Credit

Fed’s credit market duct tape will come unstuck

20 May 2020

Junk bond yields have fallen from March peaks despite dire economic forecasts thanks to Federal Reserve boss Jay Powell’s new asset buying plans. He can’t make bad business models sustainable and may even encourage bad decisions. Investors will be out on a limb if things blow up.

Banks’ credit-line sweeteners are due a rethink

15 May 2020

Corporate lenders often woo clients with backup cash facilities. That came back to bite the likes of Bank of America and Deutsche Bank, as March drawdowns depleted their capital ratios. It changes the equation for lenders, and for firms which now face higher financing costs.

Bad-debt puzzle has simple answer: consumer credit

14 May 2020

Banks like JPMorgan, Deutsche and UBS have set aside vastly different amounts to cover dud loans. Distinct accounting rules, geographies and economic forecasts matter. But the biggest determinant of lenders’ loan-loss allowances is exposure to credit cards and similar products.

Fed jump-start leaves CLO buyout motor sputtering

11 May 2020

The vehicles that buy most leveraged loans are suffering as downgrades saddle them with too much ropey debt. The Federal Reserve’s lending facilities will help – but not enough to gin up much appetite for new loans. Private equity dealmaking could be stuck in the slow lane.

Car industry’s growth engine is running on fumes

21 April 2020

The churn of new car lease sales has come to a grinding halt in March. It’s a double whammy for the likes of Ford and VW that are facing steep devaluations on cars that will be handed back by cash-strapped customers. A painful financial reckoning lies around the corner.

Banks’ love of plastic gets a bit less fantastic

15 April 2020

U.S. credit cards have delivered years of high returns and low delinquencies. JPMorgan is the biggest issuer; at Citi cards make up one-quarter of revenue. Now lenders are preparing for losses, and consumers aren’t spending. Covid-19 is taking the shine off a nice earner.

OPEC shock pours fuel on credit-market cinders

9 March 2020

The collapse in oil prices and worsening epidemic are causing turmoil in corporate debt markets. Yet the price moves are hard to justify, even matching the damage from Lehman Brothers’ failure in 2008. That adds weight to fears that bank trading limits can exacerbate a crisis.

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.