U.S. bank deal provides a timely reminder on M&A 8 Aug 2016 Giant pension fund TIAA is snapping up EverBank for $2.5 bln. Even this non-traditional buyer should be able to slash enough costs to justify the price tag. Earnings-strapped lenders may find acquisitions increasingly necessary. Cash is also becoming an integral component.
Bankers’ best business – endlessly patching up MPS 8 Aug 2016 Counting payments for its latest rescue, Monte dei Paschi will have paid $1.4 bln in investment banking fees since 2007 - twice its market value. All four of the Italian lender's rights issues were short-term fixes for dubious political ends. And all have lined banker pockets.
Review: Big Data’s all-too-human failings 5 Aug 2016 An ex-hedge fund quant exposes flaws in how information is used to assess everything from creditworthiness to policing tactics. Programmed biases and a lack of feedback are among the concerns behind the clever and apt title of Cathy O'Neil's book: "Weapons of Math Destruction."
RBS’s grand relaunch in danger of running aground 5 Aug 2016 Since CEO Ross McEwan took over in 2013, the state-owned UK bank has been slowly sorting its issues. But Brexit, low rates and ongoing high conduct charges are big problems. Throw in new losses from the tortuous Williams & Glyn disposal, and RBS looks hobbled for years to come.
Mark Carney’s sledgehammer isn’t up to the job 4 Aug 2016 The Bank of England boss deserves credit for trying. He has halved the policy rate, will resume asset purchases, and done his absolute best to limit the perverse effects of ultra-low rates. But the economic shock of Brexit is probably bigger than anything his toolbox can handle.
RSA and Aviva have hedge against Brexit gloom 4 Aug 2016 Both UK insurers can dodge post-EU referendum blues. Falling rates pose a risk to their half-year positions, but operations are solid and sterling's slide helps groups with big overseas earnings. Losing EU market access is also less of a threat than it might appear.
Renzi’s MPS gamble works win or lose 4 Aug 2016 The Italian premier chose not to haircut the bank's debt for fear of losing a crucial referendum. The alternative - raising over six times MPS' market cap - is hard, but not impossible. If the rights issue fails, Matteo Renzi still wins: it parks the issue until after the vote.
Hong Kong’s special status is in need of renewal 4 Aug 2016 The former colony has mostly thrived in the 19 years since China took charge with a promise to leave it alone until 2047. But society is divided and the rule of law under strain. Without reassurances about its long-term future, Hong Kong faces an exodus of citizens and companies.
Standard Chartered thrives on low expectations 3 Aug 2016 The UK bank will take longer than planned to hit pretty modest return targets. Yet shares surged. Relief that the turnaround is on track and a bombed-out valuation explain why. If it can sell $7 billion of toxic assets for a good price, investors may even be pleasantly surprised.
EU banks give notice that they’re not all hapless 3 Aug 2016 Dutch lender ING and French peers Societe Generale and Credit Agricole all increased second-quarter earnings. Stake sales in Visa Europe helped, and low interest rates hurt in French retail banking. But it’s a reminder that recent EU bank stress tests had a positive message too.
Struggling HSBC has grounds for its payout pledge 3 Aug 2016 The UK bank is holding its dividend and buying back shares, despite scrapping a timetable for hitting an RoE target in a world of lower-for-longer rates. A sky-high dividend yield would usually imply an imminent payout cut. But stronger capital gives HSBC grounds to hold firm.
Intesa has grounds to reject calls for full Monte 2 Aug 2016 The Italian bank's CEO has slammed analysts for questioning if the bank needs higher provisions to match bailed-out Monte dei Paschi. As stress tests just showed, Intesa is swimming in capital and bad debts are down. Markets may set higher benchmarks for its less healthy peers.
Commerz lays bare market over-optimism on EU banks 2 Aug 2016 The German bank says negative rates will further weigh on revenues. Investors are already braced for low returns: Commerzbank trades at 0.3 times book. Still, with analysts' earnings forecasts almost twice those assumed in the EU stress test, even more caution is warranted.
UK banks’ light at the end of PPI tunnel darkens 2 Aug 2016 British lenders smarting from Brexit and EU stress tests face redress for mis-sold loan insurance lasting a year longer than expected. An actual cut-off date beats none at all. But the delay means fines relating to commission mis-selling will further inflate PPI's $32 bln cost.
Weaker banks are in EU’s core, not its periphery 1 Aug 2016 A dozen lenders had sub-10 percent post-stress capital ratios and a 400-plus bps loss in the EBA's stress test. Only a third are from troubled "periphery" states like Italy. Perhaps core states should become less sniffy about a Europe-wide deposit protection scheme.
ECB’s MPS kid gloves are a necessary evil 1 Aug 2016 The European Central Bank allowed Monte dei Paschi to disregard losses on a 10 billion euro bad debt sale for internal models. Giving banks a get out of jail card could incentivise bad lending. But cleaning up MPS is critical, and not many other banks will be in a rush to copy.
Review: Iran cyber hack opened a Pandora’s box 29 Jul 2016 The documentary "Zero Days" takes a thriller-style look at the unprecedented attack on the country's nuclear facilities using the Stuxnet virus. It shows the lack of norms in this new kind of war. What’s left unexplored is how companies have become fair game in cyber battles.
UBS and Barclays face long road to nowhere 29 Jul 2016 Both the Swiss and UK banks reported second-quarter earnings that beat forecasts. But UBS said tough market conditions could persist, while the effect of the UK's Brexit vote on Barclays is as yet unclear. Their valuations reflect the likelihood that returns are stuck in a rut.
EU bank tests are more mess than stress 29 Jul 2016 A gauge of the biggest 51 lenders’ capital adequacy is imminent. There’s no pass or fail, and political considerations will prevent it having too painful an impact. The more regulators participate in such charades, the more their credibility is undermined.
MPS rescuer might just rescue Italy 29 Jul 2016 The Italian lender has picked eight banks for a 5 bln euro rights issue over another rescue deal fronted by ex-banker Corrado Passera. EU stress tests show Monte dei Paschi's capital is weak. But investor support may signal the beginning of the end of Italy's bank crisis.