Investment Banking

Santander runs a tight ship into looming storms

26 Oct 2017

The Spanish bank grew revenue in the first nine months of the year and kept a lid on costs. The lender is fast integrating Banco Popular and easily covering its cost of capital. Just as well since hazards, like a Brexit-driven UK recession, will test its efficient balance sheet.

Deutsche Bank’s next problem may be excess capital

25 Oct 2017

The German lender wants to float a 25 pct stake in its asset management arm next year. An IPO could raise around 2.2 bln euros, Breakingviews calculates. Deutsche would dilute its exposure to its best business – but would once again be able to give shareholders a dividend.

India bites bullet with $32 bln bank bailout

24 Oct 2017

New Delhi is finally tackling state lenders’ bad debts. Clever financing through “recap bonds” should reduce the strain on the public purse and soak up banks’ idle cash. The final amount may need to be higher, but the recapitalisation should help revive India's flagging economy.

UniCredit gets head start on recovery path

24 Oct 2017

A data glitch forced Italy’s biggest bank by assets to publish third-quarter results two weeks ahead of schedule. Fortunately, the figures show lower costs and stronger capital. A fee-boosting partnership with asset manager Amundi helped offset the drag from low interest rates.

Kiwis test new formula in central bank petri dish

20 Oct 2017

New Zealand was the first nation to give independent rate-setters an inflation target. Now a new government wants to add employment as an objective. The less painful the switch, the more likely others will adopt goals that better suit today’s economic and political realities.

Morgan Stanley staff have the most to cheer about

17 Oct 2017

Rival Goldman Sachs pays its people more on average, but James Gorman’s firm has boosted comp and benefits by 9 pct this year, almost double the raise of its rival. JPMorgan bankers face a pay cut. Asset-management employees, though, can afford to pop some champagne corks.

Goldman pips Morgan Stanley on style not substance

17 Oct 2017

Lloyd Blankfein’s firm bested its Wall Street rival on quarterly earnings, thanks mostly to lumpy gains on equity investments and strong M&A fees. Longer term, the broader diversification and stable trading business James Gorman has crafted is becoming more attractive.

Credit Suisse breakup faces trading conundrum

17 Oct 2017

An activist investor wants to split the Swiss bank into three parts. On paper, the private banking and asset management units alone justify its $41 bln market value. But the ailing investment bank – including an estimated $250 bln of derivatives – would struggle to stand alone.

Blame for Deutsche Bank woe extends beyond CEO

16 Oct 2017

Reports of boardroom tension at the German bank are adding to unease among investors already rattled by a sliding share price. While boss John Cryan may be in the firing line, Chairman Paul Achleitner helped set the strategy. He shares some responsibility for the bank’s malaise.

Helping Santander helps UK bank competition

11 Oct 2017

Smaller lenders are angry that a state-aid funding pot set up by RBS to improve competition could help Santander, one of Europe’s largest banks. But it may be best for borrowers. Sharing funds between minnows would have done less to permanently reduce big lenders’ dominance.

Time for Barclays to sever its U.S. cards arm

10 Oct 2017

CEO Jes Staley has a conundrum: the UK bank’s market value is so depressed investors are essentially getting the U.S. credit card business for free, according to Breakingviews calculations. Spinning off the unit would make Barclays less complex and help it to a richer valuation.

Companies WACC central bankers on yields

10 Oct 2017

Rate-setters have engineered ultra-low borrowing costs and the risk premium on stocks is down. In theory, that lowers the bar for business investments. In practice, corporate hurdle rates have barely budged for decades. It’s a reality check for policymakers trying to fan growth.

HSBC’s next challenge is how to grow responsibly

9 Oct 2017

The global bank wants insider John Flint to replace CEO Stuart Gulliver, according to the Sunday Times. If approved, he will take over a slimmed-down lender trading at 1.2 times book value. Investors now want growth – but Flint and Chairman Mark Tucker should heed past mistakes.

Review: Dani Rodrik gives economists a better name

6 Oct 2017

The mildly iconoclastic Harvard professor’s “Straight Talk on Trade” runs through several controversial claims, from praise of diversity in economic models to support for curbs on capital flows and unfair trade. His humility is admirable, even if his pessimism may be overdone.

Economic odds stacked against Catalonia breakaway

6 Oct 2017

On paper, independence looks viable for a wealthy region with GDP roughly the same as Finland’s. In reality, divorcing Spain would trigger harmful disputes over tax and debt. A Catalan central bank would lack the reserves to maintain confidence outside the euro zone.

Portuguese banks face long exit from bad-debt woes

6 Oct 2017

The three biggest banks plan to jointly manage their bad debts rather than selling them off. They have little choice. With common equity Tier one capital ratios averaging 11 percent and earnings depressed, lenders can ill-afford further hits to capital.

Greg Fleming returns rich as Rockefeller

4 Oct 2017

The ex-Morgan Stanley exec is back on Wall Street in a venture with the legendary New York dynasty. The new advisory and money-management firm for the ultra-wealthy is small by Fleming’s standards. But he has found an ideal brand to target a fast-growing $60 trln market.

Catalan banks fairly punished for wrong reason

4 Oct 2017

The prospect of Catalan independence has hit Barcelona-based lenders CaixaBank and Sabadell. A schism from Spain and the EU could trigger deposit runs and losses, but the risk of that is low. Stagnant interest rates and weak profitability are a bigger threat than self-rule.

ECB bad-loan blitz to spur Italy insolvency reform

4 Oct 2017

The European Central Bank wants lenders to fully provision against new bad loans within seven years. That could be painful in Italy, where repossessing collateral can take even longer. The new rules give Rome a short window to finally get its bankruptcy law into shape.

Central bankers’ superpowers are looking spent

2 Oct 2017

Between taming inflation, fighting the financial crisis and averting a breakup of the euro, monetary policymakers acquired an aura of omnipotence. Their responsibilities are growing and their mandates have turned into a fetish. A painful collision with reality is overdue.