Year: 2009

BofA board lets shareholders down

29 Jan 2009

There were plenty of justifications for ditching CEO Ken Lewis: valuedestroying deals, inept due diligence and plain old lousy management. There are also potential replacements. Instead directors left him at the helm. If investors want Lewis out, they must do it themselves.

Obama should tread carefully around bonuses

29 Jan 2009

The US president is castigating banks that received government funds yet paid bonuses. He s right that many payouts are excessive and it makes great political theatre. But policymakers should use caution when dictating pay issues it could come back to bite them.

Shell boldly raises divi as cash pressures build

29 Jan 2009

Falling crude prices led to a sharp drop in the oil major s quarterly net profit. Yet Shell is upping its dividend, while keeping capex flat, which means debt will rise. Managing cash and costs is the biggest challenge facing CEO designate Peter Voser this year.

Death threats and saliva challenge blog business model

28 Jan 2009

The founder of influential Silicon Valley blog Techcrunch is temporarily giving up after being spat on in Munich and receiving death threats. That's understandable. But this highlights the keyman risk that could keep this emerging medium from hitting the big time.

BBVA distances itself from Santander

28 Jan 2009

The two Spanish banks have diverged in their international strategies. Now BBVA has decided to cut its dividend, while Santander opted for a massive rights issue. The BBVA approach to capital looks more sensible, but may not be enough to cope with storms in Mexico and Spain.

Savings are crucial for emerging markets

28 Jan 2009

The IIF forecasts net private capital inflows to emerging markets this year will be just 18% of the 2007 level. Countries with big debt loads could face default unless they also have huge reserves. But China and those that generate capital domestically should be in better shape.

Is Wells Fargo calling the bottom?

28 Jan 2009

Not quite. Keeping the dividend, eschewing more Tarp capital and touting market share gains look punchy amid US banking carnage. But bosses seem to have a better handle on Wachovia than, say, Lloyds did on HBOS. It ll hurt if they re wrong, but they still have room to manoeuvre.

Germany’s car plan leaves UK well behind

28 Jan 2009

The UK s loan guarantee plan for the car industry looks poor compared to Germany s buyer incentive scheme. Germany has encouraged cautious consumers to spend, bolstering an industry that is much bigger than the UK s and achieving immediate environmental benefits.

Banks should learn that ratchets are toxic

28 Jan 2009

The price reset mechanism protecting investors in Barclays' recent capitalraising isn t as onerous as those in earlier US bank deals. But ratchets discourage future investment, cutting off access to crucial capital in a crisis. Banks, in particular, should steer clear.

BSkyB steps outside the cycle

28 Jan 2009

Home for the recession? Watch more TV. That formula appears to be working for the British payTV operator. In a dismal economy, Sky is performing well on all counts. And as ever, it s a master at public relations Sky s clever new highdefinition TV offer will create 1,000 jobs.

Santander’s Madoff offer looks stingy

28 Jan 2009

The Spanish bank is trying to do right by those it may have shepherded into the alleged fraud. But Santander wants clients who thought they had roughly E1.7bn to make do with preferred shares it values at E500m. Some discount on imaginary gains is fair, but this one looks steep.

Unicredit’s boss deserves reprieve

28 Jan 2009

Alessandro Profumo has been the victim of chitchat that he s on the way out. But an imminent reshuffle of the Italian bank s board should buttress his position. And rightly so. Profumo may have made mistakes, but he s not doing too badly against his international peer group.

RBS investors should have acted, not whispered

28 Jan 2009

One of the UK bank s top investors said it privately criticised RBS nonexecutives for not reining in former boss Sir Fred Goodwin. Yet shareholders kowtowed over the reckless ABN Amro deal and subsequent rights issue. It is late in the day to complain about powerlessness.

Wall Street starts to feel the sting of bankruptcies

27 Jan 2009

Until now, most bank writedowns were the result of marking stillfunctioning loans to market rather than borrowers going belly up. Goldman s revelation of $850m of losses on Lyondell loans suggests the next wave of financial difficulty actual corporate defaults is rolling in.

Japan stimulus threatens worse result than 1990s

27 Jan 2009

Japan s plan to buy shares in struggling companies will perpetuate inefficiency and prevent Schumpeterian renewal. Its successive stimulus packages increase its large deficit and huge debt. It is returning to the policy mistakes of the 1990s in a far less favourable environment.

Buy American is bad for US business

27 Jan 2009

Domestic woes and simplistic nationalism have put some protectionist measures into the latest US stimulus bill. If passed, it would be a dangerous backwards move as the WTO, and many US companies, recognise. Obama would lose foreign fans and US companies would foreign sales.

Hedge fund M&A gets more creative

27 Jan 2009

Stark & Roth is buying Deephaven s roughly $2bn of assets for $7.3m a relative pittance, reflecting disarray in the fund industry. But Stark will pay more, up to nearly $45m altogether, if investors stay put and returns materialise. Such earnouts could feature in other deals.

Lehman makes mark on Nomura – in red ink

27 Jan 2009

The Japanese bank lost $3.8bn in the last quarter of 2008. The Lehman operations acquired in September were the main culprit, although market volatility, Iceland and Madoff didn t help. It is an inauspicious start to the Lehman deal. Nomura has yet to prove it bagged a bargain.

Pfizer’s monster loan adds to down-market toolbox

27 Jan 2009

The drug company, Wyeth and their bankers wrestled a clever structure that could benefit all parties. The $22.5bn loan employs a lenderfriendly provision to lure banks into the market. But this trick will only work for companies sporting topnotch credit ratings.

UK government should make up mind on Lloyds

27 Jan 2009

The standoff over the cost of the bank s statefunded preference shares should be easy to settle, since there are myriad ways to restructure the capital injection. But some compromises look nastier than others. It s time the government decided how tough it wants to appear.

Can Netflix sustain its torrid growth rate?

27 Jan 2009

The DVD rental service just announced big revenue growth amid a banner quarter. Cashstrapped consumers seem to be trading in movie tickets and cable extras for monthly subscriptions. But Netflix will need to make a bigger digital push to make this a lasting trend.

Tough times threaten US mobile operators

27 Jan 2009

US telcos have long relied on torrid cell phone growth to offset their dying fixedline businesses. Now, market saturation is approaching. Worse, margins look set to compress as tapped consumers switch to cutrate services.

Yale Model may not work in deep recessions

26 Jan 2009

David Swensen's Yale model of broad assetclass diversification, with a preference for illiquid assets, is untested in a big downturn. If illiquid assets become unsaleable, Yale model investors may be stuck with obsolete assets, underperforming more flexible strategies.

Fed shouldn’t prop up US Treasury market

26 Jan 2009

The central bank is mulling the purchase of government bonds. With prices falling, the Treasury boss angering buyers and $78bn of issuance this week alone, that might seem sensible. But it would be better to let some air out of the Treasury bubble not reinflate it.

UK bank bondholders have nationalisation safeguards

26 Jan 2009

Doubts have emerged about the prospects for bondholders in any further bank nationalisations. But even a nationalised bank would have to come out of public ownership at some point. The government will need to avoid upsetting bondholders on whom it might rely in future.

EU must ease crunch from Baltic to Balkans

26 Jan 2009

Calls from western banks for eastern Europe to receive help are selfinterested yet worth heeding. The banks helped get the east into trouble. But now western institutions should help with funds and advice, argues Ian Campbell.

Downturn polarises telco techies

26 Jan 2009

The end of 2008 was grim for the telecoms technology sector. But the pain has been spread differently to the dotcom bust. Networkequipment groups are in decent shape, despite Nortel's collapse. But handset makers have hit the downturn with existing strategic problems unresolved.

Is Tarp working?

26 Jan 2009

Not if failure is defined as any fall in bank lending. But the 1.4% drop since October in one report is less than in past recessions. And this time the bond and securitisation markets the financial system relied on have seized up. Factor that in and Tarp looks a partial success.

Apollo, Cerberus get sweet deal in Lyondell

26 Jan 2009

The bankrupt chemicals giant's $8bn of DIP financing always looked a lot. But some of it is rebadged prebankruptcy debt, not new money. That's a plus for the two investment firms and other lenders involved. And it has understandably riled those who weren't so lucky.

UBS looks stuck in tax-case stand-off

26 Jan 2009

The Swiss group says it s eager to settle charges of US tax evasion for wealthy customers. But prosecutors seem to want client names, while Swiss authorities appear unwilling to abandon secrecy for smaller private banks. Until one government blinks, UBS will continue suffering.