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.
EU shows it can bank on its union after all 13 Dec 2012 The deal Europe struck on the banking union has all features of a good European compromise. Amazingly, it even managed to make the Brits happy. Against all odds, the EU is functioning. It needs to work, because there are still huge problems to solve.
Barclays’ Hector Sants hire risky for both parties 12 Dec 2012 The UK bank has appointed the ex-FSA chief executive to a key compliance role. If Barclays moves on from its Libor woes, Sants’ image as a regulator who stood up to it before the scandal will be cemented. If it doesn’t, the bank will look crafty and he will look a stooge.
Too big to fail looks on its way to being licked 12 Dec 2012 The Bank of England and FDIC sound pretty confident they could resolve a massive bank failure. It’s hard to know without a test case. But by making bigger U.S. banks pay more to fund themselves in the capital markets, investors may be showing they agree with the watchdogs.
UBS needs a refurb as well as a carve-up 12 Dec 2012 The wealth manager thrilled investors with plans to de-risk investment banking. Fixed income will give way to equities and advisory, leaving a mega-boutique resembling a jumbo Evercore Partners. The snag? The rump business needs some love to be a destination employer again.
Criminal charges aren’t corporate death sentences 11 Dec 2012 Arthur Andersen’s post-Enron demise made U.S. prosecutors skittish about indicting the likes of HSBC, which just settled for $1.9 bln. But new research suggests convictions don’t cause company failures. Banks may be special cases, but enforcers should question their assumptions.
Cliff battle shows CEOs must play nice with Obama 11 Dec 2012 U.S. business leaders have rekindled their love affair with the president, backing his tax hikes on the wealthy to avoid fiscal tightening. That may pressure the White House to accept a compromise. Even if Obama burns them, no one else in Washington can help them.
Record fine shows some banks are too big to indict 11 Dec 2012 HSBC’s $1.9 bln fine may look big, but for the bank it’s small beer. Regulators reportedly wanted to go the whole hog and indict the UK lender, but backed down on systemic risk fears. Yet another sign that four years after Lehman’s collapse, finance is far from fixed.
Bank fines go from irritant to hefty business cost 11 Dec 2012 HSBC’s $1.9 bln money-laundering bill is the biggest ever, but StanChart and ING have been forced to hand over a similar proportion of earnings. Legal expenses and tougher internal compliance add to the burden. Even if such giant fines are infrequent, the bar is now set high.
Merkel wants banking union – a good, German one 11 Dec 2012 Germany’s refusal to rush through the details of the single banking supervisory mechanism is not driven by a hidden agenda to delay the decision forever. Berlin genuinely agrees on the need for pan-European financial oversight. It just wants one tailored to its interests.
Bank crisis plans strike discordant note 10 Dec 2012 U.S. and UK regulators are sensibly singing from the same hymn-sheet on how to deal with failing global banks. Yet they sound out of tune with other regulatory calls for subsidiarisation. More global conducting is needed to create workable cross-border resolution schemes.