Investment banks heart choppy markets – for now 2 Jul 2013 The world’s biggest financial institutions may have weathered the recent bond market storm for a decent Q2 showing. Capital markets deals were vibrant, too, but have slowed. Hopes for revenue growth may rest on whether Wall Street and City traders can power through the volatility.
Policymakers who see no bubble might still get wet 1 Jul 2013 Central bankers don’t think QE has pushed asset prices well past fair values. One argument is that asset prices are lower now than in 2007. True, but that was a great big bubble. Even if today’s excesses are more modest, QE is probably doing more harm than good.
RBS/Lloyds share-sale mandate: for masochists only 28 Jun 2013 The UK government has invited investment banks to pitch for the right to help sell down its bank stakes. Bragging rights and league-table credit are up for grabs - but so is intense public scrutiny during and after the sales. The winners could wind up with a Pyrrhic victory.
UK’s big build dreams still dogged by past binge 28 Jun 2013 There is real austerity in some parts of the UK budget, but not enough to keep total spending from rising. A cap on welfare spending won’t reverse the huge previous rise. The government’s talk of 100 billion pounds in infrastructure projects sounds bigger than the pinched reality.
Investor imperative – get on top of bond duration 27 Jun 2013 Until now, only geeks worried about this measure of a bond’s sensitivity to changing rates. But if yields keep rising, duration will become a crucial indicator. For a start, it shows how the UK government is well prepared for the shift - and how the U.S. Treasury is vulnerable.
UK must beware losing austerity on the train 25 Jun 2013 The austerity-minded British Chancellor will announce more spending cuts on Wednesday. Some infrastructure projects will sweeten the pill - and may help growth. But it’s risky to spend big on rail without first deciding on an airport hub. Care is needed on capital spending, too.
Savings make Vodafone’s Kabel deal palatable 24 Jun 2013 The mobile giant has offered 10.7 bln euros, with debt, for Kabel Deutschland - a pricey 12.4 times EBITDA. Critics think Vodafone is ponderous and profligate in M&A. But this looks acceptable provided the huge promised savings with a present value of 3 bln euros can be achieved.
Resistance to Kazakh mining stitch-up looks futile 24 Jun 2013 ENRC minority holders are in a bad place, now the Kazakhmys board has accepted the low-ball bid from oligarchs and government. Unless Kazakhmys shareholders overrule their board, any ENRC holdouts could end up with unlisted, illiquid shares. Better to admit defeat and cut losses.
UK’s latest political football: the Lloyds in-price 21 Jun 2013 The UK chancellor has confirmed Lloyds will be re-privatised soon. For it and RBS there are at least four different levels at which the government can be said to have recovered its money shoring up the lenders. The exit prices are a silly distraction - but they matter to politicians.
Regulator creates fresh uncertainty for Barclays 20 Jun 2013 A review of UK bank capital has found that Barclays’ leverage ratio is too low. The lender needs to generate or find 6 bln stg of equity to get to the 3 pct minimum, yet regulators haven’t specified a deadline. If it’s 2015 then Barclays is fine. But investors just don’t know.
"Britain’s got cheap talent" shows a way forward 20 Jun 2013 British workers have changed - they take pay cuts. This makes for a painfully slow recovery now, but for higher employment and improved national competitiveness. The UK leads Europe in foreign direct investment and should stay on top - as long as it stays in the EU.
Don’t bet on RBS good bank/bad bank split 20 Jun 2013 The UK chancellor will examine the idea of hiving off the state-held lender’s ropey assets. Doing so without more public money or further slowing RBS’s privatisation will be difficult. Fortunately it looks more a sop to bad bank advocates than a genuine statement of intent.
Belgian postal IPO lacks the promise of parcels 20 Jun 2013 Bpost is delivering a 2.9 bln euro Brussels flotation. The warm reception it is receiving augurs well for UK peer Royal Mail. Both face falling letter volumes but promise big dividends. Yet Royal Mail is stronger in parcels and could benefit more from e-commerce.
BT does its best to counteract government poaching 19 Jun 2013 After leading an impressive turnaround, Ian Livingston is leaving the UK telco. The timing is surprising: BT is embarking on a big push in TV. But it’s hard to make the boss say no to a government job. And BT has plumped for a strong internal candidate who signals continuity.
Super-yachts: the new symbol of China’s excess 19 Jun 2013 The chairman of Dalian Wanda, a Chinese conglomerate, liked Sunseeker’s yachts so much he bought the company. Liquidity is ample and China’s super-rich are doing fine. But as the economy slows, showy displays of inequality and flashy deployment of capital are disconcerting.
UK banking report pulls more punches than it lands 18 Jun 2013 The long-awaited parliamentary report on UK banks is underwhelming. A “Fred Goodwin” law that could put the reckless in prison is a bold idea. A call for an inquiry into banking competition is right but hardly novel. Ultimately, the work is long on words and short on deeds.
Vodafone remains best bet for Kabel Deutschland 18 Jun 2013 The mobile giant has stronger finances than U.S. challenger Liberty Global. It would reap more savings from the German cable company and irk regulators less. But it is Liberty’s last chance to get national coverage in a vital market. And Vodafone investors may balk at the price.
Co-op’s problems leave mutual bank model intact 18 Jun 2013 Sure, the troubled UK lender has made some big mistakes. But user-owned banking makes economic sense for most types of lending. Wrong-headed economic theory undermined the mutual model in many countries. The trend should - and could - be reversed.
Bondholder pain eases Co-op’s political problem 17 Jun 2013 The mutual needs an eye-watering 1.5 bln stg in new capital. Swapping debt into equity would normally mean bondholders wind up controlling the bank. But a cleverly structured deal is set to allow the politically important mutual parent to retain its majority interest.
UK houses look expensive, like German bonds 14 Jun 2013 The British house price recovery will keep on for now, as the economy picks up. But even as it begins, homes are unaffordable. Prices have been propped up by ultra-loose money, rather like UK and German bonds. That creates the risk of a painful fall when interest rates rise.