Lloyds needs to do more to allay investor concerns 14 Dec 2011 The UK bank’s CEO Antonio Horta-Osorio will return to work in January after exhaustion led him to take two months off. If the group performs well, investors’ lingering doubts will subside. But they may require more visible evidence that Horta-Osorio now has a manageable workload.
Asian banks can’t fill gap as Europeans retreat 14 Dec 2011 Lenders in Asia are flush with local currency deposits. But companies in the region got used to a world of cheap dollars. The only way most banks can lay hold of dollars is to borrow them, which could leave a $390 billion gap as global lenders pull back.
FDIC’s WaMu settlement is more fizzle than fight 13 Dec 2011 The U.S. watchdog has extracted only $75 mln from three former executives, mostly paid by insurance. For skeptics, it’s another inadequate rap for alleged financial rogues. But raising penalties and booting deals won’t help. Making suits and punishment more predictable might.
Morgan Stanley housecleaning will please Basel 13 Dec 2011 Chief Executive James Gorman’s settlement with bond insurer MBIA puts a big chunk of the financial crisis legacy behind the firm. At $1.8 bln it doesn’t come cheap. But it puts Morgan Stanley on the right track by boosting regulatory capital and tidies up a very messy year.
Anglo-Saxon law rare winner from euro crisis 13 Dec 2011 Banks are worried that assets will be redenominated into less valuable new currencies if the euro implodes. There is little they can do to limit risks on existing bonds and loans. But they may resort to English and New York courts to protect themselves from future losses.
Lehman rump moves to control firm’s former nemesis 12 Dec 2011 Its holding in property outfit Archstone helped bring Lehman down. Now the bankrupt estate may spend up to $2.6 bln to buy control and fend off Sam Zell, architect of the ill-fated Tribune buyout. It’s odd for a liquidating firm to join an M&A fight, but creditors could benefit.
EU banks’ Coco escape route misses a trick 12 Dec 2011 The European Banking Authority will allow banks to issue contingent convertible bonds to plug their 115 bln euro capital hole. That could allow states to help without winding up with direct equity stakes. But to entice private investors, the EBA may need to allow more leeway.
RBS shows watchdogs need power to stop bank M&A 12 Dec 2011 Flawed capital rules, reckless management, a risky takeover and supine supervision all contributed to the UK lender’s collapse, a probe has found. Many shortcomings have been fixed, but more changes are needed – such as giving regulators real power to block big bank deals.
Sarkozy courts danger with ECB-bank-sovereign plan 9 Dec 2011 The French president says banks will use cheap ECB funds to pile into sovereign debt. That would be convenient for stressed governments, but tough on banks. And any hint of compulsion would scare investors. Still, political arm-twisting may make it hard for some banks to say no.
JPMorgan faces tangle in cable M&A 9 Dec 2011 The U.S. bank agreed to be a backstop buyer if Liberty Global’s takeover of Germany’s KabelBW is blocked. But JPM wouldn’t find it hard to sell KabelBW on, and it shouldn’t lose money. A clean execution of the JPM plan B could be a boost for devices neutralising regulatory risk.
EU bank recap alone won’t restore confidence 8 Dec 2011 Forcing European lenders to raise 115 bln euros in extra capital is an improvement on previous efforts. But regulators will have to be vigilant to make sure banks don’t hit the targets by shrinking loans. And trust will only return when euro zone governments fix their debt woes.
Latin America gets closer even as Europe cracks 8 Dec 2011 Cross-border deals among South American companies, like Chilean CorpBanca’s purchase of Santander Colombia, set a new record in 2011. A single Latin currency seems remote given the euro’s woes. But as the region’s private sector consolidates, it can’t be ruled out for ever.
Spanish banking sector to pay for its sins 8 Dec 2011 Banco Sabadell is taking troubled lender CAM off Madrid’s hands, and Spain’s bank-backed deposit guarantee fund is helping by making a big capital injection. Such deals minimise the cost to the taxpayer, but aren’t a free lunch for the state and won’t solve the sector’s problems.
UK banks need government to solve funding squeeze 6 Dec 2011 The Bank of England’s new 30-day facility should help keep lenders afloat if the euro crisis causes short-term liquidity to dry up. But banks also need help refinancing 140 billion pounds of term debt in 2012. For that, the state may need to guarantee their debt once more.
UK Investors’ bank bonus campaign needs teeth 6 Dec 2011 The Association of British Insurers has asked the UK’s five largest banks to cut compensation to the point where returns exceed the cost of equity. The request is reasonable. But it will only work if shareholders are also prepared to vote against directors who don’t respond.
Courts more willing to second-guess Wall Street 5 Dec 2011 U.S. judges have typically trodden softly over financial disputes and settlements for fear of ruffling markets. But the rejection of the SEC-Citi CDO deal is the latest sign times are changing. Activist courts aren’t good for certainty, but they’re filling a gap left by Congress.
Commerzbank may not avoid state aid Groundhog Day 5 Dec 2011 The German lender may need 5 bln euros of capital – two-thirds of its market value – to ease euro woes. Having almost repaid its last slug of state cash, it will resist more. But the most plausible solutions mean Berlin pumping in more equity, or giving a leg-up by other means.
Piecemeal solution would suit bust Spanish caja 2 Dec 2011 Sabadell was the only bank that made an offer for CAM, after other bidders backed out. Now Spain’s central bank must decide whether it sells the caja with all sorts of expensive guarantees. Alternatively, it could sell the good parts. This option may be the least painful.
Monte dei Paschi’s independence looks shaky 2 Dec 2011 The foundation that controls half the ancient Italian lender’s shares is struggling to pay off its debts. But Monte dei Paschi also needs yet more capital. The bank may be able to shrink its balance sheet. If it fails, it may have to find a merger partner or seek state support.
Big U.S. foreclosure settlement isn’t dead yet 1 Dec 2011 It sounds like the start of a Monty Python riff but also suits the Massachusetts lawsuit against major banks. Though it might seem to end a unified front by the states, it hasn’t really torpedoed their joint efforts. In fact, the suit could breathe new life into negotiations.