EU bank rescuers have fewer options than in 2008 22 Sep 2011 If lenders fail to recapitalise privately, governments will step in. Some tools from the last crash, like preference shares, now look out of date. State-underwritten rights issues could work. But to solve the crisis, the euro zone also needs coordinated action on bank funding.
No time for ritual sacrifice at UBS 22 Sep 2011 Top brass bear ultimate responsibility for the Swiss bank’s $2.3 bln trading loss. But firing CEO Ossie Gruebel or investment banking chief Carsten Kengeter would add to the upheaval. The board should concentrate on determining strategy - and plan succession accordingly.
European bank rescues risky terrain for Gulf SWFs 22 Sep 2011 It’s 2007 again in the banking sector. Valuations are rock bottom and troubled institutions are turning to the Gulf. But the track record of the region’s sovereign funds is mixed. Some portfolios are already bulging with financials. At least SWFs can try to learn from the past.
How much more capital do Europe’s banks need? 21 Sep 2011 Politicians are beginning to accept that lenders need bigger buffers to reflect sovereign risk. Though most could handle a Greek default, they may also require higher ratios to handle contagion. But raising the capital bar would leave governments with a big hole to fill.
Singapore not quite helpless over UBS losses 21 Sep 2011 The city state’s sovereign fund is understandably disappointed with its investment in the Swiss bank. The 6.5 pct stake may still come good, especially if UBS directs future business to Singapore. Even so, GIC may want to rethink the wisdom of being a purely passive shareholder.
ECB must give bank sickness long-term cure 21 Sep 2011 The European Central Bank is flooding Europe with short-dated funds to ease money market tensions. But banks are still struggling to issue long-term debt, increasing the risks of a dangerous credit crunch. The ECB should ease the strain by setting up a longer-term facility.
Jefferies shows bank investors are braced for pain 20 Sep 2011 Rather than punish the growing investment bank for its 85 pct crash in Q3 debt trading revenue, the market shrugged. True, a tough quarter was expected. But such nonchalance about this and JPMorgan’s earlier warning implies investors reckon fixed income will suffer for some time.
UBS rogue trader a chance to test bonus clawbacks 20 Sep 2011 The Swiss bank’s $2.3 billion trading loss is big enough to wipe out its 2011 bonus pot. But a ’doughnut’ round risks a further staff exodus. Better to share the pain with shareholders, while clawing back pay from senior staff. The amount may be small, but the gesture counts.
UniCredit’s capital options lie eastwards 19 Sep 2011 Since missing the boat on capital raising earlier this year, sovereign concerns have smashed the Italian bank’s share price. Underwriters may only back a rights issue if the euro zone crisis eases. The best option might be to find a deep-pocketed Middle Eastern investor.
Five questions the UBS investigations must answer 19 Sep 2011 The $2.3 bln rogue trading scandal raises questions about the Swiss bank’s cash management, internal controls, and supervision of its traders. It also points to structural flaws in the market for exchange-traded funds. Here’s what investigators and regulators should focus on.
Masters of synergies create few for themselves 16 Sep 2011 To support the M&A ambitions of their clients, investment bankers routinely claim 1+1=3. Yet since JPMorgan, BofA and Barclays bought Bear, Merrill and Lehman, respectively, each has shed, not gained, market share. These numbers, at least, undermine Wall Street’s deal math.
Morgan Stanley misses a trick on Mack succession 15 Sep 2011 The chairman’s departure isn’t a terrible thing. But adding his duties to CEO James Gorman’s already full slate is unfortunate when investors haven’t fully embraced his strategy. It also frees other banks to unify the roles and legitimizes the status quo at Goldman. Too bad.
How could UBS not have learnt from SocGen? 15 Sep 2011 Unauthorised trades that cost the Swiss bank $2 bln took place in the same area that spawned a $7 bln fraud at SocGen in 2008. “Delta One” is meant to be a low-risk client-focused unit. One theory is that related arbitrage trades went awry. Right or wrong, it’s still baffling.
Rogue trader puts UBS investment bank at risk 15 Sep 2011 The source of unauthorised trades that triggered a $2 bln loss is unclear. But the bombshell is a blow to the Swiss lender’s claim that its de-risked trading business poses no threat to its private bank. Though UBS can weather the financial hit, a break-up is back on the agenda.
UK bank reform will accelerate funding pain 14 Sep 2011 Britain’s banking commission wants big lenders to hold extra buffers of debt that can be written down in a crisis, and for depositors to be repaid before other creditors. UK bank funding costs will rise. But the hit should be manageable - as long as other countries follow suit.
BNP steps into leaner future with asset sale plan 14 Sep 2011 BNP Paribas is offloading 10 percent of its risk-weighted assets. The euro zone’s largest bank may be strong enough to withstand further write-downs. But this summer’s U.S. funding market strains and market sell-off show it must do more to protect itself.
JPMorgan hit may scare more bankers than investors 13 Sep 2011 Shareholders already figured Wall Street profit would take a dive, explaining why they shrugged off a warning from JPMorgan that investment banking revenue would dip by a third or more in Q3. But it lends more weight to industry-wide fears that job cuts will probably keep coming.
Regulatory overload one cause of U.S. malaise 13 Sep 2011 JPMorgan’s CEO thinks new financial red tape is slowing the recovery, and Obama just blocked an emissions rule on a similar rationale. A flood of regulation coincided with a plunge in productivity from 1973. The recent U.S. rulemaking surge may be part of today’s economic woe.
BofA boss can take comfort from Pandit’s bad patch 12 Sep 2011 Brian Moynihan gets knocked for everything from his fixes for the ailing bank to a lack of charisma - as his rival atop Citi did a couple of years ago. Pandit pulled through. That, and middling shareholder support for his latest plans, should give Moynihan a modicum of hope.
Dimon can’t have it both ways 12 Sep 2011 The JPMorgan boss has made good arguments against bad regulation. But suggesting the U.S. should opt out of “anti-American” Basel III rules undermines his case. If huge private sector banks are to avoid future government rescues, they will need to hold more capital.