Credit

Private credit pioneers will face a stress test

30 December 2019

A weak economy, high debt and falling profits should mean more corporate defaults in 2020. The pain will fall particularly on lenders specialising in private loans, who have $278 billion of assets under management. Rising losses will sort the sheep from the goats.

Buy now, pay later faces Juul-style backlash

24 December 2019

Companies offering the credit innovation say it can drive online sales and help retailers deal with refunds. One player, Klarna, is valued at $5.5 bln. But making it a lot easier to shop for free could prompt a reaction like that which befell the vaping heavyweight.

Credit card IPO shows good side of Indian banks

28 November 2019

A $1.3 bln float will let SBI Cards join the country’s most highly valued financial institutions and give buyout firm Carlyle a partial exit. Despite raging financial fires, the State Bank of India unit’s 36% return on equity demonstrates the power of well-run state companies.

Czech lender’s Hong Kong IPO braves Bud hangover

16 July 2019

Home Credit’s float may value it at over 10 billion euros. The lender offers rapid growth and a focus on the Chinese consumer. But after AB InBev’s fail, the mooted valuation could be seen as toppy given both pluses could yet turn into minuses.

Deutsche credit upgraded from hopeless to hapless

15 May 2019

The bank’s credit default swap spread, a measure of riskiness, has nearly halved. The fall was due to a legal technicality, not a change in fortune, but should help clients trade with it. Still, high funding costs mean CEO Christian Sewing will struggle to boost profitability.

Loose credit helps LBO funds slay sacred debt cows

30 April 2019

Lenders to private equity managers are increasingly giving up protections. Loan investors more used to demanding and receiving better terms than bonds are now accepting similar conditions – and, in some cases, even worse ones. That could lead to a nasty shock.

Equifax and FICO give hackers a bigger target

27 March 2019

The U.S. credit-scoring firms are teaming up to offer banks new ways to judge borrowers’ soundness. Fresh metrics could help some get credit more easily. But a wider trove of data collected without its subjects’ consent, and Equifax’s record of breaches, suggest plenty of risk.

Mario Draghi is boxed into being generous to banks

5 March 2019

The European Central Bank boss is expected to announce more cheap loans in the coming months. New regulations may otherwise cause a credit crunch just as the euro zone economy is slowing. Monetary policymakers will have little choice but to paper over a two-tier banking system.

Goldman credit card blends logic and hubris

21 February 2019

Teaming up with Apple to put plastic in wallets gets the Wall Street firm into a business with attractive returns. The mix of elite brands and technology should help the experiment along. But the bank has limited experience, and rivals won’t give up millennials without a fight.

The Exchange: Howard Marks

11 October 2018

The founder of Oaktree Capital, with $120 bln of assets, doesn’t see signs of an imminent correction or crisis. But investors, particularly in the credit markets, are acting bullish in ways they’ll inevitably regret when the cycle turns, Marks told Rob Cox earlier in October.

Breakdown: Pouring liquidity onto India’s fires

28 September 2018

Loans from shadow banks have grown far faster than at traditional lenders. Strains are now showing, amid rising interest rates, a weak rupee and $150 bln of bad bank debt. Multiple flare-ups will call the RBI to duty again, including to douse the financial system with more money.

Banks double down on Casino’s owner

17 September 2018

The French supermarket’s heavily indebted parent got a fresh 500 mln euro unsecured loan. That buys Rallye time to sell assets and avoid handing over its 51 pct stake in the grocer to creditors. For banks which are already on the hook, it’s an attempt to avert a messy collapse.

Spectre of the late 1930s haunts Ray Dalio

12 September 2018

The Bridgewater founder made positive returns in 2008 when few other asset managers did. Today, he tells Breakingviews, he worries about the U.S. deficit and debt pressures that could soon go critical. The risk of populism and conflict sounds eerily like the pre-war years.

Hadas: The paradox of risk-free finance

5 September 2018

A new study claims that national deposit insurance makes financial crises more likely. It may exaggerate, but guarantees are a sign of a basic problem in banking. The mix of public service and private risk is always potentially toxic. Separation would be hard but worthwhile.

Even a cleaner China is tempted by old playbook

20 August 2018

Beijing is cracking down on rating agency Dagong over its cosy relationships, in a rare rebuke. Yet it is also telling banks to step up support for infrastructure in order to prop up growth. Beijing wants to stimulate the economy and to keep tidying: it may struggle to do both.

Walmart credit-card shift signals race to bottom

13 July 2018

Investors knocked 7 pct off $25 bln consumer-finance firm Synchrony on fears the giant retailer will move its card business to Capital One. That looks optimistic, given Amex’s experience with Costco. But loosening credit standards suggest industry-wide pain lies ahead.

Bond markets start to call Saudi bluff on Bahrain

26 June 2018

The tiny Gulf kingdom’s bond yields are spiking. Bahrain’s borrowing and dependence on a high oil price make its debt hard to sustain. But Saudi Arabia has no interest in its neighbour devaluing or falling apart. The more markets push, the more likely Riyadh is to step in.

Trump gives China a fresh excuse to push bailouts

25 June 2018

Beijing will release $108 bln into the banking system to calm markets rattled by trade war talk. Unfortunately, officials want lenders to use most of the cash to swap bad debt for equity in ailing state commodity firms. The private sector needs the money more.

Bank of Ireland reset channels Celtic Tiger ghost

13 June 2018

The Irish lender plans to increase its loan book by a fifth and beat a 10 percent return on equity by 2021. A booming domestic economy helps, but the challenge will be avoiding past mistakes of chasing growth at the expense of asset quality. Small wonder investors are sceptical.

Steinhoff payout may test South Africa reform zeal

27 April 2018

Hedge funds piled into 1.6 bln euros of the failed retailer’s bonds betting that its healthy South African unit will honour them. The fallout from Steinhoff’s collapse may make a payout politically tricky, and challenge new President Cyril Ramaphosa’s market-friendly credentials.