Bad banks give low returns but high rewards 22 Nov 2013 State support for UBS and ING has made just 9 pct and 3 pct internal rates of return respectively. That’s not a commercial success. But the governments’ actions prevented a far worse outcome. That taxpayers are back in the black is an added bonus.
Markets may one day notice depth of French funk 21 Nov 2013 France’s stalled economy is a drag on Europe. But the government doesn’t seem to care about the bad numbers, and can point to the financial markets’ insouciance. That could change when the Fed moves - or when investors discover the renewed charms of Europe’s periphery.
Gold hasn’t melted down to its base yet 21 Nov 2013 Investor demand for gold is likely to continue falling as Fed tapering pushes up market interest rates. That may in turn affect demand from central banks in emerging markets. Asian jewellery demand offers gold an eventual salvation – but probably below $1,000 per ounce.
Metro cashes in on Russia before it’s too late 21 Nov 2013 The German retail giant is mulling a partial listing of its Russian business. Selling a minority stake in that attractive asset looks like a smart move. It could reduce the group’s debt and finance growth. But investors beware: the Russian economy is headed for a major slowdown.
Credit Suisse shows resolution has some way to go 21 Nov 2013 The bank is rearranging itself so it can deal with crises by issuing loss-absorbing debt from its Swiss holding company. In theory, that should mean fewer geographical silos. But nationally focused regulators mean Credit Suisse is also becoming more compartmentalised.
Banks need to lop another quarter off costs 21 Nov 2013 Though investment banks’ costs are down over the past five years, revenue has fallen faster. With legal and regulatory expenses rising, big banks will have to swing the axe harder to satisfy shareholders, reckons McKinsey. The full-service model looks increasingly unsustainable.
Sovereign CoCos look like good financial innovation 20 Nov 2013 Banks issue loss-absorbing contingent capital, so why not sovereigns? A Bank of England proposal to make government debt extendible in bad times would render crises easier and rarer. The system would be hard to set up today, particularly in Europe, but the idea is worth backing.
Can corporate finance save the Co-op? 20 Nov 2013 The scandal-hit UK mutual’s “root and branch” review is examining all options. Co-op’s incompetence means its unwieldy roster of businesses deserves to be broken up. Yet a poison pill and justifiable affection for its model means owner-members will stomach less radical surgery.
ThyssenKrupp botches Brazil but moves on 20 Nov 2013 The German conglomerate has admitted that it can’t sell its ill-fated Brazilian steel mill. Hiving off the good parts of Steel Americas is now the least value-destroying option in the short term. And it will allow the group to get serious about a much-needed capital hike.
Equity optimists may fast create a crowded trade 20 Nov 2013 Many large fund managers expect developed stock markets to rise next year. They reckon that companies will ramp up capital expenditure while fiscal policies become less restrictive. The reasoning may be sound. The risk is that there’s too much money chasing the same idea.
DSM’s pill deal oddly blends carve-out and LBO 19 Nov 2013 The world’s top vitamin maker is merging its drug-production arm with a private equity-backed rival. The unit was a subscale distraction. But the cost benefits of the $2.6 bln tie-up are hard to fathom. And DSM cedes control of the unit without cutting its economic exposure.
EasyJet’s growth will get harder to replicate 19 Nov 2013 The low-cost carrier is turning improved customer service into bundles of cash. The 50 pct jump in profit and the chunky special dividend marks easyJet out from peers. The shares have doubled in the past year. But future growth may be harder to win.
Vienna offers sovereign wealth fund deal of year 18 Nov 2013 The Viennese repelled the Ottomans in 1683. Now Middle Eastern money is needed to shore up the Austrian capital’s banking jewel. After expanding in former Ottoman lands, Raiffeisen needs capital to retain its empire. A deal would represent more than historical irony, though.
Tarkett’s Russian heft could prove an IPO weakness 18 Nov 2013 The KKR-backed flooring firm aims to raise up to $837 mln in a Paris IPO. Buyers need to scratch beneath the surface. The equity story is underpinned by the firm’s strength in the CIS and Russia, where an economic slowdown is adding to well-known legal and political risks.
Derivatives detail could sink bank wind-down plans 18 Nov 2013 American and European regulators want to standardize contracts to help cross-border banks fail smoothly. If the problem isn’t fixed, investors could undermine financial stability by calling in swaps. It’s a reminder of how much work still needs to be done to end too big to fail.
Markets may underrate ECB’s propensity to act 18 Nov 2013 To judge from the firmer euro, investors needed less than two weeks to decide that the euro zone central bank’s unexpected rate cut wasn’t a sign it has become more activist. The complacency misses something: the ECB is now willing to act with a much weaker consensus.
Aberdeen’s SWIP swoop gives it much-needed hedge 18 Nov 2013 The UK asset manager is paying up to 650 mln stg in shares and cash for the Lloyds Banking Group-owned rival. A big share price jump reflects likely earnings enhancements. As importantly, Aberdeen is adding scale and breadth to its current emerging market expertise.
Hugo Dixon: Athens can capitalise on market interest 18 Nov 2013 Bottom-fishing for Greek banking assets gives the country a double opportunity: lenders can use it to clean up their balance sheets by selling non-performing loans; and the state can privatise its stakes in the banks. Both should grab the opportunity while it lasts.
Falling pay cheques can’t solve Spain’s job problem 15 Nov 2013 Lower wages forced on Spanish workers are a tough sell, but could help shrink sky-high unemployment. The burden of adjustment is likely to fall on the newly employed. Yet tackling the country’s problems requires more reforms than brutal pay cuts.
Nationwide shows there is life in the mutual model 15 Nov 2013 The customer-owned UK lender is growing loans and deposits rapidly, without sacrificing prudence. After Co-op’s bail-in and Rabobank’s Libor shame, doubts about mutuals are widespread. Nationwide sends a timely reminder that with competent management they can work.