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.
HK banks’ yuan strategy looks bad for earnings 11 Oct 2011 Taking deposits in the Chinese currency isn’t the opportunity it first seemed for Hong Kong’s lenders. The business is barely profitable, and migration of savings into yuan has exacerbated a HK dollar shortage, pushing up the cost of deposits and threatening to hurt margins.
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.
Sprint’s splat opens up U.S. wireless dance floor 10 Oct 2011 Bodies are piling up in the industry’s increasingly complicated waltz. Cash concerns tripped up Sprint and partner Clearwire, after AT&T and Phil Falcone’s LightSquared stumbled earlier. That makes space for a possibly jilted T-Mobile and a surprisingly dexterous Dish.
Oil trader, stock investor variance is opportunity 10 Oct 2011 Economic fear has taken a heavier toll on U.S. oil company shares than on crude itself. Either there are bargains among the stocks of oil explorers, or commodity investors are too bullish. The difference of opinion ought to mean there’s room to make money.
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.
Bail-ins can’t always be postponed to next crisis 10 Oct 2011 After the 2008 crisis, regulators promised that bondholders would suffer haircuts when banks next needed recaps. But governments are so scared of contagion that EU taxpayers will have to pick up the tab again, witness Dexia, unless some key protections are put in place rapidly.
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.
Prisa investors take one for the team 7 Oct 2011 The Spanish media group’s core shareholders have injected 150 million euros of capital after exercising warrants at a loss. Even this act of charity doesn’t solve Prisa’s debt problem. But it might sway Prisa’s lenders to be more flexible on the repayment of 3.2 bln euros of borrowings.
Apple effect far greater than $350 bln market cap 6 Oct 2011 The company changed the world several times. It introduced the spreadsheet, made computers into consumer goods and its phones helped make the Cloud realistic. Jobs’ genius for design and user-helpfulness turned IT from nerdish to uber-cool. Apple has been tech’s good Pied Piper.
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.
Goldman bankers may need to sacrifice more spoils 6 Oct 2011 A rare loss possibly looms after the market’s tumultuous Q3. But that assumes Goldman keeps socking away 44 pct of revenue for compensation. Cutting the pool, perhaps by a lot, would keep returns above water and shareholders sweet. And this solution may not be a short-term one.
Dexia’s rescuers need to answer five questions 6 Oct 2011 The Franco-Belgian bank is facing dismemberment. Its French and Belgian state shareholders want to largely keep those operations in their own countries, sell non-core assets and wind down everything else. But to do so they will need to find answers to five thorny problems.
China Mobile’s cash pile is a $50 bln dilemma 6 Oct 2011 The Chinese telecom has more cash than Apple, but few ways to spend it. There are no logical acquisition targets, and state ownership makes it tricky to buy back shares. The best bet may be to invest in growth. Future profits may suffer as competition from the Internet heats up.
Essar’s better prepared for a second UK IPO 6 Oct 2011 India’s Essar is considering a UK listing for its infrastructure assets. With one London IPO under its belt, and lessons on governance from that experience still fresh, it should be better prepared this time around. Now there’s the small issue of timing.
Jobs, no ordinary CEO, leaves no ordinary company 6 Oct 2011 The force behind the iPod, iPhone and iPad not only created and then rescued Apple, building it into the most valuable tech company on the planet. He also changed the way people live. It’s a rare entrepreneur who leaves that legacy – and a company that can thrive without him.
BNY Mellon lawsuits more Spitzer than slam-dunk 5 Oct 2011 The current New York AG’s $2 bln suit against the biggest custodian bank may boost him politically. But BNY’s clients had a decade to take forex business elsewhere if they didn’t like the terms. The state and federal claims smack of settlement-seeking rather than legal certitude.
How a pan-European bank recap scheme could work 5 Oct 2011 Boosting the capital of euro zone banks is necessary to rebuilding confidence. A U.S.-style plan, where all lenders are forced to accept some equity, is probably the best approach. But given the lack of a central authority, political commitment to act together is more important.
Bank debt confusion makes an unwelcome comeback 5 Oct 2011 Widening spreads on banks’ own bonds are set to flatter earnings this quarter, just as in the 2008 meltdown. The gain is ignored by regulators, and will reverse when yields tighten. But inconsistent and selective reporting makes it harder for investors to filter out the noise.
A manifesto for Occupy Wall Street 5 Oct 2011 The wannabe protest movement has only vague complaints. “A feeling of mass injustice” may be understandable, but it doesn’t bring crunchy soundbites to match the Tea Party’s “taxed enough already.” Breakingviews offers a more sharply defined, if partial, set of objectives.