Euro zone bank funding backstop might need UK help 24 Oct 2011 As well as fresh capital, EU banks need term funding. But guaranteeing bank debt is beyond the remit and current firepower of Europe’s bailout fund. The European Investment Bank could help out. But that would involve putting non-euro zone states like Britain on the hook too.
Banks say sorry for crisis 24 Oct 2011 At least, they do in this imaginary letter to G20 leaders. They also promise no bonuses for top executives for two years or more. It’s part of an attempt to repair relations with an enraged public and prevent the anti-banker backlash from sweeping away what’s good in capitalism.
Greenhill scrapes itself from bottom of the barrel 20 Oct 2011 Until unveiling bumper Q3 results, the advisory firm boasted Wall Street’s worst performing stock - even BofA fared better. After staff losses elicited a panic, a change was welcome. Challenges remain, but with M&A share solid and CEO Bok sounding upbeat, the worst may be over.
Subprime CDO case tests Deutsche public relations 20 Oct 2011 A defunct lender which was bailed out by the state is suing Germany’s biggest bank over subprime losses. Deutsche disputes the suit. But claims the lender cost taxpayers $440m won’t help CEO Josef Ackermann’s already frosty relationship with German Chancellor Angel Merkel.
Citi’s CDO payout is ripe for the Rakoff treatment 19 Oct 2011 The bank’s $285 mln settlement with the SEC is about half what Goldman paid on Abacus. And yet Citi allegedly picked the assets in the CDO itself while keeping buyers in the dark. Judge Jed upbraided the watchdog for its light touch on BofA. This case warrants a similar hearing.
Morgan Stanley makes best of turbulent time 19 Oct 2011 The bank’s $100 mln Q3 profit after accounting funnies might not look like much. But it beats Goldman. Also, Morgan Stanley’s traders outperformed rivals, the brokerage held its own and more details on European risks should calm nerves. CEO Gorman’s plan may be starting to gel.
Temasek’s StanChart bond looks too clever by half 19 Oct 2011 The Singaporean fund issued a zero-yield bond exchangeable into shares of the emerging market lender. If they rise less than 27 pct, Temasek will have borrowed $512 mln for free. But the ensuing fall in the shares means the gains from this wheeze have already been wiped out.
Goldman’s loss far less worrying than it appears 18 Oct 2011 Diving into the red is rare for the Wall Street firm and confirms Goldman is losing some luster. But despite these challenges, its investment banking and trading ops held up relatively well. The pain was in private equity. Yet even that reassures the firm takes its lumps quickly.
EU bank recap may be smaller than feared and hoped 18 Oct 2011 Europe’s banks have avoided another stress test. Instead, regulators may set a minimum 9 pct capital ratio, plus a buffer for troubled sovereign debt. The bill of about 100 bln euros would be easier for governments to meet. But investors may also decide it’s not as credible.
Bank of America suffers worst of both worlds 18 Oct 2011 Forget the reported $6.2 bln profit. Both the commercial bank and the Wall Street operations fared worse than rivals in the third quarter. Even a very low tax rate couldn’t help. Strip out the accounting funnies and the CCB sale gain and BofA lost money again.
Bailout-free banking may be unattainable goal 18 Oct 2011 Policymakers want to stop taxpayers rescuing banks. That is the aim of the UK’s Vickers report. But regulators will still fret about letting lenders fail in a future crisis. Meanwhile, Vickers’ plan could perversely increase pressure on the state to direct lending.
Through adversity, Goldman still plays all angles 17 Oct 2011 The $38 bln Kinder Morgan deal epitomizes what the bank does best. It owns a stake in the pipeline operator, underwrote its IPO and worked with its takeover target, El Paso. Such finesse is what sets Goldman apart. It’s just not clear it’s a gift that will keep on giving.
Citi gets the jitters in emerging markets 17 Oct 2011 Fears of another recession already have hammered the bank’s shares. Now, Citi is slowing lending in developing countries, one of its fastest-growing businesses. With reserve releases slowing and Citi’s ROE just 3 pct after one-offs, it’s another obstacle to a banking recovery.
Dubai forced to re-embrace the suitcase banker 17 Oct 2011 Bankers are leaving the Gulf as foreign institutions return to pre-boom business models, flying in top advisers only when they are needed. With Middle East investment banking fees below 2005 levels, it’s a necessary shift. But for some banks, it may also be a sign of retreat.
Goldman Sachs’s exceptionalism takes another knock 14 Oct 2011 Shares of the Wall Street firm briefly traded at a bigger discount to book value than JPMorgan. That rarely happens and is a worrisome sign that investors fear the firm’s franchise, not just trading but serving clients, has been irrevocably damaged. Goldman is now just ordinary.
RBS’s Scrooge act: more optics than management 14 Oct 2011 The lender controlled by the British government is axing investment bank Christmas parties. Combined with other cost savings, this may head off political rancour ahead of a capital hike. Investment bankers may have few options now, but the hit to morale may have a long-run cost.
Deutsche may not escape state grip in forced recap 14 Oct 2011 The German lender could need 9 bln euros to pass Europe’s latest stress test. If the government puts up the cash, it could own a large chunk of the bank. But even if Deutsche sells businesses, places shares and cuts its dividend, it will struggle to raise the capital privately.
China’s biggest insider has poor market timing 14 Oct 2011 Huijin, the state fund that has been buying up bank stocks, isn’t a great role model for investors. It sold in the past when shares were cheap, and has made poor returns on previous dips into the market. No wonder investors don’t seem to be following its lead.
Imagine if Merrill had been smart like Goldman 13 Oct 2011 That’s the basic conceit behind the latest film to emerge in the financial crisis genre, “Margin Call.” Kevin Spacey stars as the head of a desk overloaded with MBS about to blow that his boss forces him to unload to unwitting buyers. It’s simplistic, but eerily familiar.
Jamie Dimon puts brave face on tough quarter 13 Oct 2011 JPMorgan’s boss confronted a triple whammy of falling revenue, lower reserve releases and fallout from his incendiary comments. Dimon made a good stab outlining the benefits of banking. And there are signs of a middling, not reeling, economy. But investors may be less reassured.