Oh no no, of course we didn’t take cash out of a French bank!
RTRS-SIEMENS BANK SAYS FT REPORT THAT IT TOOK MONEY OUT OF FRENCH BANK AND DEPOSITED IT WITH ECB IS FACTUALLY NOT CORRECT
Oh, er, maybe we did or maybe we didn’t!
RTRS-SIEMENS GROUP SPOKESMAN DECLINES TO COMMENT ON FT REPORT THAT COMPANY SHIFTED FUNDS FROM FRENCH BANK TO ECB
Oh, er…
RTRS-SIEMENS WITHDREW UNKNOWN DEPOSIT AMOUNT FROM SOCIETE GENERALE IN JULY, BEFORE STRESS TEST RESULTS – PARIS-BASED SOURCE
RTRS-SIEMENS WITHDRAWAL FROM SOCIETE GENERALE RELATED TO PERFORMANCE AND NOT TO OVERALL HEALTH OF BANK – PARIS-BASED SOURCE
We remain mystified as to what Siemens actually thinks about this at pixel time – and what does ‘performance’ mean in this context.
Anyway, this might be controversial but we don’t think that Siemens taking money out of SocGen is in itself such a huge thing. Sure, SocGen might have to had to fund assets from another source to replace that €500m (as the FT reports the figure) of Siemens deposits, but that’s fairly normal. Certainly though it’s come at a bad time. Whether or not Siemens took it out for performance reasons or out of fear is neither here nor there — the cash is leaving SocGen all the same.
At the same time, it’s not clear what, if anything, this means for Siemens’ relationships with SocGen on other issues or with other French banks. (Trade finance must still be a key relationship, for example?)
More interesting is news that Siemens has parked much more cash at the ECB, between €4bn and €6bn. For context, we note that Siemens Group had around €13bn in cash or cash equivalents on balance sheet in June, according to its latest financial results.
And Siemens has had the opportunity to place much of it in a very topical place at the ECB, according to the FT — the one-week deposits issued as part of the central bank’s sterilisation operations related to its sovereign bond purchases.
The size of the operations is now €143bn owing to recent Italian and Spanish bond purchases, so Siemens Bank’s one-week deposits are helping to sterilise between 2.8 and 4.2 per cent of the total. This is maybe not a massive number in itself, but it is interesting we think given the thousands of credit institutions who operate in the Eurosystem and who are also eligible to bid for the sterilisation deposits. Some ECB board members happen to be anxious that the central bank can continue to sterilise its interventions in the massive Italian bond market (which perforce have to be persistent and large in size). This is an intriguing datapoint despite Siemens’ general banking license with the ECB.
Of course what Siemens does with its cash is its business, and certainly if “performance” is the issue it’s possibly getting a better rate at the ECB (where the sterilisation deposits have a fairly remunerative rate). It’s purely a coincidence that it’s also a massive safe haven!
Update – On further reflection… Siemens cites “performance” in its movements of cash which we take to be improved rates. But of course, rates from the sterilisation operations can change a lot depending on demand (bid cover, and so on) at each tender. It fluctuates, it’s safe to say, so might not reliably provide more remunerative rates. Plus it’s debatable how much importance a corporate treasurer might put on earning a few more basis points, next to the fact of where the cash is placed. In which case the ECB’s haven status stands out even more. There’s nothing wrong (it’s prudent even!) with Siemens doing this.
We are of course just dying to know what Juergen Stark thinks of a German engineering conglomerate helping prevent the ECB’s bond-buying from becoming full-blown QE. Presumably he would not be impressed.
Related link:
Banco Santander versus Bank of BMW – FT Alphaville