Lazard Q3 tosses shareholders an M&A challenge 22 Oct 2015 The Wall Street firm reported record operating revenue and stellar margins, and CEO Ken Jacobs is bullish on the future. Advisory houses’ recent stock drops imply investors are more skeptical – Lazard shares trade at less than 13 times next year’s earnings. Both can’t be right.
CIT’s John Thain blazes trail for Jeff Immelt 22 Oct 2015 The boss of the once-struggling shadow lender is retiring after turning the firm into a decent bank. GE’s CEO is dismantling his company’s finance unit to get out from under onerous regulations applicable to lenders. A big reorganization offers a good chance for a graceful exit.
Big banks win by a whisker in UK competition probe 22 Oct 2015 Britain’s antitrust watchdog has ducked breaking up the country’s four dominant lenders, or taking the sensible step of banning “free” current accounts. Smaller banks will still find it tough to grow. As for bank account holders themselves, they will be little better off.
Credit Suisse will struggle to shed subpar UBS tag 21 Oct 2015 New boss Tidjane Thiam is raising $6.3 bln and cutting costs to turn Credit Suisse into a wealth manager first, rather than private-cum-investment bank hybrid. Yet cross-town rival UBS is already ahead in that respect. Swiss acquisitions are logical, but growth could be elusive.
Deutsche’s fat finger points in helpful direction 20 Oct 2015 Germany’s biggest bank erroneously paid $6 bln to a hedge fund client in June. Howlers like this are common in trading. But this is embarrassing for Deutsche Bank given its supposed aptitude. At least co-CEO John Cryan may find it easier to pursue some much-needed trimming.
Duesseldorf joke hides serious threat to non-EU UK 20 Oct 2015 HSBC has considered moving its global HQ to Asia. Now one of its senior execs says it might base its European business in the provincial German city. That’s unlikely. Still, UK exit from the EU would bring regulatory and political pressure on London’s financial centre.
Banks need more than Fed’s help to boost earnings 19 Oct 2015 Execs and shareholders alike place a lot of faith in rate hikes improving the bottom line. Lenders’ stated benefits of an upward move, though, aren’t just unrealistic - they also won’t do much for returns. Higher borrowing costs also tend to hit banks with unforeseen problems.
Dewey leaders may skate but law firms on thin ice 19 Oct 2015 Jurors couldn’t decide whether the defunct legal shop’s bosses cheated lenders with dodgy accounting. Prosecutors blew it, but the case highlights the bloat, greed and intransigence at many big firms. Only the nimble and tech-savvy will escape a harsh verdict from clients.
Morgan Stanley Q3 casts doubt on low-risk strategy 19 Oct 2015 The bank’s $740 mln profit equates to a 3.9 pct ROE, the worst of any big bank. Adding back one-offs takes that only to the 7 pct Goldman managed. CEO James Gorman promised a safer and more solid enterprise than its rival. On this showing, it’s more boring without the benefits.
Barclays, Credit Suisse, Deutsche: which to back? 19 Oct 2015 Three of Europe’s top four investment banks have new leadership bent on strategic change. Deutsche Bank’s task is hardest: its top line relies most on low-return trading activity. Credit Suisse’s equities prowess and headstart over Barclays in finding a new CEO give it an edge.
Deutsche Bank’s shake-up puts stick before carrot 19 Oct 2015 Four top executives, including co-head of investment banking Colin Fan, are leaving amid a split of the German lender’s securities and asset-gathering businesses. It should address past failings and improve future accountability. The next task: making sure the good people stay.
Fortress macro fund closure could help its stock 16 Oct 2015 The alternative manager of $72 bln has lagged peers since its stock market debut in 2007. Now it’s closing a onetime flagship fund and losing a principal, Mike Novogratz. It may not be all bad, though: changes in Fortress’ asset mix could now get the attention they deserve.
The Devil’s Dictionary of Post-Crisis Finance 16 Oct 2015 Ambrose Bierce wrote “The Devil’s Dictionary” a century ago, ranging acerbically across government, commerce and life. Breakingviews’ original re-use of the form for finance – in 2007, when the crisis was barely beginning – is no longer adequate. Herewith part two of the sequel.
Piraeus debt swap makes most sense for Greek bulls 16 Oct 2015 The Greek bank is offering senior creditors a debt-for-equity swap. Acceptance means bondholders get a bigger upside if Greece recovers, and it could help banks’ current capital raising. But those worried the state is not out of the woods should hang on to their bonds.
Goldman Sachs Q3 too sluggish for a thoroughbred 15 Oct 2015 The bank’s $1.4 bln profit only missed estimates by a hair. But steep revenue drops in bonds and equities knocked its return on equity down to 7 pct for the quarter. That’s Citi and BofA territory. Goldman’s intentionally edgier business model requires better returns.
Citigroup may finally deserve more investor love 15 Oct 2015 The $150 bln mega-bank weathered choppy third-quarter markets better than some. Sure, its $4.3 bln profit only provided an 8 pct annualized return on equity, but that’s an industry problem. Citi is the only big U.S. bank trading below its tangible book value. That’s unjustified.
UK bank bosses avoid worst of personal liability 15 Oct 2015 New UK legislation that could see miscreant bankers jailed will be changed so the burden of proof is on the regulator. Doing otherwise might have been counterproductive. The senior managers’ regime now looks like an enhanced version of what banks should be doing anyway.
Clogged IPO exit ramp boxes in buyout barons 15 Oct 2015 Blackstone and peers have had a good run taking heavily indebted companies public again. Offerings for Albertsons and Neiman Marcus have been delayed. First Data struggled. Petco and Univision may, too. It bodes poorly for private equity when selling becomes as tough as buying.
Wells and JPMorgan expose BofA’s $7 bln challenge 14 Oct 2015 Brian Moynihan’s bank needs to earn that much in extra annual profit for a 10 pct return on equity. Cost cuts to match Wells-type efficiency wouldn’t quite do it. And Jamie Dimon’s outfit has fair returns even on falling revenue. Only a rate hike might get BofA over the line.
JPMorgan Q3 gives lie to investors’ biggest wish 13 Oct 2015 Shareholders say more loan growth would make them bullish on U.S. banks. CEO Jamie Dimon delivered that in spades, but earnings fell, excluding tax breaks. Blame the obvious culprits of low-risk borrowers and rock-bottom rates. The reality is investors live in cloud cuckoo land.