Posts tagged 'Accounting'

The pictorial UBS beat

UBS beat profit forecasts with their Q3 results on Tuesday, coming in with a SFr 1.02bn ($1.13bn) of net profit.

In the absence of unauthorised gains to offset them, unauthorised (er) losses from the trading scandal cost the group SFr 1.85bn. All more or less as expected, and in a tough market environment (click to expand):

Writing down Greece at Deutsche, encore

Deutsche Bank’s third-quarter results, 2011:

- A €777m profit, double forecasts but down from €1.1bn in the second quarter (excluding charges from the Deutsche Postbank merger) Read more

Dear ESMA … about those Greek debt impairments

From Tuesday’s FT — some letter-writing:

Some European financial institutions should have taken bigger losses on their Greek government bond holdings in recent results announcements, according to the body that sets their accounting rules. In a letter sent to the European Securities and Markets Authority, the European Union’s market regulator, the International Accounting Standards Board criticised the inconsistent way in which banks and insurers have been writing down the value of their Greek sovereign debt. Read more

IASB criticises Greek debt writedowns

Some European financial institutions should have taken bigger losses on their Greek government bond holdings in recent results announcements, according to the body that sets their accounting rules, the FT says. In a private letter sent to the European Securities and Markets Authority, the European Union’s market regulator, the International Accounting Standards Board criticised the inconsistent way in which banks and insurers have been writing down the value of their Greek sovereign debt. Separately, the FT also reports that on Monday two top European officials went before parliament to defend the region’s banks.

How to value a Greek bond like a CDO, part two

Ce contexte spécifique et la liquidité très faible du marché de la dette grecque a conduit le groupe Crédit Agricole S.A. à valoriser, au 30 juin 2011, ces instruments en « mark to model » et à les classer en niveau 3, à l’exception des titres du portefeuille de négociation restés en « mark to market » niveau 1 compte-tenu de leur nature et de leur maturité (inférieure à 6 mois)…

Sorry — the consolidated financial statements to Credit Agricole’s latest results were only published in French on Thursday. Though you’ve no doubt got the gist of “mark to model”. That and Level 3, which is the place where banks can reclassify assets and price them purely through modelling, when market prices (“Level 1″) are too infrequent or illiquid to be observed. There’s also a halfway house, Level 2. Read more

Another way to impair Greek bonds

Another way to swap them too?

Interesting fact: Commerzbank’s Greek bond exposure is almost all positioned in maturities after 10 years. Ostensibly, the current IIF financing offer for Greece targets bonds maturing before 2020. No later. Read more

How to value a Greek bond like a CDO

There are two fun things about BNP Paribas’ €534m Greek bond impairment (sat right at the top of its second-quarter results press release…)

 Read more

Greece as a test for auditors

Much like the rating agencies, many auditors have suffered a crisis of creditability in recent years.

That will make their reaction to the IIF’s proposed financing offer for Greece all the more interesting. Read more

SEC investigating Groupon accounting

The SEC has asked Groupon to answer questions about its use of an unusual accounting metric in financial information provided under its IPO filing, the WSJ reports. Investors have argued that the ‘adjusted consolidated segment operating income’ framework under-rates the company’s marketing costs. Groupon earned $60.6m in operating income for 2010 on the adjusted CSOI basis, and lost $413.4m on a GAAP basis according to its S-1 filing, FT Alphaville reported at the time. The SEC is also looking at Groupon’s accounting of gross profits, with the probe prolonging the company’s pre-IPO review, says CNBC.

Ready, set, impair those Greek bonds!

Hey European banks! Have you seen this?

[International Accounting Standards IAS39 - Paragraph 59] A financial asset or a group of financial assets is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. It may not be possible to identify a single, discrete event that caused the impairment. Rather the combined effect of several events may have caused the impairment … [these events can include] a) significant financial difficulty of the issuer or obligor; … Read more

A peek at private placements

We know that private placements have become a popular method of European bank funding recently.

Though smaller, the deals do allow issuers access to cheaper, more flexible funding — or even money that might not otherwise have been available to them given recent eurozone sentiment. Plus the banks don’t have to worry about providing, for example, billions worth of collateral upfront in a benchmark covered bond issue that would have been closely scrutinised by the market. Read more

Italian volatility, l’accounting differenza

Because some day you might want a detailed breakdown of how Europe’s banks are accounting for their Greek, Spanish — and even Italian — bonds, here’s a helpful table from Deutsche Bank.

It comes from Mohit Kumar and Abhishek Singhania, who’ve crunched the stress test dataRead more

The unstressed tests, and Italy bonds

We’re getting the results of the European bank stress tests later (at 1700 London time) and while we’ll discover who has failed, or nearly failed, the raw data on sovereign exposures, as Jonathan Weil notes, should prove far more useful in the coming days.

Although, FT Alphaville has already seen enough to indulge in a favoured game. That of pointing out just how quickly reality tends to outpace the “adverse” sovereign scenarios employed. Read more

Under-reported – and non-performing – assets at US banks

A sudden regulatory and accounting push on banks’ “extend and pretend” practices means we’re about to get a peek at one form of renegotiated loans come the third-quarter — so-called Troubled Debt Restructurings.

The Securities and Exchange Commission has been on the case of restructured bank loans since March this year, when it fired off a letter asking financials to clarify their loan modifications. As a reminder, loan mods can change the terms of a loan for a borrower, giving them another chance to make good on the debt, but modified loans do have an unnerving tendency to redefault. In April, the US accounting board announced they’d be firming up rules on how banks account for and report Troubled Debt Restructurings (TDRs). The new guidance is expected to increase the amount of loans reported as TDRs on banks’ balance sheets once it comes into effect this Autumn. Read more

Europe’s non-performing loan zones

Here’s PricewaterhouseCoopers’ (theoretical) non-performing loan (NPL) barometer:

 Read more

The foreigners are frightened

Ouch.

China’s B shares index, which contains 53 Chinese companies that foreigners are allowed to own, has finally succumbed to those fraud and accounting scandals, losing 12.8 per cent last week alone. Read more

Regions Financial investigates executives

The board of Regions Financial is investigating whether executives delayed public disclosure of loans that were going sour during the financial crisis, the WSJ reports, citing to court documents and people familiar with the matter. The audit committee of the nation’s 12th-largest U.S. bank by assets—and the only one of its size still supported by crisis-era government aid—began its probe after the Federal Reserve expressed concerns about past practices, these people said. The board review comes as regulators step up scrutiny of methods banks use to classify loans, which can make banks appear healthier than they are. Investigators are looking at so-called extend-and-pretend cases—where a bank gives a borrower more time and delays reclassifying a souring loan—as well as at “troubled-debt restructurings.”

New strategy – AIG will buy European junk instead of its own

AIG is back on Wall Street.

Fresh from failing to acquire its own portfolio of dodgy deals from the Federal Reserve — AIG’s Mortgage-Backed Securities (MBS) were acquired by the US central bank during the crisis and transformed into Maiden Lane II — the bailed-out insurer has a new strategy to lure investors to its stock after last month’s ‘re-IPO.’ Read more

How to tinker with bank risk-weightings

Risk-weightings for bank assets are still relatively new things.

Codified in the Basel II rules first published in 2004, they were meant to shift financials away from set levels of required capital, tailoring them to the perceived amount of risky assets held by banks. Read more

Dupe de Group(on) – some very special accounting

You gotta love new accounting principles — especially ones drummed up by IPO-ing tech firms.

From Groupon’s S-1 filingRead more

Greek ‘reprofiling’ and Orwellian accounting

Gotta love this straight-shooting piece of research from Alliance Bernstein.

The word “re-profiling” comes straight from “Newspeak“, the communication model employed by the Ministry of Truth in Orwell’s 1984. The one thing that is clear about re-profiling is that it does not include haircuts to the principal of the debt, but alterations to the maturity and potentially also to the coupon of the bonds. Read more

The extend and pretend exposé – coming to a bank near you

In March, the US Securities and Exchange Commission fired off a few letters asking a number of America’s regional banks to clarify their loan modification practices. In particular the SEC is reportedly looking into “troubled debt restructurings” (TDRs) which involve modifying existing loans’ terms.

Just to be clear, this particular form of ‘extend and pretend‘ is 100 per cent legal, though it’s governed by some fairly nebulous accounting rules and is meant to be reported. First though, look at those TDR growth rates. In a special report out on Thursday, Fitch Ratings says reported TDRs increased 48 per cent to $106bn in 2010. The mix, however, is the really interesting (and significant) thing. Read more

To avoid Greek restructuring losses – an accounting loophole for banks

“We previously expressed the view that, ‘unless the government concerned was prepared to suffer significant economic costs (and in effect, restore bond holders to the position they were in before credit concerns arose) there is no way for holders to avoid having to book losses in their financial statements’.”

Scratch that! Read more

Roubini’s guide to a Greek debt restructuring

Cut, paste and mail to your favourite holder of Hellenic debt:

 Read more

Choose your own MBS accounting

Basel III. Accounting. Mortgage-Backed Securities. Yawn.

But wait — Basel III’s attempt to incentivise banks into managing their interest rate risk could be about to permanently alter the way banks handle some $1,480bn worth of MBS, or 11 per cent of their assets. Read more

A little Protium light

For no reason other than to have it out in the open somewhere -presenting the financial filings of C12 Capital Management LLP:

It’s controlled by C12 Capital Management Holding Ltd – as in the guardians of Protium, the infamous Barclays toxic asset portfolio which is now being wound up – and it’s a nice breadcrumb on the trail leading to Michael Keeley, the former BarCap executive who managed Protium assets. Read more

Protium’s coming home

Eighteen months, $6.39bn of toxic assets, a $12bn loan and a pandaemonium of accounting shenanigans later…

…We’ll ask again, what exactly was the point? Read more

Citi’s Basel-dodging, capital-avoiding, accounting switch

Citi doing weird accounting manoeuvres? Perish the thought!

From the bank’s first-quarter results press releaseRead more

Centralised price discovery!

Behold a central pricing solution for illiquid assets… stuff like TruPS CDOs or, err, Irish bank loans.

 Read more

Those European stress test details

In case you forgot that other crisis…

The European Banking Authority has just published parameters for the upcoming European bank stress tests. A first glance has them about as meek as expected. Read more