U.S. student loans could need $500 bln bailout 27 Feb 2015 Borrowing for education has soared over the past decade, ballooning to $1.2 trln and growing far faster than GDP. With serious delinquencies at 11 pct and Washington on the hook, there’s a mess in the making. A Breakingviews calculator shows how big Uncle Sam’s exposure could get.
U.S. airlines throwing stones from glass hangars 27 Feb 2015 Delta, United and American want trade deals changed, arguing Gulf rivals are unfairly subsidized. That’s rich, given the bailouts, antitrust exemptions and other goodies these three enjoy. Blowback from domestic peers may persuade them that whining to Uncle Sam won’t fly.
Europe can afford to cut Greece some slack 27 Feb 2015 Athens wants to slice its primary fiscal surplus to one-third of the level agreed in its current bailout programme. That might leave debt too high for comfort – yet there is room for a compromise that Greece’s euro zone partners could afford.
Lloyds investment case hinges on its next dividend 27 Feb 2015 The UK bank’s first payout since 2008 is an encouraging milestone. But it’s largely symbolic. The critical valuation issue is whether Lloyds’ pledge to pay out at least half its future earnings represents a floor or a ceiling - and whether the regulator allows fatter payouts.
Weak euro can lift Airbus profit further 27 Feb 2015 The European aircraft maker pleased investors with higher-than-expected operating profit and a 60 pct dividend hike. Higher profitability was driven by a weaker euro. With that currency tailwind likely to persist, the annual results give a foretaste of future improvements.
Review: Building HSBC’s sprawling, flawed empire 27 Feb 2015 The Hong Kong bank grew into one of the world’s biggest financial institutions. But poor results and a furore over Swiss tax make for an unhappy 150th anniversary. A new history shows how hands-off management and breakneck M&A under former chairman John Bond are partly to blame.
India goes back to future with $137 bln rail push 27 Feb 2015 The government’s ambitious plan will require finesse in raising money. But the investment case is strong. India’s British rulers reaped huge productivity gains by building out the railways 150 years ago. Modernizing the dilapidated network could produce even better returns.
Verizon taps out unwise riposte to new web rules 26 Feb 2015 Regulators are giving consumers a boost by preventing broadband providers from offering favorable treatment to certain clients. But the telecoms giant expressed its discontent in Morse code and then in old typeset. Disagreeing is fine. Taunting your overseer, though, is a risky move.
Oil finally percolating toward a level price 26 Feb 2015 U.S. light crude has rallied 12 pct from last month’s six-year low but is still shy of where shale drillers can profit. Higher demand and less capital spending may push prices up while steady output from Saudi Arabia and others limits their rise. About $60 a barrel looks likely.
Never mind Bill Gross: Allianz is thriving 26 Feb 2015 The star investor’s acrimonious departure from Pimco caused huge outflows and hurt operating profit at Allianz, the German owner of the U.S. bond-fund firm. That obscures Allianz’s real strength. Annual results underline the insurer’s renewal under outgoing CEO Michael Diekmann.
Simpler is better for Reed Elsevier 26 Feb 2015 The dual-listed media giant is fixing a baroque corporate setup. That should lure new investors and cut the discount on its Dutch shares. A simultaneous rebrand as “RELX” is ungainly – but at least this helps distance the largely digital group from the printed past.
JPMorgan pruning could help fees sprout anew 26 Feb 2015 The U.S. mega-bank may trim some Wall Street operations if returns don’t improve. It’s bad news for smaller rivals if one of the biggest players in rates and derivatives can’t make money in some areas. But if clients end up paying more, bank investors will eventually benefit.
Morgan Stanley makes $2.7 bln hit an afterthought 26 Feb 2015 Like Citi, the bank sprung a legal settlement on investors. Unlike its rival, Morgan Stanley has shunted the cost into the previous year, making 2014 profit barely more than half what was reported. That’s handy, if cynical, for a Wall Street firm keen to trumpet its turnaround.
Rob Cox: Welcome to the new, global Tangentopoli 26 Feb 2015 Corruption is causing trouble for elites from Sao Paulo to Virginia and Santiago to London. Inequality can be a tolerable byproduct of free-market capitalism, but not when the winners are profiting from a rigged system. As a new book argues, such gains encourage radicalism.
Disinflation is steelier than German metalworkers 26 Feb 2015 A big pay deal in the sector is a small positive sign. Higher wages are the only sure way to reverse a global trend of lower prices. But it’s not enough. Germany’s ability to issue five-year debt with a negative yield shows the downward trend is stronger, nationally and globally.
StanChart board clearout is only the first step 26 Feb 2015 Installing Bill Winters as CEO to replace Peter Sands ends the short-term uncertainty about the bank’s leadership. But the former JPMorgan executive will face an overflowing inbox when he takes charge in June. Capital, credit quality and returns will be the immediate priorities.
RBS turnaround enters critical period 26 Feb 2015 The British lender is cutting its once-mighty investment bank further after a full-year loss of $5.4 bln. That’s the right strategy, but it will hit short-term profitability. Worse, RBS’s state owners may not make investor returns their priority after the May election.
Iberdrola takes baby steps to grow U.S. business 26 Feb 2015 The Spanish utility is paying $3 billion mostly in shares to merge its U.S. assets with much smaller listed UIL. The U.S. has greater growth potential than Spain, and the price isn’t cheap. But the small cash outlay makes this a relatively low-risk, if not transformational, deal.
Australia’s property market joins closed-door club 26 Feb 2015 The government plans to charge fees to foreign buyers and enforce restrictions on sales of existing homes. After Hong Kong and Singapore, another hot real estate market is cooling to Chinese money. It adds to the political pressure on other countries to become less welcoming.
Asian telco IPOs show investors still yield-hungry 26 Feb 2015 Investors snapped up shares in Thailand’s Jasmine broadband fund and may do the same for Hong Kong provider HKBN, reflecting the view that U.S. interest rates will remain lower for longer. As long as money remains cheap, shareholders will chase generous and reliable dividends.
Fed critics confuse independence with lack of bias 25 Feb 2015 U.S. lawmakers accused central bank Chair Janet Yellen of playing political favorites. Revealing more about her meetings wouldn’t hurt. But Fed officials favor different economic models that may reflect party divisions. That doesn’t mean they aren’t making their own decisions.
Computer Sciences LBO talk rings unhappy bells 25 Feb 2015 Activist investor Jana and the $10 bln IT services firm’s bosses have incentives to sell. But past attempts to find a buyer for the company have foundered. Declining sales and vulnerable cash flow make it a tricky buyout candidate. Splitting it up may be a better first step.
Petrobras downgrade tests Rousseff’s fiscal faith 25 Feb 2015 The Moody’s decision to strip Brazil’s state oil giant of its investment-grade rating redoubles the need for the president to support her economic lieutenants, who are trying to repair Latin America’s biggest economy. To do so, Rousseff will have to face down rising resistance.
Solar strikes it rich in oil’s financial wells 25 Feb 2015 A SunPower and First Solar JV will pool assets in a company that could pay fat dividends. The renewable energy page out of fossil fuel’s playbook generated $1.5 bln of extra market value. The structure presents some conflicts and the pressure will be on to supply new projects.
Lowball SFX bid stops music at Wall Street rave 25 Feb 2015 Robert Sillerman, the U.S. entrepreneur trying to roll up EDM festivals as he did concerts, is offering 37 cents on the IPO dollar for the remainder of the firm he took public less than two years ago. It’s shameful treatment of public investors. They were, however, amply warned.
Pre-election nerves lurk under UK market calm 25 Feb 2015 It’s hard to tell from UK asset prices that investors abhor uncertainty. Sterling is rising and stocks are hitting record peaks less than three months before a very close election. Healthy economic fundamentals help. Still, there are plenty of jitters in options prices.
HSBC tax storm exposes flawed succession policy 25 Feb 2015 The UK bank’s chairman and CEO just about survived a grilling from domestic lawmakers over the Swiss tax debacle. The wrongdoing happened when Douglas Flint and Stuart Gulliver had lesser roles. But a bank that picks insiders to chair the board makes a rod for its own back.
Social trends may point to higher yields, someday 25 Feb 2015 In 2005, a Barclays strategist suggested a declining population of savers could push bond and stock prices down. A decade later, a different strategist at the same bank says the same thing. It may work out in time, but demographics have more influence on GDP than asset values.
Maersk definitively casts off conglomerate past 25 Feb 2015 The shipping giant has already streamlined and grown more open. Now it is shedding 20 pct of Danske Bank, the clearest break yet with history. Shares rose 6 pct. Transforming conglomerates can be like reorienting a super-tanker. But with focus in fashion, it’s worth the slog.
UK jail-a-banker rules will hike board pay 25 Feb 2015 That’s the likely upshot of Britain’s new regime to hold financiers accountable for wrongdoing. Regulators have stopped short of applying the rules to all non-executives, but half of most boards still risk incarceration. As a result, they will probably demand more money.