Lloyds/RBS earnings hits to weigh for years 4 Nov 2009 Shareholders in the UK s two bailedout banks haven t been wiped out. But their returns are being savaged by forced disposals plus mammoth, expensive and dilutive capital increases. Lloyds will recover faster. But even by 2012, RBS may be earning barely a few pence a share.
SocGen’s healing can’t mask crisis scars 4 Nov 2009 The French lender s profit more than doubled as the investment bank got back in the black. Stock and bond trading provided another lift but their contribution is shrinking. And credit losses and accounting writedowns persist. Small wonder SocGen sees lower profitability to come.
Fed’s latest inaction creates more bubble risk 4 Nov 2009 By not even signalling an end to easy money the US central bank runs the risk of further inflating asset and commodity prices and sinking the dollar. Its mandate is to keep inflation and employment stable. Avoiding bubbles ought to be central to this mission.
Buffett changes habits for railway deal 4 Nov 2009 To buy Burlington Northern, he is paying a full price, issuing precious Berkshire Hathaway stock, and splitting each of the company s baby B shares into 50 pieces, taking their price down from $3,000plus into the doubledigit realm of normal stocks. Whatever next a dividend?
RBS and Lloyds see their fortunes diverge 3 Nov 2009 In February, the UK banks seemed as bad as each other both were staring at state insurance and higher government ownership. This fate has indeed now befallen RBS, which has received a further smack from Brussels for good measure. But for Lloyds, the future looks brighter.
Buffett’s $34bn buy is barely a bargain 3 Nov 2009 The US value investor has a name for buying dollar bills for 50 cents. His deal to buy the Burlington Northern railway group doesn t appear to fall into that category. True, Buffett is going big in a company and industry he likes. But it is a bet on growth rather than on value.
Republican surge may reopen economic debate 3 Nov 2009 Offyear US election results favouring Republicans bring no national change. But a bipartisan economic consensus since 2007 has favoured state spending and bailouts. The results suggest a distrust of both that may force policy modifications nearterm.
BofA succession soap opera gets new twists 3 Nov 2009 It s bad enough that Ken Lewis resignation under fire left directors scrambling to find a replacement. Now they re reportedly having a hard time finding a candidate who ll move to Charlotte while an investor claims they still haven t contacted the most obvious contenders.
Blackstone may be big beneficiary of attrition 3 Nov 2009 Steve Schwarzman's alternative asset manager may not raise another record LBO fund like its $21.7bn 2007 leviathan. But relative growth does look achievable in a shrinking industry.
Grübel’s gloom wasn’t overstated – or heeded 3 Nov 2009 When the revered Swiss banker took over at UBS earlier this year, his grim outlook was partly dismissed as mere expectations management. But a weak Q3 bears him out. Even UBS strongholds wealth management and equities suffered. The shares don t reflect Grübel s continued caution.
J&J finds merger-sized savings – in itself 3 Nov 2009 The US healthcare conglomerate will slash up to 8,000 jobs. Unfortunately, the benefits are likely to be as fleeting as the cuts accompanying giant pharma mergers. That's because it's increasingly tough finding new drugs to replace lost revenue as sales of old products run down.
UK only half undoes Lloyds/HBOS mess 3 Nov 2009 The government is pretending that disposals by Lloyds and RBS will create more competition in high street banking. But this was European not UK policy and the banking sector is still less competitive than before the government blessed Lloyds disastrous acquisition of HBOS.
EU should heed Putin’s call for help on Ukraine 3 Nov 2009 The Russian president is meddling in Ukrainian politics by hinting that a new gas row is looming, and that Europe should help Kiev pay its bills. But he has a point. The EU hasn t done enough to assert its influence and help Ukraine sort out its industrial and political mess.
What does Buffett see in railways? 3 Nov 2009 He s paying a big premium to swallow Burlington Northern Santa Fe, a US railroad operator. It s not necessarily a signal to buy the sector in a hurry. But the Berkshire Hathaway chairman does seem to think rail transport could be building a bit of a head of steam.
Ryanair should take its foot off the gas 2 Nov 2009 The budget airline says it may abandon its aggressive growth strategy from 2012 and start paying dividends. This may be a tactic to scare Boeing into sweetening terms on a massive order for planes. Either way, the discipline of dividends could support Ryanair s drifting shares.
Global banks should be federalists – or pay up 2 Nov 2009 Regulators want to avoid the collapse of another international giant like Lehman. Turning all crossborder wholesale banks into capital federalists like HSBC is probably a nonstarter. But Lord Turner s alternative that refuseniks should hold more capital is worth exploring.
TPG does a Debenhams down under 2 Nov 2009 The US buyout firm has quadrupled its money floating Australian department store chain Myer for A$2.4bn. But the shares fell 9% on their debut, albeit in a weak market. Investors will hope Myer isn t another letdown like Debenhams, the UK retailer TPG floated in 2006.
RBS loan-insurance gain mitigates Brussels pain 2 Nov 2009 The UK bank s larger degree of state support relative to rival Lloyds means the EC is giving it a much rougher ride. The threat of unanticipated disposals has knocked RBS shares. But improved terms for stateprovided loanloss insurance should limit shareholders' suffering.
Logic battles politics in Goldman-Fannie deal 2 Nov 2009 The profitable Wall Street firm might relieve the US government s zombie housing lender of tax credits it can t use. Both ought to profit from such a deal. The government s problem is that handing Goldman any benefit is politically fraught even if it helps taxpayers.
Tool industry engineers near-perfect deal 2 Nov 2009 Stanley Works is buying Black & Decker for $3.5bn in a deal that leaves almost nothing for investors in the two companies to fret over. If only dealmaking was always this simple.
Ford adds capital icing to earnings cake 2 Nov 2009 The Motown carmaker followed up its $1bn earnings surprise with a deft bit of balance sheet restructuring. Ford hopes to raise up to $3bn of new capital while also paying back almost as much debt. That should add confidence the firm is properly planning for longterm success.
Lloyds opens door to new era of bank capital 2 Nov 2009 The UK bank plans to swap hybrid bonds for a security convertible into equity when times get tough. Meanwhile, RBS has got rainyday capital from the state. Regulators will be happy that contingent capital is now a reality. Investors will be wary, but may have to join in.
SAB will struggle to make Femsa refreshing 2 Nov 2009 The South African brewer is the frontrunner to acquire Mexico s Femsa for some $7.5bn. It could easily finance the deal and Femsa would fit well with its emerging market portfolio. But getting the numbers to work for shareholders won t be easy.
Lehman bequeaths an artistic premium 2 Nov 2009 The investment bank s dodgy real estate portfolio precipitated its collapse a year ago. But Lehman s demise added value to a mostly unremarkable art collection. The pictures cruised past auction estimates. There s no accounting for taste or emotion in asset valuation.
CIT may find bankruptcy easier than rebirth 2 Nov 2009 The troubled US business lender fought hard, including bending over backwards to dissident Carl Icahn, to have its prepackaged filing accepted by creditors. But the harder task still remains: convincing the world it has a reason to exist beyond Chapter 11.
Vodafone’s India push gets more costly 2 Nov 2009 First Spain, then Turkey, now India. The subcontinent is the mobile group s latest problem area. Vodafone faces a price war, a $2bn tax claim, and the exercise of a $5bn put option by local partner Essar. The real cost of the 2007 deal taking Vodafone into India is now emerging.
Cautious currency thaw shows Iceland on right track 2 Nov 2009 The troubled country is slowly ending capital controls put in place to prop up the krona. Iceland now seems less like a stricken banana republic. With partnationalised banks, overgeared consumers and a vulnerable currency, it is closer to looking like the UK in miniature.