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.
EU banks mustn’t shrink their way out of recaps 13 Oct 2011 Some lenders may argue that they can boost their capital ratios by cutting lending or selling assets, and so don’t need to be stuffed with government cash. But this could trigger an even more severe downturn. Governments shouldn’t allow it.
Most EU states could afford large bank recaps 12 Oct 2011 If the lenders stress-tested in July faced realistic sovereign debt haircuts and a minimum 7 percent core Tier 1 capital ratio, they’d need 93 billion euros. That’s less than 1 percent of Europe’s GDP. It’s a reminder that the barriers to action are more political than economic.
Qatar still hasn’t found gold in Credit Suisse 12 Oct 2011 Credit Suisse’s preferred advisor status to the Gulf country is a source of envy, as Qatar prowls for assets in a period of M&A dearth. So far the relationship doesn’t seem to have suffered from Qatar’s 2008 investment in the bank, which proved to be a mixed blessing.
Embattled Wall Street should prepare for worse 11 Oct 2011 Bankers are already on the defensive. Third-quarter earnings look set to be shoddy. Another 10,000 job cuts may be in the offing. And protesters are ready to camp outside Jamie Dimon’s house. Yet financials have grown as a share of GDP since 2006, suggesting more pain is to come.
Spanish bank mergers off to inauspicious start 11 Oct 2011 Banco Popular is paying a steep price for rival Banco Pastor. The 1.3 bln euro deal doesn’t lift the mid-sized lender into the big league and does little to strengthen its balance sheet. It’s a reminder that while more consolidation is inevitable, not all investors will benefit.
Europe’s banks suffer collective action headache 11 Oct 2011 EU lenders are resisting calls to boost their capital ratios. While all banks would benefit from a stronger financial system, none want to bear the cost. Decisive European governments could overcome this problem. However, they are affected by the same dilemma.
Will Wells Fargo get hooked on Wall Street crack? 10 Oct 2011 The California-based lender has mostly resisted lower Manhattan’s siren call. New rules would make it even costlier. But Wells kept Wachovia’s investment bank and is hiring. Ailing Morgan Stanley could even be a good fit. But such temptation can become a debilitating addiction.
China’s bank intervention is a Band-Aid at best 10 Oct 2011 Buying shares of ICBC and its peers in the market sends a signal the government will stand behind its lenders. Cracks in the property market and non-bank lending suggest it may be necessary. The move should reassure depositors, but won’t spare banks from the trouble that looms.
Dexia rescue riskier than it looks for Belgium 10 Oct 2011 After a weekend of wrangling, Belgium is to nationalise the domestic arm of the Franco-Belgian bank. The direct cost will only be about 1 pct of GDP. But lots of loose ends remain around Dexia’s funding guarantees and solvency. The true cost may end up being a lot higher.
Volcker Rule draft still leaves many gray areas 7 Oct 2011 U.S. regulators have made a good stab at trying to minimize the prop-trading ban’s impact on market-making. But their 200-page draft still raises many questions. It confirms that the former Fed chairman’s know-it-when-you-see-it mantra was too simplistic for this complex task.
UK should participate in EU bank recap exercise 7 Oct 2011 Britain may wish to wriggle out of bolstering its lenders, on the grounds that the euro crisis is on the other side of the English Channel. But there are good reasons for it to play ball. RBS is top of the list for a mega injection. Barclays may need one too.
Del Monte settlement quantifies cost of conflicts 6 Oct 2011 Barclays will surrender a big slug of fees from the $5.3 bln buyout, where it advised the seller and financed the buyer, KKR. Wall Street read the writing on the wall after a judge’s slap. But when banks get spanked on the bottom line, the message resonates loud and clear.
Credible EU bank tests need a higher pass mark 6 Oct 2011 Regulators are looking at ways to recapitalise Europe’s lenders. One quick fix is to re-run July’s stress tests with tougher assumptions. But imposing haircuts on sovereign debt will not be enough. Authorities should also raise the capital hurdle banks need to clear.