Can Citic avoid the investment bank buyer’s curse? 23 Jul 2012 The Chinese securities firm is paying $1.3 bln for Credit Agricole’s CLSA. Avoiding another Dresdner/Wasserstein, Nomura/Lehman or Credit Suisse/DLJ would be hard for any bank - much less one controlled by Beijing. Arm’s length management alone is unlikely to make this deal different.
EU seals fate of Spanish savings banks 23 Jul 2012 As part of the country’s bailout, the euro zone wants Spain’s cajas to cede control of their banking arms. Even Caixabank - the great survivor - will eventually look more like its commercial rivals. The purge will be good for the financial sector, and for corporate Spain.
Citi, M. Stanley reveal randomness of M&A advice 19 Jul 2012 The two are trying to set a price for a stake in their wealth management JV. Bankers for Citi, the seller, think the unit is worth over $22 bln. The buyer’s whiz-kids conveniently reckon nearer $9 bln. There may be reasons for the gulf, but it’s a bad advert for merger science.
James Gorman left exposed by dismal showing 19 Jul 2012 Morgan Stanley eked out a paltry 2 pct return on equity, worse than peers. Fixed income trading was particularly weak. Client concerns ahead of a Moody’s downgrade may have contributed. Either way, the success of CEO James Gorman’s strategy is starting to look shaky.
Lloyds settles for cut-price branches sale 19 Jul 2012 The UK lender will sell 632 branches to Britain’s biggest mutual for about 750 mln stg. That’s about half the original asking price, and less than half the sum comes upfront. But the tag reflects depressed values for listed banks. And at least this is off Lloyds’ to-do list.
Sovereign funds still hungry for Western banks 19 Jul 2012 Bad early-crisis bets haven’t put rich states off backing global lenders. Qatar and Norway have upped their exposure to Credit Suisse, while Singapore’s Temasek has joined the throng. The enthusiasm reflects a lack of attractive alternatives, as much as hopes for a recovery.
Madrid’s bad bank likely to involve jiggery-pokery 19 Jul 2012 Spanish banks receiving state aid will be forced to sell dud assets to a bad bank. That’s a good idea. But how will Madrid finance what could be a 100 billion euro bill and keep it off balance sheet? That’s where creative finance could come in. Ireland provides a model.
BofA needs top line growth, not just cost cuts 18 Jul 2012 The U.S. mega-bank’s plan to reduce costs is paying off. Brian Moynihan is now targeting annual cuts of $8 bln altogether by 2015. On recent form that would boost tangible equity returns to around 10 pct - probably just enough. But without revenue growth, BofA will look mediocre.
Credit Suisse bows to Swiss National Bank pressure 18 Jul 2012 A month after the central bank questioned its strength, the group is boosting capital by 8.7 billion Swiss francs. It hopes to earn a 15 percent return on equity through extra cost-cutting. But any sustained recovery requires investors to believe the capital rebuild is now over.
Money-laundering probe puts HSBC in penalty box 17 Jul 2012 U.S. Senate revelations of the bank’s “pervasively polluted” approach to handling suspect cash have tarnished its status as a crisis survivor. Beefing up compliance is a smart response. But with a criminal investigation and big fine looming, HSBC can’t afford any more mistakes.
Goldman’s pay-earnings balancing act looks wobbly 17 Jul 2012 The firm has tweaked capital and trimmed costs to boost returns to shareholders. But it still set aside 44 pct of Q2 revenue for pay. With return on equity running at just 5.4 pct, that looks unsustainable. Absent a market rebound, cutting comp is the least investors will expect.
City of London watchdogs roughed up over Libor 17 Jul 2012 The Bank of England governor and the FSA chairman each took a blow in the latest parliamentary hearings into the rate-fixing scandal. But MPs still failed to ask a key question. The central bank’s Court may need to take over the role of inquisitor.
What if banks boycott Libor? 17 Jul 2012 The Barclays scandal is prompting banks to rethink their role in setting interest rates. But a mass boycott of Libor could throw markets into a tailspin. Regulators need to decide urgently how the benchmark for hundreds of trillions of dollars of contracts should be reformed.
Euro bank union should spur fatter capital buffers 17 Jul 2012 As the euro zone inches towards creating a collective safety net for banks, it will focus on reducing the cost to taxpayers. Witness the ECB’s volte-face on haircutting bondholders. One way forward is to copy the UK and require lenders to issue a minimum amount of bail-in debt.
Libor jailbirds would be hollow symbols 16 Jul 2012 Rate-rigging sentences might assuage public lust for Wall Street scalps. But U.S. prosecutors have missed big on financial-crisis villains. Al Capone was nailed for tax evasion. Libor convictions would also miss the point - and might only get real banksters’ distant cousins.
A Vanguard bank might struggle to find assets 16 Jul 2012 The $1.6 trln U.S. mutual fund giant is mulling a deeper move into retail banking. Vanguard could leverage its gold-plated reputation to woo customers and sidestep stricter fund rules. But consumer lending is a higher-risk business than it’s used to that could sully its image.
Citi global retail bank worth more than the whole 16 Jul 2012 It’s big in Asia and Latam as well as in mature markets. But ascribing just a low-growth multiple makes it worth $83 bln. That’s more than Citi’s market cap. Sure, the consumer business is Citi’s biggest unit by profit and revenue. Even so, something doesn’t add up.
Jamie Dimon can’t swim past the whale just yet 13 Jul 2012 The JPMorgan boss reckons the CIO trading debacle is behind him. Explanations and fixes from Dimon and his deputies are solid. But it’s still unclear if they’ll pay a price. And newly revealed bad risk data and mismarked trades mean JPMorgan still has a lot of trust to win back.
Wells Fargo displays its anti-JPMorgan colors 13 Jul 2012 Like its New York rival, the San Francisco-based bank posted a profitable quarter, but its results came with almost none of the baggage. Wells is hardly pure, paying $175 mln to settle charges of discriminatory lending. But it continues to reap the rewards of keeping it simple.
Guide for the perplexed: Libor litigation 12 Jul 2012 It’s unclear who got hurt in the rate-rigging mess, but banks will pay big bucks just fighting mounting lawsuits. How much is still anyone’s guess. Bank investors can hope for full disclosure and quick settlements, but as this primer shows, the legal battles have just begun.