faces. Number one is creating a healthy Chrysler.
Continental struggles under its E11bn debt mountain 22 Jul 2009 The German car parts maker is trying to strengthen its highly leveraged balance sheet. A rights issue could probably only raise E1.5bn. But that s enough to dilute majority holder Schaeffler significantly and keep a mooted merger of the two debt junkies at bay.
US stress test of Wells Fargo not so wide of mark 22 Jul 2009 The bank s bosses didn t like the government's process one bit. And they re pointing to bumper earnings to prove their point. But shareholders cared more about the spike in troublesome loans. They d have been more spooked if the stress test hadn't forced Wells to raise capital.
Bonus-bashers could face uphill struggle 21 Jul 2009 The UK s FSA is questioning multiyear guaranteed bonuses. But banks, including statecontrolled ones, are paying up for talent. While in theory regulators could enforce restraint, the mood has changed over the last few months. Wily bankers could well keep getting their high pay.
Fourth CEO in a year unlikely to rein Freddie in 21 Jul 2009 Charles Haldeman will try to control the US mortgage giant. But the company's political masters are still stuffing the beast with assets. Striking a balance between serving government and longsuffering shareholders has eluded managers with stronger track records.
Lloyds, RBS shouldn’t be broken up in wrong way 21 Jul 2009 Both UK opposition parties are talking about using the government s stakes to split the rescued banks. They may be too big. But if so, the state s shareholdings are the wrong tool to use for cutting them and other industry giants down to size.
Recession forces reality on California lawmakers 21 Jul 2009 The US state's deal to close its $26.3bn budget deficit includes accounting gimmicks but also genuinely painful cuts, which appear to reverse a longterm bloating of state spending. It shows how, if outside constraints are tight enough, crisis can bring real opportunity.
CIT pays heavy price for reprieve 21 Jul 2009 Creditors will give the struggling US lender a $3bn lifeline. But the rescuers have extracted tough terms. The loans have a hefty interest rate and good security. CIT gets more time to struggle on, but it probably won't survive without some luck and help from the government.
HSBC asks investors to look through phony losses 21 Jul 2009 A $4.7bn reported loss on the $17bn rights issue is set to bring the bank into the red for the first half of 2009. The accounting is a nonsense, like losses from narrowing market spreads on the bank s own debt. But HSBC s unsophisticated shareholder base may need some convincing.
Wall Street’s up-and-comer gets ahead of itself 21 Jul 2009 Sure, Jefferies is one of the few investment banks that s building and hiring. It just became the newest primary dealer for US government debt and posted good secondquarter earnings. But it s a long way from being the global fullservice firm boss Richard Handler thinks it is.
Bernanke’s exit strategy requires expert timing 21 Jul 2009 The Fed chief told Congress he can drain liquidity by boosting interest on banks reserve deposits. Those recently topped $800bn. If bank appetite for making loans returns, the Fed could have a hard time keeping that money from flooding into the economy.
Paul Allen tries rule quirk to gag Charter lenders 21 Jul 2009 The billionaire owner of the bankrupt US cable company is pushing a plan that would defang senior lenders, led by JPMorgan. It relies on a rule that allows borrowers to keep some existing loans in place, which could let equity holders like Allen retain control of the process.
CIT’s semi-rescue suggests slow climb up 20 Jul 2009 A $3bn loan has warded off a Monday bankruptcy filing, but the US lender still doesn t have a viable business model. It will struggle and shrink and may yet fail. CIT s woes are a reminder: while traders rake in profits, the real economy and normal banking continue to struggle.
Cowdery and pals could make nearly £100m from Friends 20 Jul 2009 And that wouldn t be a stretch. To achieve that, they would merely need to boost its value by 15% a year. For a proposed acquisition that is neither in cash nor involves a premium, this incentive structure is too rich. Something will have to give.
Swine flu unlikely to make UK economy sicker 20 Jul 2009 According to some UK economists, the country s next crisis will be epidemiological. But predictions that swine flu will cut the country s GDP by 5% look overdone. Only a virulent mutation could do that. Fear may hurt a little, if it cuts into leisure and tourism.
Porsche-VW truce wouldn’t end bad governance 20 Jul 2009 The feuding families which control the debtladen sports car maker seem finally to be close to the obvious deal: VW buys out Porsche s car division. But the row has highlighted both companies strange corporate arrangements. Other disputes will arise unless these are changed.
Tory bank plans deserve two cheers 20 Jul 2009 The UK opposition which is likely to be in government in a year has many good things to say about how to prevent future bubbles. But the Tories are too fixated on abolishing the FSA. This, at best, would amount to rearranging the deckchairs.
Fortress faces up to reality 20 Jul 2009 CEO duties at alternative investment firms were light while the boom lasted. No longer. Fortress founder Wes Edens is following peers such as Guy Hands at UKbased Terra Firma in handing over the top spot to focus on investing. The move, while overdue and imperfect, makes sense.
Jenkins exit good for Barclays PR – and business 20 Jul 2009 The UK bank s top earner may want to set up on his own or keep his huge pay package secret. Whatever his reasons for going, Barclays should have few regrets. Jenkins was an easy target for regulators, investors and the public. And Barclays can now afford to hire more rainmakers.
Why does Morgan Stanley want to hire a hedgie? 20 Jul 2009 The Wall Street firm is supposed to have disavowed prop trading. But bringing Jack DiMaio back to banking could be a smart move. He was a seasoned sellsider before, and knows what clients want. And if Morgan Stanley ever restarts risktaking, DiMaio would be an asset.