RBS bonuses sadly remain a necessary evil 15 Jan 2014 Opposition politicians want the state-owned lender to cap bonuses at 100 pct of salary. It would be great if new boss Ross McEwan could cut pay at loss-making RBS – investment banking is not a strategic priority. But this accident-prone bank can’t afford a further skills exodus.
Ambitions exceed delivery in Europe market reform 15 Jan 2014 The aims of the revamp of regional market trading rules are laudable: more transparency and greater investor protection. Some of the changes are good. Others, notably caps on off-exchange share trading, may prove heavy-handed. But it’s not too late to refine the implementation.
Too soon for Madrid to untangle itself from Bankia 15 Jan 2014 It’s logical for Spain to mull a partial sale of its biggest bank mess. Spanish bank shares have rallied, the government is keen for a success story, and a small sale could work. But Madrid might have a better chance of recouping its money once Bankia finishes its turnaround.
Hollande finally gets it. Can he do it? 15 Jan 2014 The French president launched a pro-business plan to restore profits and create jobs while cutting public spending. Acknowledging that France needs more supply-side reforms is sound. Whether Hollande has the political strength to implement the new policies is another matter.
Punch bondholder brawl nears last orders 15 Jan 2014 The over-indebted UK pub group has been caught between different sets of bondholders for years. They may not like its latest 2.3 bln stg restructuring plan, but rejecting it risks a messy default. The cocktail of debt and financial engineering would leave a nasty hangover.
Sterling may fall as UK inflation eases 15 Jan 2014 The buoyant pound may weaken, temporarily, in the face of latest UK consumer prices. The inflation level helps the Bank of England’s lower-for-longer interest-rate promises. A bout of risk aversion could also hit the value of sterling. But the retreat won’t last.
Diageo counterbid for Beam would be strong stuff 14 Jan 2014 The Johnnie Walker distiller could top Suntory’s $16 bln offer. Rival Pernod Ricard would find it harder but not impossible to bid, too. Either could reap some cost savings. But there are strategic, financial and antitrust reasons why a counterbid looks like a long shot.
Mainstream market outlook could still be right 14 Jan 2014 Contrarians have had a good start to the year. The consensus is that safe bond yields will rise in 2014; they’re falling. Equities are supposed to do well, but look wobbly. Still, a first-quarter setback could improve the chances things will pan out as widely expected by year-end.
German investment drought imperils growth prospect 14 Jan 2014 Angela Merkel has vowed to end Germany’s long-standing freeze on public and private investment. But she is only considering symbolic actions that will not reverse two decades of negligence. The country’s depleting infrastructure is threatening its long-term economic potential.
Shorter-hour memos won’t cure sick bank cultures 14 Jan 2014 Investment banks now want younger workers to spend less time on the job. And they’re also appalled at insider-trading allegations, including a new one on U.S. interest-rate swaps. But such practices won’t stop without an end to the industry’s endorsement of amoral ambition.
Big Pharma should nourish biotechs, not eat them 13 Jan 2014 Productive drug labs rarely survive M&A intact. The market rightly loves Alnylam’s purchase of assets from Merck and simultaneous $700 mln sale of a chunk of itself to Sanofi. Instead of killing the golden goose to try to harvest eggs, Sanofi’s deal could encourage production.
Botched $8.5 bln Celesio deal creates only losers 13 Jan 2014 U.S. drug wholesaler McKesson has failed to buy its German peer - despite both sides and most shareholders wanting a deal. The drawn-out process exposed weaknesses at Celesio and in Germany’s M&A rules. Elliott, the hedge fund that tried to play kingmaker, will suffer too.
Cross-border capital flows fall to healthier level 13 Jan 2014 A 61 percent decline since 2007 might sound like a dangerous retreat in globalisation. But at the peak only 5 pct of the funds went to emerging markets. Too much involved land speculation and carry trades. Today’s smaller but sounder investments probably do more good.
Leverage reprieve may be short-lived 13 Jan 2014 Basel’s softening of its equity-to-assets metrics will help European banks like Deutsche and Barclays, which have big fixed income trading operations. Differences with U.S. regulation are narrowing. The flipside is that a common global measure could in time be raised more easily.
Amec engineers $3.2 bln strategic shift 13 Jan 2014 The UK engineer is set to buy U.S.-listed rival Foster Wheeler. The structure is solid: a slim 12.8 percent premium, decent cost cuts, and payment half in stock to keep debt down. Investors just need to be satisfied that a big push into downstream energy makes sense.
Spanish royal ruckus comes at terrible time 13 Jan 2014 Spain’s democracy is strong enough to question a princess on tax-evasion charges. But widespread corruption among the masses will be harder to fight if the elite is under suspicion. And the royal family loses respect just when the country most needs a stable national institution.
UK election clouds have gilt-edged lining 10 Jan 2014 Politicians are already jostling before next year’s general election. On current form, the left-leaning opposition could oust the governing coalition. Any knee-jerk investor dismay may be tempered given the Labour Party is likely to cement Britain’s place in the European Union.
Carney shouldn’t shift BoE’s guidance goalposts 10 Jan 2014 The Bank of England Governor has a nice little problem. His forward guidance, based on a 7 percent unemployment rate, might seem to suggest a rate hike. Shift the goalpost? But goalposts that shift lose their credibility. And a move would dangerously reduce policy flexibility.
Spain can benefit from inbound conquistadors 10 Jan 2014 For decades, Spanish business bought up assets in emerging markets. But low valuations and cultural affinity are now attracting Latin American investors to Spain. It’s useful for Spanish assets to have a buyer in the market. And national reciprocity can be helpful in M&A.
Euro zone “happy loop” carries a warning 9 Jan 2014 European bank shares are rising along with peripheral euro zone bonds. It’s the mirror image of the “doom loop” of shared falls. This connection solves - rather than causes - a policy headache. But it shows the symbiotic link between governments and banks hasn’t been broken.