New chief US bank lawmaker needs minimal conflicts 28 Mar 2013 That’s why Sherrod Brown makes a better choice than Chuck Schumer to lead the Senate bank committee, whose current chair is departing. The Ohio politico may have fringey views about breaking up banks, but he’s more likely to challenge the status quo than a friend of Wall Street.
Pensions need to share pain when cities go broke 28 Mar 2013 Stockton wants bondholders to pay for its financial woes while leaving retirement benefits intact. That’s unfair and undermines the law’s power to rein in runaway pension costs. A U.S. judge should deny the California city bankruptcy protection until it revises its position.
Cypriot banks’ liquidity lifeline becomes a noose 28 Mar 2013 Laiki’s 9 bln euros of emergency liquidity assistance from the Cypriot central bank kept it afloat before the bank’s winding down. Now it has been dumped on rival Bank of Cyprus. The island state is learning the hard way that ELA is a liability for the government, not the ECB.
Malone swoop frees Barclays but traps Ziggo 28 Mar 2013 Liberty Global has a paper profit of over 40 mln euros after buying 13 pct of Dutch cable company Ziggo from Barclays. It’s typically shrewd of Liberty owner John Malone - Barclays was desperate following a botched share sale. But Ziggo shareholders should have mixed feelings.
ECB will have to bankroll new era for euro banks 28 Mar 2013 Credit spreads have jumped on the belief that Cyprus will be a template for resolving bust banks. The threat of bailing in senior creditors makes for safer banks and fewer taxpayer-funded bailouts. For now, it worsens life for weak banks. And that means more work for the ECB.
Hugo Dixon: Cyprus controls an "omnishambles" 28 Mar 2013 If the Argentine-style “corralito” really can be lifted in seven days, the damage could be contained. But that doesn’t seem credible. Extended controls could spawn bribery, sap confidence, further crush the economy, spread contagion and ultimately lead to euro exit.
China shadow bank curbs attack symptom not cause 28 Mar 2013 New rules will limit the danger of off-balance sheet loans to the banking system, albeit with some pain for smaller, more aggressive lenders. The danger is that borrowers will be forced to find even more shadowy sources of lending – or that China suffers a painful credit crunch.
How to go public and private all in one go 27 Mar 2013 Brazilian ethanol producer Biosev is preparing to sell new shares, with parent company Louis Dreyfus offering to buy them back in 15 months. It’s essentially an IPO, a convertible bond and a potential buyout packaged together. It’s an overly clever solution to a unique problem.
Petrobras struggles even with baby steps 27 Mar 2013 Brazil’s state oil giant needs to find $15 bln to afford $50 bln of government-mandated capital spending. It’s already cut the dividend. Now it plans to sell its Nigerian wells. That may only raise a third of what’s needed. And Petrobras has a poor record of flogging assets.
Argentina may finally be picking up some toys 27 Mar 2013 The country’s government has thrown many from the pram in its fight to avoid paying anything to bondholders unhappy with a default settlement. Now ministers seem to be considering paying with new securities. It might not win over holdouts yet. But it’s an encouraging sign.
Cyprus capital controls create monetary disunion 27 Mar 2013 Nicosia is set to limit cash, credit-card use and the transfer of funds abroad. Making a Cypriot euro less fluid than in the rest of the euro zone sets a dangerous precedent. If controls persist beyond a few weeks, Cyprus may come to rue not taking a chance on bank runs.
BRICS inch towards alternative to dollar bloc 27 Mar 2013 Brazil and China will use their own currencies for trade and the five nations are still working on creating a rival to the World Bank. With nearly half the world’s population and 15 pct of its trade - and despite flawed policies - the group is a useful counterweight.
Potemkin Dell fight would have optical merits 27 Mar 2013 Even if Blackstone doesn’t buy the PC maker, bidding against Silver Lake at least looks like rivalry in LBO-land, undermining allegations of collusion. Dell’s board also comes off as rejecting the bad J Crew precedent. A phony battle just won’t help shareholders much.
UK’s new bank capital tsar starts as good cop 27 Mar 2013 The Bank of England has ordered banks to raise 25 bln stg by the year end. But its required 7 pct core Tier 1 ratios fall short of some continental banks. The weak economy may have been a factor. And going softer makes a share sale of RBS or Lloyds easier before the election.
Pru pays price for ignoring M&A advice 27 Mar 2013 Adviser Credit Suisse pressed the UK insurer to tell the FSA about plans to buy AIA in 2010, but the Pru dodged regulators’ questions about strategy and financing issues - when deal talks were in full flow. CEO Tidjane Thiam may survive the resulting censure. His bonus shouldn’t.
Chinese credit alarms sound in the east 27 Mar 2013 Results from lenders CCB, Bank of China and AgBank show signs of credit strain around the Yangtze delta, where private businesses and manufacturing abound. Though national bad debt levels are low, a mess in the east would be felt by the rest.
Ethical economy: Banker-think in welcome retreat 27 Mar 2013 For once, investors got it right. They yawned through a crisis in Cyprus, a country too small and special to matter. But bankers and people who think like them keep on fearing the worst. They should get used to a world where politics - and justice - take precedence over finance.
Hong Kong raises stakes in U.S.-China audit battle 27 Mar 2013 The local regulator is suing Ernst & Young for withholding documents on a suspect client. The audit firm says Chinese secrecy rules left it no choice. The case mirrors a broader U.S. complaint about Chinese accounting frauds. But Hong Kong has much more to lose.
U.S. energy sector activists not quite out of fuel 26 Mar 2013 Hedge fund Audley’s effort to inject fresh board blood into $1.8 bln coal miner Walter Energy suggests bigger targets with egregious governance like Chesapeake and Hess are growing scarce. But there are still a few, like Apache and Devon, where weak performance invites scrutiny.
Rousseff’s popularity a lagging economic indicator 26 Mar 2013 The Brazilian president has an approval rating of 79 pct even with GDP growth running less than 1 pct and inflation rising. Past expansion, high employment and popular social policies are buoying Rousseff for now, but the slowdown and weak productivity growth mean it won’t last.
Latest blast from Basel misses obvious target 26 Mar 2013 The Basel Committee wants to reduce banks’ exposure to any one institution to cut overall risk. There’s one exception: governments. The spectre of sovereign default still haunts Europe’s banks. Basel should tackle this risk sooner rather than later.
Bertelsmann faces 50 shades of digital challenges 26 Mar 2013 The success of the “50 Shades” erotic trilogy boosted Bertelsmann’s 2012 profit. Yet the media giant’s successful book publisher hides structural weaknesses. Many of the company’s markets are shrinking, and repeated attempts to adjust to the digital age haven’t been convincing.
Kazakhmys and ENRC risks go further than governance 26 Mar 2013 Sharp falls in the stock price of London-listed ENRC and its 26 pct shareholder, Kazakhmys, may make the companies look cheap. But investors need to dig deep to see any value. ENRC’s iffy governance is only part of the problem. Operational and strategic questions are rife.
Goldman and Buffett scratch each other’s backs 26 Mar 2013 They’re amending the terms of warrants used in a 2008 rescue investment of the bank. Buffett gets his profit without having to stump up $5 bln in cash. Goldman minimizes dilution, which helps its return on equity - while also easing stock buyback negotiations with the Fed.
Over-eager pension funds may harm EM golden goose 26 Mar 2013 U.S. retirement managers are struggling to find decent returns, leading many to stretch into riskier areas like emerging markets. But a pension-fueled shift of up to $680 bln into the asset class could prove self-defeating and squeeze out whatever extra yield remains.
Banking confidence tricks revealed by Cyprus 26 Mar 2013 Modern banking rests on two core beliefs: depositors can always access their money, and governments will step in if banks can’t. The botched bailout of Cyprus has exposed both as hoaxes. Restoring faith in the system will be hard. But a more stable alternative is elusive.
China retailers stumble in pursuit of growth 26 Mar 2013 GOME and Li Ning expanded rapidly to take advantage of rising wealth and urbanization. Economies of scale looked like the reward. But online shopping and shifting consumer tastes have forced a costly rethink. China’s expansion can be disruptive as well as lucrative.
Target shortage feeds desperate Mideast telco M&A 26 Mar 2013 Bahrain’s incumbent telco is eyeing a stake in part of India’s Reliance after agreeing to buy assets from Cable & Wireless. Stiff competition at home is forcing tiny Batelco further afield. The snag is that there are too many big telcos in the region chasing too few assets.
U.S. Congress revs up to squash its own swap rules 25 Mar 2013 A bill that claims to flatten the playing field for U.S. and foreign derivatives traders drew unanimous support in its first test. But it would create a giant loophole in the Dodd-Frank reforms and make regulators’ jobs harder. That’s no way to reduce systemic risk.
Bitcoins need more than fear and love to thrive 25 Mar 2013 The value of the digital currency beloved by inflationistas and libertarians has shot up more than 60 pct in a week thanks to the Cyprus-infused panic over deposit insurance. But it currently has too many drawbacks: utility, not emotion, will determine whether Bitcoins catch on.