Can clients still trust the mighty McKinsey? 3 Mar 2011 That's something they should be asking after the SEC, as part of its insider trading crackdown, accused the elite management consultancy's former chief of betraying Goldman's secrets. Corporate clients had already questioned the firm's advice but not its culture or discretion.
Cypriot bank fortifications aren’t disaster-proof 3 Mar 2011 The islandnation's banks have recapitalised and can count on large deposits. But they're so intertwined with Greece that they could be badly hurt if that country defaults. With banks' liabilities about 650 pct of GDP, the government would struggle to deal with a major crisis.
Growth, not inflation, is Asia’s bond market worry 3 Mar 2011 Rising food, fuel and property prices suggest Asia has a serious inflation problem. Markets tell a different story. Asian bond yields indicate investors are more concerned that the region's growth will slow and believe that the U.S. recovery offers more attractive opportunities.
Buyers for Citi subprime unit face enticing puzzle 3 Mar 2011 Cleanedup CitiFinancial is one of the few remaining U.S. lenders catering to people with lower credit scores. Regulations pushing banks to focus even more on the affluent could make the unit a moneyspinner. But any new owner would first have to solve its funding dilemma.
Murdoch’s remedy for News Corp/BSkyB falls short 3 Mar 2011 A spinoff of Sky News will limit News Corp's stake in the unit to 39 pct, but Murdoch's history provides little reason to believe mechanisms to protect editorial independence will be effective. For shareholders, the lack of financial detail in the agreement is also a worry.
U.S. spending deal won’t settle funding fight 3 Mar 2011 Democrats and Republicans have compromised to avoid an embarrassing temporary shutdown, and may cut a deal for the rest of the year. But even if this logically implies raising the statutory debt ceiling, it's not clear agreeing on that will be so easy.
Macau proves a risky bet for Las Vegas Sands 3 Mar 2011 The casino operator's value has dropped more than $2 bln over U.S. probes into corruption in China's gambling enclave. Macau's seedy side is no secret, but Sands, with its hopes of being welcomed in more genteel places like Spain and Singapore, has more to lose than most.
Osborne should give King another tough Sentance 3 Mar 2011 Many assume that George Osborne, the Chancellor, will want a dovish economist to replace arch hawk Andrew Sentance, who leaves the monetary policy committee in May. What he needs is an external member that keeps the MPC transparent, intellectually challenged and independent.
StanChart rides high on footprint premium 2 Mar 2011 The emerging market lender's earnings rose 27 percent as credit conditions improved and it piled on loans in Asia and Africa. StanChart's geographic charms are no secret. But rising costs, regulatory unknowns and ambitious investment bank plans make its valuation seem generous.
Portugal’s ducking and diving won’t avoid bailout 2 Mar 2011 The Portuguese government claims investors' takeup of its offers to buy back shortterm debt is a sign of confidence. That's only partially true. Investors aren't rushing to sell, but they won't lend to the country at affordable rates either. A bailout still looks inevitable.
Omens and portents swirl around FICC trading 2 Mar 2011 Last year's moribund turn in selling bonds, currencies and commodities appears to have continued. And now UBS has removed its trading boss. With spreads tight, leverage low, capital more expensive and prop trading off the table, the business is looking ripe for a trim.
Showdown heralds bigger UK bank commission battle 2 Mar 2011 The panel pondering the future of Britain's banks appealed to ministers because it feared it would be undermined by the Merlin pay and lending deal. Though the commission prevailed, the standoff is a reminder that it will have to fight to see its recommendations implemented.
Fannie, Freddie fix fades further into future 2 Mar 2011 U.S. financial reform architect Barney Frank sees signs of consensus with Republicans on reducing the government's role in mortgage finance. But the GOP's former enthusiasm for major reform looks to be waning. Delay and dilution make it more likely taxpayers remain on the hook.
Google’s spam fight may bring added bonus 2 Mar 2011 Tweaking algorithms to cut down on lowquality links will make the Internet search giant's users happy. That in turn should help maximize Google's longterm value. Just as importantly, it could ease pressure from U.S. and European governments to impose search neutrality.
E.ON’s $6.4 bln UK power sale stacks up nicely 2 Mar 2011 U.S. utility PPL has beaten Warren Buffett and Hong Kong entrepreneur Li Kashing to nab E.ON's UK electricity network. The purchase could generate an 8 pct return from the start, excluding synergies. PPL gets steady cashflows in an uncertain world, while E.ON gets to deleverage.
iPad 2 launch shows Apple’s cool with corporate 2 Mar 2011 The new tablet device is faster and lighter than its predecessor. Ill CEO Steve Jobs turned up to showcase the latest features for kids, teenagers and geeks alike. Oddly missing was anything special to tempt business customers. Apple rightly reckons they'll come around anyway.
Chinese Twitter looks cheap versus real thing 2 Mar 2011 Weibo's owner, Sina, spooked investors saying it will take longer than expected for the microblog to make money. Yet the potential remains large. Weibo has half the users of Twitter, for a quarter the implied valuation. Even political unrest might create an unexpected boost.
Oil supply can’t contend yet with car demand 2 Mar 2011 Middle East tensions won't have factored much into February's strong auto sales. And in America especially, improving credit and a need to replace aging cars are powerful forces. High gas prices will hit SUVs. But it may take a worse spike to dent pentup desire for smaller cars.
GOP attacks make Bernanke’s credibility vulnerable 2 Mar 2011 The Fed chairman's easy money approach, backed by most of his Fed fellows, still rules U.S. monetary policy. But the new Republican House majority's demand for tighter money and claims that inflation is understated raise the stakes for Bernanke's position.
Asian bankers might just deserve their premium 2 Mar 2011 HSBC has released figures showing it pays more to nonUK staff. The suggestion will rankle with Western bankers, who preside over four times the fee pool. Though Asian packages are juiced up by competition and unlevel regulation, there is a case for paying scarce bankers more.
Carrefour’s spin-off plans fail to impress 2 Mar 2011 The French retailer is to sell its harddiscount division and some of its real estate. Activist shareholders have pushed for such moves after seeing a third of the value of their investment wiped out. They'll get some cash back, but the shakeup won't boost value massively.
Goldman’s balance sheet disclosure a mixed bag 1 Mar 2011 The Wall Street firm has included useful new data in its annual report enough to put rivals in catchup mode. But some details are still missing, including ones Goldman implied would be there. The extra disclosure is a start, but doesn't yet go far enough.
German boom carries a risk for euro zone 1 Mar 2011 Unemployment in Germany is falling faster than expected. Business confidence is at its highest level in 20 years. The economic vitality is good for Europe. But if it reinforces Berlin's conviction that others should emulate its model, the euro zone debt crisis could drag on.
Russia keeps Gazprom monopoly safe for now 1 Mar 2011 The awarding of the giant Kovykta gas field to Gazprom belies expectations that a rival producer would end up getting the prize. Although the stateowned group's position is being steadily eroded, Russia may have lost an opportunity to whip up competition in the gas sector.
India misses opportunity in latest fiscal budget 1 Mar 2011 Projections of a moderately declining deficit make sense only by ignoring the funny accounting and assuming the economy keeps rocketing ahead. With state spending, inflation and commodity prices increasing, India appears to be going more Gordon Brown than Deng Xiaoping.
Insider trading scandal rattles trust at the top 1 Mar 2011 What started in the dark underbelly of the hedge fund world just burst into bluechip America. SEC allegations against Rajat Gupta drag Goldman Sachs, P&G, McKinsey, American Airlines and even Harvard into the mud. Confidence in U.S. boards just suffered a massive blow.
Why ROE is the wrong measure for bank success 1 Mar 2011 Several of Europe's big lenders have set new return on equity targets. But the ratio takes no account of the riskiness of a bank's assets, and is raised by leverage. Shareholders and regulators should push for banks to adopt a broader range of performance measures.
Dark side of American bank consolidation exposed 1 Mar 2011 Wall Street's titans aren't paid to sweat the details. That's become painfully obvious from the foreclosure mess that may cost big banks like JPMorgan and BofA billions. Bank mergers brought cost savings, and temporarily higher stock prices, but left a massive muddle.
Italian banks’ gold recap plan looks a non-starter 1 Mar 2011 Lenders are hoping to boost capital by revaluing their stakes in the goldrich central bank. But even if Bank of Italy boss Mario Draghi allowed such an obvious fudge, it would run afoul of new Basel rules. The ploy only draws attention to banks' pressing need for fresh equity.
Bloated U.S. programs can easily show way on cuts 1 Mar 2011 The government's auditor has found duplication and overlap that may be wasting $100 billion or more a year. As long as Washington is inefficient, Americans are justified in resisting service cuts and higher taxes. Uncle Sam doesn't need either one to make a start on austerity.