We’ve been harping on about the rise and importance of the central execution desk and internalisation practices more generally for a long while.
But we haven’t touched the topic recently because, well, banks and concerned parties tend not to enjoy discussing it very much. Read more
That’s banks’ exposure to Russia by major economy, put together using BIS data by Gilles Moec and team at Deutsche. Click the image to enlarge. Read more
Alternate title: the market isn’t entirely nuts, when’s the crash?
While tech titans and buyers of initial public offerings dream of a wondrous future, bank investors appear to be saying something very different.
Here’s the FT’s Tom Braithwaite and co, recently foreshadowing the US bank earnings season:
Citigroup and JPMorgan Chase have warned publicly that fixed income revenues – the engine of most investment banks’ profits since 2000 – will be down by double digits when they report first-quarter earnings next month.
After six years in the red (the latest an £8.2bn loss for 2013) the only way is up and this bank is on it:
Today RBS is announcing a new plan with the ambition of building a bank that earns its customers’ trust by serving them better than any other bank.
And here is Ross McEwan rallying clearly delighted staff with that message.
Picture a kangaroo in a sauna, its pouch stuffed with cash. The Aussie banks are where you go for bank dividends, paying out practically all their earnings in durable swimable plastic cash.
But Citi would like to draw your attention North: Read more
Wondering where next to focus attention after the emerging market carnage? Citi has a bank chart for you:
Are you sitting comfortably? Too comfortably, perhaps?
Huw van Steenis isn’t. He’s come back from Davos with the feeling that while banks have got ahead of europe-wide stress tests by raising capital (€25bn, in fact, he calculates) he is far from relaxed about the consequences of the Asset Quality Review. Read more
In our previous post we argued that one of the reasons QE may have failed to perform as expected, especially when it comes to stimulating price levels and employment, is because the modern monetary system isn’t what many believe it to be. Or at the very least, money doesn’t work exactly the way many economists and analysts believe it does.
As Tyler Cowen noted on Tuesday:
Milton Friedman, some time ago, wrote that money was for the most part neutral, and that the new money rapidly mixes in with the old. That made sense to me at the time, and it nudged me away from Austrian views, yet we have seen decidedly non-neutral effects from the various QEs and the periodic taper talk.
“We haven’t forgotten who keeps us in business,” reads the slogan on the website of Zions Bancorp, Utah’s biggest bank. Read more
Another good snippet from the BIS quarterly review that’s worth highlighting comes in the observation that banks are losing their raison d’etre due to the erosion of their funding advantages versus non-banks. Which means they’re increasingly resembling listless entities devoid of purpose in a capital shadowland that’s not willing to let them move onto another more deathly plane.
From the survey (our emphasis):
The erosion of banks’ funding advantage limits their effectiveness as intermediaries. There are indications that euro area banks, for instance, passed on some of their relatively high borrowing costs. The average interest rate on euro area bank loans stalled at levels above 3% over the past three years, in spite of falling policy rates. As the cost of funding in bond markets trended downwards, large corporates increasingly faced incentives to bypass banks and tap markets directly (Graph 6, left-hand panel).
A useful chart from Citi on Thursday morning (which you may click to enlarge), on the recent rise in bank holdings of sovereign debt. Read more
What does this mean?
Seriously — what does it mean?
It’s an analyst’s take on Lloyds Banking Group’s latest profits update, whatever it was that actually constituted profits here. Beyond that you’re on your own: Read more
Friday bank chart time, and as we like ambiguous messages, lets look at debt issuance by the Giips — banks across Greece, Italy, Ireland, Portugal and Spain.
The good news is that it is up a lot so far this year, $7bn or a hefty 16 per cent rise on the same period last year. Whooo.
The bad news is that it is still down a lot compared to, say, the same period in any of the preceding six years. Hoooo dear. Read more
We don’t know exactly what next year’s Asset Quality Review will involve yet, but we are starting to get a picture of what investors think about the ECB’s forthcoming burrow through bank balance sheets.
In short, given that it might not be all over until the end 0f 2014, everyone is feeling pretty good about the banks right now, and that might explain a surge of appreciation for European stocks. Read more
Monte dei Paschi di Siena, Italy’s third largest, oldest, most loved and, ahem, only moderately state supported lender revealed its big survival plan on Monday.
More earnings, more capital, buy signals are bound to start flooding in this morning and… oh. Read more
The European asset quality review is on its way! Or at least details of how the ECB plans to run the so-called AQR are due this month. We expect fine tooth combs, desk lamps in faces and penetrating stares.
But, as the Economist explains, it is not a stress test. That would be all about simulating disaster to spot it in advance. Read more
It does not lend money (except rarely), it does not issue or underwrite securities, it does not serve business customers. It does have two sovereigns as customers, but they are regularly confused as one sovereign.
It would like you to know that it does not have any anonymous accounts.
Guess the bank — which has just filed its first ever annual report (for 2012): Read more
“I’d like to be instrumental in the manipulation of key interest rate benchmarks to the benefit of my employer”, said no aspiring financier ever. Equally unimaginable are freshly-minted bankers starting out wide-eyed, bushy-tailed and eager to aggressively mark books in order to disguise losses.
And yet, here we are with a plethora of scandals and misdeeds.
Why do so many in the industry lose their way? Read more
Q. How do you approach a sleeping depositor in a Cypriot bank?
A. Very slowly: Read more
From the FT on Wednesday:
Vince Cable, business secretary, has lifted the lid on tensions between the government and the Bank of England criticising its “capital Taliban” whom he accuses of holding back the recovery by imposing excessive financial burdens on the banks.
He’s angry that the Bank (well, the “jihadist” element, at least) are holding “back small business lending by demanding banks hold onerous levels of capital as a cushion against further shocks.”
We may have to take this blog into list format… Read more
The New York Times ran a big piece on the ongoing commodity shuffle this weekend. The one FT Alphaville (and others) have been writing about for a long while now, and which applies to both metals and energy markets.
The story followed a Reuters article reporting that the Fed was now “reviewing” a landmark 2003 decision that first allowed regulated banks to trade in physical commodity markets. It was this, we always noted, that allowed for the emergence of a so-called physical loophole for a number of top Wall Street institutions active in commodity markets. The fact that they were swap dealers with physical exposures ensured they were eligible for exemptions (on such things as position limits) whilst other financial institutions were not. Read more
You’re Jeroen Dijsselbloem.
You expropriate subordinated bondholders of a Dutch bank, SNS Reaal — insisting that the bonds “entirely lose their value, which would also have happened if SNS had gone bankrupt” rather than receive a €3.7bn bailout. It’s a huge precedent for bail-ins. It’s a new order. No reverse-ferreting.
Months later… Read more
The Basel Committee on Banking Supervision is back with another look at risk-weightings — that is, the risk weighting done by banks using their own models rather than the standardised BIS methods.
A new BIS/Basel paper focuses on the banking book, whereas a study published in January looked at the trading book. Read more
Ohhh, who’s being naughty now? Read more
China Everbright Bank placed itself directly in the firing line of terrible puns last week when reports it had defaulted started to circle.
Thankfully, Anne Stevenson-Yang from J Capital read into the news a bit further than most:
The interbank defaults last Thursday provided definitive, if indirect, proof that the cash coming into China is for financial investment and interest arbitrage. It masquerades as a trade surplus but is not. With the tightening of the domestic central bank credit window, Chinese banks are heavily dependent on these inflows for the cash they need to roll over loans. That is why the banks immediately went into distress when regulators decided to clamp down on fraud on the trade account.
The world is becoming intimately acquainted with the technical ins-and-outs of the Bloomberg LP empire.
There is Bloomberg’s bread-and-butter business of selling sophisticated data terminals to thousands of banking, hedge fund and regulatory authorities around the world. There is also the well-respected news wire run by Matt Winkler. Read more
A telling chart (which you can click to enlarge) from BNP Paribas’ Ricardo Santos and Michelle Lam. As they note — after a break particularly in the second half of 2012, there’s recently been a marked increase in banks’ holdings of sovereign debt… especially in Italy, France, Portugal and Spain. Read more
The Aussie banks are very good companies. They are profitable, resilient, well capitalised, well managed, shareholder focused and have a very strong industry and regulatory structure. However, following the significant leveraging of the Australian & NZ households over the last thirty years they are now low growth and remain heavily exposed to housing, funding markets & unemployment risk. Read more
Cyprus may not be a template but as Pawel Morski said, the actual template is probably not going to look all that different.
We’ve already written a little bit about this and on Thursday Barclays published a note suggesting the Cyprus mess, plus the incoming common resolution framework, might wipe €15bn annually from the profits of Europe’s biggest banks. The draft of said framework is scheduled to come into play by 2015 with the bail-in tool, which had been delayed until 2018, perhaps being moved forward. We await clarity from European legislators this summer
, if the summer ever arrives.
Concerning Barclays’ €15bn figure, it’s made up of a few different, but connected, elements. Read more
Gary Jenkins writing in Credit Matters this week gets to the heart of the matter when it comes to what investors should do with their money (our emphasis):
Is nowhere safe? The natural reaction to this is that fi nancing for banks should become more expensive. We are already seeing this reaction in the market to some degree. But what does this mean for a product like Cocos? How does an investor monitor the risk of conversion if the ECB could, on any given day, decide to withdraw liquidity unless the bank were to improve its capital position?