Who doesn’t like to start the day with a nice hot cup of vindication? There will be plenty of time to recognise those who have been warning about a lack of real liquidity and the chance of real volatility later. For now the question is what to do?
Credit strategist Alberto Gallo of RBS, who has been on team no-liquidity for a while, says wait and see.
What do we do now? We wait a bit longer. Our high yield macro-spread model shows cash should trade at around 500bp in € vs 400bp currently. European high yield spreads are still below last year’s tantrum levels, while US HY spreads are just getting there (508bp). Compared to previous bull market selloffs, this isn’t a short one – but could still last for a while longer.
Cross-posted from Lex Live — Lex’s new, free, blog. Lex has also been writing notes this week on the consequences of independence for sovereign debt, banks, and Scotland’s oil industry…
Or, why it isn’t surprising at all that RBS and Lloyds would move their respective holding companies to the UK, probably overnight, if Scotland voted to become independent. Despite the odd packaging of this as NEWS by the UK press.
It’s the emergency liquidity (or ELA). Click chart to enlarge:
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
Spotted deep in the bank’s 2013 results. “We will be a more UK focused bank…” — you can say that again. Read more
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.
First off – bonuses. I’ve said I’m pragmatic, I’ll pay in the market to get the best people and to hold onto them. What more do you want to know?
– Ross McEwan, ‘Ross McEwan, RBS chief executive, answers your questions,’ Guardian Read more
The Royal Bank of Scotland Group plc (“RBS” or “the Group”) will announce its full year results on 27 February 2014, which will reflect the following: Read more
Meet the new £38bn RBS internal bad bank same as the old Non-Core bank:
First up, consider this comic flow chart from the FCA. Click to enlarge.
Yes, of the 30,169 cases of potential mis-selling of interest rates hedges to gullible British businesses, a sum total of 10 cases have so far been settled. The bill to date is £500,000, but there’ll be a few zeros added to that figure before we’re through. Read more
A new word to you? Yes, well, we were searching for a suitable adjective to describe this:
20 June 2013
Tullett Prebon plc
Statement in relation to court proceedings
Actually — is it so bizarre that Stephen Hester is getting booted like this?
Hester probably did plan on another two years as RBS’s chief executive. He probably is miffed about being taken off the bomb-disposal task still left on the bank’s balance sheet. Although wasn’t it becoming clear how dysfunctional the relationships with the Chancellor, the government and Parliament had been getting? Maybe it’s the corollary of getting closer to reprivatisation. Read more
Here’s a close up of the pic from ITV News that got tongues wagging on Tuesday. Click to enlarge. Young eyes recommended…
Probably best to just get on and crowd-source the analysis and commentary on this one:
Yeah, so “stupid Libor emails” is now an established sub-genre in banker literature.
Though the funny thing about Wednesday’s RBS revelations is that attempts at manipulation generally, at least at the start, weren’t written down. The whole problem was that people trading rates were sat right next to people in charge of submitting rates for Libor. That’s due to the “Short-Term Markets Desk”, RBS management’s October 2006 bid to “facilitate more communication”. Oops. Read more
Presenting the CFTC order against RBS, as part of the bank’s $325m settlement with the regulator over allegations of “hundreds” of attempts at manipulation of Libor (notably Yen Libor):
It’s not exactly surprising that US Libor prosecutors are pushing for criminal charges against one of Royal Bank of Scotland’s subsidiaries.
As we keep hearing, RBS’s level of involvement in the rate-rigging scandal is somewhere between Barclays, which got a nonprosecution agreement and paid $460m in penalties, and UBS, which paid $1.6bn and had to agree to having a Japanese subsidiary plead guilty to criminal charges. Read more
Soon, it appears, we’ll have another big Libor settlement to write about — this one from RBS. Both the FT and the WSJ are tipping the fines to be in the order of £500m. The FT says it could be more than £400m to the US authorities and about £100m to the FSA; the WSJ doesn’t mention how it might breakdown between the US and UK, but says the settlement “could be completed within the next two weeks”.
Also, yikes! RBS (or specifically, an Asian unit of RBS) might have to plead guilty to some criminal charges if the US prosecutors have their way, says the WSJ.
Shockingly RBS does not like this. But… RBS may not have any choice: Read more
The research department at Investec offer a notably clear illustration of any given analyst’s recommendation record on any particular stock.
Let’s look at Ian Gordon’s record on Lloyds and RBS. Click to enlarge each image. Read more
Here’s another addition to the canon of Libor-related conversations.
A former RBS employee is suing the bank for wrongful dismissal after the bank fired him last year for allegedly participating in Libor-fixing. Tan Chi Min, the ex-employee in question, was the bank’s Singapore-based head of delta trading for Asia. Read more
Almost four years after the Royal Bank of Scotland was part-nationalised, the UK government is still struggling to figure out what to do with it. Until recently the discussion was focused on when and how to sell the state’s 82 per cent stake back to the market. Now the focus is on fully nationalising it. Go figure.
From Thursday’s FT: 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
“The other effect of the euro-area crisis has been to create a large black cloud of uncertainty hanging over not only the euro area but our economy too, and indeed the world economy as a whole.”
Here’s the speech. Read more
Okay, it’s a cliche to call Coutts & Co “HM Bank,” although Her Majesty does indeed bank there.
Which makes this instant news: Read more
Stephen Hester, RBS chief executive, has said that larger losses posted on Thursday could in fact be interpreted as a good thing, showing the rapid removal of the bank’s legacy assets, the FT reports. Mr Hester added that the bank was “more than three-quarters of the way” through cleaning up its balance sheet, which has shrunk from £1.6tn to £977bn in three years, compared with a target of £1.2tn. But RBS has also been swept up in a tide of debt crisis losses at European banks, including the biggest income hit for Credit Agricole since it went public in 2001, the WSJ adds.
Breaking pre-market news on Thursday,
- RBS posts £2bn loss, pays £390m in bonuses – statement. Read more
Royal Bank of Scotland’s insurance arm has taken a step closer to an expected multi-billion pound flotation by dropping the name of its parent in a rebranding exercise, says the FT. The business has renamed itself Direct Line Group, after one of its best known brands in a stable that also includes Churchill, Privilege and car breakdown service Green Flag. The name change is another sign that parts of RBS are distancing themselves from the bank’s brand. Coutts dropped the Royal Bank of Scotland name from its international businesses in November as part of its attempt to revitalise one of the oldest brands in private banking.
Tax authorities have arrested a number of investment bankers at Royal Bank of Scotland and other banks in an inquiry into alleged fraud, reports the FT. Investigators arrested four current and one former RBS employee at their homes, as well as several bankers at two other banks, on allegations that they used investments in film productions to evade taxes. HM Revenue & Customs, which is conducting the investigation, on Sunday confirmed the raids, which happened on Wednesday, without naming the banks involved. “This investigation relates to the actions of the people arrested in relation to their own financial affairs and is not connected to the business activities of the banks,” the tax authority stressed. RBS said: “We will co-operate with the authority in any way that can be helpful to them.”
RBS is still in its loss making phase (1) which inevitably gives us communication challenges. The losses ironically are a measure of our recovery success…
– Stephen Hester’s memo to staff on Tuesday. Read more
Stephen Hester has revealed that the dramatic restructuring of Royal Bank of Scotland has cost £38bn in a rallying memo to staff days after the embattled chief executive waived a £1m bonus, the FT reports. Urging employees to “prove the critics wrong”, Mr Hester provided a stark reminder of the difficult task he faces in cleaning up the bank after its £45bn government bail-out three years ago. The £38bn charge includes the loan losses, disposal costs and restructuring charges the bank has taken since its near collapse in 2009. People close to RBS estimated that the final restructuring bill could surpass the price paid for the government’s 83 per cent stake. Mr Hester highlighted the cost for the first time as he sought to boost morale among staff following the recent bonus dispute. “There is no doubt that our position in the spotlight makes the job harder,” he wrote in an email. “But the best way to deal with it is to prove the critics wrong.”