UK regulator gives RBS fresh reason to shrink 26 May 2016 The Bank of England has introduced a new capital requirement for lenders deemed systemically risky in a domestic context. Big banks basically have enough equity to meet it already. But Royal Bank of Scotland’s weighting to the UK means it has most to gain from getting smaller.
Sterling options market gets the hump over Brexit 26 May 2016 Traders are braced for big sterling swings around the EU referendum and then expect volatility to subside. But true calm may prove elusive whatever happens. Even if Britain votes to stay, there will be enough economic and political uncertainty around to ensure trading is lively.
European IPO market regains its senses 26 May 2016 Danish renewable energy utility DONG priced its initial public offering at up to $16 bln, suggesting a forward EBITDA multiple in line with stricken carbon-heavy peers. If it sounds dull, that’s the point. European IPOs are still a buyer’s market, but maybe now a rational one.
Banco Popular flags trials of holding bank equity 26 May 2016 The Spanish bank’s 2.5 bln euro rights issue better protects it against real estate losses, but is still a surprise for shareholders. Pain is also not being shared with equity-like CoCo holders. Dealing with the uncertainty would be easier if returns were more compelling.
Bank returns paradox cannot hold 25 May 2016 Why do banks seek double-digit returns when interest rates are so low? The Bank of England is among those wondering. Return expectations may be too high, or banks may still be too risky. Investors don’t appear to care. If they did, banks might face calls to break up.
Russia’s show of financial power fails to convince 25 May 2016 Moscow is selling its debt to foreigners and lending $25 bln - 2 pct of domestic GDP - to Egypt for a nuclear plant. Such shows of financial strength are all well and good. But the debt sale isn’t quite what it seems, and lending big sums at sub-market rates is risky.
India’s $120 bln of bad debt is ripe for picking 25 May 2016 Global funds such as KKR and J.C. Flowers are eyeing stressed assets. Indian authorities are pressuring lenders to acknowledge bad loans and, in turn, raise capital. A new bankruptcy code helps too. After years of false starts, India’s bad debt business could finally take off.
Wells Fargo gives rivals more bad news than good 24 May 2016 Wall Streeters may be relieved to learn the California-based titan isn’t growing in securities, at least not yet. More worrisome is a decision by boss John Stumpf to cut overall return targets. Unlike Wells Fargo, most lenders already are struggling to beat their cost of capital.
Wanted: CEO for Italy’s could-be national champion 24 May 2016 UniCredit needs a new chief executive. The bank’s ideal candidate has credibility to raise capital, gumption to lead a break-up or buy local rivals, and nous to schmooze shareholders from Verona to Libya. Share options cheap. Contact Breakingviews executive search.
1MDB scandal stings Singapore’s banking pillar 24 May 2016 The city has shut down BSI as Swiss authorities open a criminal probe into the private bank relating to the Malaysian state fund. The battle against illicit money flows is global. But Singapore is only now properly facing up to the risks of its push into wealth management.
BofA legal escape rubs salt in crisis wounds 24 May 2016 A U.S. appeals court tossed out a $1.3 bln verdict over dodgy loans sold to Fannie and Freddie. Like recent reversals of traders’ convictions, the case suggests greed and a little lying on Wall Street may not be unlawful. Those looking for accountability will be disappointed.
Goldman could easily assuage shareholders on pay 20 May 2016 Only 66 pct backed how the Wall Street firm compensates its bosses. A $5 bln fine over dodgy mortgages didn’t help. But Goldman is also one of the few banks not to use long-term incentives in determining salary and bonus. Doing so would be a cheap way to win investor support.
Investors may rue framing art as an asset class 20 May 2016 Collectors increasingly see paintings as investments – and collateral. The value of loans secured by art has doubled to $10 bln in four years. Yet as this spring’s big auction downturn shows, the business is volatile. Best to rely on the aesthetic return.
Deutsche’s latest mess looks like a Protium moment 20 May 2016 The German bank is probing a deal that enabled ex-trading boss Colin Fan and others to profit, with leverage provided by their own employer. The investigation is ongoing. But it looks to have similar flaws to Barclays’ Protium deal - with staff interests above shareholders’.
More to market fears than just fear itself 19 May 2016 German Finance Minister Wolfgang Schaeuble reckons investors are too jittery. Valuations, interest rate policies and dicey geopolitics are valid reasons to be nervous, though. Bearish moves by old-timers George Soros and Carl Icahn speak louder than a politician’s words.
Deutsche, Barclays hit in D.C. watchdog crossfire 18 May 2016 Treasury’s new proposal to curb tax-driven cross-border M&A targets debt U.S. units issue to overseas parents. That, though, is what the Fed is making big foreign banks do to prevent bailouts. The two agencies are trying to fix the mess. But it puts Washington in a bad light.
Heta bail-in mess nears suitably ugly endgame 18 May 2016 Austria has met creditors halfway over the rump of lender Hypo Alpe Adria. Senior bondholders can receive a bond today worth about 90 pct of their original investment, up from an 82 pct offer in March. With some holdouts remaining, it won’t fully salvage a poorly handled affair.
JPMorgan owners miss a trick snubbing breakup idea 17 May 2016 Just 2.5 pct of the bank’s investors voted for studying a possible split. There’s less reason to dismember the lender run by Jamie Dimon than Citi, whose shareholders dismissed a similar proposal. But it would be a useful exercise – and might even bolster the case for big banks.
Wall Street given license for yet more low returns 17 May 2016 Investment banks hoping a recovery will boost dismal earnings just got a slap from BCG. The consulting firm reckons they’ll lose more business to regulation and new competitors. The solutions it offers will take time and money, excusing subpar earnings for a few more years.
Limp UK banks probe cedes antitrust fix to fintech 17 May 2016 Britain’s long investigation of retail banking has made feeble proposals: more transparency, easier account switching and a cap on overdraft fees. Opening big lenders’ data to tech-savvy players should boost competition. But EU-level changes would have made that happen anyway.