Nordic bank low-rate survival kit is hard to copy 18 Feb 2016 Swedish and Danish banks have been dealing with negative policy rates for a while. But they have fee-driven business, low costs and strong capital ratios. They offer only a partial guide for European or Japanese peers for whom sub-zero interest rates are more novel.
Banks’ hybrid hissy fit is no disaster 18 Feb 2016 Fears that Deutsche Bank may stop coupons on hybrid debt took the bank to crisis. That will be seen as proof that hybrids are no match for real equity. Yet the mess was caused by vague regulators and lazy investors. Without these obstacles, hybrids can still play a role.
Bankia proves retail IPOs/state banks don’t mix 17 Feb 2016 The bailed-out Spanish lender is refunding all retail investors at a cost of 1.8 bln euros. Bankia had already set aside the funds, but the debacle shows why selling state-held banks to unsuspecting punters is a recipe for disaster. Lloyds Banking Group should take note.
Credit Agricole’s simplicity comes at a price 17 Feb 2016 The French lender has partially unwound its Byzantine structure at a cost to its listed entity of 467 mln euros in earnings each year. A one-off capital boost doesn’t offset that. Yet making itself simpler should soothe Credit Agricole’s shareholders and regulators.
Apollo’s $7 bln ADT deal comes with extra security 16 Feb 2016 It’s an alarming buyout given the state of credit markets. The LBO firm and co-investors, though, are kicking in a big slug of equity to keep debt at a relatively safe level. Merging ADT with another Apollo-owned company should add cost savings and help lock up a decent return.
Portugal adds CDS eyesore to bond market heresy 16 Feb 2016 Lisbon’s shock decision to bail in Novo Banco debt won’t trigger its credit default swaps, lawyers have decided. Jumping CDS spreads partly explain the current panic over banks. That’s bad - if they don’t protect against defaults, they’re less reliable as market gauges or hedges.
Chinese banks start new year with old bad habits 16 Feb 2016 Lenders dished out $385 bln in new loans in January as the authorities pumped cash into the slowing economy. Fresh credit can stimulate spending and help companies repay overseas borrowings. But adding to the overall debt pile only makes the eventual cleanup even more painful.
Bank valuations look unkind, but not irrational 15 Feb 2016 The one-fifth fall in European lenders’ share prices since New Year might make it seem the sector is hugely undervalued or about to implode. Conventional valuation metrics imply something more prosaic. Assume lower-for-longer rates hit returns, and low multiples may be merited.
UK Faustian pact with banks has a grim logic 15 Feb 2016 HSBC’s unsurprising decision to stay domiciled in London rounds off nine months of the UK softening its approach to banks. There are reasons to find this new tone uncomfortable. But that is a moot point so long as the banking sector supplies 7 pct of UK income tax revenue.
Garrett-Cox exit captures peak asset manager pay 15 Feb 2016 The departing head of the UK’s Alliance Trust received 1.4 million pounds and a full year’s pay despite a shareholder rebellion. It’s a lot for a position that was effectively redundant. Katherine Garrett-Cox’s timing is apt: asset manager pay is probably peaking anyway.
HSBC’s choice for status quo risks pleasing nobody 15 Feb 2016 After a 10-month flirtation, the lender is staying put in London. Britain has become more bank-friendly, and HSBC’s former Hong Kong home less certain. Moving its HQ would have been costly and complex. Yet the public rumination could leave both cities feeling short-changed.
Dear Draghi: Time to buy bank bonds 12 Feb 2016 Bank shares have slumped and bank bond yields are up. ECB chief Mario Draghi can stop the rout from damaging the economy by buying lenders’ debt. The moral hazard concerns are big, but manageable. Breakingviews imagines a memo from a bank CEO.
Commerzbank picks good time to mend the roof 12 Feb 2016 The German lender has restored its dividend, which was expected, and strongly improved its capital, which was not. Commerz is now better placed to withstand current volatility. The downside: its costs are too high and its returns remain lamentable.
Jamie Dimon aligns money and mouth 12 Feb 2016 JPMorgan’s CEO personally bought some $25 mln of the bank’s shares. This vote of confidence reflects his mantra that lenders do best buying back stock when it’s near book value. It is also an important counterweight to the panic gripping investors in U.S. banks.
Morgan Stanley case refutes skeptics of mea culpas 11 Feb 2016 The bank joins JPMorgan and BofA in bad-mortgage settlements acknowledging dodgy behavior. It’s not an admission of guilt but shows critics were wrong to claim firms would fight, rather than reveal misconduct. Greater transparency is a decent legacy for Wall Street’s watchdogs.
Keep an eye on the banker stage of M&A cycle 11 Feb 2016 France’s Natixis is buying control of Peter J. Solomon, a specialty corporate consigliere. The U.S. boutique wants to roll up fellow advisory shops. Veteran dealmakers can recall the fates of Robertson Stephens and Wasserstein Perella, and wonder if history will repeat itself.
Deutsche has enough capital but not enough clarity 10 Feb 2016 The German lender’s solvency is strong enough to withstand the most likely clouds on the horizon. But Deutsche Bank’s 1.4 trln euro balance sheet is opaque and stuffed with derivatives. Boss John Cryan could deliver relief by opening up on its oil and other exposures.
UniCredit heads into market storm – in leaky canoe 9 Feb 2016 The Italian bank beat 2015 net profit forecasts, and boss Federico Ghizzoni is making progress on a plan to cut costs and boost revenue. Yet UniCredit still looks undercapitalised. It’s a bad time to be a bank, let alone one whose strategy rests on suddenly less-clear growth.
Deutsche hybrids: from poster boy to problem child 9 Feb 2016 The German lender has moved to reassure investors fretting about delayed coupons on its new AT1 securities, after CDS prices collapsed. Unlike hybrid forebears in 2008, AT1s should absorb losses. Yet instead of dampening volatility, the fear of a trigger is exacerbating it.
Bridgewater spat tests odd but successful culture 8 Feb 2016 Founder Ray Dalio and a top lieutenant at the $154 bln hedge fund firm have been at odds. The “radical transparency” behind 25 years of 13 pct returns usually doesn’t include internal clashes spilling into the open. It may heighten “key man” worries at such an idiosyncratic shop.