Banking whales have had their day 29 Dec 2016 A year ago, Bank of England boss Mark Carney suggested regulators had cracked the "too big to fail" bank problem. Yet new rules keep coming, and international cohesion is fading. The biggest cross-border lenders like HSBC will find it ever harder to make their cost of capital.
Diverging central banks will power dollar in 2017 28 Dec 2016 Donald Trump’s promise of increased U.S. government spending and the likelihood of tighter Fed policy contrast with continued weak growth and loose monetary conditions in the euro zone and Japan. That means the greenback is set to get stronger against most other currencies.
ECB’s tough love is good for banks, bad for Italy 28 Dec 2016 The European Central Bank says Monte dei Paschi needs 9 bln euros of extra capital - up from 5 bln euros - after seeking state aid. Raising the bar is a prudent response to prolonged uncertainty. But it adds to Rome’s debt, and may push up the bailout bill for other banks.
Saudi’s IPO gusher will lay dormant 28 Dec 2016 A $2 trillion flotation of oil producer Aramco, once planned for 2018, is likely to slip further down Riyadh's agenda. Politics makes the IPO complicated, and recovering oil prices make it unnecessary. While Saudi's bankers may wish it otherwise, postponing is the logical choice.
Europe’s best antidote to populism is unpopularism 28 Dec 2016 Parties that promised to take on the elite had a roaring 2016. Even so, the withering of the moderate centre isn’t inevitable. In Greece the pendulum is swinging away from radical government. Liberals with sound economic policies can win – if they’re willing to make enemies.
Harry Potter can add magic to predictive power 23 Dec 2016 As J.K. Rowling's boy wizard turns 20, it's a good time to recall how many agents and publishers rejected him. Similarly closed minds help explain why recent political upheavals have surprised many and economic forecasts are often wrong. A little more imagination goes a long way.
Deutsche wins biggest in U.S. regulatory casino 23 Dec 2016 The German bank can weather a $7.2 bln hit for mortgage bond mis-selling. Credit Suisse's settlement means it and Deutsche now have similar capital ratios, but the latter had more to lose. Barclays' lack of a deal reflects its pluck - but possibly a bigger balance sheet thwack.
Italy’s Monte dei Paschi bail-in is a bailout 23 Dec 2016 EU rules require states that rescue banks to force losses on creditors, or convert them into shares. Italy's MPS rescue allows retail investors to swap bonds for safer ones, leaving the government holding the bag. It's a 2008-style bailout, complete with financial engineering.
JPMorgan’s Monte Paschi flop is in eye of beholder 23 Dec 2016 The U.S. bank led the attempted private rescue of Monte dei Paschi and thus shares some of the blame for its failure. But lost fees hurt it too. Delaying a bailout until after Italy's referendum also means the career of ex-PM Matteo Renzi may have a second act.
Russian sanctions will shrivel to soccer boycotts 23 Dec 2016 Pro-Kremlin leaders in Europe and the U.S. plus a rising oil price will embolden Vladimir Putin in 2017. That could lead to a rethink on sanctions and a soft response to Baltic sabre-rattling. Western protests will be limited to threatening boycotts of the 2018 World Cup.
Race to build will add impetus to old-world stocks 23 Dec 2016 Infrastructure is one of the few areas where Donald Trump, Angela Merkel and Theresa May will agree in 2017. Not all the numbers bandied about are as big as they sound. But it should create jobs in developed economies – and gee up long-underperforming infrastructure stocks.
Nokia’s new patents war dials up disappointment 22 Dec 2016 The Finnish group is countersuing Apple for patent abuse after antitrust accusations. Recent cost cuts have boosted Nokia's margins, but drawn-out lawsuits could hurt a business that is a third of operating profit. With network sales weak ahead of 5G adoption, it's a bad signal.
Monte dei Paschi endgame can still be made fair 22 Dec 2016 Italy's third-biggest bank unsurprisingly failed to raise 5 billion euros. A forcible debt-for-equity swap would limit state money. If compensation was only paid to mis-sold retail creditors, MPS could be rescued within European rules and without unfairly hitting taxpayers.
Banco Popular’s new broom has plenty to tidy 22 Dec 2016 Shares in the Spanish bank are already down more than 60 percent in 2016. Popular's new chairman Emilio Saracho will have cleaning up to do when he takes over next year. He broadly has two options, but the most likely is another capital hike to cover dud assets once and for all.
Grocery sector is ripe for big checkouts 22 Dec 2016 Pressure on traditional food retailers is relentless, and many-pronged. Customers are spending less of their budget on food and suppliers like Unilever are toying with selling direct to shoppers. Then there’s Amazon. The solution isn’t better retailers – it’s fewer of them.
Fund manager pay will be next to feel the squeeze 22 Dec 2016 Low returns, lacklustre performance and the growth of cheaper index-tracking funds are squeezing fees. That in turn means lower revenue and margins. To placate shareholders, asset managers will have to follow the example set by investment banks – and pay their people less.
Spanish banks get their mortgage comeuppance 21 Dec 2016 Domestic lenders must refund excess interest charged on housing loans with floor clauses, after the European Court of Justice unexpectedly overturned a Spanish ruling. Fair enough: the original verdict was too kind on banks. The hit to earnings looks painful, but manageable.
Mediaset shares on the up bit of a rollercoaster 21 Dec 2016 Silvio Berlusconi's group has soared in value on hopes of a takeover by Vivendi, controlled by Vincent Bollore. The French tycoon may still unlock a breakup value higher than the current share price. Yet his objectives aren't clear, and Mediaset may also face a big dip.
South African debt will be downgraded before Zuma 21 Dec 2016 After legal and political setbacks, the country’s president is more vulnerable than ever. Yet Jacob Zuma’s power base makes removing him difficult. The longer he clings to office, the bigger the chance that South Africa loses its investment-grade credit rating in 2017.
Breakdown: Fintech steps towards maturity 21 Dec 2016 Blockchain, robo advice and other technologies once hyped as the most disruptive to finance will take a back seat in 2017. The payments battle will step up a gear. Alternative lenders will hunt for deposits. And resurgent earnings may give U.S. banks a timely war chest.