Swiss bank debt bonuses are worth copying 23 Jan 2015 UBS is to join Credit Suisse in paying bankers partly in high-risk bonds that implode if capital ratios weaken. Using debt is a spur to longer-term thinking, and is a check on recklessness. Those who still only pay in cash and stock – like Deutsche Bank – should follow suit.
Siemens faces big oil deal debacle 23 Jan 2015 The collapsing oil price turns the German engineer’s dash for shale into a costly blunder. Its $7.6 bln September bid for U.S. oilfield kit maker Dresser-Rand will stain CEO Joe Kaeser’s reputation. With shares of Dresser’s peers clobbered, a major impairment is looming.
ECB bazooka a water pistol for emerging markets 23 Jan 2015 Between Mario Draghi’s bond-buying plan and the Bank of Japan’s ongoing splurge, central banks are pumping out $1.5 trillion a year in cheap money. The surprise should boost emerging markets wary of rising rates. But fading growth and falling prices will overwhelm the stimulus.
Saudi succession could cast shadow over oil policy 23 Jan 2015 A clearly identified heir means the death of the Kingdom’s reformist ruler is unlikely to destabilise the world’s largest crude producer. Yet the new king may boost spending to smooth the transition. The change may weaken Saudi Arabia’s tolerance for cheaper oil.
Fudge on loss-sharing weakens ECB’s massive attack 22 Jan 2015 At 1 trln euros or more, the European Central Bank’s long-expected bond-buying programme is powerful enough to impress markets and push down the euro. But partial nationalisation of any losses amounts to policy fragmentation. It risks undermining the euro zone’s foundations.
Markets give Mario Draghi instant reward 22 Jan 2015 The European Central Bank president gave anxious investors more monetary easing than they expected. They responded by giving the ECB’s asset purchase plan a head start. The euro and regional bond yields both fell. Draghi may be smug now, but he still has to push up inflation.
Edward Hadas: Finance more worrying than politics 22 Jan 2015 It’s easy to see why the rich and powerful in Davos are concerned about geopolitical risk. The world looks more dangerous and violent than a year ago. But a financial system that’s so little changed since the crisis poses a closer threat to global order and prosperity.
Portuguese scandal breeds oddest of M&A activists 22 Jan 2015 The $9 bln sale of Portugal Telecom’s old domestic unit to France’s Altice is at risk. The unlikely foe? The lawyer who runs PT’s own investor meetings. Resistance to the deal is understandable after PT’s history of bad management. But halting the disposal would be self-sabotage.
Monitise woe a disruptive sign for bank disrupters 22 Jan 2015 The UK mobile payments company has guided for flat 2015 revenue and put itself up for sale, citing share price weakness. Visa’s stake sale and the launch of Apple Pay were catalysts. And a shift from a licence model to subscriptions is proving tricky for all software providers.
Spanish soccer scores by signing Chinese tycoon 22 Jan 2015 Wang Jianlin is the first mainland mogul to buy into a top European club, pumping 45 mln euros into Atletico de Madrid. It’s a high-value transfer for the indebted Spanish champions. For teams seeking cash and access to new fans, a Chinese billionaire strengthens the line-up.
Enjoy UK’s economic idyll while it lasts 21 Jan 2015 Britain seems to have reached the sunny uplands. Earnings are rising faster than prices, unemployment is falling and policy rate rises are off the agenda. But persistent disinflation casts a dark shadow. If prices stop rising, wage increases may also disappear.
One share, two votes is a step backwards for Italy 21 Jan 2015 The country’s long-term shareholders could soon enjoy extra voting rights. This may tempt family firms to float and enable more privatisations. Yet Italy’s markets need more dynamism, not less. The days when a few corporate powerbrokers called the shots were meant to be over.
BBVA hedges banking’s demise with bitcoin punt 21 Jan 2015 The Spanish bank’s ventures arm is backing Bitcoin marketplace Coinbase, alongside tech investors and a stock exchange. BBVA has been a pioneer in digital banking, but Bitcoin aims to disintermediate lenders. That suggests BBVA’s outlay is more hedge than long-term investment.
ASML shows benefits of market power 21 Jan 2015 Shares in the $46 bln chip equipment manufacturer hit record highs after full-year results showed soaring demand from memory chipmakers. At 25 times forward earnings, ASML’s valuation would be toppy in most sectors. But, like chip designer ARM, the Dutch firm dominates its market.
Euro zone QE-by-country not as bad as it sounds 20 Jan 2015 The ECB’s bond-buying programme may leave national central banks on the hook for potential defaults. The goal is to soothe German fears on subsidising weaker countries. Sceptics see a fissure in the monetary union. The fears are exaggerated, but perceptions matter.
ECB’s mission possible: surprise markets 20 Jan 2015 Investors are so geared up for 600 billion euros of quantitative easing that its arrival could underwhelm. Yet Mario Draghi has a reputation for bending markets to his wishes. High uncertainty about how bond-buying will work means the ECB boss still has scope to over-deliver.
Climate feels right for certain deals in Davos 20 Jan 2015 The Swiss mountain air is crisp but the M&A market is hot. Fresh off a $3.5 trln year, bankers and CEOs have plenty to discuss at the World Economic Forum annual meeting. It’s less clear the atmosphere is conducive for the important political accords for which Davos is renowned.
Big Oil’s dividends look safe – for now 20 Jan 2015 Leverage is low and costs and capex can be cut, so the likes of Shell and Total don’t need to slash payouts now. But the current oil price drop has a 1986 feel. Then it took five years to regain the previous peak. If the pain lasts that long, payouts will have to be sliced.
Unilever’s high-fat valuation looks vulnerable 20 Jan 2015 Sales at the maker of Dove soap and Lipton tea fell 2.7 pct last year, hit by currency moves. Revenue is likely to be flat in 2015. Unilever’s business can handle a low-growth world: cost cuts boost earnings and lower oil helps. But its shares trade on awkwardly rich multiples.
Goldman deviates back to bad old standard 19 Jan 2015 CFO Harvey Schwartz says the Swiss currency mess was “a 20-plus standard deviation move.” That’s a daft assessment. Predecessor David Viniar was similarly soft-headed in 2007. A bit of rhetorical flourish is fine, but not if execs look as if they don’t understand risk.