U.S. lenders tempted by new way to make bad loans 1 Apr 2015 A credit score that monitors whether Americans pay household bills on time should expand how many individuals can borrow from banks. But it could also encourage financial institutions desperate for higher returns to ignore more crucial metrics like income and outstanding debt.
Tidjane Thiam’s pay is insufficiently prudential 1 Apr 2015 The outgoing Prudential CEO was paid 8.3 mln stg in shares for hitting long-term targets. Given his record, the largesse can be defended. But the UK insurer - and fund manager – should follow peers in requiring such awards to be held until outperformance is proved sustainable.
Draghi’s QE is doing all it can for securitisation 31 Mar 2015 The ECB chief’s bid to boost asset-backed security markets has produced few new deals, and its purchase programme is small. But the falling cost of issuance is tangible enough, and regulatory hurdles are lifting. Besides, politics preclude Mario Draghi from buying riskier assets.
BoE will test banks for deflation ECB didn’t see 30 Mar 2015 The darkest scenario of British banks’ annual stress tests sees prices fall for over a year at home, and nearly four in the euro zone. Last year the ECB didn’t factor in deflation risk at all. The Bank of England is obviously freer to consider the possibility of its own failure.
China’s banks turn lens on unhappy economy 27 Mar 2015 Lenders’ annual results give a chance to see what’s happening in corners of the country other data doesn’t show. The numbers reveal companies hit by falling commodity prices, small businesses struggling and consumers losing confidence. Banks may soon be called to the rescue.
Buffett-3G juggernaut can keep on truckin’ 26 Mar 2015 Kraft Heinz is the third time the Sage of Omaha and the trio behind AB InBev have joined forces, after swoops on the ketchup maker and Tim Hortons. The partners’ patience, financial firepower and industry experience give them big advantages. Bigger deals may lie down the road.
Flat euro yield curve is unused windfall 26 Mar 2015 ECB polices have almost eliminated the extra yield that usually comes with longer-term debt. Euro zone member governments gain from cheaper financing. They could do more. Additional bond-financed investment would stimulate the economy cheaply. That probably won’t happen.
Bumper European share sales carry risk of excess 26 Mar 2015 Banks have hawked big slugs of EU stock in overnight placings, with 5 bln euros worth offered in three days. For now, underwriters have support from QE-powered strong markets, so they’ll risk losses for the sake of league table kudos. But complacency seems to be creeping in.
Congress lines up a big wet kiss for small banks 25 Mar 2015 A new bill proposes excluding lenders with less than $50 bln in assets from Basel III capital rules. But small banks are already exempt from many stringent new regulations. Giving them more help is more a sign of Washington’s unending affection than genuine need.
Heinz and Kraft prove that one M&A bank is enough 25 Mar 2015 The companies have a single adviser each in their mega-merger: Lazard for the ketchup maker and Centerview for the mac-n-cheese king. The involvement of Warren Buffett and 3G helps, as does the absence of outside capital. But a lone consigliere per side suffices in most tie-ups.
Edward Hadas: Deutsche Bank’s long round trip 25 Mar 2015 The German bank spent two decades expanding massively into the capital markets business. Along the way, it lost touch with its original mission of serving German businesses and their owners, without finding a viable new one. The crisis has spurred a return to traditional values.
BayernLB’s rekindled growth drive may backfire 25 Mar 2015 Germany’s No. 2 Landesbank is still haunted by the past, as shown by a 1.2 bln euro impairment on loans to Austrian lender Heta. BayernLB also has yet to repay 2.3 bln euros of state aid. With much cleaning up still to do, plans for national growth look too ambitious.
China brokerage IPO a triumph of wonky markets 25 Mar 2015 GF Securities is paying a high price for foreign currency and international prestige. It will sell $3.6 bln of new shares in Hong Kong around 50 percent cheaper than those already listed in China. Investors back home get diluted – except those connected enough to play both sides.
Banks may need bruises for living wills to impress 24 Mar 2015 HSBC, RBS and BNP failed to provide credible resolution plans again, regulators say. They join 11 big banks watchdogs demanded new failure schemes from last August. Stress test results improved when dividend cuts caused pain. Whacks may be needed here too for better results.
Profumo leaves Monte Paschi with mixed record 24 Mar 2015 The veteran Italian banker will leave as chair of the Sienese lender after its next rights issue. Alessandro Profumo revamped MPS governance but the bank’s future remains up in the air. As with his previous role as UniCredit CEO, there have been hits and misses.
QE froth leaves banks stuck with stocks and bonds 24 Mar 2015 Botched trades have left Credit Suisse, Deutsche Bank and others holding blocks of securities or forced to sell at deep discounts. With quantitative easing lifting prices to uncomfortable highs and sparking a glut of transactions, the risk of dealing for third parties has risen.
What Deutsche Bank’s strategy revamp should say 20 Mar 2015 The German lender’s co-CEOs Anshu Jain and Juergen Fitschen have cut investment bank assets by a fifth. They should chop at least that much again, faster, while exiting Postbank and marginal countries. Without radical action, Deutsche will struggle to make decent returns.
Wall Street owners finally get breakup bona fides 19 Mar 2015 The SEC is allowing BofA shareholders to vote on whether to spin off Merrill Lynch. The watchdog previously muzzled similar requests at JPMorgan and elsewhere. Banks won’t like the scrutiny, but it’s a worthwhile debate to air publicly, as they’re running the numbers internally.
Goldman’s shadow bank debuts somewhat deceptively 18 Mar 2015 In what could be seen as a bad ad for its own bankers and lead underwriter BofA, shares of the middle-market lender fell as much as 2.5 pct. Deal fees typically drag on business development company IPOs, however. And unlike some rivals, Goldman’s trades above its net asset value.
Central bankers struggle to follow good advice 18 Mar 2015 Their global club, the BIS, is good at spotting trouble. Current worries include risk-taking enabled by easy money and illusory market liquidity. But rate-setters have to think domestic, not global. Their parochialism makes preventing crises much harder than predicting them.