UBS could charge rivals for cutback benefits 30 Oct 2012 The Swiss bank’s retreat from fixed income trading may eventually increase returns for its own shareholders. But competitors will gain right away from the reduction of capital in the business. By rights, they should all compensate UBS for making the sacrifice.
UBS euphoria overdone 30 Oct 2012 The Swiss bank says its restructuring will boost returns and capital. Investors agree: UBS’s market cap is up SFr 4.4 bln ($5 bln) since the plan emerged. But the stated SFr 3.3 bln one-off charge ignores the real costs of transformation, most of which are hostage to fortune.
Deutsche evolution outshone by UBS revolution 30 Oct 2012 The German bank had a strong third quarter, driven by fixed income and equities trading. But its recent three-year strategy to improve capital and returns now looks less decisive against the Swiss bank’s wholesale restructuring. Investors may want Deutsche to be more radical.
Three reasons China’s banks deserve their derating 30 Oct 2012 The biggest lenders trade at just 1.2 times book value, despite returns on equity above 20 percent. Why? Because healthy reported numbers don’t reflect the risk of bad debts rising, the squeeze on bank deposits, or the likelihood that some will need more capital.
Ailing Greek banks need better Troika oversight 29 Oct 2012 After an 18 bln euro bailout, Greece’s four biggest lenders will be mostly owned by the Greek state’s HFSF entity. But if Greek insiders run the HFSF, it may not be able to fight against poor corporate governance. The euro zone, which is footing the bill, should have more say.
Financial shrinkage gets helping hand from UBS 29 Oct 2012 The Swiss bank has found that it can’t make bond trading pay. That will be tough on employees and a slow exit would be costly for shareholders. But the pain is just collateral damage from the financial sector’s deleveraging, a steady process which is making the world less dangerous.
Frankenstorm is salient risk management reminder 29 Oct 2012 When it comes to natural disasters like the freak storm slamming into the eastern U.S., there’s no such thing as too much preparation. The same is true in business, particularly banking: calamities often strike without warning and there’s no such thing as too much capital.
Nomura still limping towards new reality 29 Oct 2012 Buoyant fixed income revenue and better results from the United States challenge the notion that the Japanese group is retreating to its roots as a domestic stockbroker. But as the industry reshapes, Nomura’s new CEO still has to prove he can cut his way to better returns.
UBS rethinks the impossible 27 Oct 2012 The Swiss bank is going where no bank dares tread with a bold strategy to wind down fixed-income trading. It will be a costly and slow task - that’s why rivals tend to think it can’t be done. But if UBS thrives as a mega-boutique, others could follow. And the system benefits too.
Pandit putsch is setback for U.S. board governance 26 Oct 2012 Separating the jobs of chairmen and chief executives is generally to be encouraged. But the logic is undermined by recent events at Citigroup. Chairman Mike O’Neill’s ouster of ex-CEO Vikram Pandit is looking increasingly like a power-grab rather than a service to shareholders.
Risk relief may soften banks’ commodities blow 26 Oct 2012 Proposed regulation is making it tougher for investment banks to trade commodities. That presents unregulated trading houses an opportunity to poach people and looks unfair. But banks which pull back also dial down risk, and that may earn them higher valuations in the market.
Lazard advises Wall Street on how to take the pain 25 Oct 2012 Christmas came early for activist Nelson Peltz, if not some of Lazard’s employees. The firm will slice $125 mln in expenses by year-end. Though Lazard still pays out more to staff than rivals, the move is consistent with CEO Ken Jacobs’ goal to boost returns for shareholders.
Santander’s fortification phase is far from done 25 Oct 2012 The Spanish bank turned a profit in the third quarter despite taking big provisions - ordered by the state - against the splintering economy. But Santander looks weak compared to global peers under new Basel III capital rules. If anything, closing this gap is getting harder.
Credit Suisse keeps on finding more costs to cut 25 Oct 2012 The Swiss bank led peers last year with a 3 bln Swiss franc cost reduction plan. That programme is well under way, but returns are still squeezed. So it has announced another 1 bln of cuts. With unrelenting pressure for more capital, investment banking remains a tough business.
Gupta insider trading sentence apt but incomplete 25 Oct 2012 The former McKinsey boss and Goldman director asked to be allowed to help Rwandans. Instead he got two years in the slammer. His request oozed chutzpah but made a useful point. Ideally, sentences should punish crooks but also exploit their skills. This one goes only half way.
Can Barclays old boys make the Irish play pay? 24 Oct 2012 Barclays alumni made millions helping their ex-employer offload subprime assets in 2009. Now they have taken a 17 pct stake in Ireland’s 74 bln euro bad bank. The terms aren’t public. But the arrangement seems to need leverage, or a discount, or both if history is to be repeated with this new punt.
Canada banks give local M&A advisers hope 23 Oct 2012 Zealous watchdogs have nixed several deals, or talked of doing so. While Chinese buyers face the heaviest fire, locals aren’t immune. But the risk should be low for RBC’s $4 bln purchase of Ally’s Canadian auto finance arm and TD’s of Target’s credit card business for $6 bln.
Experian sees gold in Brazil’s blind credit boom 23 Oct 2012 The credit bureau’s $1.5 bln purchase of the rest of Serasa brings Experian’s total outlay since 2007 to below nine times EBITDA for a business that has tripled. As Brazil’s banks lend aggressively with little information on a rising middle class, there’s further growth to harvest.
Equities business hits the pain threshold 23 Oct 2012 The cash equities model is broken. An industry plagued by overcapacity and weak profitability can’t cope with higher costs and lower volumes. Some investment banks are trimming equities headcount, when they really need to decide whether they should be in the business at all.
Goldman exposé doesn’t go according to plan 22 Oct 2012 Greg Smith’s resignation book doesn’t blow the lid on Wall Street the way “Liar’s Poker” did. Even his purported tale of disillusionment has been done before and better by Goldman veteran Jonathan Knee. The real revelation is the firm’s apparent erosion of employment standards.