Wall Street police discover how hard reform can be 26 Sep 2014 The financial crisis has forced financiers to change the way they do business. Bad cultures and behaviors are hard to root out, though. Witness JPMorgan’s whale of a loss. A whistleblower has revealed similar troubles at the New York Fed. Regulators also have toughening up to do.
Santander has a 6 bln euro capital opportunity 26 Sep 2014 The Spanish bank’s diversification and earnings power are cushions against a shock. But the core capital ratio looks tight. Given Santander’s high valuation, there may not be a better time to boost equity and silence capital sceptics. Raising 6 bln euros would do the trick.
Sainsbury should heed market message on dividend 26 Sep 2014 The UK grocer’s shares are down 27 pct since May and yield over 6 pct. The group faces the same competitive threats as dividend-slashing Tesco. A small drop in sales, coupled with margin compression, would make Sainsbury’s payout unsustainable. Management has cover to make a cut.
Power to borrow is vital for proper UK devolution 26 Sep 2014 Prime Minister David Cameron plans to devolve more tax and spending to Scotland after it voted to stay in the United Kingdom. For the process to be really meaningful, though, the Scots must be free to issue debt. That’s risky, but there are ways to limit the dangers.
World should steel for peak China demand 26 Sep 2014 Chinese consumption of crude steel fell in August for the first time this century. Slowing housebuilding is adding financial strain to a troubled supply chain. A rethink of how much is enough for the world’s biggest steel user could also throw the global market off kilter.
Macau casino stocks facing slower-growth future 26 Sep 2014 The enclave’s gambling revenue has fallen for three months, even as hotels remained full and visitor numbers grew. China’s anti-graft crackdown and weak economy deterred high-rollers. Many won’t be back. Though mass-market gamers can keep Macau expanding, the pace will be slower.
Frothy M&A talk will worsen San Miguel’s hangover 26 Sep 2014 The Philippine conglomerate is eyeing an overseas oil and gas deal and says it remains interested in Britain’s United Biscuits. With a mixed track record in its recent deal-making, all the chatter will only weigh on the group’s already underperforming shares.
Wall Street needs sheriff more than toll collector 25 Sep 2014 U.S. Attorney General Eric Holder is stepping down after squeezing multibillion-dollar penalties from banks. He had less success securing convictions, leaving law enforcement just an expensive cost of doing business. Next financial crisis, Uncle Sam should send in a tougher cop.
Apple CEO Tim Cook gets $25 billion warning shot 25 Sep 2014 That’s the value wiped off the stock after a botched system update and reports its new phones can be bent. It’s a small hit for a $600 bln company. But the 2012 Maps fiasco is a reminder that one-off issues may presage more pain. Cook needs to nip this one in the bud.
ValueAct’s Valeant return hints at value trap 25 Sep 2014 The departure of the activist fund led by Jeff Ubben from the drug company’s board in May set off a slide in its stock, the currency critical to its M&A-machine strategy. ValueAct is rejoining, and may buy more. Some good investments are harder to leave than they are to make.
Time for Telecom Italia to set its own agenda 25 Sep 2014 The Italian telco is indebted and adrift, having failed to clinch GVT in Brazil. No wonder predators are circling. Reported bid interest from industry veteran Sol Trujillo may not go anywhere – but it underscores the need for TI to produce a clear plan for capital and strategy.
Financial fall raises Gherkin’s symbolic status 25 Sep 2014 Receivers are shopping London’s pickle-shaped edifice for $1 bln. Bankruptcy can’t undo its effect on the skyline. Now, though, the glass-sided Gherkin also will reflect back to City bankers and traders an ill-advised currency hedge, a lasting monument to the dangers of avarice.
Politics mar GSK and RBS chairman succession 25 Sep 2014 Philip Hampton is to join drug giant GSK in January, but may not succeed Chris Gent as chairman until next September. The long transition reflects the difficulty of replacing Hampton at state-backed RBS in an election year. For GSK, the ambiguity in board leadership is unhelpful.
Guest view: EU must hold firm on opening markets 25 Sep 2014 European legislation to free up the derivatives trading and clearing industry may face stiff resistance. Policymakers need to be resolute if they want to deliver a truly open market in financial services, say the CEOs of the London Stock Exchange and clearing house LCH.Clearnet.
Edward Hadas: The core of what economics should be 25 Sep 2014 A new textbook will help make the academic discipline less dogmatic and more realistic. It is a small step in the right direction. An ideal introduction would have a clearer definition of the field and its purpose – and forget about supply and demand.
Modi has six months to save "Make in India" drive 25 Sep 2014 India’s top court has cancelled the allocation of mines that produce a tenth of its coal. The blow to power, metal and cement companies worsens the energy deficit. If Prime Minister Narendra Modi does not find a solution by April, his efforts to boost manufacturing will suffer.
Sinopec’s petrol station revamp is an uphill job 25 Sep 2014 The Chinese oil giant wants to sell more from its 23,000 pump-side stores. But even if non-fuel sales rise sixfold, the unit won’t be worth a lot more than the $58 billion valuation put on it by outside investors. Breakingviews’ calculator spells out the scale of the challenge.
Sam Waksal’s new biotech tests Wall Street amnesia 24 Sep 2014 The former ImClone boss who went to prison for an insider trading scandal that also ensnared Martha Stewart plans to take his latest venture public this year. He follows second-chancers like Donald Trump and LTCM founder John Meriwether. Investors can be astonishingly forgiving.
Tesco chairman should step aside 24 Sep 2014 Richard Broadbent will struggle to restore market confidence in the UK retailer. This week’s accounting scandal compounds existing concerns about his period at the helm. The priority should be an orderly handover to the right successor. But speed matters too.
Uncle Sam gets wires crossed on data privacy 24 Sep 2014 A hacker went to prison for exposing personal information AT&T didn’t protect. Now prosecutors are defending the legality of doing essentially the same thing in the Silk Road drug website case. Online privacy laws are flawed when enforcers can’t decide what’s allowed.
Tesco needs to lighten the debt load 24 Sep 2014 Britain’s biggest retailer is overrun with strategic and operational problems. And it must keep investing despite a weak balance sheet. A rights issue is impossible for now due to a lack of trust in the numbers. That leaves holding the dividend down and making disposals.
German M&A boom defies ghost of Daimler-Chrysler 24 Sep 2014 Be it SAP or Siemens, Merck or Bayer, Germany’s big blue chips are on a foreign buying spree. At $91.5 bln, outbound M&A is up sevenfold on 2013. That’s despite the car crashes of previous mega-deals. Investors are giving a new generation of bosses the benefit of the doubt.
Full-on QE poor fix for ECB’s no-inflation problem 24 Sep 2014 Markets remain unimpressed by Mario Draghi’s efforts to make prices rise more quickly. Sinking inflation expectations will strengthen the hand of those who want the ECB to launch all-out government bond-buying. But even such desperate measures may not be the panacea.
Savings rate is sound goal for central bankers 24 Sep 2014 It certainly looks like monetary policy these days doesn’t have much effect on price changes. Its power over labour markets is also limited. Perhaps central banks should target savings, which have been too low in the United States. Higher interest rates would be a start.
BNP Paribas needs a chair to shake up its board 24 Sep 2014 Baudouin Prot is resigning as the French bank’s chairman. His likely successor is technocrat Jean Lemierre. As an adviser to Prot he’s hardly an outsider. But that’s less vital than a readiness to refresh BNP’s board following its mega-fine from U.S. regulators.
Banks’ next big risk: IT 24 Sep 2014 Established lenders worldwide are fighting to upgrade snarled and creaking IT platforms. It won’t get easier: smartphone payments are adding complexity, regulators are cracking down and costs are up. Systems fail more often. If banks don’t act, Amazon et al may eat their lunch.
Starbucks avoids froth in $913 mln Japan buyout 24 Sep 2014 The U.S. coffee chain is buying the 60.5 pct of its Japanese business it doesn’t already own at a discount to the unit’s market value. Expiring licenses give Starbucks a chance to take control of a large market on the cheap - as long as minority shareholders don’t resist.
China dairy correction churns Fonterra profits 24 Sep 2014 A 76 percent fall in earnings for the New Zealand dairy group shows the China milk bubble deflating. Record milk prices have tested consumers’ tolerance, and traders may have overstocked. The underlying trends are still positive, but it will take a while to skim off the froth.
Rob Cox: Is "stranded costs" a euphemism for fat? 23 Sep 2014 The answer to that question may determine the winner in the latest activist battle to captivate Wall Street: Nelson Peltz’s siege of DuPont. The billionaire’s controversial arithmetic suggests the chemicals giant has grown bloated over its 212 years. He’s on to something.
U.S. financial regulation really can be fixed 23 Sep 2014 Four years after the landmark Dodd-Frank proposal went into effect, Congress is finally poised to correct mistakes in it. A wide bipartisan margin in the House approved some reasonable changes. It only goes to show consensus is indeed possible and the law needn’t be dismantled.