Ethical economy: Greed is not limited to bankers 9 Nov 2011 Barclays’ Bob Diamond is right that his industry needs an ethical rejig, but the problem of wanting too much from finance is everywhere. To get to a healthier system, homeowners, investors and politicians need to learn moderation.
HSBC’s good intentions collide with market reality 9 Nov 2011 The lender’s pre-tax profits halved in Q3 from the prior quarter, as loan impairments rose and the European business dipped into the red. CEO Stuart Gulliver’s turnaround should still make HSBC a leaner, better bank. But his targeted 15 percent return on equity now looks optimistic.
Citi risk measurement scheme warrants closer look 8 Nov 2011 CEO Vikram Pandit is touting a plan for financial firms to disclose regularly how risk scenarios play out for a standard, hypothetical portfolio, as well as their own assets. Such a comparative tool might have raised red flags about MF Global -one reason it deserves attention.
Citi’s CDO settlement now seems to pass muster 8 Nov 2011 Judge Jed Rakoff raised tough but fair questions about the bank’s $285 mln deal with the SEC. Though Citi initially appeared to get off light compared to Goldman, its responses to the court show the case’s many gray areas. The watchdog may in fact have exacted all it could.
Crisis anniversary marked with much dead wood 8 Nov 2011 Five years ago today, Meritage became the first notable subprime mortgage lender to fail. Too few heeded this canary in the coal mine. Now, while there are some signs of progress, the mortgage market remains moribund. It’s worth a look back - and forward.
SocGen dividend cut better than capital-raising 8 Nov 2011 The French lender is aiming to plug a third of its 3.3 billion euro capital deficit by scrapping its dividend. Investors may complain. But with SocGen shares down almost two-thirds since February, skipping a payout is better than the risk of dilution from an equity issue.
Greece’s zombie banks need rapid recaps 7 Nov 2011 The political crisis in Athens has triggered further deposit erosion and a terrible liquidity squeeze at the country’s lenders. With the ECB unwilling to provide more cash, the Greek central bank has thrown them a new emergency lifeline. But extra capital is also needed – fast.
Unlikely Mussolini muse guides Wall Street protest 7 Nov 2011 Occupy Wall Street is really a campaign against economic inequality. Ironically, the work of fascist thinker Corrado Gini - he of the coefficient - may be most useful to their cause. Other statistics also show that the top 1 percent is pulling far away from the madding crowd.
Joining "too big to fail" club is a bonus for BOC 7 Nov 2011 Bank of China has been added to the list of globally systemic banks at the request of domestic regulators. Though it already has government backing, SIFI status could help BOC win more business abroad. And it doesn’t need extra capital. More Chinese lenders may want to sign up.
BofA considers right stock swap at wrong time 4 Nov 2011 Exchanging up to $6 bln of common shares and debt for prefs could save the bank some $300 mln a year and lift regulatory capital a bit. Yet the move could be a tactical error for CEO Brian Moynihan. The resulting dilution risks alienating investors at a vulnerable time for BofA.
Bob Diamond sets high bar for bank rehabilitation 4 Nov 2011 Banks should serve a social purpose and meet real client needs, Barclays’ CEO argued in a thoughtful lecture. Though the change of tone is refreshing, lenders must now show that reality reflects the ideals. For Diamond, that also means exercising restraint on bonuses.
RBS investment bank faces tortured decline 4 Nov 2011 The state-controlled UK lender says weak growth and reforms will make it focus on retail and commercial banking. Future job cuts will fall in its wholesale division. With no bonuses accrued in the third quarter, the future for RBS’s investment bankers looks bleak.
Jefferies’ differences with MF Global are notable 3 Nov 2011 Both Wall Street brokers took advantage of larger rivals’ regulatory pain - and bragged about it. But Jefferies has stressed client, rather than prop, trading. Its finances are clearer too. These are important distinctions getting lost in the panic after MF’s failure.
Investment banks braced for a painful correction 2 Nov 2011 Earnings fell sharply in the third quarter. Several banks are already axing jobs. Others will sit tight, worrying about missing a rebound. But the industry has too much capacity for an era of higher capital requirements and lower revenue. Reality is bound to sink in this winter.
BofA card climbdown may push fees back in shadows 1 Nov 2011 Like rivals, the bank is scrapping plans to charge customers using debit cards. That may seem a win for consumers. But banks will find other, less transparent ways to make up for $8 bln in lost fees. The upshot of Durbin’s bill: consumers get fleeced by both banks and retailers.
Credit Suisse cuts necessary but not sufficient 1 Nov 2011 The Swiss lender plans to slash risk-weighted assets in its weak fixed-income business by half, and lose 1,500 more jobs. This should boost return on equity, which fell to 6 pct in the third quarter. But the bank is making some optimistic assumptions to hit its 15 pct target.
Tough markets prompt Nomura soul-searching 1 Nov 2011 After a $589 million quarterly loss, the Japanese group is shrinking its investment bank. It’s not alone. But unlike peers, Nomura was sub-scale to begin with. Without a sustained market recovery, it is hard to see how Nomura’s global ambitions can survive.
Greek creditor losses could top 50 percent 31 Oct 2011 Banks have provisionally agreed to haircut their bond holdings by half, but the coupon on the new bonds they will get is still being negotiated. If the euro zone plays hardball, losses could reach 60 percent, Breakingviews latest calculator shows.
Barclays sets bar high and low for peers 31 Oct 2011 The UK lender’s flagship investment bank performed well in the maelstrom of the third quarter. But while BarCap’s top-line income was relatively strong, job cuts across the group have also ticked up. It shows that even stronger players are on the defensive.
Europe’s bank recap won’t need much state help 27 Oct 2011 EU lenders need 106 billion euros to maintain a 9 percent core capital ratio after sovereign haircuts. Greek and Portuguese banks aside, most can plug the shortfall on their own. But while equity investors may be relieved, the exercise does little to reopen funding markets.