Review: A partial defence of financial innovation 24 Jul 2015 The crisis has made many suspicious of new ideas in finance. “Smart Money” sets out to plead for the other side. The optimistic tone is refreshing, and the book offers many interesting examples of new business models. However, the case has too many gaps to be truly persuasive.
Green bonds struggle to justify the hype 23 Jul 2015 China’s first eco-friendly bonds push this year’s issuance close to $20 bln. The market has grown fast. But definitions are fuzzy, returns are humdrum, and it’s not clear what problem this solves for corporate issuers, most of whom could sell conventional debt at similar rates.
Bond trading bright spot hints at dim bank future 22 Jul 2015 MarketAxess keeps growing even as new rules and volatility have whacked Wall Street profit in fixed income, currency and commodities. But the tech-driven firm’s second-quarter results show its revenue isn’t keeping pace with rising volume. That’s a worry for larger rivals.
Barclays faces awkward Qatari settlement dilemma 22 Jul 2015 The UK bank may have the option of taking a so-called deferred prosecution agreement for alleged inadequate disclosure of fees paid to the emirate after a 2008 capital hike. A speedy resolution would remove a key risk for investors. But it might also open a legal can of worms.
John Thain leads way for U.S. regional bank M&A 21 Jul 2015 The CIT boss – and last CEO of Merrill Lynch – secured regulatory approval to buy OneWest. It’s the first deal to create a systemically important financial institution. It should clear the way for more mergers for banks fearful of regulators but in need of profit boosters.
Dodd-Frank plays Whac-A-Mole with financial risk 20 Jul 2015 This seminal piece of legislation, now five years old, has forced banks to increase capital and improve oversight. Parts of the once-murky derivatives market are more transparent, too. Overall, the system looks much safer. But the law may have created new risks.
Morgan Stanley makes modern run at Goldman 20 Jul 2015 The bank led by James Gorman raked in decent revenue yet fell just shy of its 10 pct return on equity target. Trimming expenses would get it there, and could even catch Goldman at 11.7 pct. Although the two have trod different paths down Wall Street, the rivalry may never die.
Shouldn’t Credit Suisse and StanChart swap CEOs? 20 Jul 2015 Bill Winters is beginning his tenure as new boss of the emerging markets lender at the same time that Tidjane Thiam takes charge of the Swiss investment and private bank. Both are capable executives, but their experiences seem uncannily to better suit the other’s job.
ECB faces tricky call on Greek bank solvency 20 Jul 2015 With Athens’ lenders open again, attention now shifts to Frankfurt’s supervisory test of their capital strength. Half of their buffer is deferred tax credits, which supervisors hold in low regard. But taking a tough approach makes a painful bail-in of depositors more likely.
UK seeks watchdog: must be tactful, tough and able 17 Jul 2015 Britain is searching for a new regulator after Chancellor George Osborne ousted Financial Conduct Authority boss Martin Wheatley. His replacement will need to avoid mistakes and forge a conciliatory pact with financial institutions while also protecting consumers. It’s a big ask.
Review: A virtuous defence of finance 17 Jul 2015 Markets are more ethical than confrontational, writes Pierre de Lauzun. The French banker even praises his industry for tying present to future and supporting the common good. He’s onto something. Finance can be socially helpful, if it shakes off so-called economic rationality.
Bafin barbs show scale of Deutsche overhaul task 17 Jul 2015 A leaked letter from the German bank’s lead regulator slams executives for incompetence - or worse - over Libor. New CEO John Cryan needs to repair relations. Improving controls and recruiting new managers complicate the already-sizeable job of boosting Deutsche’s performance.
Rob Cox: The world’s hardest central bank job 16 Jul 2015 It’s not Yellen’s, Draghi’s or Kuroda’s. Russian central bank chief Elvira Nabiullina faces a unique bouquet of challenges. On top of a weak oil price and ruble, nettlesome inflation and Western sanctions, there’s Vladimir Putin. Under the circumstances, she deserves a medal.
Goldman for once may miss mega-bank sprawl 16 Jul 2015 Legal costs whacked the Wall Street firm’s Q2 earnings. More worrying was the far worse showing than rivals in fixed-income trading. Broader institutions such as Citi, BofA and JPMorgan gain a cushion from areas like treasury services. Goldman’s focus isn’t always an advantage.
Ultra-efficient Citi needs efficient returns 16 Jul 2015 The banking behemoth is now second only to U.S. Bancorp in keeping costs down. But it’s nowhere near its smaller rival’s market-leading return on equity. Offloading its remaining toxic assets and using more of its tax breaks will help. But that’s a slow process.
Greek anger reflects fall, not level, of income 16 Jul 2015 The bailout plan was approved, with bitterness all round. Economist Branko Milanovic’s comparison with Portugal helps explain the ire. The average Greek has consumed more over the last 20 years, but now has less. The political effect of the drop is much worse than the economics.
China’s rout may disrupt online finance pioneers 16 Jul 2015 Regulators have targeted Hundsun, an $8 bln trading-tech firm backed by Alibaba founder Jack Ma, over the market crash. Internet finance in China flourished in legal grey areas. If official attitudes are hardening, it will be riskier and pricier for Ma and peers to innovate.
U.S. banks lay bare irrational investor exuberance 15 Jul 2015 BofA and U.S. Bancorp stock shot up even though neither lender’s core earnings beat estimates. It reflects BofA’s cost cuts, U.S. Bank’s loan-growth plans and industry hopes for higher interest rates. None, though, does enough for the bottom line to justify the enthusiasm.
BofA earnings best in years but tougher task ahead 15 Jul 2015 The bank run by Brian Moynihan cranked out a second-quarter profit of $5 bln as costs hit their lowest level since 2008. Return on equity remains subpar, though. Without some one-off extras, BofA’s core earnings would need to rise almost 40 pct to beat its cost of capital.
Greek exit talk leaves euro investors unperturbed 15 Jul 2015 A taboo was broken when Germany suggested Athens could leave the European monetary union, albeit temporarily. In theory, if one country can exit, so can another. But markets aren’t pricing in any redenomination risk. Greece is being treated as an exception, not a precedent.