May, 2009
Pink picks
Comment, analysis and other offerings from Thursday’s FT,
Insolvent banks should feel market discipline
Professor Matthew Richardson and economist Nouriel Roubini write: Joseph Schumpeter famously argued that the essence of capitalism was creative destruction,
Stress tests fuel bank rally
US financial stocks soared on Wednesday on investor relief that capital shortfalls identified by the government’s “stress tests” of 19 large banks were not as big as some had feared. The bank rally took off as news of the test results leaked out ahead of their official release on Thursday.
Citi, BofA have biggest shortfalls
Citigroup and Bank of America emerged from the governments ‘stress tests’ as the banks with the biggest capital shortfalls, with Citi requiring more than $50bn in fresh equity and BofA requiring about $34bn.
Lex: Zombie banking in America
In the short term, many shareholders will be diluted as banks convert preferred shares into common equity to raise capital as required by US government stress tests, says Lex. But at the end of this process,
Porsche, VW agree merger
Volkswagen and Porsche announced plans to merge on Wednesday, ending the 3½-year takeover saga surrounding Europe’s largest carmaker. After a meeting of the Porsche family owners and VW and Porsche executives in Salzburg,
Sony Ericsson may need rescue
Japan’s Sony and Sweden’s Ericsson are preparing for the possibility of having to secure new financing at Sony Ericsson, their troubled joint venture that manufactures mobile phones. Sony and Ericsson are considering a capital injection,
KKR to buy AB Inbev Korea unit
US buyout firm KKR is is buying Anheuser-Busch InBev’s South Korean beer unit for $1.8bn, reports Bloomberg. AB InBev, formed in a $52bn merger last year, and KKR plan to announce the deal Thursday, according to people with knowledge of the matter. The Belgian brewer is seeking to sell $7bn of assets to help repay $45bn of borrowings taken on to fund last year’s acquisition of Anheuser-Busch.
Chrysler rebels owed just $295m
Dissident creditors trying to block the reorganisation of Chrysler are a small group of investors that are owed just $295m, court documents show. Some members of the group have tried to remain anonymous after being criticised by the Obama administration.
Fortress narrows quarterly loss
Fortress Investment Group, the publicly traded US hedge fund and private equity house, on Wednesday reported a narrower Q1 loss as it continued to feel the impact of client redemptions and lower revenues from fees.
BNP sees strong Q1 profit
Investment banking revenues at BNP Paribas reached a record high in the first quarter, leading to bigger profits than expected at France’s biggest bank, despite rising bad loan provisions. BNP on Wednesday reported Q1 net profits of €1.56bn ($2.07bn),
Shareholders reject Provident bonuses
UK shareholder anger over executive pay issues intensified on Wednesday as investors voted down plans by Provident Financial to pay a bonus and double-digit salary increases to top executives. More than 51% of votes on the sub-prime lender’s remuneration report were cast against it at its annual meeting on Wednesday.
Commerzbank to divest property unit
Commerzbank is to divest its Eurohypo property finance subsidiary as part of a deal with European competition authorities to compensate for the €18.2bn ($24.2bn) of state aid given to Germany’s second largest bank.
Deutsche Post: no bid for Royal Mail
Deutsche Post on Wednesday confirmed it had not made an offer for the UK’s Royal Mail and turned the spotlight on plans to overhaul its own mail delivery business. Frank Appel, chief executive, prepared the ground for a clash with German labour unions as the logistics company races to cut costs.
Gold sales cost Europe $40bn
Europe’s central banks are $40bn poorer than they might have been after they followed a British move 10 years ago to shrink the Bank of England’s gold reserves, according to an FT analysis. London’s decision on May 7 1999 to sell must of its gold reserves in favour of assets such as government bonds marked the peak of so-called “anti-gold” sentiment among European central banks.
SocGen picks Oudéa as chairman
Frédéric Oudéa was promoted to executive chairman of Société Générale after the sudden resignation last week of Daniel Bouton. It is the second time that Oudéa has succeeded Bouton, having replaced him as chief executive last May after the Jérome Kerviel trading scandal in January 2008 forced Bouton to split his chairman and chief executive roles.
Red-faced IMF fixes east Europe error
The IMF has corrected an embarrassing error that led to exaggerated estimates of the external debt levels of crisis-hit eastern European states. In its latest Global Financial Stability Report, published in April,
Overnight markets: Relief
Asian stocks jumped on Thursday on better-than-expected US and Australian jobs reports and an assurance from US Treasury secretary Tim Geithner that none of the biggest US banks are insolvent. Japan’s markets re-opened after a string of holidays.
While we wait for the stress tests…
Still no (official) sign of the results of the stress tests – despite many, many appearances by people familiar with various matters – so in the interim, here’s some chart porn.
EconomPic Data, using data compiled by Calculated Risk,
Overnight markets: Weak
Asian markets (Mon)
03:00 BST
Nikkei down 60.95 (-0.65%) at 9,371.88
Topix down 1.04 (-0.10%) at 894.19
Hang Seng up 178.17 (1.02%) at 17,568.04
US markets (Fri)
S&P500 up 21.84 (2.41%) at
[The Stanford Series] When it came to Sir Allen Stanford, many warnings went unheeded
In October 2002, a Mexico-based accountant sent a letter to the US Securities and Exchange Commission expressing his concerns about his mother’s investments with the Stanford Financial Group.
The man’s mother had invested all of her family’s money in high-yielding certificates of deposit at the Antigua-based Stanford International Bank.
personfamilias (definition of)
From FT Alphavilleopedia:
1. a person familiar with matters of state, institution or private enterprise, who is willing at times to divulge said matters to select members of the press on condition of anonymity.
Rally fever hits oil
Yes that’s right, rally fever is threatening to go trans-asset-classdemic.
On Wednesday WTI crude futures soared as much as 4 per cent to $56 per barrel as US stock figures from the EIA revealed a larger than expected drawdown in gasoline inventories and a smaller than expected build up in crude stocks:
So who is this person familiar with the matter?
As FT Alphaville has already noted here, there appears to be one very busy “person familiar with the matter” doing a not insubstantial amount of leaking to the media with regard to the stress-test results.
Platts versus the rest of the energy trading world
Platts, a key assessor of physical energy prices, appears to be treading on some thin industry ice.
Energy traders are reportedly up in arms over the group’s planned changes to its pricing methodology which would see it move the timing of some of its US over-the-counter assessments to 3.15 pm from 2.30pm US central time. Platts’ reasoning for the move is as follows:
A suckers’ rally or the real deal?
The question is on quite a few lips right now. The Footsie is up 25 per cent in the space of two months, as has S&P 500 has risen some 34 per cent from its March 9 low.
James Montier at SocGen says he doesn’t have a clue.
Wells Fargo needs $15bn, Bloomberg says
Hot on the heels of a vague CNBC report that stress test results showed Wells Fargo would need “more capital” comes this Bloomberg story :
Wells Fargo & Co., the fourth-largest U.S. bank by assets, requires about $15 billion in new capital as a result of regulators’ stress test on the lender,
GAO less than pleased with former SEC chairman Cox
The Government Accountability Office, the investigative arm of the US congress and known for its poisonous pen, strongly criticises the leadership of former SEC chairman Christopher Cox in a report released on Tuesday.
One peeved Landesbank
WestLB, fuming even, on learning that rating agency S&P has downgraded the German institution from A- to BBB+ with a negative outlook. Out pops a statement in protest:
The decision of S&P is, in our opinion,
China’s fake recovery
Renewed commodity demand and a rise in manufacturing activity in China are being heralded by many as justification for the global “green shoots” recovery argument.
Much of this sentiment was reinforced this week when Hong Kong brokerage CLSA reported a rise in its Chinese purchasing managers’ index.