Four questions Monte dei Paschi must answer 23 Jan 2013 The Italian bank is probing how opaque derivatives trades racked up hundreds of millions of euros in losses. It has promised to come clean about how it got into the mess. Investors and taxpayers need transparency on what it was doing, why it was doing it, and why they weren’t told.
China’s bail-in bonds leave room for conflict 23 Jan 2013 ICBC may become the first Chinese bank to issue debt that can be written down to zero by the regulator in a crisis. Since the state is also the bank’s biggest shareholder, that leaves bondholders exposed. If bad loans swell, outsiders could be forced to foot a chunk of the bill.
U.S. Bancorp puts rivals big and small to shame 22 Jan 2013 The Minneapolis-based bank with $350 bln of assets cranks out better returns than giants like JPMorgan and midsize lenders like PNC. Its success is no secret: a good mix of business, no stretching for profit and costs kept in line. The shock is that so few others can pull it off.
James Gorman must shine or resign in 2013 18 Jan 2013 The Morgan Stanley boss presided over a poor Q4. Even so, there are some encouraging signs. The trouble is, investors have seen them before and not yet reaped the benefits. Success requires cutting pay and other costs and improving FICC. This year Gorman needs to make it happen.
JPMorgan flaws should ring alarms everywhere 18 Jan 2013 The huge U.S. bank is supposed to be among the top risk managers. If the conflicting mandates, discredited theory, inadequate checks and primitive technology behind its $6.2 bln trading losses in 2012 are really as good as it gets, plenty of regulators and investors should worry.
Lloyds should change CEO bonus vesting, not size 18 Jan 2013 A storm is brewing over Antonio Horta-Osorio’s bonus. Like banking peers, Lloyds was shamed in 2012 for past mis-selling of mortgage insurance. Yet there was progress in restructuring and the boss deserves any payout due. To become palatable, the award could be deferred not cut.
Citi, BofA give investors only reasons to fret 17 Jan 2013 Both U.S. banks had a messy fourth quarter full of litigation expenses and other charges. Stripping those out still left each with measly single-digit returns. With rivals more solid, BofA chief Brian Moynihan and new Citi boss Mike Corbat are under even more pressure to perform.
Goldman and Wall Street finally wake up on pay 16 Jan 2013 The firm led by Lloyd Blankfein gave more to investors by taking from bankers. Morgan Stanley is deferring all bonuses for top staff and should be trimming payouts. Jamie Dimon is taking a hit for the whale debacle. These are encouraging signs of a new attitude on compensation.
JPMorgan board goes soft on Jamie Dimon over whale 16 Jan 2013 The bank’s 132-page report into the trades that cost it $6.2 bln dishes out blame to several now departed managers. But it just echoes the chairman and CEO’s own mea culpa. The $10 mln docked from Dimon’s pay will sting but the board could do more, like removing one of his hats.
Mervyn King exit may detoxify BoE/bank relations 16 Jan 2013 Lenders and their regulators shouldn’t be best buddies. But banks feel the outgoing governor’s recent vim partly reflects his previous mistakes. Mark Carney offers a clean slate. Given the Bank of England’s new structure could make it harder to manage, that’s just as well.
JPMorgan risk scrutiny better late than never 15 Jan 2013 Two U.S. watchdogs have put the bank on notice over risk management following last year’s $6 bln trading loss. CEO Jamie Dimon has tried to put the episode behind him. The regulators may be late to the game, but they’re right to focus on improving how complex banks are managed.
Regulators must grab chance to bin EU capital ruse 15 Jan 2013 The Basel Committee is probing how banks risk-weight assets. Its first step should be to name and shame the EU countries where sovereign debt can still be free of capital charge. If wary bank investors got clarity, they might start trusting Europe’s banks a little more.
UK bank capital reforms are double-edged sword 14 Jan 2013 The BoE’s new Financial Policy Committee could soon be able to make banks hold extra capital for sector-specific risks. That’s an improvement on the current system. But if the FPC isn’t joined up with other national and global agencies, it could create more confusion.
Banks will pay either way for gaming UK tax change 14 Jan 2013 Companies have long sought tax boons for staff by fiddling with payout dates. Now Goldman Sachs and others are looking at delaying bonus payments to capture a reduction in personal tax rates. But it’s not good corporate citizenship, reputations will suffer and staff will feel it.
Wells Fargo productively bides time 11 Jan 2013 The San Francisco-based bank generated a record $5.1 bln quarterly profit even as its net interest margin tumbled another 10 basis points. Wells Fargo, like its peers, can’t lend out the deluge of deposits fast enough. It’ll be an ongoing challenge until the Fed reverses course.
Commerzbank faces timing dilemma over rights issue 11 Jan 2013 The German lender looks undercapitalised on new Basel III rules, has state aid to repay, and the shares are up a third since November. Financially, it should raise capital sooner rather than later. Politically, Germany’s 25 pct stake and looming elections argue the opposite.
RBS Libor bonus ploy reflects second-tier status 11 Jan 2013 The UK bank’s reported plan to pay half its expected Libor fine from its bonus pool sends a noble message to shareholders and taxpayers. But RBS’s ruse is unlikely to be followed by Barclays and UBS. Both are still more in thrall to their investment banking talent.
Big U.S. banks have plenty to prove in 2013 10 Jan 2013 Wells Fargo aside, valuations have languished below book value. After a strong 2012 for stock markets and with Q4 reports imminent, JPMorgan and Goldman are again near that level. Getting there will be a relief rather than anything to crow over, and investors rightly remain wary.
UBS grilling shows how banks go badly wrong 10 Jan 2013 The Swiss bank’s ex-CEO and three deputies gave a British parliamentary committee, and future bank bosses, a lesson in how not to do it. They admitted incompetence on Libor-rigging, but explained that they had made so many grave mistakes that this one escaped their notice.
For China’s borrowers, bank lending is so passé 10 Jan 2013 Bank loans made up just half the economy’s financing in 2012, while long-term corporate lending contracted sharply in December. It’s now off-balance sheet finance that drives China’s growth. That makes monetary data less useful, and creates new risks when credit goes wrong.