Year: 2009

PCCW chooses favourable moment to get out the red ink

22 Apr 2009

Oneoffs and unexplained impairments led to a 15% drop in reported earnings at the Hong Kong telecoms firm. While the underlying business held up well, Chairman Richard Li is playing down the good news. But then, he is trying to push an unpopular buyout through the courts.

Inefficient financial regulation has its charms

22 Apr 2009

That s the position of US state insurance watchdogs, who oppose the federal government s attempt to gain oversight of the industry. The feds say the state system is outdated and hampers innovation. Experience suggests that s not entirely bad, argues Dwight Cass.

UK likely to regret soaking the rich

22 Apr 2009

The Budget is a hammer blow to the City of London, landing multiple punches on high earners. The measures are likely deter foreigners from working in UK financial services. And in removing incentives to make more money, they may reduce the country s taxable revenue base.

UK snubs Mervyn King by rejecting Glass-Steagall

22 Apr 2009

The Bank of England boss had called for a debate over whether banks should be split into utilities and casinos. The government has now closed the debate. The lesson for King: if he wants to influence such matters in future, he had better state clearly what he thinks.

Consumer defaults bring risk of financial relapse

21 Apr 2009

Anyone seeing the green shoots of recovery shouldn't lose sight of soaring defaults on US consumer debt. The level of such debt is far higher than in 198082 or in the Depression, and credit losses much exceeding banks' profits could deal the financial system another blow.

US earnings highlight breadth of downturn

21 Apr 2009

Caterpillar is a heartland manufacturer. BlackRock is a New York money manager. Both saw quarterly revenues and adjusted profits slump to a similar extent. That underlines the scarcity of shelter from global economic trouble and raises questions for policymakers, too.

Questions Cuomo should be asking Carlyle

21 Apr 2009

The New York attorney general has alleged the state pension fund's former CIO and a political adviser were part of a kickback scandal. Now the state has banned the use of finders, or placement agents, when investment firms seek funds. But the buyout shops aren t out of the woods.

UK boost to securitisation no cause for panic

21 Apr 2009

State plans to aid the mortgagebacked security market may raise fears of a return to the originateanddistribute model that sank the financial system. But securitisation, in proportion, has its place and temporary subsidy of the market may be a necessary evil to boost lending.

Spain’s central bank makes independence pay

21 Apr 2009

The Banco de España didn t prevent a housing bubble, but it did keep Spanish banks out of foreign debt sludge. Now its governor is taking flack for speaking out on pension and labour reform. He should be praised and more independent central bankers should follow his example.

Tesco’s allure is still firmly in the future

21 Apr 2009

Right now, the UK retail behemoth mostly faces problems: strong rivals in the core UK grocery market and a bungled US launch. But UK nonfood is growing, Asia is coming along and global rival Carrefour is struggling. Investors aren t paying much for Tesco s tantalising prospects.

Shipping industry adrift in global slowdown

21 Apr 2009

The global shipping fleet is still growing at a record pace. But world trade is set to decline 9%. The excess supply will last for years. Shippers and their financiers may benefit from lower costs once trade recovers. But in the meantime, it's all about survival.

GM is in no position to set terms of Opel sale

20 Apr 2009

The US carmaker is reportedly willing to sell a majority stake in OpelVauxhall in return for a E500m injection into its European subsidiary. But GM is in a weak position to set terms. Germany, which would guarantee E3bn worth of loans, will decide the structure of any deal.

Investors push back on hedge fund governance

20 Apr 2009

Steel Partners tried to force a potentially disadvantageous restructuring on investors. Warren Lichtenstein s firm has had to backtrack, offering investors alternative options. Whether it s enough remains to be seen. But the dynamic reflects investors' new power over hedge funds.

US may have way out of bank recap bind

20 Apr 2009

The administration will struggle to get Congressional approval for more bailout cash. But if its stress tests don t lead to more capital injections, they will be branded a whitewash. One way to square the circle is to convert the government s existing prefs into ordinary shares.

George kept hard liquor out of UK’s punchbowl

20 Apr 2009

The former Bank of England governor, who has just died, gave the institution a fine start to independence and got a series of difficult calls right. There is a good lesson in his overall approach: he shunned greed, focused on safety and was strict on inflation.

Ex-RBS investment bank boss merits rough treatment

20 Apr 2009

Johnny Cameron presided over a financial calamity at his last job. Now the UK regulator has made it hard for him to take a new position at boutique Greenhill. The FSA s response strikes a chord. But with so many culprits around, it won t be easy to set a consistent policy.

UBS clean-up advances with $2.5bn LatAm retreat

20 Apr 2009

The Swiss bank is selling Pactual back to André Esteves three years after buying the investment bank from the Brazilian trading whiz. The price looks surprisingly good for the times. But it may not be enough to compensate UBS for the cost to its private bank in the region.

US should allow banks to pay back Tarp

20 Apr 2009

If they can prove they ll have adequate capital, banks should be allowed to shuck off the scarlet letter . That means more scrutiny for those that can't. But the stress tests should bring that anyway. And even without Tarp constraints, regulators should be able to rein banks in.

BofA’s murky quarter keeps the pressure on Lewis

20 Apr 2009

The bank earned $4.2bn in the first three months of the year. But, like Citi, BofA relied on oneoff gains and accounting benefits and added a low tax rate to boot. Strip those out and BofA lost money. That leaves boss Ken Lewis s position hanging in the balance.

Heineken’s debt swoop could herald pub sector shift

20 Apr 2009

The Dutch brewer has bought 30% of the senior debt in Globe, the troubled UK pub company to which it supplies beer. Buying at a discount to protect contracts makes sense. But if Globe goes bust, this could usher a return to the days when brewers owned their estates.

Oracle’s Sun deal shows tech’s barriers melting

20 Apr 2009

Sure, snaffling up Sun for $7.5bn secures a key programming language for the dealhungry US software giant. But Sun is predominantly a hardware company. The industry distinctions among tech s giants are blurring rapidly.

PepsiCo’s $6bn deal brings bottling full circle

20 Apr 2009

The US beverage giant offered to buy the bottling companies it spun off in the 1990s. That should give Pepsi more control over its distribution, a smart move in light of its changed business. The bottling spinoff fad was based on financial engineering and has gone flat.

Zhongwang IPO doesn’t prove market’s mettle

20 Apr 2009

The Chinese aluminium firm s $1.6bn listing offers a sort of play on the country s $585bn fiscal stimulus. It s also a test of whether investors have regained their taste for big bets on untested issuers. The timing and lack of anchor shareholders suggests not.

CDS critics can’t have it both ways

17 Apr 2009

Some want credit derivatives trading limited to investors who own underlying debt. But others are now blaming creditors who own credit default swaps for forcing companies into bankruptcy. The arguments directly conflict. Better just to try to ensure the swaps are traded safely.

Citi’s Q1 bounce not as good as it looks

17 Apr 2009

The megabank's $1.6bn of profit barely covered preferred dividends. And without accounting benefits and the gain from selling Redecard, Citi made a loss. Still, the troubled bank wasn t in the red for once, and it gave its best showing in more than a year.

Poland takes Korean road to recovery

17 Apr 2009

The global recession is hurting, but Poland isn t in desperate straits, thanks to sound government finances and a sharp fall in the currency. A $20bn request to the IMF is largely precautionary. It s the East Asian restructuring model and it seems to be working.

German bad-bank scheme looks ingenious

17 Apr 2009

Banks get funding to hold toxic assets to maturity, thus avoiding firesales. They only take expected hits as they materialise. And the state provides catastrophe insurance, protecting banks in case things are worse than expected.

GE becomes bellwether for global stimulus

17 Apr 2009

Its first quarter beat expectations. Even the financial side made money. But that briefly sexy business now looks like a drag. GE's onceboring industrial businesses seem set to benefit from an eventual economic upturn and, shorterterm, from worldwide government spending.

Dimon takes the gloves off

16 Apr 2009

The JPMorgan chief landed multiple punches on government policy, calling Tarp a scarlet letter, PPIP irrelevant for the firm, and risky, and accounting changes a hullabaloo. Bank bosses are rarely so frank but good earnings and a strong balance sheet offer some cover.

UK’s budget likely to disappoint

16 Apr 2009

With annual borrowing set to soar to perhaps 12% of GDP and debt climbing towards 100% of GDP, a credible medium term fiscal plan is needed. But a government which is unlikely to last beyond next year isn t well placed to deliver that. Still it must try its best.