Month: October 2017

Hadas: Greed is best indicator of financial crisis

26 Oct 2017

New research casts small-time property investors as the secret villains in the 2007 U.S. house price collapse. As usual, the love of leverage was the root of financial distress. Balance sheets are stronger today, but investors still haven’t learned the virtue of moderation.

Celgene shows biotechs going the way of Big Pharma

26 Oct 2017

Some $30 bln of Celgene’s market value has vaporized in recent days after it admitted it bought a dud asset and axed $1-2 bln of revenue from its long-term forecast. The combination of an insufficiently productive pipeline and unreliable M&A is familiar to big drugmakers.

Europe’s MiFID ties tardy SEC in knots

26 Oct 2017

The U.S. agency provided breathing space to financial firms facing conflicting rules on charging separately for research. The belated action is only a band-aid. The SEC could learn from the commodity watchdog, which has already been settling permanent deals with EU counterparts.

GSK’s new CEO held hostage by dividend cult

26 Oct 2017

The British pharmaceutical company’s market value slid by 6 bln pounds after Emma Walmsley suggested big deals and dividends might not be compatible. Being flexible is perfectly rational – unlike investors craving for high payouts at the potential expense of growth.

Banks draw short straw from ECB

26 Oct 2017

The central bank will trim its monthly bond purchases but promised to keep buying for longer. That balances the demands of those who oppose money printing with the wishes of rate-setters who fear growth is still fragile. The losers are banks, whose negative rate pain will endure.

Twitter’s credibility is for the birds

26 Oct 2017

Jack Dorsey’s social network had to restate user numbers for three years. Quarterly ad revenue fell a whopping 8 pct. However, a promise of coming profitability has put investors in a tizzy. Cutting costs is a start, but it’s going to take more to mend Twitter’s broken wings.

Lazard is the best of an unlikely listed bunch

26 Oct 2017

The merger-advisory firm’s quarterly revenue beat expectations. The spread between rivals who are doing well and those who aren’t, like Greenhill, is widening. But it’s not clear why investors should want to own shares in such choppy businesses, or why boutiques really need them.

Comcast earns its peacock feathers

26 Oct 2017

The $170 bln U.S. media firm was early and careful expanding beyond cable pipes. Two examples are its purchase of NBC Universal and its recently launched wireless service. Comcast stock has trounced Verizon and AT&T. Brian Roberts’ company has even topped Disney’s market cap.

Jes Staley gets no due for new-look Barclays

26 Oct 2017

The UK bank’s boss heralded the end of major restructuring on Oct. 26. Investors – who sent the shares down 7 percent on weak third-quarter results – aren’t convinced. At a deep discount to book value, Barclays offers decent upside if Staley can hit his modest return targets.

Saudi utopia plan is so bonkers it just might work

26 Oct 2017

The nation’s crown prince plans to build NEOM, a shining $500 bln city on the Red Sea where entrepreneurs draft the rules and robots outnumber people – and which one day will be a publicly listed company. Dreamers are welcome, but he'll need capable doers above all else.

Sliding investment bank pressures Deutsche CEO

26 Oct 2017

The German lender’s net revenue dropped 10 percent in the first nine months of 2017, led by sharp declines in trading fixed income and currencies. While cost-cutting limited the damage to the bottom line, boss John Cryan’s turnaround strategy depends on a recovering top line.

AB InBev grows bigger without getting better

26 Oct 2017

A year after acquiring SABMiller, the world’s No.1 brewer said cost savings from the deal will be higher than expected. Bulking up allows the Belgian company to buy on better terms. Yet it looks worryingly weak at persuading consumers to drink more of its beer.

Santander runs a tight ship into looming storms

26 Oct 2017

The Spanish bank grew revenue in the first nine months of the year and kept a lid on costs. The lender is fast integrating Banco Popular and easily covering its cost of capital. Just as well since hazards, like a Brexit-driven UK recession, will test its efficient balance sheet.

Nokia joins Ericsson in Nordic doldrums

26 Oct 2017

The Finnish telecoms-kit maker’s shares slumped 15 pct after poor third-quarter results. They are trading at a discount to Ericsson’s stock despite improving margins. A warning on weak demand for its mobile-networks products shows tough market conditions trump good management.

NTT Docomo is shrinking to greatness

26 Oct 2017

The Japanese mobile giant will repurchase up to $2.6 bln of shares. With limited growth options, Docomo must shower shareholders with buybacks and dividends to grease returns. In turn, that helps its separately listed, state-backed parent NTT keep its own investors sweet.

Qantas has clear skies ahead

26 Oct 2017

The Aussie airline briefly unsettled investors by warning of stiffer competition, rising fuel costs and a few months of lower growth. But the domestic outlook is good and its market position is strong. Despite a breakneck rally, Qantas's share price is still grounded in reality.

Beijing’s dollar bonds seek to reprice China risk

26 Oct 2017

A $2 bln sovereign dollar bond sale is the country’s first since 2004. Despite rating downgrades, the two-part deal is priced aggressively, with slim premiums to U.S. Treasuries. Local banks can guarantee demand, which could artificially cut borrowing costs for Chinese issuers.

Western oil drillers flirt with OPEC-style dilemma

25 Oct 2017

U.S.-focused producers may be targeting higher returns over pumping more crude. Majors like Exxon and Chevron know the trade-off, too. Selling less oil at a higher price is appealing if everyone joins in. But the cartel’s internal tensions show how easily self-interest prevails.

China’s bike-share firms must switch gears in U.S.

25 Oct 2017

Mobike and Ofo, the People’s Republic’s two biggest dockless cycle-share startups, are cruising into American cities. Aggressive expansion makes sense in this winner-take-most market. But city officials and local rivals may force them to hit the brakes in unfamiliar ways.

Carlyle puts socialism at the heart of capitalism

25 Oct 2017

Like China’s ruling party, the buyout firm has pulled off a leadership reshuffle, with new roles for David Rubenstein and his co-founders. Both Carlyle and China will share duties among a collective of powerful men. But at least in the Middle Kingdom it’s clear who’s in charge.

Banks score hollow victory in class-action win

25 Oct 2017

The U.S. Senate killed a rule allowing groups of consumers to sue financial firms and card issuers. Forced arbitration clauses caused uproars in the Equifax hack and Wells Fargo fake-accounts mess. The shrinking political target on Wall Street’s back is set to grow again.

Deutsche Bank’s next problem may be excess capital

25 Oct 2017

The German lender wants to float a 25 pct stake in its asset management arm next year. An IPO could raise around 2.2 bln euros, Breakingviews calculates. Deutsche would dilute its exposure to its best business – but would once again be able to give shareholders a dividend.

Lloyds capital gusher suffers regulatory blockage

25 Oct 2017

Robust third-quarter earnings should enable Britain’s largest retail bank to pay a hefty dividend. But increased capital requirements have raised doubts about how much it can distribute. That, along with the sluggish UK economy, puts a question mark over the lender’s valuation.

Italy takes baby step forward in bank bail-ins

25 Oct 2017

Banca Monte dei Paschi di Siena shares resumed trading after a 4 bln euro bailout. Institutional bondholders forced to take stock face a 40 pct hit. Small investors will lose less thanks to a special deal. At least they will share some of the cost to taxpayers of saving the bank.

Investors embrace Indian bank recap on any terms

25 Oct 2017

Shares of India’s 20-odd state banks added about $15 bln of market value on news of New Delhi's planned bailout. The scheme should let lenders take proper hits on bad debts, and resume profitable business. Yet key terms, and allocations to individual banks, remain unclear.

China’s autocracy puts end to reform illusions

25 Oct 2017

As China's Communist Party tightens its grip, Western hopes that rising incomes would produce more economic and political opening look like wishful thinking. Delusions about inevitable reform are best set aside. For foreign capital this "new era" looks riskier than the last.

Chinese oil major CNOOC tests limits of self-help

25 Oct 2017

Results show the Chinese state-owned oil giant has clambered out of a hole. An ill-timed 2013 acquisition of Canada's Nexen forced relentless cost-cutting which is now paying off. Stubbornly weak crude prices, and China's electric vehicle push, could cap investors' appreciation.

Xi’s new stature can overawe China’s market forces

25 Oct 2017

The president emerges from a key party congress with his name in the constitution, no successors in sight, and a mandate to push his agenda faster. Xi Jinping still talks reform, but this intimidated system may become more responsive to his whim than supply and demand.

Activist broadcasts Japanese governance weak spot

25 Oct 2017

A UK investor wants TBS to sell corporate stakes and return cash to shareholders. Fair enough: The $3.5 bln TV network owner has little obvious use for Tokyo Electron and other holdings. Despite some broader progress, it will take more pressure to break this bad Japan Inc habit.

Hudson’s Bay buildings are its real luxury goods

24 Oct 2017

The C$2.2 bln department-store owner is selling Lord & Taylor's New York building for $850 mln to WeWork. It may not satisfy activist Jonathan Litt, who's waging a proxy fight for bolder steps. But with retail in retreat, the firm is conceding it needs to monetize its property.