Lloyds gets a $383.2m fine for Libor manipulation — split between US and UK regulators and including a fine of £70m and some £7.76 million in compensation to the BoE for manipulating the Special Liquidity Scheme (yup, the same scheme set up to help struggling banks) — and we get to relive the glory days of Libor manipulation transcripts.
Some plain vanilla from the FCA:
After a day of digestion, the new RBS strategic plan still leaves a lot of questions unanswered. Indeed, the most pressing one we have heard from investors is whether the bank is an outright short or simply one to avoid, given the limited free float.
A lot of focus, also on whether the management of the bank — which soon won’t include departing chief financial officer Nathan Bostock — will be able to see through the strategic plan they have sketched out on the back of an envelope in the few months since Ross McEwan took over.
But another leaps to mind. The plan is to shrink the international, cross border, bit of the business to end up as a sort of UK-focused Lloyds Plus. But once you start letting the air out, how do you stop the balloon becoming a whoopee cushion? Read more
Claudius was a Roman emperor from AD 41 to 54.
Claudius notes are Tier 1 instruments that were issued by Credit Suisse back in 2010 and which feature a call date that first comes into effect in December 2015. Except, as bank bond investors have experienced from time to time, the issuers of such securities have an unnerving tendency to sometimes behave unexpectedly. Credit Suisse made some noise when it released earnings last week that it may call the Claudius bonds thanks to something known as a “regulatory par call.” 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
António Horta-Osório is surely a little happier this morning after he looks to have finally gotten rid of the 632 branches known as Project Verde which the European Union had ordered he shift as a condition for approving government aid. The EU had given him till 2013 to complete the disposal. Read more
Aka: an attempt to fill in the missing pieces of the underpants gnomes’ collateral swap, details of which were revealed last week.
First a reminder of how this will work, from Claire Jones over at Money Supply: Read more
It comes from a hedge fund activist par excellence:
That’s a letter (hat-tip to Bloomberg) from Christopher Hohn, managing partner at The Children’s Investment Fund, to British financial regulators questioning “loss absorbency” of contingent capital at the state-backed lender. The FT reports: Read more
According to the Evening Standard:
Lloyds Banking Group is understood to have received a multi-billion-pound takeover approach for Scottish Widows, its life assurance, pensions and savings business. Read more
Not all 800 banks who tapped the ECB’s second three-year liquidity op — obvs. But…
[DJ] Intesa Sanpaolo Took Up EUR24B Of ECB’s LTRO – CEO
… we can just not call your bonds like you thought we would.
This is the tactic that Santander and Lloyds have seemingly been taking, as they try to get bondholders to exchange subordinated debt for senior bonds that improve capital. Read more
Some good news for the battered UK banking sector?
HM Treasury is going to announce special liquidity measures to help Lloyds, Barclays and RBS get through a funding hump in the first quarter of next year. Read more
When you’re short of money, the odd £747m always comes in useful, but it doesn’t go far these days. It’s enough to finance the UK state spending machine for about nine hours. The government had spent more than the proceeds from the sale of Northern Rock before it could read the reaction to it in Friday’s papers.
The sale is almost irrelevant to the future of British banking. The price isn’t bad, in the circumstances, even if the taxpayers have lost nearly half the money we put in to rescue the Crock in the first place. But it speaks volumes about value in the rest of the sector. Read more
Breaking pre-market news on Wednesday,
– Admiral says profits will be at the lower end of analyst estimates because of large personal injury claims — statement. Read more
Lloyds has launched the sale of a portfolio of commercial property loans worth £1bn in a sign that the bank is accelerating the process of unwinding its £24bn bad loan book, the FT reports. The highly anticipated sale, which includes loans made at the top of the market on offices, high street shops and factories, is understood to have attracted interest from pension funds, private equity groups and overseas investors.
Tim Tookey, Lloyds’ finance director, is to resign from Britain’s biggest high-street lender to become chief financial officer at Friends Life, the UK life assurance company created by Clive Cowdery’s Resolution consolidation group. The FT says Mr Tookey, a pivotal figure in helping Lloyds to secure a crucial £20bn-plus recapitalisation two years ago, denied the move was due to any falling out with the bank’s new chief executive, António Horta-Osório, who joined the bank from Santander UK and took over as CEO in February. Mr Tookey was said to have concerns about the credibility of Lloyds’ new financial targets – 15,000 job cuts, £1.5bn ($2.3bn) of annual cost savings, an increase of as much as 10 per cent in the net interest margin and a return on equity of up to 14.5 per cent, all by 2014 – especially given the discouraging macroeconomic backdrop.
Investment vehicle NBNK is discussing the takeover of National Australia Bank’s UK assets, the Telegraph reports, in a deal that will kick-start the formation of a new banking group that could challenge Britain’s largest lenders. The new venture, which was set up by Lord Levene to acquire banking assets, is in early talks that could lead to an offer for Clydesdale and Yorkshire banks, the two brands NAB owns in the UK. NBNK is expected to announce that it is in talks about a potential acquisition as early as Tuesday, the FT says. Its shares would then be suspended from the Aim market. The move would give NBNK access to a banking platform, which would be a significant advantage in its attempts to buy the 632 branches Lloyds is selling.
Some of Britain’s biggest banks have begun quietly ridding themselves of billions of pounds of assets they have found difficult to sell following the financial crisis, the FT reports, moving them off their balance sheets and into staff pension funds. The moves – designed with the dual purpose of clearing unwanted assets from the banks’ own books while at the same time closing pension fund deficits – have been made as exceptional top-up payments into the pension schemes over recent months. HSBC made a £1.76bn exceptional payment into its pension scheme, comprising a portfolio of assets ranging from subordinated debt to asset-backed securities, last December. Lloyds also made a £1bn commitment to its pension fund as part of a £5bn transfer of assets into an intermediary funding vehicle. Lloyds did not respond to requests for information about the arrangement, but pensions experts said the measures were comparable with the HSBC plan.
Nick Clegg wants to give every British voter shares in the state-owned banks as the deputy prime minister looks to revive his battered image by creating a “people’s banking system”, reports the FT. Mr Clegg told the Financial Times he had written to George Osborne and Danny Alexander at the Treasury this week, asking them to look into introducing a “mass share-ownership scheme” as part of the privatisation of Royal Bank of Scotland and Lloyds Banking Group. “Psychologically it is immensely important that the British public feel they have not just been overlooked and ignored,” Mr Clegg said from Rio de Janeiro, where he is on a two-day trade trip. “Their money has been used to the tune of billions to keep the British banking system on a life support system and they have absolutely no say at all in what happens when normality is restored.”
Funny coincidences, Lloyds Banking Group edition.
Last night Bloomberg reported that Lloyds has ruled out a sale of its insurance arm Scottish Widows. A sale had been seen bullish for the bank, by disciplining its vast post-crisis balance sheet a bit more and allowing return on equity to drift into the high teens. (RBS is targeting about 15 per cent ROE from its own balance sheet repair.) Read more
Not too surprising to see Lloyds’ effort at kitchen-sinking Irish exposures in its Q1 results, with impairments up £500m more than guided to £1.14bn…
Even so, it’s a nice test case of how bad Irish property loan losses could conceivably get, and/or the appetite for recognising losses – compared to Irish lenders and the recent stress tests in Ireland. Read more
Lloyds Banking Group was thrust back into the red in the first quarter of this year after taking a £3.2bn provision for potential compensation claims arising from payment protection insurance, a controversial type of loan cover, the FT reports. The bank – the biggest provider of PPI – is the first to take a hit following last month’s decision by the High Court to throw out an appeal from the industry against regulatory changes that would force lenders to refund past policies. The provision by Lloyds is far larger than expected – the Financial Services Authority had estimated that the changes could cost the whole industry £4.5bn and analysts had expected Lloyds’ share to be about £1.5bn. The hit, along with higher than expected loan losses from its tattered Irish real estate portfolio – higher than analysts had anticipated, at £1.1bn – pushed Lloyds into a first-quarter pre-tax loss of £3.47bn, compared with a £721m profit a year ago.
Handy heat map sort of thing from Goldman’s analysts, on what Monday’s Independent Commission on Banking report (chair: Sir John Vickers) promises for UK lenders.
Click to enlarge: Read more
Quick update from S&P on Friday:
Worldwide catastrophe losses in the first quarter of 2011 could set a new record, as losses from the Japanese earthquake and subsequent tsunamis are tallied. Insured losses from last month’s New Zealand earthquake are currently estimated at $10 billion, and still rising. Insured losses from unrest in North Africa and the Middle East are also still being calculated, with the tab at $8 billion to $10 billion and also rising.
How many years has Japan been preparing for the ‘big one’?
On Friday it hit — the 8.9 magnitude quake that hit off the coast of north-eastern Japan is the seventh-largest on record, and far outstrips the 1995 temblor in Kobe. Read more
Which anarchist added this to the list of public responses sent to the UK’s Independent Banking Commission? (H/T to the FT’s Paul Davies):
While again emphasising that this is a personal view, I do believe that in the interests of competition, the merger of HBOS and Lloyds was misconceived and Lloyds Banking Group should be broken up. Under normal circumstances this would never have been allowed and nothing has happened since to make the decision any more correct…
With UK inflation trending above the Bank of England’s 2 per cent target (yet again), attention is now turning to the possibility of interest rate increases this year, and their potential impact on British mortgages and banking losses.
Just look at this note from Deutsche Bank’s Jason Napier and David Lock: Read more
Breaking pre-market news on Tuesday,
– Simon Property Group not to make offer for Capital Shopping Centres — statement. Read more
Calling experts in placing shares — a lot of shares:
Crash, bang and wallop.
Or, the sound of the UK house building sector on Thursday morning: Read more
The future of the British banking sector, might just be right here
On Friday we get the trailed publication of the UK Independent Commission on Banking’s so-called ‘Issues Paper’ and call for evidence. It’s 68 pages of rip-roaring industry stuff, but we’ve picked out the more interesting “reform options” for you below. Read more