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.
BlackRock’s Larry Fink is fighting the tide 14 Apr 2015 People pay attention to the investment firm’s boss, who speaks for $4.7 trillion of assets. His call for more long-term thinking is justified. He’s also right that tax policy can help nudge investors. But sensible arguments won’t dislodge irrational and entrenched short-termism.
Goldman case prosecutors acting like vampire squid 14 Apr 2015 The U.S. government couldn’t nail the bank’s ex-programmer Sergey Aleynikov for swiping code. Now NY is taking a shot. It evokes the kind of overreach that has foiled insider trading cases. Enforcers lose credibility by wrapping their tentacles around prey that should go free.
JPMorgan finds right way to so-so earnings 14 Apr 2015 The bank’s $5.9 bln Q1 profit comes courtesy of good results across the board. Fixed income trading was especially strong, having played rising volatility well. But everything from higher capital requirements to strict Fed policy made return on equity an uninspiring 11 pct.
Europe’s lending boom shows power and limits of QE 14 Apr 2015 The ECB’s bank survey shows how loose monetary policy is boosting demand for credit in Europe, helping small companies. That is good for growth. Yet the results are uneven, and investment is not driving demand. The central bank’s policies work, but governments need to do more.
Wells Fargo Q1 shows appeal of GE Capital’s wares 14 Apr 2015 Lower taxes and securities gains helped the West Coast lender beat estimates. But Wells has slowing loan growth, less interest income and more unused deposits – issues regional banks will probably face, too. That makes the assets GE’s finance unit is selling look very attractive.
Goldman pay scheme sums up new industry norms 13 Apr 2015 One of the strongest banks on Wall Street now reckons just 12 pct is a worthy return on equity over an economic cycle. Outperformance is 15 pct, according to the latest cash incentive plan for CEO Lloyd Blankfein and his lieutenants. At least it takes eight years to pay out.
ECB nudges Monte Paschi towards fire sale 13 Apr 2015 The European Central Bank wants MPS to find a merger partner, the Italian lender says. That’s a more serious issue for MPS than an awkward breach of counterparty limits. There aren’t many likely acquirers - and the regulatory pressure makes it even harder to secure a good price.
Wall Street bids slow farewell to GE fee darling 13 Apr 2015 The U.S. conglomerate has been the best corporate client for investment bankers since 2000, spending some $5.1 bln for assistance. Shrinking GE Capital will keep M&A dealmakers happy. The unit’s borrowing, however, is the biggest moneymaker. Much of that could now be at risk.
GE finally exorcises Jack Welch’s financial demons 10 Apr 2015 It took a near-death experience and flat-lined shares, but Jeff Immelt is ditching banking and returning GE to its industrial roots. The timing works on many levels: asset values are high and lending businesses can be funded. Immelt also keeps a step ahead of prowling activists.
Immelt’s SIFI escape route is tough to follow 10 Apr 2015 The $280 bln GE is offloading most of its finance unit and should be able to ditch the systemic tag imposed by watchdogs. That will free CEO Jeff Immelt’s remaining empire from onerous rules. Big U.S. banks might fancy similar liberty, but they are more tightly hemmed in.
GE shows way by ending wait for tax Godot 10 Apr 2015 The U.S. conglomerate is bringing home $36 bln and will pay $6 bln in taxes on it. The move helps GE deliver a capital return plan with sufficient heft to make a mark. It also should be big enough to be noticed by other companies paying a price for leaving some $2 trln overseas.
Apax funding IPO would have awkward precedents 10 Apr 2015 The private equity giant wants to float a vehicle that would invest in its buyout funds, according to a report. The timing is good: investors are hungry for alternative assets and Apax deals have done well. Still, listed PE units like this have a chequered past in Europe.