Some expansive credit-related thoughts arrive from Alberto Gallo at RBS, for a quiet May Day when Europe’s capitalists take the day off in honour of its workers.
In short, its the safe stuff that may not be safe anymore as/if/when the continent’s economy expands: Read more
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
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.
The share price is down a fifth in 12 months. It’s cheaper than Lloyds (on price to tangible book), as a bank with Asia supposedly at its feet. The boardroom is a mess and last week’s “reorganisation” may not fend off an eventual cash call.
Still, after that excellent year for Standard Chartered — Citi’s analysts suggest it’s time for ANZ to buy it: Read more
The Financial Conduct Authority has written to the banks, suggesting that they think long and hard before enforcing contractual terms agreed with their small business borrowers.
Whatever could it have been about the Rev Paul Flowers that pushed Len Wardle — chairman of the Co-operative Group, and who led its board in appointing the Reverend to chair the Co-operative Bank from 2010 — to resign on Tuesday? Read more
That’s Money Service Businesses — bureaux de change, cheque-cashing services… money remitters.
That makes them sound small. But remittances are a big deal for unbanked economies like Somalia. (About £100m from the UK alone, says Oxfam.) Read more
Meet the new £38bn RBS internal bad bank same as the old Non-Core bank:
‘Exit Quadrant’ Businesses identified by the Strategic Review that are unlikely to achieve sustainable returns or are operating in markets of low attractiveness. These businesses have a clear path to exit.
What we think Barclays were trying to say there is that these are rubbish assets which they would quite like to get rid of.
That’s from the 14-page glossary to the UK bank’s latest (44-page) earnings update. 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
That would be Euan Sutherland, chief executive of the Co-operative Group, announcing “we have been listening carefully” to bondholders (eventually). Anyway, Sutherland has three principles for the now bondholder-dominated recapitalisation of his group’s bank (still in negotiation)… Read more
The PRA works with the FCA and the FRC to improve the quality and usefulness of information disclosed on firms’ safety and soundness… Consistent with that, we will work with the FCA and the FRC to review the extent to which there is scope to extend bondholder influence over banks, with a view to bringing forward recommendations in due course…
— Bank of England (and Prudential Regulation Authority) response to the Final Report of the Parliamentary Commission on Banking Standards
Alternatively… the PRA need look no further than the wreckage, on Monday, of the Co-operative Bank’s plan to deliver the £1.5bn recapitalisation they ordered.
Plan B (for Bondholder) has taken over. Read more
It’s Help to Buy 2 launch day. Or, extend mortgages and warehouse them until the UK government supplies its guarantee for a portion of the money in January, launch day.
The scheme’s complete rules are here if you missed all 66 pages. Note the lending policy questionnaire.
So, reflecting on some HTB bits and pieces floating around on Tuesday… Read more
It’s “a reasonably sensible policy with some likelihood of success.”
What recent government initiative might Neville Hill and Steven Bryce, Credit Suisse UK economists, be referring to?
Why Help to Buy 2 of course. Read more
In contrast I am an optimist. I believe in free markets.
–George Osborne, Conservative party conference 2013
Details TBC, of course. But UK banks will be lending mortgages with a five per cent deposit in the very near future, under the rushed-forward Help to Buy 2 scheme.
And that means the UK government will be guaranteeing them — not the borrower — the next 15 per cent of mortgage value. Hence the fee paid by lenders for the guarantee (90bps for a 95 per cent loan to value, less for lower LTVs, apparently). Read more
Monday — The Co-operative Bank takes flak from yet another group of its bondholders for refusing to consider any sort of Plan B in getting them to share the burden of recapitalisation.
Friday — It starts considering Plan B. Read more
For the Co-operative Group, there is only one plan for fixing its bank’s embarrassing £1.5bn capital shortfall. Plan A.
Plan A is an exchange offer to holders of Co-op Bank’s subordinated bonds for more senior debt, plus shares in a public listing, alongside a stake taken by the Group. Bondholders said they need more detail about the haircut involved. But they’ve already been told to take it or leave it.
Well, increasingly — and therefore interestingly for the bail-in era — they’re doing neither, and preparing their own Plan Bs… Read more
If you laugh at this, then maybe a lot of macroprudential regulation is comical.
What to make of this startling call from UK’s Royal Institute of Chartered Surveyors, to the Bank of England’s Financial Policy Committee?: Read more
In particular, the recapitalisation plan is subject to finalisation and its implementation is subject to a number of inherent risks. Risks include a failure by bondholders to participate in the Exchange Offer, a legal challenge by affected Bank bondholders to the Exchange Offer and a failure by, or inability of, The Co-operative Group to make its proposed contribution…
Failure to implement the recapitalisation plan may result in regulatory intervention that could reduce or eliminate the value of the equity and modify, reduce or eliminate debt payment obligations.
— ‘Cautionary Statements’, The Co-operative Bank plc Interim financial report 2013
That’s the official version of the Co-op Bank warning to subordinated bondholders to swallow conversion of their debt into equity, in order to ensure its £1.5bn capital rescue. The unofficial version, from the mutual whose model was once lauded by politicians? “There is no plan B”.
Well, the bondholders are starting to think of Plan C. Read more
Not a relaxation of capital requirements by the Prudential Regulation Authority on Wednesday — it’s a relaxation of the amount of liquid assets which banks have to hold (falling by some £90bn, apparently) so long as they do meet strictures on capital.
From the release: Read more
HSBC’s interim report 2013:
– Pages: 295
– Words: loads
– Risk-weighted assets: $1,105bn Read more
How’s this for a bank bondholder disclosure? Bear in mind — it’s over 20 years old.
From the UK National Audit Office’s look at the Treasury’s accounts:
Much more here. It’s largely because of the withdrawal of the biggest crisis-era sovereign guarantees for banks: Read more
The Commission encourages bondholders, where they are sufficiently concerned, to raise such issues publicly where practical. The PRA should examine the scope for extending bondholder influence of this type…
— ‘Changing Banking for Good’, Parliamentary Commission on Banking Standards
It’s actually well worth reading the full letter from Mark Taber to Andrew Bailey of the Prudential Regulation Authority, the latest protest against the £500m bail-in of subordinated bondholders that’s emerged from the Co-op Bank mess.
Click to enlarge for the Prudential Regulation Authority’s table on UK bank capital shortfalls…
If you are the “politically astute” person to run UK Financial Investments — then hurry!
The application deadline ends on June 21: Read more