French investment banking has less than meets eye 23 Apr 2015 Returns at BNP Paribas’ and Societe Generale’s trading and advisory businesses are better than peers. But the pair’s divisions carry less equity against gross assets than rivals. Before dashing in, investors should consider what the return would be with greater leverage restraint.
Banker-bashing comeback in full electoral swing 22 Apr 2015 It’s not just in the UK, where voters hit the polls in May. Though the U.S. election is over 18 months away, the debuts of Clinton, Cruz, Paul and Rubio are already inciting the torch-and-pitchfork brigade against finance. Some barbs should worry Wall Street more than others.
Edward Hadas: Hooray, trading slowed on Friday 22 Apr 2015 A Bloomberg outage limited activity in some usually busy financial markets for a few hours. That’s no loss. Excessive trading does more economic harm than good and encourages risky leverage. Slower markets would be less wasteful – though people would still find ways to speculate.
GE Capital sale may be zero-sum TBTF game 21 Apr 2015 Shrinking the finance unit should allow GE to ditch its systemically worrisome tag. One possibility is Wells Fargo buying $83 bln of the assets, in deals that would surpass the comfort level of regulators for most bank M&A so far. And it would make one mega-bank even more mega.
Thiam needs to think big at Credit Suisse 21 Apr 2015 Incoming CEO Tidjane Thiam is inheriting a mixed bag. First-quarter net profit surged 23 pct as trading and wealth management shone. But underwriting and M&A revenues fell, and risk-weighted assets remain high. The Swiss bank needs more capital and less investment banking.
Alliance Trust can do more to fend off Elliott 21 Apr 2015 The Scottish investment trust’s fight with Elliott Advisors has turned ugly. Embattled CEO Katherine Garrett-Cox has criticised the U.S. activist but barely parried its criticisms. Copying some of Elliott’s ideas - and tweaking her pay - would be a smarter defence.
Old age will get more unpleasant around the world 20 Apr 2015 Older populations and economic slowdown have put budgets out of whack globally. Tax increases and austerity alone won’t solve the problem. Governments will need to find ways to erode seniors’ benefits without succumbing to their voting power. It will be painful.
Morgan Stanley Q1 rivals Goldman by different path 20 Apr 2015 James Gorman’s firm had its best quarter in years. Its Wall Street competitor still has the edge with returns and book value growth. By one key metric, though, investors value Morgan Stanley more highly. Gorman’s strategy, which downplays volatile trading, is starting to pay off.
Deutsche should limit retail selloff to Postbank 20 Apr 2015 The German lender’s strategy review has narrowed down to selling part or all of its retail business. A wholesale-only Goldman Sachs equivalent would be more profitable, but less stable. Deutsche would be better off staying a universal bank - but cutting a lot more cost.
Euro zone bond analysts live in brave new world 20 Apr 2015 The old skills are almost useless. Chart patterns tell no tales in uncharted territory. And forget about inflation, growth and nebulous concepts like term premia. Just study politics and ECB buying. It’s an easier life for specialists, but this market is riskier for the economy.
GE’s higher sum may reflect most of the parts 17 Apr 2015 With the financial arm being jettisoned, the focus starting with Friday’s Q1 results is squarely on the industrial businesses. Valuing the pieces similarly to rivals, $276 bln GE carries a smaller but conspicuous conglomerate discount. Don’t expect it to shrink much more.
Review: Some of what is wrong with economics 17 Apr 2015 Meghnad Desai mocks his fellow economists for not seeing trouble ahead during the early 2000s credit bubble. The retired professor wisely calls for more study of history and a less narrow perspective, but he is still too conventional. He ignores the crucial financial cycle.
Blackstone brandishes its long-term bona fides 16 Apr 2015 Nearly eight years after going public, the buyout shop is taking a victory lap. Its shares finally trade noticeably above the IPO price, and Q1 results suggest Blackstone’s model is working. Even so, owners of the firm’s equity may prove more fickle than investors in its funds.
Goldman’s improved returns come at higher risk 16 Apr 2015 The bank left behind years of ho-hum profit with an estimate-beating $2.75 bln in the first quarter. The firm kept costs down, but trading accounted for much of the boost. That raises the issue of whether such earnings are sustainable – and how shareholders should value them.
Citi finally flirts with financial respectability 16 Apr 2015 CEO Mike Corbat now runs one of the leanest banks in the industry, helping the lender’s $4.8 bln first-quarter showing beat expectations. Citi is starting to look undervalued. But return on equity needs to be more than mediocre to justify a sustained rally. That will take time.
Banks show they can do something right 16 Apr 2015 Bank accounts and electronic money improve personal financial security. So the global finance industry can take a well deserved pat on the back for a 700 million increase in the number of people with accounts. But new data shows the United States has some problems.
UBS has grounds to resist fresh breakup calls 16 Apr 2015 Activist Knight Vinke says the Swiss group’s investment bank gets unfair funding subsidies from wealth management. But the cost of spinning it off could offset a valuation bump for the remainder. With returns up and dividends resurgent, UBS’s current strategy looks a surer bet.
Buyout barons find new ways to drill into shale 15 Apr 2015 Apollo, Carlyle and KKR suffered because of oil’s plunge, but such firms are on the hunt for investments in the sector. Energy companies may be reluctant to sell at distressed prices. Creative structures like those used recently by Blackstone and EIG could ease the way for deals.
Europe’s credit boom locks in mediocre returns 15 Apr 2015 Investors are throwing money at European companies. Carrefour and Danone paid little over 1 pct a year to borrow for a decade; Novartis got 20-year funds at similar levels. A Breakingviews calculator shows how bond buyers’ generosity could backfire.
Bank of America stuck in slow lane to nowhere 15 Apr 2015 Brian Moynihan’s dealmakers raked in cash last quarter and his mortgage bankers improved. BofA slashed expenses, set aside far less for legal woes and its deposits problem pales next to JPMorgan’s. Yet trading is weak as is return on equity. An investment case is hard to make.