Year: 2009

Banks’ woes make economic recovery distant

16 Jan 2009

Governments are being forced to pour money into banks. But that money may deal with fresh losses rather than spur fresh lending. It's all bad news for economic recovery and for government finances.

Obama will need his old dogs to learn new tricks

16 Jan 2009

His economics team is short on new faces, and his $825bn stimulus bill looks like a massive version of oldschool Keynesianism. Yes, his picks can hit the ground running a big plus. But to salvage the US economy, Obama must ensure they don t just run in the same old directions.

BofA lifeline is small thanks for Merrill rescue

16 Jan 2009

The $20bn injection resembles Citi s second bailout. BofA gets the same amount of capital and on better terms than the market would have provided. But if BofA took one for the team in acquiring Merrill and preventing another crisis, it isn t getting that much appreciation.

Schröder’s Putin links may tip balance at TNK-BP

16 Jan 2009

The former German chancellor is to be a supposedly independent director of TNKBP, the divided AngloRussian oil major. But his ties to Russian prime minister Vladimir Putin, and his chairmanship of a Gazprombacked pipeline, raise fears that Russia will call the shots.

M&S’s annus horribilis is well underway

16 Jan 2009

A downgrade of M&S debt to just above junk is a blow for the UK retailer. M&S doesn't have to refinance until 2011, and it may not be alone in suffering at the hands of more cautious rating agencies. But this is a reminder that chairman Stuart Rose needs to take tough action.

Citigroup identifies workable structure – for future breakup

16 Jan 2009

The bank s plan to put unwanted assets and operations into a separate unit is a good first step. But it will need to go further, winnowing down its global retail sprawl, if not separating it completely from its chastened wholesale businesses when the timing is right.

Investment banking nadir looking yet more distant

15 Jan 2009

After Lehman, it felt like sentiment could hardly worsen. But December seems to have been a devastating month for the business. Deutsche Bank, Bank of America and Barclays are among those offering bad omens. Plenty more losses and job cuts may be on the horizon.

Renault should skip dividend if it receives state aid

15 Jan 2009

The French government wants the carmaker to skip its planned E1.3bn dividend in exchange for its share of a statefunded industry bailout. That is quite right. Renault shareholders must understand that the company badly needs cash and should conserve all it has.

Lebedev should be welcomed as UK press baron

15 Jan 2009

The oligarch who reportedly wants to buy London s Evening Standard newspaper will suffer from the same bad reputation as Russian peers. But he owns two of Russia s most liberal newspapers and has previously sidestepped Kremlin machinations. He deserves the benefit of the doubt.

HSBC doesn’t need mega capital raising

15 Jan 2009

Granted, the $20bn fillip prescribed by Morgan Stanley analysts wouldn t hurt. Strip out accounting quirks and HSBC is less well padded than it looks. But the unfortunately timed research note may have given the bank an undeserved air of desperation.

DSG, Home Retail will struggle in present form

15 Jan 2009

After some betterthanexpected trading updates, two of the UK retail sector's biggest sellers of discretionary goods are back with bad news. Both DSG and Home Retail saw sales tumble. Both saw margins crunched. The outlook for nonfood retailers just gets worse.

BofA follows Citi into the mire

15 Jan 2009

Once lauded as a market saviour, CEO Ken Lewis is seeking another big dose of Tarp cash. That has sent BofA s stock plummeting. At least JPMorgan s earnings weren t as bad as expected. But as the crisis continues, the list of healthy US banks is likely to shrink further.

2012 Olympic host losers look like winners

15 Jan 2009

London s games are already struggling. Big sponsor Nortel has gone bankrupt. The Olympic village may require more funds than originally planned. Vector in their respective economic problems and New York, Paris, Madrid and Moscow should thank their lucky stars.

ECB, unlike Fed, avoids going all-in

15 Jan 2009

The ECB trimmed its key interest rate to 2%, well above the US Fed's 00.25% target range. That matches France and Germany's caution on fiscal stimulus. If it lasts, Europe's restraint will produce a smaller quick boost. But it could make the longerterm recovery less vulnerable.

Disney heats up UK football rights auction – a bit

14 Jan 2009

Deep pockets failed to win Disney s ESPN TV network the broadcast rights for the German Bundesliga. Sure, serious interest in the English Premier League ups the stakes for current holders BSkyB, and Setanta especially. But this auction still won't be as hotly fought as the last.

Credit thaw starts, but ice age isn’t over

14 Jan 2009

Libor spreads are narrowing. Coveredbond and highyield issues are back. That suggests credit is coming out of the deep freeze. But asset reallocation and low government bond yields may account for some of the revival. Economic reality points to a continued cold snap.

Hiving off pieces alone won’t cure Citi

14 Jan 2009

The notion that simply selling noncore units like Smith Barney will do the trick is flawed. Citi s problems didn t develop in these ancillary businesses but within the core of the wholesale bank. Fixing its broken culture of unaccountability is CEO Pandit s real challenge.

Good news: December retail sales were awful

14 Jan 2009

US consumers celebrated their inner Scrooge at Christmas: retail sales fell for the first year since the series began. But this should be welcomed. It means consumers are rebuilding their balance sheets. When the government stops overspending too, the US economy will recover.

Is blocking investor withdrawals ever OK?

14 Jan 2009

Many hedge funds have thrown up gates to stop money leaving. Winning managers can smugly say all such instances, from Tudor to Steel Partners, are bad. But there is a difference between honest attempts to limit losses and selfserving moves that hurt the industry s reputation.

Euro pays price for ECB losing the initiative

14 Jan 2009

The euro s tenth birthday was attended with much celebration. But it looks less cheerful now as the dollar responds to highly activist US policymaking, and amid exacerbated concerns about Ireland. The ECB must face up to the urgent need to cut rates.

Dubai’s Nakheel drops 1km back to earth

14 Jan 2009

The stateowned property developer is wisely suspending a vainglorious project to build a 1km tower, which was trumpeted when Dubai s financial health was already looking a worry. With Nakheel still trying to refinance $3.5bn, this might not be its last retreat.

Apple needs to prepare for a future without Jobs

14 Jan 2009

Steve Jobs is stepping down for health reasons. Investors can hope he ll recover and return. But Apple needs a credible transition strategy in any case. It should name a new CEO and leave Jobs as chairman. That would minimise disruption and set the stage for the postJobs era.

UK boost to business lending looks insufficient

14 Jan 2009

The government is providing £10bn of guarantees on smallbusiness lending, among other measures. That is some help. But the plan looks fiddly and does not attack the ongoing funding challenges that underlie banks lending strike. Costlier state intervention may yet be needed.

Obama should not impose a stamp duty

14 Jan 2009

Supporters of a US financial transactions tax say it will reduce financial speculation. But gamblers will find other ways to wager. And adding to the burden of individual investors already sitting on big losses won t help the markets or the economy recover.

Deutsche Bank won’t face the music

14 Jan 2009

Despite a E5bn fourthquarter loss, the German group boasted of its capital strength and will pay a small dividend. But Deutsche s reputation as a risk manager is tarnished. Investment banking profit also looks scarce. Its confidence in resisting fresh capital sounds overblown.

Nortel bankruptcy offers path for GM to follow

14 Jan 2009

The Canadian tech group has gone bust despite holding $2.4bn of cash on its balance sheet. Filing now, while burning cash, nonetheless allows it to avoid expensive debtorinpossession financing. Other troubled but cashrich firms, such as GM, should take note.

Neiman Marcus is test case for lenient LBO debt

14 Jan 2009

The highend US retailer was one of the first to issue pik toggle and covenantlite debt. It is now paying some interest in kind. But that s not as alarming as other companies similar moves. Neiman gives LBO bosses a chance to prove that lenient debt terms aren t always toxic.

Tim Geithner has some explaining to do

14 Jan 2009

The US Treasury nominee s tax lapses don t look large or especially wilful. But he needs some good answers as to why he didn t pay two years taxes even after questions were raised by the agency he is due to run. The episode should also prompt a debate over a simpler tax code.

Creativity is key in new world of M&A

13 Jan 2009

Spirits giant Constellation just sold lowerend brands like Montezuma Tequila to focus on highermargin products. But getting a deal done with debt markets closed required creativity in this case a $60m loan to the buyer. That boosts its risk a bit but looks smart nonetheless.

BNP needs a compromise to clinch Fortis deal

13 Jan 2009

The French bank s courtdelayed plan to buy the Benelux bancassurer will face fierce opposition when put to a shareholders vote in a month. BNP could extend an olive branch by giving up on the insurance business. But failing to get Fortis retail network would be a major setback.