Wall St could learn a thing or two from Detroit 3 Jan 2013 Both needed government aid in 2008. But it is the automakers that have restructured and become decently profitable in straitened times. Detroit’s Big Three still have work to do, but they have responded better. Motown’s chiefs can more easily justify big pay days too.
Lehman could be 2013’s Humpty Dumpty 2 Jan 2013 Nomura has struggled with the defunct firm’s European and Asian operations. Barclays may offload the U.S. arm. So why not stitch Lehman back together? Plenty of sidelined Wall Street execs could run it. But funding looks difficult. It’s Wall Street’s problem in a nutshell.
Banks will stop giving stuff away this year 2 Jan 2013 Lenders have underpriced everything from corporate loans to current accounts in an effort to suck in business. But tougher regulators and shrinking revenue streams make such cross-subsidies harder to justify. An overhaul of the industry’s approach to pricing is overdue.
EU drops the ball on Monte dei Paschi bailout 28 Dec 2012 The 3.9 bln euro recapitalisation of Italy’s third largest bank had looked likely to punish Monte’s foolhardy equity investors. Instead, the European Commission has let them off the hook. That hurts Italian taxpayers and dilutes important single market principles.
Bank CEO survivors’ club may shrink again in 2013 27 Dec 2012 Of the major bank chiefs who had their jobs before the crisis, three remain: Goldman’s Lloyd Blankfein, JPMorgan’s Jamie Dimon and Brady Dougan at Credit Suisse. Each has had setbacks. But the two U.S. bank heads appear to have shrugged them off. Dougan looks more vulnerable.
UK government loses wiggle room on bank reform 21 Dec 2012 An influential parliamentary commission has endorsed UK plans to erect firewalls between retail and investment banking. But it has also called for tough safeguards including the option of forcing bank breakups. That’s a welcome push-back on attempts to water down new legislation.
Diamond Bob will bounce back in 2013 21 Dec 2012 A toxic brew of Libor, bonus spats and regulatory ire led to the ousting of the Barclays CEO in 2012. Yet investors will soon twig that Diamond’s bank wasn’t the only fiddler of interbank rates. He’s unlikely to land another big CEO gig, but he may resurface.
Spain’s exit plan for duff banks better than UK’s 20 Dec 2012 Madrid has just put 1.9 bln euros more into its lenders. The economy is still shaky, and foreign interest in the state’s bad bank isn’t the confidence boost it seems. But setting a fixed deadline to sell its new stakes is preferable to the UK’s flaky policy on RBS and Lloyds.
Fed’s foreign bank crackdown is price of stability 20 Dec 2012 Forcing overseas lenders to properly capitalize their U.S. arms is necessary to protect the local - and global - financial system. The Federal Reserve’s unilateral approach could prompt others to follow suit. But fears that fragmentation will stifle global banking are overblown.
Shadow banks lead China towards a dark place 20 Dec 2012 The secret sauce in the country’s growth is no longer bank lending, but an explosion in off-balance sheet credit. The troubling expansion of funds extended through wealth management products - many of them short-term and dependent on confidence - may force a moment of reckoning.
UBS points to next banking worry: client risk 20 Dec 2012 Investment banks’ new mantra is to put clients at the heart of all they do. After years of risking client cash in prop trading, new rules have rightly forced a change. But the cosying up by interdealer brokers to their client UBS shows that relationship businesses have risks too.
Derivatives fraud ruling crosses a line 20 Dec 2012 UBS and Deutsche are among banks found guilty of fraud over derivatives sold to Milan. The verdict is likely to be tested by an appeal. But for now, it overrides banks’ usual defence that sophisticated clients know what they are getting into. And it could affect many other deals.
$2.3 bln Brazilian insurer IPO looks too pricey 19 Dec 2012 That would value the unit state-owned Banco do Brasil wants to hive off at 12.5 times earnings - richer than rivals. BB Seguridade may be a good business. But it will remain majority-owned by a bank that does the bidding of an interventionist government. That warrants a discount.
Jumbo fine isn’t the end of UBS reputation woes 19 Dec 2012 The Swiss bank’s $1.5 billion settlement for rigging interest rates encapsulates all that was wrong with the culture of investment banking. UBS says it changed its spots. But with the prospect of further litigation and client fallout, investors may fear the leopard’s still alive.
UBS shows banks must never think they’re well run 19 Dec 2012 The Libor fines widen the already gigantic gap between pre-crisis self-image and reality at the Swiss bank. Even after a big 2008 mea culpa, rates traders engaged in routine, casual wrongdoing. The bank was so convinced it was fundamentally boring that it couldn’t face reality.
Jefferies puts Wall Street’s dilemma in a nutshell 18 Dec 2012 The firm reported record annual revenue but only a paltry 8 pct return on equity. CEO Richard Handler, like bosses of larger rivals, wants to improve on that. He has a tax-efficient merger on the cards to help. But without an upturn or big cost cuts, others won’t be so lucky.
Deutsche bosses live down to unfortunate tradition 17 Dec 2012 The bank’s arrogance is legendary in Germany. Bosses have been making PR gaffes for decades. So a report that the co-chief executive whinged to a state governor about a police tax investigation sounds all too familiar. Jürgen Fitschen just made Deutsche’s problems worse.
Deutsche Bank CEOs are running out of chances 14 Dec 2012 The last week has seen Deutsche warn on Q4, suffer police raids and be forced to pay corporate damages. True, the issues relate mainly to the bank’s history. But Anshu Jain and Juergen Fitschen now have no margin for error as they try to move Deutsche on from its, and their, past.
Other banks may take most of the UBS Libor pain 14 Dec 2012 The Swiss lender is set to pay $1 bln for fiddling interbank rates. That’s more than twice as much as Barclays, which lost a CEO over the case. After many reputational blows, UBS has less to lose. But fellow Libor miscreants will be looking at an even more hostile world.
UK banking union concessions don’t count for much 13 Dec 2012 Britain’s newly won safeguards to protect its big financial sector are worth having. But they may be revisited if most non-euro zone states join the new ECB-controlled bank union. And it will in any case be hard to avoid moving in step with new initiatives pushed by Frankfurt.