RSS feeddeleveraging
’The EBA bank recap, broken down
No deleveraging because of our recapitalisation exercise, really — or if there is, you’ll hardly notice it. So says the European Banking Authority in a Thursday night release:
(Warning: pie charts follow)
Over three quarters of eurozone bank capital-raising will be about improving the capital side of the capital ratio,
LTRO smackdown
Dan Davies takes us to task over the ECB’s three-year liquidity to banks, and catalysing the (unsecured) funding market:
Oops. It’d be nice to be wrong. Lloyds — which didn’t borrow from December’s LTRO incidentally — really isn’t Barclays,
All is for the best in the best of all possible Commerzbanks
Shares in Commerzbank were up about 11 per cent at pixel time. It’s generally a strong day for European banks as well, but we suppose (bemusedly) it’s following this statement from the German lender on its €5.3bn capital hole…
Return of the large caps
Between 2000 and 2010, European large caps underperformed mid caps by 28% and lagged small caps by 47%.
And yet, the equity strategists at Morgan Stanley recommend investing in large caps in 2012. The decade of underperformance has been reversing.
A Magyar martingale
(We mean martingale, the betting strategy, not the quant model!)
Here’s the thing about Hungary, as we see it anyway. If you look at things like the current account, for example, it says “fixable by the IMF”.
Implications of the US money market fund retreat
That chart is from the latest Fitch Ratings report of the biggest US prime money market funds.
Check out Tracy Alloway’s writeup and we’ve also chucked the report in the usual place.
But the short story is that these funds continue to pull back from French banks in large amounts but have gradually eased back into non-euro-plagued UK,
Deutsche’s Reid on shorter business cycles
It must be nearly Christmas, for the last Deutsche Bank Early Morning Reid of 2011 was today.
Luckily, strategist Jim Reid and his team left us with a note on their thoughts for what the new year will hold,
Let there be credit claim collateral
OK — you’re sick to death of hearing about the European Central Bank’s three-year liquidity may, or may not, get banks to buy sovereign debt to pledge as collateral.
So why not hear about all the other extra trash assets the ECB will now accept? Potentially much more economically critical trash.
Is there a world outside EBA capital targets? [updated]
Update — FT Alphaville has heard that the answer to this question is in fact… yes. See below for more details.
The official EBA numbers on European bank capital shortfalls are out. In aggregate it’s €114.7bn.
When the deleveraging meets the real economy
Looking forward to the new year yet?
After a likely outright contraction in GDP in 2012, in the creditless recovery that we envisage the pick-up in GDP growth is likely to be slow and shallow.
That’s from a note by Daniele Antonucci at Morgan Stanley in which the analyst assesses the impact of bank deleveraging on the real European economy.
Nomura on European bank deleveraging and US loans
Nomura has a new report showing that US loan growth is having a good quarter thus far, even after accounting for the normal seasonal boost, but what caught our eye was the excellent series of charts on the activities of foreign bank subsidiaries in the US.
The great de-leveraging
Or as Matt King at Citi put it in his latest presentation, “Payback Time: The Coming Decade of Deleveraging”. In short, we’ve borrowed much too much, and the public sector can’t substantially reduce its debt without a corresponding increase in borrowing in the private sector,
French exposure in pictures
Au bout du fossé, la culbute.
Brace yourself. Here are some reasons why markets are giving France, in particular, a kicking today, according to the Banca D’Italia’s latest financial sector report on November 2:
What Americans are(n’t) buying
Other than what’s happening overseas, few topics have been more thoroughly scrutinised recently than the relationship between housing market activity, deleveraging and the US consumer.
James Hamilton tackled this in a post yesterday explaining the impact that sluggish spending on housing and autos is exerting on economic growth,
…And Justice for All (in emerging Europe)
CEE Banker: If everybody agrees I’m innocent, how come I’m going BACK to the market jailhouse? The ECB is guilty of failing to shore-up monetary conditions in the CEE!
European policy-maker: You are out of order! We have provided a liquidity backstop for eurozone banks that operate in the region!
CEE :
Another look back at housing and deleveraging
A question we’ve been pondering lately is just why there’s been such a renewed, intense policy focus on the US housing and mortgage markets in particular.
Or rather what we’ve really been wondering is,
Honey, I shrunk Emerging Europe
Eurozone banks selling assets in Emerging Europe – to tart up their capital ratios under crisis pressure – is not front-page news at the moment.
Frankly, we think it should be!
It’s a huge test case.
The looming crunch de crédit
Whatever happens in the eurozone this week, banks will have new capital ratio targets. They are not going to raise enough actual new capital to meet them.
Ergo they flip the ratio and start burning off risk-weighted assets.
Struggling back to neutral, (fiscal) policy edition
Or, if Ben won’t budge, then what?
We closed our last post by writing that “if policy is needed to offset household deleveraging and the corresponding reluctance of businesses to spend, help would have to come from the fiscal side.”
Struggling back to neutral, (monetary) policy edition
Ezra Klein has offered a name for the current situation that’s not nearly as sexy as the ones we came up with, but which is reasonable enough:
If it were up to me, we would call what we’re in a “household-debt crisis,” or something more elegant that gets the same idea across,
Are US banks turning Japanese?
An important question given struggling financial stocks, a stalling US economy, US public sector cuts and concerns over the impotence of QE3. Take your pick, really.
Fortunately it was also a question tackled Friday morning in a special conference call hosted by Nomura’s US banking analyst Brian Foran,
Britain isn’t just in very deep trouble. It’s doomed
This… will spark some debate. Anything on the future of the British economy entitled the ‘Armageddon Project’ and applying terms like ‘psychology of denial’ and ‘debt addiction’ will do that.
But since the UK’s growth outlook and status as a safe haven will be closely watched for the rest of 2011…
More on bifurcated US consumers
Advertising Age on Monday had a look at the contrast in spending patterns between upper-income America and, well, everyone else:
Overall, [the Consumer Edge Research] “Willingness to Spend” index of U.S.
The banking system – still broken
Here’s a perfectly nuanced view of how quantitative easing — the programme started by the Federal Reserve to avert depression following an almighty banking bubble — impacts asset prices.
First, envision part of the QE process.
Taylor-fied of eurozone interest rate policy
*WARNING*
This is another dose of Taylor Rule-based eurozone interest rate hindsight. But it’s a dose of interest rate hindsight that comes with a bit of foresight too — given the market is positioning for a rate rise by the European Central Bank sometime this year.
The deleveraging pain in Spain
Here’s a problem for Spain (and to a lesser extent, the US and UK) charted:
It comes from Morgan Stanley’s 125-page European banking presentation, wherein the analysts reinforce their vision for the (reshaped) future of the industry.
This is not normal ECB tightening
In which ‘strong vigilance’ = ‘token gesture’.
Three charts on the European Central Bank and the euro periphery, from Credit Suisse’s global equities team on Monday:
US deleveraging and consumption, in progress
There was some good news in this morning’s Personal Income and Outlays report for January, though not quite enough to get excited about.
Personal income climbed 1 per cent, well above expectations, and the savings rate increased for the first time since last July,
The ‘depreciation doomsday machine’
There are prognostications of doom for the US economy, and there are highly specific prognostications of doom for the US economy.
Here is one, from Charles Dumas of Lombard Street Research:
The potentially