Financial Services

Viewsroom: Turkey’s financial crisis may spread

16 August 2018

The feud between President Tayyip Erdogan and U.S. President Donald Trump over steel tariffs threatens to turn other emerging markets cold. Breakingviews columnists discuss the global impact of Turkey’s currency meltdown. Plus: A bad bank in China gets whacked by political risk.

Fried chicken risks diverting Beijing state fund

15 August 2018

China Investment Corporation may join a bid to take private the owner of local KFC outlets, Bloomberg reports. A takeout has merits, but is also a distraction for the $940 bln giant. Its mission is to invest foreign exchange reserves abroad, not dabble in private equity at home.

UK insurer buyout depends on avoiding potholes

14 August 2018

Bain Capital is offering 1.2 bln pounds in cash for esure. To justify a multiple of 12 times 2019 earnings, the private equity firm will need to ramp up the motor and property insurer’s digital credentials. An overhaul is necessary to counter the industry’s shaky prospects.

Political risk creeps into China’s very bad bank

13 August 2018

Huarong Asset Management says earnings will drop sharply, after its chairman’s fall from grace triggered a liquidity crisis. The government, its top stakeholder, seems content to watch the shares collapse. Investors will take note: state backing now comes with more caveats.

Guest view: ESG ratings aren’t reliable enough

10 August 2018

Socially responsible investing has become a $20 trln-plus industry, but how do we know if firms are actually doing well by doing good? Shiva Rajgopal and Richard Foster pinpoint four big problems in measuring the environmental, social and governance impact of investments.

Summer lulls offer false sense of security

10 August 2018

That, at least, is the lesson of August 2008. A complacent Citi exec claimed the lender had more than enough capital, Merrill handed one banker a $40 mln guarantee, GM’s CEO was talking up its prospects - and the Fed was worried about inflation. The hubris didn’t last long.

UK insurers can reap rewards for clarity

9 August 2018

Legal & General delivered a 7 pct rise in operating profit in the first half, beating peer Aviva. Fewer one-off charges meant more of that flowed through to shareholders, delivering a higher 20 pct return on equity. Cleaner results justify the group’s lofty premium valuation.

Australia’s bruised CBA shows signs of resilience

8 August 2018

The country's largest bank has endured public scrutiny, fines and executive departures. But a near-5 pct drop in full-year earnings, the first decline in almost a decade, belies a more encouraging picture for businesses like home loans. New boss Matt Comyn has tools to rebuild.

Chinese peer lending protests set political trap

7 August 2018

Beijing police on Monday stopped irate investors converging on the banking regulator and demanding compensation for losses from collapsed peer-to-peer lenders. Officials are partly responsible, yet a rescue would reinforce moral hazard. The risk is that discontent spreads.

HSBC’s targets start to look like a low bar

6 August 2018

The UK-based bank reported a slight drop in first-half pre-tax profit thanks to higher costs. More important is double-digit revenue growth at its biggest divisions and fatter lending margins. Higher rates should see the lender clear its 11 percent return target.

China’s yuan squeeze sends a bearish signal

6 August 2018

The central bank has reinstated a rule that makes it more expensive to short the currency. By turning back to 2016-style measures, Beijing slowed the slide. It also telegraphed where the yuan is heading. That will encourage capital outflows and complicate efforts to boost growth.

Review: The complex causes of the financial crisis

3 August 2018

The upheaval that’s unfolded over the past decade had myriad origins. In “Crashed”, Adam Tooze brings a historian’s perspective to the crisis and its aftermath. His ambitious narrative links Wall Street turmoil to euro zone disorder, but is stumped by political ructions in 2016.

RBS takes final step to being a cut-price Lloyds

3 August 2018

Royal Bank of Scotland has announced its first dividend since 2007, despite a paltry 1.1 percent return in the second quarter. Excluding one-off fines, the show of strength is credible. Lower core costs and impairments should close the valuation gap with Lloyds Banking Group.

Pakistan shows limits of China’s opaque largesse

3 August 2018

A mooted IMF bailout of the South Asian nation has raised new questions about its Chinese debts. The secret nature of Beijing’s support is a big part of the problem. To be sustainable, the country’s “Belt and Road” plan requires more clarity about its terms and conditions.

Barclays can close value gap quicker than SocGen

2 August 2018

The UK and French banks trade at a 25 percent discount to book, yet both are making returns above 11 pct. That implies Barclays and SocGen deserve more investor love. With a second quarter less obscured by one-off charges, Barclays deserves to close its gap more quickly.

BNP’s targets have bite despite muzzled traders

1 August 2018

France’s biggest lender reported a sharp dip in quarterly investment bank revenue, hindered by an unhelpful trading backdrop. Yet robust European loan growth should boost overall revenue. If BNP can meet its cost targets it can still hit its 10 pct return goal a year early.

Fund managers’ twin-CEO model has short shelf life

1 August 2018

Janus Henderson has named Dick Weil as sole chief executive, ditching a two-headed model put in place when the group was formed last year. The integration of Henderson and Janus is nearly done. But clunky governance is a distraction from the big challenges facing money managers.

Generali faces debt cost conundrum

1 August 2018

The Italian insurer’s 5.7 pct average debt cost is pulled up by a slug of pricier hybrid debt. Buying it back would sort this and reduce the effect of spiking domestic bond yields on its solvency. The catch is that Generali will probably have to pay up to do so.

China shows foreign investors carrot and big stick

31 July 2018

Plans to ease restrictions on overseas investment in mainland stocks are a welcome respite from trade tensions. But vetting buyers for security risks, as in the U.S., gives officials new clout. China’s recent veto of Qualcomm’s bid for NXP will make investors extra wary.

Review: Barclays’ enduring investment bank problem

27 July 2018

In “The Bank That Lived a Little”, Philip Augar documents the UK lender’s tortured attempts to build a business capable of taking on Wall Street rivals. Battles over strategy, scandals, bonuses and poor returns will be all too familiar to present boss Jes Staley.