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.
Hugo Dixon: Euro zone doesn’t need Disziplin union 22 Oct 2012 At their summit last week, European leaders nudged forward plans for a fiscal union with discipline as its leitmotif. Such a union is neither desirable nor necessary. It may not be politically feasible either.
RBS’s CEO succession gains urgency post Panditgate 19 Oct 2012 Recent wins mean Stephen Hester has achieved much of his turnaround plan that was due to end in 2013. Meanwhile, Vikram Pandit’s ugly exit from Citi shows it’s wise for bank bosses to quit while ahead. RBS’s board should put two and two together and prepare for life after Hester.
Vickers’ ring-fence is worth defending 19 Oct 2012 Paul Volcker has picked a hole in the UK Commission’s plan to isolate banks’ retail deposits. The ex-U.S. central banker is probably right that fences would fall in an extreme crisis. But that doesn’t make them worthless. They’d simplify banking and protect the financial system.
Morgan Stanley investors must wait for pay day 18 Oct 2012 Boss James Gorman set aside more for bankers in Q3 after railing against Wall Street’s “heads I win, tails you lose” culture. Revenue rebounded, but not enough for shareholders to get the cut Gorman says they deserve. His model for Morgan Stanley needs to catch up to his message.
Latest attempt to find Libor victim: Main Street 17 Oct 2012 U.S. homeowners are accusing big banks of making money out of nudging the benchmark interest rate higher. Bringing in Joe Public could add to political pressure for tougher regulation. Even so, it’s hard to see how more than a tiny amount of harm was done.
Brian Moynihan can’t ignore Citi’s regime change 17 Oct 2012 The BofA boss has had less time in the corner office than Vikram Pandit did. But he faces the same challenges to boost performance, as the bank’s third-quarter 6.3 pct ROE shows. While improving, Moynihan needs to do more before he, too, clashes with the board and shareholders.
Spain’s bad bank will require financial acrobatics 17 Oct 2012 The next stage in cleaning up the financial system will be hiving off rotten assets into an off-balance sheet asset management company. Madrid has two conflicting objectives: minimising the state’s debts and maximising the clean-up. It should prioritise the latter.
RBS sale prospectus gets a bit easier to write 17 Oct 2012 The UK bank is to ditch its toxic-asset insurance policy with the state. That removes only one of many barriers to the government reducing its 82 pct stake. But it’s an indicator of both management and political will to do a share sale - probably before the 2015 election.
Corporate China beating banks at their own game 17 Oct 2012 Banks and bondholders aren’t the only ones working to keep the country’s debt-fueled party from crashing: companies are also lending more to each other, for longer. As growth slows, the risk is that rising past-due bills make it hard for the private sector to repay mounting debt.
Pandit succumbs to “three strikes you’re out” rule 16 Oct 2012 A trio of failures, not all of his making - pay, dividends and Smith Barney - lost him the confidence of shareholders, regulators and the board. It was time to go. Mike Corbat is solid. But radical change like a value-enhancing breakup would be a more surprising move for Citi.
Goldman exceptionalism remains elusive 16 Oct 2012 The bank’s Q3 net income beat Wall Street forecasts and enabled a small dividend hike, but the 8.6 pct return on equity still wasn’t enough to cover the bank’s cost of capital. Goldman CEO Lloyd Blankfein has more room to maneuver than Citi’s boss, but the bar is also far higher.
UK needs stronger safeguards on euro banking union 16 Oct 2012 The European Commission’s plan for a single supervisor to oversee euro zone banks tries to address the danger that non-euro states get frozen out on pan-European issues. But it doesn’t go far enough. London will need better protection before it can agree to the changes.
Citi’s mediocrity shines through dark quarter 15 Oct 2012 Two big Q3 hits left the mega-bank with just a 1 pct return on equity. Excluding them boosts net income to $3.3 bln, though still with a meager ROE flattered by loan loss releases. Operating leverage progress is welcome, but it’s time for CEO Vikram Pandit to raise Citi’s game.