China’s smaller banks flunk hard decisions 12 Apr 2017 Big banks' annual results suggested China's bad debt problem is easing. Alas, the picture at smaller institutions remains grim. Some, like China Everbright, rolled over lots of shaky loans. It would be easier in the long run if these lenders started recognising more losses now.
China’s offshore bond revival could be brief 24 Mar 2017 Companies are rushing to sell dollar bonds overseas, aided by a new ability to issue onshore guarantees. Yield-hungry foreign investors are keen. But as liquidity tightens and rates rise, expect more defaults. Those pledges could prove unreliable if things go wrong.
China has leeway to tackle local debt mountain 7 Mar 2017 Authorities say cutting the $2.2 trln local government debt pile is a 2017 priority. Past attempts failed. An improving economy gives Beijing room to address the issue, in part by boosting local tax power. Possible higher interest rates and lower land prices argue for haste.
Review: Libor revealed dark underbelly of trading 3 Mar 2017 Two new books show how the benchmark interest rate underpinning many of the world's financial products was rigged. Jailed trader Tom Hayes leads a cast of deceitful or inept bankers, brokers and regulators. Yet both tomes might have said more about how to stop future malfeasance.
Rate tweak whiplashes UK insurers 27 Feb 2017 Insurance companies will have to pay more for injury claims after the government said payouts must be discounted at a negative rate. The metric was too high before, and arguably still is. The real mystery, though, is why financial risk ends up with claimants, not insurers.
Carlyle hedges against American greatness 23 Feb 2017 Tax-cut fever may be gripping Wall Street but the buyout firm led by David Rubenstein is embarking on its biggest quest for distressed assets. The $2.5 bln fund is a good reminder that lofty valuations, an aging recovery and a chaotic new administration can produce bad outcomes.
French corporate debt immunity to Le Pen will fade 15 Feb 2017 Even the slim possibility that far-right leader Marine Le Pen might lead France out of the euro zone has pushed up government bond yields. By contrast, corporate debt has suffered relatively little damage. Savvy investors will make this anomaly disappear soon.
UK watchdog trolls EU with City Brexit manifesto 14 Feb 2017 European bankers often fear a post-EU Britain will become an offshore casino. The FCA’s consultation on the UK’s listing regime mostly focuses on worthy goals like tech financing. But some proposals – like laxer listing standards for foreign companies – could feed the paranoia.
Singapore banks running out of profit defences 14 Feb 2017 Singaporean lender OCBC posted disappointing results due to higher bad debt charges, driven up by delinquencies in the energy sector. Banks in the city-state have propped up profits by running down bad debt provisions, but that leaves them increasingly vulnerable.
UK student debt sale is a third-class idea 9 Feb 2017 The government is selling 12 bln pounds of student loans. If wage growth motors, the sale price could wind up looking cheap. Given its reluctance to sell RBS shares that are depressed in value, and the reduced imperative to balance the budget by 2020, it's a needless risk to run.
Banco Popular creditors get a shareholder airbag 3 Feb 2017 The Spanish bank's stock fell after it took bigger than expected losses. Yet it took steps to protect hybrid debtholders from losing their coupons. Bondholders have an edge over banks: even if it's possible to inflict losses on them, the pain may be more bother than the gain.
Europe’s “whatever it takes” becomes “what next?” 2 Feb 2017 Bond yields are rising as the end of money-printing looms. The return of a crisis like the one that prompted ECB President Mario Draghi's pledge to save the euro zone is unlikely. Yet as investors focus on political risk and debt, governments will face tougher choices.
French elections beat Brexit for market disquiet 30 Jan 2017 The Gallic vote is worrying investors more than Britain leaving the EU. It now costs over a third more to insure against a French default than a UK one, though rating firms see little chance of either going bust. It's the scope to weaken its currency that gives Britain an edge.
EU banks handed new way to lose business 9 Jan 2017 The European Central Bank will set tougher rules than American peers to limit risky lending. The limits could make it harder for Europe’s banks to compete with U.S. or UK ones in lucrative private equity deals. The upshot may be safer lenders – but ones that make even less money.
Regional pain makes UK consumer credit risks real 6 Jan 2017 The BoE's chief economist says a merely moderate rise in housing finance means consumer borrowing risks are contained. But unemployment is up in Scotland and northern England, where faster-growing personal loans matter more. Banks' pricing competition could worsen the reckoning.
ECB’s tough love is good for banks, bad for Italy 28 Dec 2016 The European Central Bank says Monte dei Paschi needs 9 bln euros of extra capital - up from 5 bln euros - after seeking state aid. Raising the bar is a prudent response to prolonged uncertainty. But it adds to Rome’s debt, and may push up the bailout bill for other banks.
Cheap CoCos keep Chinese banks dancing 20 Dec 2016 Smaller Chinese banks need to raise billions of dollars in loss-absorbing bonds. Having to raise regulatory capital is supposed to curb risky behaviour. But state support means mainland banks pay far less than European peers. That gives them little incentive to sober up.
EU bank forbearance trade may get another boost 14 Dec 2016 Europe's lenders may need 276 bln euros of new debt to shield taxpayers from bailouts, says a regional watchdog. The market might struggle to absorb the volume. However, most banks are yet to face hard deadlines. It’s another area where regulators might help out investors.
China bond market could use some foreign insight 9 Dec 2016 Regulators may allow foreign ratings agencies into the onshore market. That might comfort overseas investors enough to persuade index compilers to include Chinese bonds. The trick will be stimulating competition in a market twisted by government guarantees.
Renzi has time for one last gamble 8 Dec 2016 Despite resigning as Italy’s prime minister after losing a referendum, there’s a way back for Matteo Renzi: a quick election. That could pit him against the 5-Star Movement, which wants a vote on the euro. Renzi may still have enough support to win, but would need to move fast.