This is just too easy. Like killing-dodos-with-a-automatic-machine-gun easy. (Not that we ever could, or would, do that!)
The banking industry’s PR arm(y) is the opposite of Britain’s forces, for it only continues to grow and grow, not unlike bacteria. Lob in auxiliary PR, ie industry “awards”, and frankly we’d be surprised if a disgraced chief executive didn’t have at least one “Banker of the Year” accolade to his name by the time of his (or dare we say “her”?) fall. Read more
The statements of CFTC and Department of Justice in the US, and FSA in the UK, are out concerning Barclays’ $200m, $160m, and £59.5m fines respectively for “attempted manipulation of and false reporting of LIBOR and Euribor Benchmark rates”. The FSA fine is the largest the agency has ever imposed.
From the CFTC statement: Read more
Previously we looked at US consumption trends in the second half of last year. Spending had outpaced incomes as the savings rate fell, and consumer credit expanded, leading to questions of “sustainability” and the like.
Well, apparently income growth and the savings rate were both meaningfully understated. Read more
Barclays has warned it may have to scrap its ambitious target of a 13 per cent return in equity in 2013, while profits at the bank fell eight per cent in the last three months of 2011, Reuters reports. Income at Barclays Capital fell 19 per cent on the quarter, and almost half on the year, to $2.84bn. Adjusted return on equity fell to 6.6 per cent from 6.8 per cent a year earlier, throwing doubt over chief executive Bob Diamond’s ambitions for the bank, the WSJ adds. While Barclays Capital has capped employees’ cash bonuses to one of the smallest among investment banks, total pay across the bank fell by just 15 per cent, and salaries rose 2 per cent even though headcount fell by more than 6,000, the FT says.
Goldman Sachs, Barclays Capital, Bank of America and Credit Suisse were on Tuesday finalising bids for $7bn of mortgage-related securities that used to belong to AIG and are due to be auctioned later this week by the Federal Reserve Bank of New York, the FT reports, citing people familiar with the matter. The auction for the debt, which was acquired by the New York Fed as part of the bail-out of AIG in 2008, is scheduled to take place on Thursday, with BlackRock Solutions managing the sale. The four banks and the New York Fed declined to comment. The securities, which have a notional value of $7bn, are part of a $20bn portfolio housed in a special purpose vehicle called Maiden Lane II. T
Barclays Capital is preparing for the sale of more than €1bn worth of German apartments, reports the FT, citing people familiar with the process as saying the bank has held discussions about the sale of the portfolio with private equity buyers, including Blackstone. The sale, involving 26,000 residential properties, predominantly in Berlin, Hanover and Magdeburg, would mark one of Europe’s largest residential property deals since the start of the financial crisis. BarCap took control of the residential portfolio last month after exercising a call option on a €1.36bn loan made to BauBeCon, the German residential landlord, at the peak of the market in 2007. The BauBeCon portfolio had a market value of €1.42bn at the end of June, with the yield on the portfolio at 6.8 per cent and a 4.2 per cent vacancy at the end of 2010, according to a report by CoStar Finance earlier this year. It is unclear how much BarCap has written down the value of the portfolio, but bids of between €900m and €1.2bn are understood to have been made.
Barclays’ finance director has called for an overhaul of “opaque and complex” accounting rules that artificially boosted the profits of big European and US banks by billions of pounds in the third quarter of this year. In a letter published in today’s Financial Times, Chris Lucas said the requirement for banks to adjust their figures to reflect the market value of their own debt was widely believed to distort their actual profits. (The fact that banks elected to use this accounting method rather than accrual accounting isn’t mentioned, an area we discussed in this FT Alphaville post.) From the gallant letter: “We urge the European Commission, the IASB, regulators and other interested parties to consider taking the straightforward step of amending current requirements in IAS 39. Addressing this issue will improve investor confidence and increase transparency in financial reporting by banks. We look forward to being able to adopt the new rules as soon as possible.”
Banks based outside the US could be dragged into the American “Volcker Rule”, which bans proprietary trading, according to the latest draft of the rule and lawyers that were ploughing through leaked copies on Thursday, the FT reports. The rule bans US banks from trading for their own account and imposes strict limits on their ownership of hedge funds in an attempt to hive off the riskier parts of finance from the utility functions of banking. Non-US banks are supposed to be exempt but the latest draft forces the likes of Barclays, Deutsche Bank and Credit Suisse to have to pass a four-step test: a transaction must be “conducted by a banking entity that is not organised under the laws of the United States”; no party can be a US resident; no staff “directly involved” can be “physically located” in the US; and the transaction must be “executed wholly outside” the country. The rule – which was passed into law by last year’s Dodd-Frank regulatory overhaul and sent to the Fed and other regulators for detailed rulemaking – is due to be officially unveiled next week after months of behind-the-scenes wrangling between government agencies. Bankers, lobbyists and lawyers are scrambling to interpret the the leaked proposal, the WSJ says, which appeared late on Wednesday on the American Banker website.
US bank stocks were pummelled on Thursday by a grim combination of European contagion fears and doubts over future profitability after the Federal Reserve’s “twist” of the yield curve and concern that some groups may fall to a loss in the third quarter, the FT reports. Goldman Sachs will face the second loss in its history as a public company, Barclays Capital predicted; Morgan Stanley was plagued with rumours about exposure to ailing French banks; and Bank of America and Citigroup hit new 12-month lows. Morgan Stanley, whose shares have fallen by more than 40 per cent in the past three months, bore the brunt of the early selling, falling to levels last seen when the company was faltering in the financial crisis at the end of 2008. FT Alphaville has more on the pessimistic forecasts traded between banks. Meanwhile BofA has reached an agreement to sell an approximately $880m portfolio of commercial mortgages at a discount of 20 to 25 per cent off the face value, the WSJ says, citing a person familiar with the deal.
Barclays will eliminate about 3,000 jobs this year as investment banking profit fell by more than a quarter, Bloomberg reports. The bank has already cut 1,400 positions this year, CEO Bob Diamond told reporters after Barclays reported a 27 per cent decline in pretax profit to £1.42bn ($2.31 billion). The total reduction in employee numbers this year will be of the magnitude of 3,000, he said. The FT adds that the British bank was hit by a £1bn charge to cover the cost of resolving complaints about the sale of payment protection insurance (PPI). On an adjusted basis that strips out the previously-announced PPI provision and some other factors, it said profit had increased 24 per cent to £3.68bn.
Barclays and Nylon Capital, a hedge fund, have settled legal action brought by the UK bank which is connected to its decision to invest £250m of “seed capital” into Nylon’s flagship funds, the FT reports. Nylon was set up seven years ago by Alan Burnell, the former head of government bond trading and fixed-income derivatives at Barclays Capital, and at the time was one of the largest new hedge funds with about $1.4bn under management. The legal dispute is connected to a decision of Barclays in December 2009 to give notice that it wanted to withdraw its £250m investment in the funds.
The trading slump on Wall Street has battered profits and is about to cost some people their jobs, the Wall Street Journal reports. Credit Suisse started laying off investment-banking employees Tuesday, and the cost-cutting push could claim 400 to 600 jobs. This month, Barclays has eliminated 100 jobs in its investment bank, including some stock-trading employees. The latest cuts are on top of 600 layoffs in January. At Goldman Sachs, the annual survival-of-the-fittest culling of 5 per cent of the securities firm’s employees won’t be enough in 2011, according to someone familiar with the New York company’s plans. The New York Times says executives are still debating whether the current trading slump is a blip.
Regulatory snafu anyone?
The UK’s Independent Banking Commission (IBC) recommended in April that banks start ‘ring-fencing’ their retail operations so that large banks are able to fail without endangering depositors. That is, so-called ‘universal banks’ that provide both investment banking and retail operations will have to have retail subsidiaries, with separate and sufficient ‘ring-fenced’ capital to cover their own liabilities. Read more
Michael Robinson over at the BBC’s World Service has been investigating high global commodity prices in a series entitled Bubble Trouble?
In this week’s episode Robinson looks at the copper market and in particular the scale of potential copper shenanigans that may or may not be going on in the market. Read more
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
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
Breaking pre-market news on Wednesday,
– Barclays Capital revenues down 15 per cent in three months to end March; to purchase Protium’s investment manager for $83m — statement. Read more
And the carry trade/currency weirdness continues:
LONDON (Dow Jones)– U.K. bank Barclays Capital pulled yen prices off its Barx dealing system for a short period Wednesday, as the Japanese currency fizzed to its strongest levels on record, a person familiar with the situation said Thursday. In a spectacular move, the dollar collapsed against the yen at 2100 GMT Wednesday, sinking 4% to hit a record low of Y76.25. Read more
A US bankruptcy court judge has ruled that Barclays’ purchase of Lehman Brothers’ US broker-dealer was fair and should not be revisited, reports the FT. The court also ruled that the Lehman estate should turn over nearly $2bn still owed to Barclays as part of the deal. The defunct investment bank had sued Barclays in 2009 to recover some $13bn. Banking Times says Judge James Peck ruled that the sales process was fair under the circumstances, if imperfect. In reaching his decision, Peck took account of the level of systemic risk created by Lehman’s collapse and the extent to which this was curbed by Barclays’ acquisitions, the online publicationa dds.
Big US banks are poised to report higher quarterly profits after the release of billions of dollars in reserves set aside for bad loans, the FT reports. The fourth-quarter earnings season for the industry, which kicks off with results from JPMorgan on Friday, is expected to show improving bottom lines from a year ago when many financial institutions were still grappling with mounting credit losses. Apart from the release of provisions for bad debts, loan balances increased during the last three months of 2010 after eight straight quarterly declines, according to Barclays Capital analysts.
Here’s a brave call from UBS bank analysts on Monday.
They reckon Barclays could be moving towards a restructuring — that is, shedding some of its “value destroying” pre-crisis assets and refining its business ops in an effort to avoid a Basel III-induced earnings drag and boost pay-offs to shareholders. Read more
The Federal Reserve has just released details of its Primary Dealer Credit Facility — the programme that allowed the Fed’s official ‘trading partners’ to borrow from the central bank in return for posting collateral. It was created in March 2008 to help ease liquidity after the credit crunch and the collapse of Bear Stearns. Read more
Barclays is not joining its peers and promising a pick up in investment banking activity in the remaining months of 2010.
Diamond Bob could, of course, be low-balling expectations but the tone (and figures) of Tuesday’s third quarter results statement from Barclays suggests this isn’t the case. Read more
Talk about courtroom drama.
From the closing arguments of Lehman’s suit against Barclays (that’s the one alleging an $11bn ‘windfall’ asset grab when Barclays snapped up its best bits in 2008): Read more
Not contingent convertibles but contingent re-convertibles. CoReCos? Re-CoCos?
Barclays Capital is, according to a report by Reuters Breakingviews, working on contingent capital that would help it meet forthcoming regulatory demands without having to issue new equity. But intriguingly, the bank has spurned the ‘traditional’ CoCo idea, going instead for something new: ‘step down, step up’ bonds. Read more
We may not be getting September’s FOMC minutes until Tuesday — but judging from the state of FT Alphaville’s inbox on Monday, the only thing analysts want to talk about is the inevitability of more quantitative easing from the Fed.
Most interesting of the lot — Barclays Capital’s take on rates after QE is launched. Read more
Press release from Nomura late on Thursday afternoon:
“PCP Gulf Invest 3 Ltd (“PCP3”) has today entered into derivative transactions with Nomura International Plc (“Nomura”) in order to protect the value of the remaining 131,602,175 warrants it holds in Barclays PLC and complete the hedging of PCP3’s entire interest in Barclays PLC warrants and ordinary shares. In connection with its related hedging activities, Nomura will simultaneously execute a market placing of approximately 220 million shares. Read more
No doubt about the main high lowlight of the week (apart from the FOMC meeting) — the Irish government’s attempt to find buyers for €1.5bn of four and eight year bonds on Tuesday.
In an effort to calm nerves ahead of the auction, Ireland’s finance minister Brian Lenihan went on the offensive at the weekend, pointing out that the country had raised sufficient funds to finance its budget through to the middle of next year. Read more
Japan’s intervention to weaken the yen sparked widespread regional speculation about parallel action by other Asian countries with appreciating currencies, reports the FT. Leong Wai Ho, senior regional economist at Barclays Capital in Singapore, said it was “certainly possible” that further intervention might follow, as central banks took advantage of the lead set by Tokyo. “What the Japanese move has done is to reduce the risk of intervention for other central banks by removing the one way expectation in the market that Asian currencies will always continue to appreciate,” Mr Leong said. However, foreign exchange traders said there was no sign of intervention by other Asian countries on Wednesday.
It’s tough being a Bob — or, a study in modern banker-bashing.
We said on Tuesday that Bob Diamond’s appointment as Barclays’ next chief executive was going to be read as a threat to the government over plans to force the bank to break up — since Bob could shift Barclays to America first, spiking HM government’s guns. Read more