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Archive for the ‘Banks’ Category

S-Reits are still a hold

In Banks, Property, Reits on 02/12/2016 at 1:12 pm

for me.

After all UBS tells its private banking clients “[Reit] yield spreads to government bonds in Singapore (450 basis points) and Hong Kong (400bp) compare favourably with the global average of 306bp . . . And we expect the continued demand for yield to drive this spread lower, supporting Reit prices.”

But then didn’t DBS tell its private banking clients to buy Swiber bonds?

But then UBS is no DBS.

Lose-lose for OCBC and Barclays

In Banks on 29/11/2016 at 3:49 pm

FT reports that Barclays has raised almost a third less than expected from the US$225m sale of its wealth and investment management business in Singapore and Hong Kong to OCBC.

 When the deal was announced in April this yr, Barclays had indicated it could fetch US$320m from selling the business, which had US$18.3bn of assets under management at the end of last year. It had tot the unit was worth US500m.

When the unit’s clients were given the choice of whether to join OCBC, some of them decided to either stay at Barclays or to leave for another bank. This reduced the price OCBC paid, which was fixed at 1.75% of assets under management.

While OCBC paid a lot less (one third less), it can’t be happy that so many clients don’t believe the BS about Bank of s’pore, it’s private bank.

Banking: Nothing has changed since 19th century

In Banks on 28/11/2016 at 2:08 pm

In the 19th and early 20th century, bankers were seen as the aristocracy of clerks. They were paid more and had better conditions. Sound familiar doesn’t it?

But what doesn’t sound familiar at all was that a banking career was then seen as a moral duty.

In 1912, AW Kerr, a senior figure in Scottish banking, gave an address to a packed meeting of the Institute of Bankers in Edinburgh.

“The banker engages in capitalistic economising not purely as a matter of expediency, of constrained adaptation to the mundane necessity of making a living, but in the expectation that such activity would test his inner resources as a person in charge of his own existence, and affirm his human worth,” he said.

Those were different times. Though, curiously, since the financial crisis top bankers are once again banging on about human worth.

Just a couple of months ago the new head of Barclays gave a speech in which he told staff that if they didn’t hold values such as respect, integrity and stewardship dear, they should quit.

Kerr, I think, would have approved.

Then, as now, the rank and file may have seen it rather differently.

A sketch by Robert Shirlaw, who worked at the bank in 1900, shows a clerk who has climbed a stair of ledgers and is waving a victory flag. He looks pretty pleased with himself there at the top, yet trapped below him are squashed clerical workers.

The caption reads: “We climb upwards on the stepping stones of our own dead selves.”

http://www.bbc.com/news/magazine-23419229

So doing God’s work and minting it ain’t new.

Fintech round the world

In Banks, Internet on 19/11/2016 at 6:15 am
Lawrence Tang of Invest Hong Kong at the recent Money 2020 fintech conference in Las Vegas. “We are at the right place to try to capture some of these high-flying fintech companies,” he said.

Where Finance and Technology Come Together

The new industry mixing finance and technology has no clear capital, but major international cities and lesser ones are vying to attract companies.

Fintech: the reality behind the hype

In Banks on 09/11/2016 at 1:08 pm

It’s all about automating processes

At Goldman the number of people engaged in trading shares has fallen from a peak of 600 in 2000 to just two today … and another 200 software engineers who work on systems that, in effect, do the job on their own.

And

Goldman has mapped each of the 146 steps of an initial public offering in 51 charts that appear in proper sequence on a five-foot long roll-out. Costly, redundant steps are being cut or, once again, automated.

(Economist)

Based on what Tharman and the central bank say about fintech, they get the bit about automating processes as this MAS wish list shows: http://fintechnews.sg/3268/fintech/mas-100-fintech-problems-to-solve/

And it’s not only me who says that the authorities here get it about fintech

a list of fintech start-ups in Singapore compiled by CLSA using data from website Tech in Asia includes almost 180 firms. By contrast, a comparable list for Hong Kong would have fewer than half that number. Singapore’s local regulator appears “to be highly supportive of fintech and has a clear view of when and under what conditions it will regulate the industry”, says Jonathan Galligan, CLSA’s head of Singapore research.

FT

 

China the paper tiger

In Banks, China on 06/11/2016 at 2:41 pm

New York’s banking regulator fined the Agricultural Bank of China US$215 million for a series of money-laundering violations and attempts to “mask” suspicious transactions. The bank is not contesting the fine.

As the Agricultural Bank of China of is owned by the Chinese state, this is as insulting to tChina as sailing a foreign warship sailing within 12 miles of a Chinese rock in the South China Sea.

And it isn’t even a US Federal agency that the bank is kow towing to. It’s a state agency that is giving China the bird and making it grovel.

What has RedBean and other China supremacists have to say?

Duterte the talk cock sing song Peenoy president should note that even China kow tows to a state agency.

Causeway relations: No barking, No growling

In Banks, Malaysia on 27/10/2016 at 5:42 am

Whatever we may think about the First Lady of M’sia (FLOM) and her hubbie (First Man of M’sia? FMOM?), let’s give them credit for one thing. They’ve not played the “S’pore” card that Tun M and other M’sian polticians used to play. They’d bash S’pore to distract attention from their actions. They’d blame their problems on S’pore’s machinations into M’sian politics.

If the following actions had been carried out when Tun M was PM, our water supply would have been cut:

— S’porean authorities investigated the circumstances in which US$681m moved from a S’pore-based bank (Falcon Bank) into a M’sian account of FMOM and then FMOM transferred US$620m back to Falcon. Falcon Bank’s local unit was ordered to close.

— They also investigated BSI Bank’s local unit over fund flows linked to Malaysia’s 1MDB. BSI’s local unit was shut down in May on account of financial irregularities and its officers were charged in connection with the probe.


Dr M still not sarisfied, has problems with S’pore

Former Malaysian prime minister Mahathir Mohamad has attacked Singapore’s handling of alleged money-laundering linked to Malaysian state investment fund 1Malaysia Development Berhard (1MDB), accusing the Republic of not targeting those accused of siphoning off more than billions from the fund.

“Notice that the Government of Singapore is very reluctant to pinpoint the people involved in this corruption,” Dr Mahathir said in an interview with The Financial Times. “It affects Singapore’s reputation as a financial centre. It is not doing the right thing. The people who accepted the bribes are not the people who are laundering the money.”

Today


Despite all these actions, there were no accusations from FMOM or his ministers that S’pore was acting against M’sian national interests. If these investigation had happened during Dr M’s premership, he’d have declared war or, worse, cut iff the water supply. At the very least, ties between the two countries would be very chilly.

Instead the love-fest initiated by both PMs continues. We should thank Najib for his maturity.

Gregory (Scotland Yard detective): “Is there any other point to which you would wish to draw my attention?”

Holmes: “To the curious incident of the dog in the night-time.”

Gregory: “The dog did nothing in the night-time.”

Holmes: “That was the curious incident.”

Silver Blaze by  Sir Arthur Conan Doyle

Wells Fargo misdeeds were peanuts

In Banks on 15/10/2016 at 11:24 am

Only $5 million had to be set aside to compensate customers and the $185 million in fines are a rounding error.

wells fargo stock fake account scandal

But its top executive had to go.

Unique Selling Point of Swiber junk bonds?

In Banks, Energy, Financial competency on 07/10/2016 at 3:31 pm

DBS’s private banking clients were told Swiber bonds were safe ’cause DBS was a big lender?

This wicked, evil tot crossed my mind when I was reminded that DBS

had a S$700 million ($522 million) exposure to the Swiber group of companies and expected to recover roughly half, given some was secured by assets. That amount represents 92 percent of Swiber’s $567 million in total equity at the end of the first quarter, the last time it reported its financial position. It also probably means that just over half of all the leases, borrowings and notes payable reported by Swiber were owed to DBS.

Any credit officer should balk at a lender being in charge of more than half the debt of an entire company. It gets worse, however, because on top of that, Swiber’s debt had already become much larger than its equity, a sign the bank should have considered scaling back its exposure.

https://www.bloomberg.com/gadfly/articles/2016-08-03/how-deep-into-oil-rigs-is-dbs

I mean DBS wouldn’t lend money to any dog, let alone a dying dog with maggots festering in it, would it? And persuade its private banking clients snd accredited investors to join in, would it?

More on StanChart’s latest problem with the US

In Banks, Temasek on 29/09/2016 at 2:38 pm
 

From NYT Dealbook

Standard Chartered Under Investigation

Standard Chartered has been accused of potential wrongdoing by officials at an Indonesian power company in which it is an investor.
The United States Justice Department is looking into the accusations, a person briefed on the matter said. The investigation was related to accusations that officials at the company, MAXpower, had paid bribes to win contracts, according to The Wall Street Journal, which earlier reported the inquiry.
A recording of a conversation with the company’s chief executive, who used to work at Standard Chartered, featured discussions about illicit payments and joking references to soccer balls stuffed with cash, The Journal reports.
The situation is particularly tricky for the bank, which is based in London but does most of its business in Asia, because of the settlement it reached after an investigation into accusations that it had transferred money for countries affected by United States sanctions.
Misconduct could prompt prosecutors to re-evaluate whether to revoke the deferred-prosecution agreement and force the bank to plead guilty.
It’s also a blow to William T. Winters, the chief executive who has been trying to overhaul the bank.

StanChart got caught again

In Banks, Temasek on 28/09/2016 at 4:56 am

Standard Chartered said it was being investigated by the US Department of Justice over claims that an Indonesian subsidiary had paid bribes to secure contracts.

The London-based but Asia-focused bank said it had referred the matter to the “appropriate authorities” and launched its own review.

The Wall Street Journal newspaper said that an internal audit at Indonesian energy company Maxpower Group found evidence of possible bribery and US prosecutors were examining whether the bank was culpable for not stopping it.

Two years ago I wrote Double confirm StanChart’s rogue bank & PAP apologist is a fool

Remember a “PAP is always right” man KPKBing when StanChart was charged that the reulator was a “rogue regulator”. StanChart then made the dean of LKY School look dumb, really dumb, by pleading guilty.

Double confirm that StanChart is a rogue bank and the PAP apologist is a fool because now: The management of Standard Chartered is facing renewed pressure after being placed under fresh scrutiny by US regulators.

Two years after being fined more than £400m for breaching US sanctions towards Iran, the bank revealed that a two-year deferred prosecution agreement (DPA) that was imposed at the time was being extended for three years.

The US authorities are now investigating whether Standard Chartered breached its sanctions rules beyond 2007, the period when the previous offences for which the bank was penalised took place.

http://www.theguardian.com/business/2014/dec/10/standard-chartered-management-us-regulators-investigation-sanctions

 

Feds treat as bribery US bank’s programme for PRC White Horses

In Banks on 27/09/2016 at 2:05 pm
 
JPMorgan’s efforts to hire the children of China’s ruling elite seem to keep coming back to bite it. NYT Dealbook

(JPMorgan hired friends and mamily of leaders at three-quarters of major Chinese firms it took public in HK under the Sons and Daughters program, which ran from 2004 to 2013, JPMorgan took referrals from a broad spectrum of China’s business and political elite, according to a document compiled by the bank as part of a federal bribery investigation)

NYT Dealbook continues

The bank is preparing to settle with federal prosecutors and the Securities and Exchange Commission after being the subject of a federal bribery investigation.
But it is now also facing scrutiny from the Federal Reserve and the Office of the Comptroller of the Currency, two agencies that were not previously known to be involved.
The Fed is seeking a $62 million fine, while the Office of the Comptroller of the Currency will seek to mete out its own punishment, according to people briefed on the investigations. The two regulators are focusing on a breakdown in controls and practices that allowed the improper hiring to take place, rather than the bribery aspect.
JPMorgan is expected to pay federal prosecutors and the S.E.C. about $200 million.

 

How the mighty are fallen

In Banks on 27/09/2016 at 5:07 am

On market capitalisation Deutsche Bank now ranks 78th among global banks, just below the likes of Malaysia’s Public Bank [a sua kee in M’sia] and Brazil’s Itausa Investimentos Itau. FT

And if u are wondering our three local babks are a lot bigger on this measure than Deutsche.

Whatever happened to ” Deutscheland uber alles*”?


 

*above others

China’s plans to rule tech & finance

In Banks, China on 22/09/2016 at 2:33 pm
“It is the goal of Chinese outbound industrial policy programs to replace foreign technology leaders in the medium term — not just in China but also in global export markets.”
— Sebastian Heilmann, president of the Mercator Institute for China Studies, a think tank based in Berlin, on China’s strategy of investment.

 

 

China’s Wealthy Help Bolster European Capital

Asia’s high net-worth individuals, whose wealth has surpassed counterparts in North America, have been major investors in regional bank bonds.

 

From NYT Dealbook

Perils of being an “atas” investor

In Banks, Financial competency on 20/09/2016 at 1:27 pm

Mom was “medium risk” investor but junk bond sold to her 

When Elaine Tham signed an “accredited investor” form with her bank in Singapore two years ago, she took a fateful step toward losing all the money she had set aside for her children’s education.

Based on her financial profile and investment priorities — her need for S$150,000 ($110,000) to pay university fees — a local branch of HSBC Holdings Plc had initially categorized her as a “medium risk” investor. But because the value of her property and car entitled her to “accredited” status, a category reserved for wealthy investors, Tham says she was persuaded to take a riskier path. She agreed to invest S$250,000 in the bonds of a small Singapore energy-services company, Swiber Holdings Ltd., which said in August that it won’t be able to repay its bondholders.

Tham is one of many Singaporeans who lost money by investing in Swiber, which sold an unusually high proportion of its bonds to the wealthy clients of banks in Singapore. Amid signs last week that more local energy-services companies are being dragged down by the prolonged slump in global oil prices, some are urging quick action to plug loopholes in Singapore’s investor-protection rules.

Man didn’t know he was “accredited investor”

The revisions to the law proposed by the MAS might have helped another Singaporean bondholder, Sandeep Kapoor, who says he is facing losses after buying S$250,000 of Swiber bonds in 2014. The 50-year-old engineer said he only found out he was an accredited investor last month, some two years after the purchase, via his relationship manager at DBS Group Holdings Ltd. 

Under the proposed revisions, he would have been given the chance to opt in to accredited investor status, rather than being automatically assigned to the category because of his wealth.

http://www.bloomberg.com/news/articles/2016-09-19/bond-losses-show-vulnerability-of-singapore-s-not-really-rich

How managers encourage abusive behaviour

In Banks on 19/09/2016 at 2:24 pm
Khalid Taha, a former Wells Fargo personal banker, said he fielded complaints from customers about questionable accounts until shortly before he left the bank this summer.

but ensure that their staff suffer the consequences

Wells Fargo Warned Workers Against Sham Accounts, but ‘They Needed a Paycheck’

Former employees say that their managers warned them not to bend the rules, but they felt pressured by the bank’s aggressive sales culture to create fake accounts anyway.

NYT Dealbook

Our banks are sway kees even in SE Asia

In Banks on 13/09/2016 at 3:20 pm

I’m surprised to learn that the State Bank of India is bigger than DBS. And that Bank Central Asia is bigger than OCBC and that ICICI Bank and Bank Rakyat Indonesia are bigger than UOB.

Temasek’s China banks perform better than ang moh counterparts

In Banks, China, Temasek on 10/09/2016 at 4:36 am

Temasek has meaningful stakes in China Construction Bank, Industrial and Commercial Bank (ICBC) and Bank of China  and they are doing well. Something the ant-PAppyists cybernuts don’t tell.

As they say an info graphic (esp from the FT) is worth a lot more than a A380 filled with BS.

Chinese banks

Since Feb’s lows, these three (and Agri Bank  have delivered a total return upwards of 40%)

And dividend yields are attractive, at over 5%.

But ant-PAppyists will always KPKB,.

The truth about the loss of IT jobs

In Banks, Economy on 09/09/2016 at 6:13 am
Here’s one TRE poster that I hope doesn’t join the migration to The Idiots  — Singapore or TISG as it prefers to be known. He wrote:
Good News:

This is good news, the Indians will return to India. IT department here all belongs to Indians already, no longer a Singaporean job. We got sold out long ago.

Rating: +18 (from 20 votes)
He’s right up to a point. The IT industry here belongs to FTs from India and locals are discriminated against in the sector according to people like Gilbert Goh and TRE posters.

He was responding to a Bloomberg report carried by TRE that said Barclays intends to cut approximately 100 IT jobs here

The report said that the employees are part of the Information Technology Operations team.The IT function will be moved to India to save on costs.

Barclays has since confirmed in a statement that it is in the process of cutting jobs here saying “identified a number of additional roles that carry out global activity in Singapore which can be relocated”

As I’ve reported before, in the early noughties, the PAP administration allowed the likes of Merrill Lynch, Citi and Beutsche to import cattle truck-loads of Indian IT FTs, in return for the banks promising to set up big chunks their global back office IT ops here.

As I reported beforem one shop in Suntec City had to fold after Citi retrenched its Indian ITs during the financial crisis. The owner’s biz model was premised on Indian FT techies.

Carrefour also closed its section selling freshly made Indian food that it opened a year earlier.

These two businesses show the kind of spin-offs of having FTs here. And what happens when they leave.

In general, the benefit of FTs coming in is the money they spend on entertainment, rent etc. When they leave, this spending is lost.

Using bitcoin technology

In Banks on 06/09/2016 at 5:36 pm

Blockchain is the technology behinf bitcon. And banks are studying how to use it to transfer $. Chart: How blockchain works

 

Banks say the greater safety that will come with a “golden record” of trades — one ledger that updates in real time as trades are executed.

There will be cost saving, as a fully synchronised and digitised settlement operation makes cumbersome, labour intensive back offices redundant

There will also be capital saving, as the time delay between transactions being executed and settled is reduced,

The problem: no reversal for honest mistakes, or fraud: transfer is transfer

 

Why Goldie wants to be the people’s bank

In Banks, Internet, Investment banking on 29/08/2016 at 3:26 pm

The maths behind Goldman Sachs move into retail internet finance

As it has done many times in its past to survive and to thrive, Goldman is in the process of reinvention. This explains Marcus, its new online lending business named after the company’s founder, Marcus Goldman, along with GS Bank, its online savings account business with no minimum balance requirements. After all these years, Goldman Sachs has suddenly discovered retail banking. But it is not out of altruism or charity, nor is it nefarious. It is all about making money from money, which has always been Goldman’s specialty. In fact, GS Bank and Marcus fit together elegantly in helping Goldman find new sources of profitability.

And here’s why: In the zero-interest-rate environment that the Federal Reserve has carefully curated for eight years, Goldman and other banks can gather up money — the raw material they use to make more money — at virtually no cost. By opening an online bank, Goldman can gather up billions of dollars in consumer deposits without the cost of a physical branch and pay its customers close to nothing for their money. Goldman is offering to pay savers 1.05 percent annually. That may sound like close to zero, and it is, but the rate is also nearly 17 times more than the 0.06 percent annual interest rate that JPMorgan pays me on my savings account.

Goldman’s idea is to get people like me to move my money, of course. Sure, the 1.05 percent is a teaser rate, created to attract billions of dollars to Goldman’s new venture. And it will no doubt work. Since April, GS Bank has collected $1.8 billion in deposits, essentially by word of mouth.

Goldman will then take that raw material and use it to make more money, in large part by lending it out through its online lender Marcus, which aims at consumers looking to borrow around $20,000. Goldman will charge plenty more in interest for these loans than the 1 percent it is paying savers at GS Bank. Although its terms will not be known until Marcus rolls out officially in October, assume for the moment that the going rate for consumer loans of this nature – if both Lending Club and Prosper are useful guides – is around 12 percent. That difference – the 11 percentage points – is what Goldman will largely rake in as profit.

Buffett: Bank fines like speeding tickets

In Banks on 11/08/2016 at 6:07 pm

Warren Buffett on Driving Violations, Baseball and Jamie Dimon Warren E. Buffett offers an unusual defense of Jamie Dimon, comparing the billions of dollars that JPMorgan Chase has paid in fines to state troopers handing out a speeding ticket.

Big banks strike back

In Banks on 10/08/2016 at 1:57 pm

Just when u think they have been defeated

Big Banks Make a Pitch for Hearts and Minds

Citigroup’s ad campaign for the Olympics showcases the benefits of large global banks, and other big banks are trying to soften their image.

NYT Dealbook

S’pore: “hewers of wood and drawers of water”

In Banks, Economy on 10/08/2016 at 7:50 am

FT reports that Goldman has 62 per cent of its “strategic location” headcount in Bangalore, 22 per cent in Salt Lake City, 8 per cent in Dallas/Irving, 7 per cent in Singapore and 1 per cent in Warsaw.

We are “hewers of wood and drawers of water” for Goldie. PAP administration will say that we must thank the FTs for this. Given our world beating rankings in academic excellence, who is responsible for ensuring that we (because of the FTs) can only be “hewers of wood and drawers of water”?

The PAP administration is a reasonable answer given its claim that the rankings shows the PAP administration’s long-term planning. To be fair, in the early noughties, the  PAP administration sought to make S’pore a global hub for banks IT operations. FT Indians were let in by the cattle-truck load because Merrill Lynch, Citi and Deutsche agreed to use S’pore as  global hub. I know someone in Suntec City whose biz model depended on the FT Indians Citi employed. When Citi retrenched, he closed his biz. As did the spot in Carrefour that sold great Indian cooked food.

Fintech’s greatest impact

In Banks on 02/08/2016 at 1:08 pm
Will be in trading, settlements and general back office.

From NYT Dealbook

We’ve Hit Peak Human and an Algorithm Wants Your Job. Now What? On Wall Street, the still-essential business of banking will go on – but maybe without as many suits. “We have 20,000 manual interventions on trades every day,” said Michael Rogers, president of State Street. “There’s a huge opportunity to digitize that and move it forward electronically.”

 

Why Dodge City’s marshall upset with HSBC

In Banks, Currencies on 27/07/2016 at 1:19 pm

From NYT Dealbook

How Traders Use Front-Running to Profit From Client Orders Federal prosecutors charged two HSBC employees on Wednesday with “front running.” But how do traders use this practice to maximize profits?

The real reason HSBC didn’t return to HK?

In Banks on 13/07/2016 at 1:42 pm

Shareholders like me were disappointed that HSBC decided against returning to its hometown HK, preferring to remain being HQed in London

Seems one good turn deserves another: UK lobbied US for leniency for the narco bank. http://www.bbc.com/news/business-36768140

The Mexican branches of HSBC had custom-built counters to facilitate drug money deposits.

Italian mess shows why the Brits voted Leave

In Banks on 11/07/2016 at 2:02 pm

There is a crisis in Italian banking and the cheapest, most efficient way of solving the crisis is an Italian govt bail-out. But EU “rules” are “preventing” this.  EU wants the retail investors in bank bonds to take a hit.

With a friend like EU, who needs enemies.

From NYT Dealbook:

ITALY’S PLAN FOR BANKS IS DIVIDING EUROPE The Italian government needs to spend an estimated $45 billion to shore up its banks, which are burdened with bad loans. But fears that European authorities will bar the government from providing this support is adding to turbulence in the aftermath of Britain’s vote to leave the European Union,Peter Eavis reports in DealBook. And the situation could keep investors on edge through the summer.

Italian bank shares have dropped steeply – an indication of a storm ahead. The stock price of Banca Monte dei Paschi di Siena, one of Italy’s most troubled lenders, is down 80 percent in the last 12 months. Its shares trade at under 10 percent of its book value – a sign that investors really think that the bank needs new capital, although when bank stocks sink that much, they find it almost impossible to raise new capital on the markets.

Italian banks don’t appear to need an overwhelmingly large sum to return them to a firmer footing. The problem is their 200 billion euros, or about $222 billion, of bad loans. The banks have already set aside significant reserves to absorb losses in these loans, effectively valuing them at 40 percent of their original value, according to some analyses.

But investors appear to think that the loans are worth less than that, and the theory is that banks would have to value the loans at an even lower level.Banking experts say that €40 billion of support is needed to help the banks take those losses.

The Italian government could mimic the United States government’s TARP spending in 2008 and plow that money into the banks, but a bailout of that sort may be illegal under relatively new European rules that aim to protect taxpayers.

The rules aim to force investors in the banks to provide support in times of trouble by buying their debt securities. Under anti-bailout rules, these securities would be forcibly turned from debt into new equity, which could absorb any new losses taken on the bad loans. Under such a so-called bail-in, the equity would in theory be worth less than the debt securities, leading to losses for investors who held the debt.

In Italy, however, retail investors hold many of these debt securities– families own about a third of them, according to the research organization Bruegel. A bail-in would focus the pain on Italian households, and the fear of losses might also prompt investors to stop lending to banks and lead depositors to withdraw their money.

A compromise with Europe’s leaders does not look impossible, although there is considerable tension over the question.

The rules provide ways to give Italy a pass, but Cassa Depositi e Prestiti, a large investment entity controlled by the Italian government, could also provide bailout funds. Either way, analysts agree that the government would have to overhaul the industry.

Training bankers the Chinese way

In Banks, China on 07/07/2016 at 1:26 pm

Chinese Bank Staff Beaten for Poor Performance on Course A motivational trainer in China beat eight rural bank employees with a stick, shaved the heads of the men and cut the hair of the women after they performed poorly on a training weekend.

NYT Dealbook

Wayang only, our banking secrecy laws

In Banks on 26/06/2016 at 5:30 am

In the case reported below, MAS was quoted as saying by ST that “Banking information could be disclosed through client’s consent or via Singapore mutual legal assistance.”

MAS seems to suggest that consent or mutual assistance are the main channels for disclosure.

So where got banking secrecy? All wayang.

From NYT Dealbook:

UBS Gives I.R.S. Records on U.S. Citizen’s Account in SingaporeUBS ended a legal fight with the Internal Revenue Service, agreeing to hand over records on an American client’s account in Singapore as the authorities seek to move beyond Switzerland in their fight against offshore tax evasion.

“UBS confirms that it complied with the summons based on client consent in accordance with Singapore law,” Marsha Askins, a UBS spokeswoman, said in an e-mail.

IRS agents served a summons on UBS in 2013 for the records. Hsiaw had $990,351 in his UBS account in Switzerland in 2001, and closed that the next year, transferring $194,356 to his Singapore account in 2002, according to the IRS petition. The bank said it couldn’t produce the information because Singapore’s bank-secrecy laws prevent disclosure without permission from Hsiaw, which he hadn’t provided, according to a court filing.

Singapore’s laws and regulations don’t prohibit sharing of information for investigations into possible tax offenses, and banking information could be disclosed through client’s consent or Singapore mutual legal assistance, according to the city state’s central bank.

“Even if Singapore’s bank secrecy laws, as UBS contends, precludes disclosure of the summoned bank records relating or pertaining to Hsiaw’s Singapore account(s), international comity requires that the records be disclosed,” IRS revenue agent James Oertel said in the Feb. 23 petition.

 

Fintech I can appreciate

In Banks on 23/06/2016 at 7:01 pm

Goodbye, Password. Banks Opt to Scan Fingers and Faces Instead. Frustrated by thieves stealing personal data from millions of customers, banks are investing in biometric technology to offer better security.

NYT Dealbook

And govt wants to encourage fintech?/ PAP is never wrong

In Banks, Economy, Internet, Political governance, Public Administration on 22/06/2016 at 6:04 am

Is Tharman trying to tell jokes again? (Examples in the past, another recent one?). He’s the leading advocate of fintech here.

But demand for digital services leaves banks and other financial institutions more open to more risk. The majority of top bankers said they were open to more risks than they could manage as a result of digital developments, according to a global survey of bankers by the consultancy Accenture.

Yet the PAP administration has indicated by its plan to restrict direct access to the internet for civil servants that it is trying to cut cybersecurity risks by cutting internet connections.

——————————————————

Delinking cicil servants from the internet

‘The Govt’s move to delink computers used by civil servants from direct access to the Internet is “absolutely necessary” to keep govt data and public services secure,’ PM. He cited the possibility of personal data like NRIC numbers, addresses and income tax returns being hacked and put up for sale in the internet.

When this policy takes effect in May next year, civil servants can only access the Internet through dedicated computers or through their own computers. It seems that there have been very determined attacks on the Govt’s IT systems and the threats are getting more severe and sophisticated. Just relying on the system’s defensive measures is looking like a losing proposition? It is best to cut the connections to the minimum?

————————————————————-

So how does the call for more fintech dovetails with the plan to deny most civil servants direct access to the internet?

 

Fintech is all about increasing connections, the civil service delinking initiative is all about cutting connections.

Does the PAP administration think that the banks and other financial institutions can safeguard data better than it can? Or that the data financial institutions hold  is not so impotant?

Or maybe is the delinking policy, is as suggested by Chris K, aimed at avoiding a PR disaster:” PAP must always look good even when PAP goofs”? A variant of “Napoleon is always right”*?

Or is Tharman just joking about the importance of fintech to S’pore?


*Another one of Boxer’s mottoes is “I will work harder”. Sounds so S’porean and something that the PAP encourages. But then why is productivity is so worryingly low. Too many of the PAP’s favoured caste, FTs, isit?

2047 financial problem in HK

In Banks, China, Hong Kong, Property on 21/06/2016 at 1:24 pm

From NYT Deal book

Expiration Date on China’s Promises Stokes Unease in Hong Kong Housing Most banks have yet to formulate mortgage policies beyond 2047, when an agreement guaranteeing the city a high degree of autonomy runs out.

I’m sure Uncle Redbean and Goh Meng Seng will scold the banks foer being afraid. They look forward to the day when Chinese “rule of law” prevails in HK.

 

HSBC Defends Its Asian Ambitions

In Banks on 16/06/2016 at 2:01 pm

“I wouldn’t want to be anywhere else,” Douglas Flint, the bank’s chairman, said in an interview. “The fact that the market is uncertain about the value of that today just reflects market sentiment and it will change.”

Seriously, where else can it go?

But Asia is looking sick.

Equity trading Floors Go Quiet Across Asia Revenue from trading stocks in China and Hong Kong could fall 30 percent to 50 percent in the first half compared with a year earlier, Bloomberg reports, citing senior executives at four firms who spoke on the condition of anonymity.

NYT Dealbook

HoHoHo, StanChart Cracks Down on ‘Above the Law’ Bankers

In Banks, Corporate governance, Emerging markets, Temasek on 15/06/2016 at 1:50 pm

The bank is cracking down after “recent transgressions” concerning employees’ outside business interests, close financial dealings with co-workers and excessive expenses, Bloomberg reports, citing a series of memos issued over the past two months.

NYT Dealbook

Fall of BSI and Goldie rainmaker: From heroes to zeroes

In Banks, Malaysia on 14/06/2016 at 1:17 pm

How a 143-Year-Old Swiss Bank Took a Quick Road to Ruin in Asia When a rainmaker left RBS Coutts with 70 colleagues for BSI, a small Swiss bank looking to get big in a hurry, it set off a chain of events that thrust the bank into the center of the financial scandal involving 1MDB.

NYT Dealbook

And here’s how a Goldman Sacks partner, whose wife called Rosmah Najib (FLOM or self-styled First Lady of M’sia) a friend, became a zero

http://www.bloomberg.com/news/articles/2016-03-30/the-rise-and-fall-of-tim-leissner-goldman-s-big-man-in-malaysia

HSBC, StanChart tua kee, DBS “peanuts”

In Banks on 13/06/2016 at 1:18 pm

According to a recent survey, HT says HSBC’s market penetration of corporate banking relationships in Asia (ex Japan) at 60%, StanChart’s at 50% and Citi’s at 44%. ANZ and DBS followed with 34 and 33%.

Fintech began in 1860s

In Banks, Internet on 06/06/2016 at 1:48 pm

With the use of the telegraph

Timeline: The Evolution of Fintech Starting in 1865, the structures, networks and ideas that are the foundation for financial technology today began to take shape.
NYT »

More on Fintech and the banks

In Banks, Uncategorized on 03/06/2016 at 6:20 pm

From NYT’s Dealbook

FINTECH VS. BIG BANKS Regulatory concerns have long dogged the banking industry, but these days, senior executives of big banks are keeping a close eye on something potentially more disruptive to the sector, which is financial technology, or fintech, Andrew Ross Sorkin writes in DealBook’s special section “Fintech’s Power Grab.” It’s too early to tell just how much fintech will upend the financial industry, but those who back the start-ups say that the potential is enormous. If these newcomers succeed, “Wall Street as we know it may become an outpost of Palo Alto,” Mr. Sorkin writes.

Of course, there are the skeptics, like the banking investor J. Christopher Flowers, who have dismissed the fintech frenzy as mere hype that defies common sense and will leave a trail of failed companies in its wake. But Mr. Sorkin writes that a third view may have the highest likelihood of coming true: “The big banks, so powerful and yet so anxious about the possibility of being disrupted by the upstarts, will gobble them all up in a spate of mergers and acquisitions that puts the disrupters squarely inside the institutions they were supposed to overtake.”

The banking industry needs to realize that change is coming whether it likes it or not, contends Steve Case, a founder of AOL and an entrepreneur with investments in several fintech businesses, who just wrote a book about the future, “The Third Wave.” “Some banks will be smart and figure out how to partner with some of these entrepreneurs or acquire some of these companies or do joint ventures, but if they just think it’s going to stay the way it is, they will be surprised,” Mr. Case said.

NORTH KOREA LINKED TO ATTACKS ON BANKS

In Banks on 30/05/2016 at 5:24 pm

From NYT Dealbook:

Security researchers have tied several online breaches at Asian banks to North Korea, Nicole Perlroth and Michael Corkery report in DealBook. The digital security firm Symantec said that in three recent attacks, the thieves used a rare piece of code that had been seen in only two previous cases – the hacking attack on Sony Pictures in 2014 and attacks on banks and media companies in South Korea the year before.

Symantec researchers said the evidence linked an attack at a bank in the Philippines last October with attacks on Tien Phong Bank in Vietnam in December and another in February that resulted in the theft of $81 million from the central bank of Bangladesh.

Eric Chien, a security researcher at Symantec who found the code used across the attacks, said it was the first time that a nation had used online attacks for financial gain.

The attacks raised alarm bells because the thieves gained access to Swift, which is considered the world’s most secure payment messaging system. It is used by 11,000 banks and companies to move money between countries, making it a tempting target. Swift itself had warned of a coordinated assault on banks, although it stressed that it was the banks’ connections to its networks, rather than the network itself, that were breached.

The possibility that Pyongyang had turned to digital theft was not surprising. North Korea’s economy has been ravaged by sanctions and food shortages. Its gross domestic product was estimated to be $12 billion to $40 billion, compared with South Korea’s $1.4 trillion.

“If you presume it’s North Korea, $1 billion is almost 10 percent of their G.D.P.,” Mr. Chien said. “This is not small change for them.”

There is no evidence to date that the thieves have gone after large American or European banks, though new possible attacks are being reported weekly. Last week, evidence emerged that Banco del Austro, an Ecuadorean bank, was infiltrated by hackers who were able to sneak into the Swift network.

FireEye, the security firm investigating the intrusion on Bangladesh’s central bank, is looking at several more undisclosed cases where banks’ systems were compromised, The Wall Street Journal reports, citing a person familiar with the matter. The suspected attacks involved eight other banks, all of which are in Asia.

Analysts worry that the breaches could hold back global finance; larger banks may become reluctant or even refuse to transact with smaller banks in the developing world unless they have assurances that their networks would not be compromised.

Making victims of cybercrime pay: So PAPish

In Banks, Humour on 26/05/2016 at 5:08 pm

But it’s the UK, not S’pore.

The FT reports that UK bank customers may have to cover cost of fraud under new proposals. Under the plans, individuals or companies with lax online security could find themselves  without banking services or even excluded from the system under which banks compensate customers whose accounts are hacked.

Bet u this will happen here first. It’s so PAPish. It’s a Hard Truth to favour big biz over the little people, is it  not? Harry must be turning in his metaphorical grave.

Two “secret” tecniques that Buffett uses

In Banks on 22/05/2016 at 2:58 pm

In March this ye, the FT carried an article “The $62bn secret of Warren Buffett’s success”.explaining that that he’s a leading proponent of delaying tax payments as long as possible.

A reader in response to the article said that this technique was part of another technique Buffett uses: unique, deep value liability funding strategy inasmuch as it is an investing strategy

Great article. Most of us misunderstand Buffett’s strategy. It’s a unique, deep value liability funding strategy inasmuch as it is an investing strategy. He was able to get 15%-20% return even if his stock investments only went up 5%. How? OPM leverage. Check out these guys’ explanation below – they’re really sharp. I’d keep an eye out for them: https://www.scmessina.com/2015/02/if-warren-buffett-had-to-start-today-could-he-still-reach-his-current-level-of-wealth/

Cyberattacks on global payments system

In Banks, Internet on 22/05/2016 at 11:01 am

NYT Dealbook

SWIFT REPORTS A NEW ATTACK Thieves have found their way into the Swift global bank network as investigators are still trying to solve the $81 million heist from the central bank of Bangladesh, Michael Corkery reports in DealBook.

The second attack involved a commercial bank, which Swift declined to identify. In a letter it planned to send to users on Friday, which The New York Times reviewed, Swift warned that the two attacks bore similarities and were likely part of a “wider and highly adaptive campaign targeting banks.”

Banking experts said the attacks might be impossible to solve or trace. Swift said the thieves got their hands on legitimate network credentials, initiated the fraudulent transfers and installed malware on bank computers to disguise their movements.

The attackers clearly exhibit a deep and sophisticated knowledge of specific operation controls within the targeted banks – knowledge that may have been gained from malicious insiders or cyberattacks, or a combination of both,”Swift said. It also warned that the gang of thieves may have been able to recruit bank employees to hand over credentials.

Security experts who have studied the attacks said the thieves were probably lurking inside the bank systems for months before they were detected and are likely to strike again.

Swift’s core messaging system was not breached, but the criminals attacked the banks’ connections to its network. Banks are responsible for maintaining the security of their own connections to Swift and digital criminals have found ways to exploit loopholes in bank security to obtain login credentials and dispatch fraudulent Swift messages.

This second attack suggests a highly sophisticated threat that did not depend on weak digital defenses.

HSBC: Bad news, good news

In Banks, Emerging markets on 21/05/2016 at 10:11 am

HSBC Said to Hire 175 Compliance Employees HSBC is hiring 175 people for the financial crime compliance team at its British consumer bank, which will eventually be isolated from its trading business, Bloomberg reports, citing people familiar with the plan.

HSBC to Move 840 Technology Jobs Out of Britain to Save Costs The bank announced plans last year to shed as many as 50,000 jobs by the end of next year as it seeks to reduce its costs and reshape its business.

HoHoHo: Chinese banks

In Banks, China, Temasek on 05/05/2016 at 10:10 am

Mid-sized Industrial Bank reported some of the highest levels of investment receivables in its first-quarter results. The bank held Rmb2tn in investment receivables as of the end of March, 36 per cent of its total assets and equivalent to the size of Singapore’s gross domestic product last year.

(FT)

And remember we hold shares in  three out of the four biggest banks

The suspicion is that Chinese banks are owning up to just as much bad news as they can afford while keeping reported earnings stable. It’s not clear who they are trying to fool. Shares of the big five trade at between 70 and 80 percent of book value, suggesting investors wised up long ago. The latest trickery will only make them more cynical.

http://blogs.reuters.com/breakingviews/2016/04/29/chinese-banks-stealth-clean-up-fools-nobody/

OCBC pays price for biz model

In Banks on 03/05/2016 at 10:16 am

While

United Overseas Bank (UOB) posted a 4.4 per cent fall in first-quarter net profit, as lower wealth management fees and trading income more than offset higher net interest income. (CNA)

OCBC had a 14 per cent decline in quarterly net profit. Unlike UOB and DBS it has adopted a bankassurance model which depends on income from its life insurance division.

Oversea-Chinese Banking Corp (OCBC), Singapore’s second-biggest lender, announced on Friday (Apr 29) a 14 per cent decline in quarterly net profit, as its insurance income dipped and allowances rose.

For the three months ended March, net profit was S$856 million, down from S$993 million a year ago.

Profit from its life assurance unit plummeted 58 per cent, a fall of S$116 million, largely due to unrealised mark-to-market losses from subsidiary Great Eastern Holdings’ bond and equity investment portfolio, the bank said.

Wealth management income, comprising income from insurance, private banking, asset management, stockbroking and other wealth management products, was down 17 per cent to S$482 million, from S$583 million a year ago. (CNA)

DBS’s results should be a lot closer to UOB’s than OCBC’s, unless there’s something really nasty at DBS’s Indonesian business.

 

S’pore banks under some pressure

In Banks on 28/04/2016 at 6:16 am

Too much capital: The average Tier 1 capital ratio at OCBC, DBS and United Overseas Bank was a unhealthy 14% at the end of last year.

Worse

each dollar of Oversea-Chinese Banking Corp.’s assets earns only 1.2 cents in operating revenue before provisions, compared with 1.6 cents for Hang Seng Bank in Hong Kong. 

The narrow wiggle room for liquidity calls for caution. Hang Seng Bank’s loan-to-deposit ratio is less than 72 percent, by Bloomberg’s calculations, and 85 percent for OCBC. It’s hard to see Singapore lenders aggressively expanding their loan books if deposit growth doesn’t keep pace. But as Bloomberg Intelligence analyst Diksha Gera noted recently, HSBC and Malaysia’s Maybank are joining Citigroup and Standard Chartered in locally incorporating their Singapore retail banks. Growing competition for deposits at home could whittle away margins. 

http://www.bloomberg.com/gadfly/articles/2016-04-06/singapore-s-broken-piggy-bank

UBS bearish that StanChart has turned a corner

In Banks, Emerging markets, Temasek on 27/04/2016 at 10:32 am

It’s Shares jump despite fall in profit

Standard Chartered shares surged 10% in London after the bank — which generates almost three quarters of its revenue from Asia — reported a surprise decline in loan impairments and capital increased more than some analysts estimated.

Pretax adjusted profit fell 64 per cent to US$539 million (S$729 million) for the first three months of 2016, from US$1.5 billion a year earlier, said the London-based bank in a statement yesterday. Losses on bad loans fell 1 per cent to US$471 million in the quarter, well short of the US$650 million of impairments estimated by Mr Chirantan Barua, an analyst at Sanford C Bernstein. 

But there are still huge problems.

Revenue dropped 24 per cent in the quarter to US$3.35 billion, as income from every business unit declined.

http://www.bloomberg.com/news/articles/2016-04-26/standard-chartered-profit-drops-64-as-revenue-misses-estimates

UBS expects the share price to fall to 430p within 12 months.

With many funds short or underweight at the start of the year, commodity prices regaining some poise, EM equities rallying and EM funds seeing a return to inflows, a rally is directionally easy to rationalise.

But the StanChart rally has happened against a ~60% fall in consensus profit forecasts for this year and 30% decline for next. Our estimates are unchanged and so is our view: we see great businesses within StanChart – predominantly Transaction Banking, Financial Markets and bits of Retail – but we think the headwinds of de-risking, deleveraging, and flat and low yield curves will combine with elevated loan losses to make life particularly difficult near term (we forecast a loss for this year), leaving the 8% ROE target for 2018 out of reach.

 

 

HoHoHo, Soros bearish on China

In Banks, China, Temasek on 25/04/2016 at 10:06 am

After StanChart, thetr are three other Chinese other monkees on Temasek’s back. Remember we have big stakes in three of China’s big 4 banks.

As China’s Growth Slows, Banks Feel the Strain of Bad Debt Chinese lenders feel rising pain from souring loans in troubled industries – even as they face pressure to keep local companies afloat.

NYT Dealbook

Soros bearish on China

George Soros is warning markets that China’s financial system is at risk and the rise in credit will be the downfall for world’s second biggest economy.

Speaking at an Asia Society event in New York on Wednesday, Soros said the similarities between the credit markets in China “eerily resemble” to those of the United States in 2007 before the financial crisis.

Recent stimulus packages in China have seen sharp rises in asset prices – namely in the housing and construction sector, but Soros believes these have been fueled by excessive lending to underperforming industries.

“Most of the money that banks are supplying [in China] is needed to keep bad debts and loss-making enterprises alive,” Soros said.

Read more: George Soros Worried about China’s Financial System | Investopedia http://www.investopedia.com/articles/investing/042116/george-soros-worried-about-chinas-financial-system.asp#ixzz46i1T5WmU
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HSBC: End in sight

In Banks, China, Hong Kong on 20/04/2016 at 10:23 am

HSBC Chief Said to Leave in Two Years Stuart Gulliver, HSBC’s chief executive, will step down in two years, and the bank has already started compiling a list of possible internal successors, The Sunday Times reports, citing senior sources.

NYT Dealbook

Naving him as CEO since 3011 is like us kanna Mah Bow Tan and Raymond Lim and Taacob at the same time.

Here’s an interesting tot from FT reader on executive salaries

“Chief executives are agents for owners, the shareholders. They should be treated the same way as football club managers. Your team performs badlly and you are promptly sacked. Preferably they should have only one or two year’s contracts, to be ended on expiry without compensation.”
By Brian Reading on Four ways to bring galactic executive pay back down to earth

 

Fintech is fashionable

In Banks on 04/04/2016 at 12:24 pm

NYT Dealbook reports

‘FINTECH’ BOOM SAID TO THREATEN BANK JOBS Up to 30 percent of employees in the banking industry could lose their jobs to new technologies over the next decade, Nathaniel Popper reports in DealBook.

A report by Citigroup said that the number of employees at American banks would drop to 1.8 million in the year 2025, down from 2.6 million last year. An even sharper drop is predicted for European banks.

The jobs would be lost to start-ups cutting into different parts of the financial industry.

The projection comes after Antony Jenkins, the former chief executive of Barclays, said that banking was facing a series of “Uber moments,” in which the jobs in the industry could halve.

Banks are already being forced by volatile market conditions and new regulations to make cuts.

The Citigroup report noted that the banking sector had attracted record investment over the last five years and that new technologies had taken off the fastest in Asia, particularly China.

New financial technologies have been slower to gain traction in the United States. But “given the growth in fintech investment, this isn’t likely to continue for long,” wrote Kathleen Boyle, the managing editor of Citigroup GPS, in the report’s introduction.

High flyer takes pay cut

In Banks on 28/03/2016 at 10:21 am

CEO of a big UK insurer left to head a big Swiss bank: more prestigious.

He gives  the lie the to Hard Truth that got to pay big bucks to attract talent to be minister. Either that or being minister is not a pretigious job. Btw, I once remarked that ministers needed “danger” money what with LKY’s “Off with his head” attitude even after he moved to the shadows.

FT reported last week:

Credit Suisse’s new chief executive Tidjane Thiam took a big pay cut to join the Swiss bank.

The bank’s annual report shows he was paid SFr1.58m for the six months he worked last year as well as a bonus of SFr2.86m, a package roughly in line with his predecessor Brady Dougan writes the FT’s Laura Noonan.

It annualises to SFr4.57m, a lot less than the £11.8m – or around SFr16.5m – Mr Thiam got for his last year at insurer Prudential. Credit Suisse paid SFr14.3m to buy Thiam out of his Prudential shares, the report showed.

Mr Thiam asked the board to cut his first bonus by 40 percent to reflect the challenging environment the bank was facing, and in solidarity with colleagues including those in global markets where the 2015 bonus pool was cut by 36 percent.

Pinoys big time money launderers

In Banks, Casinos on 19/03/2016 at 5:39 am

Brazen Heist of Millions Puts Focus on the PhilippinesThe country’s lightly regulated casinos and tough bank secrecy laws had prompted warnings from the United States and money-laundering experts before the theft.

The Philippine authorities cannot say what happened to the $81m sent to their country. Much of the money disappeared in its opaque casinos, which they say are not covered by rules to prevent money laundering (a worry in itself). The CCTV system at a bank branch where some of the money was withdrawn was not working.

(Economist)

DBS, OCBC, UOB: peanuts

In Banks on 18/03/2016 at 2:51 pm

They are tiny in private banking, not only globally but refionally too.

In October lat yr, it was reported by CBA DBS’ private banking arm is now the eighth largest in the Asia Pacific, according to a widely followed industry ranking released on Friday (Oct 16), after assets under management (AUM) grew by by 35 per cent last year.

Private Banker International (PBI), an industry journal, said DBS’s AUM for high-net-worth clients rose 35 per cent to US$73 billion last year, helped by the Singapore lender’s acquisition of Societe Generale’s Asian private banking business.

No where near the global giants

Global wealth

See if you can spot OCBC or UOB.

 

HoHoHo: Chinese banks have more problems

In Banks, China, Temasek on 16/03/2016 at 9:29 am

Funny that we don’t hear much in ST nowadays that Temasek has big, big stakes in Chinese banks. http://www.temasek.com.sg/portfolio/portfolio_highlights/majorportfoliocompanies.

Last yr, ST was boasting

http://www.straitstimes.com/business/companies-markets/temasek-raises-stake-in-chinese-bank-icbc

http://www.straitstimes.com/business/temasek-raises-stake-in-icbc-in-vote-of-confidence-after-rout

But maybe, ST’s cottoned on that Chinese banks have problems, big problems

NYT Dealbook reports

“CHINESE BANKS SWAP DEBT FOR EQUITY A new approach to managing China’s corporate debt burden offers temporary relief for banks, but spells difficulties for the country’s economy, Keith Bradsher reports in DealBook.

Deeply troubled companies are using stock to pay for overdue loans. On Thursday, a heavily indebted Chinese shipbuilder disclosed that it would issue equity to its creditors, instead of repaying $2.17 billion in bank loans.

Banks with stakes in indebted companies are likely to be even more reluctant to shut them down, leaving China with enormous overcapacity in sectors like shipbuilding, steel and cement, hampering growth for years to come.

The strategy has advantages – it would allow companies to cut their debt loads. This could help their credit profiles and keep their businesses running. Bank loan books will also appear healthier, since they can reduce the amount of past-due loans.

However, it could make problems more pernicious as the companies are putting off hard choices like laying off employees or closing operations.

It is still unclear how widespread the strategy has come. The shipbuilder, China Huarong Energy Company, had to disclose the move only because it is listed on the Hong Kong stock market. It is one of dozens of Chinese shipbuilders in financial distress as prices for new ships worldwide have halved in the last two years.”

And there’s another related problem

http://blogs.reuters.com/breakingviews/2016/03/11/china-debt-swap-could-leave-banks-in-capital-hole/

HSBC: Cut ang moh, Indian layabouts

In Banks, Hong Kong, India on 23/02/2016 at 7:06 am

People and assets.

HSBC’s so-so results prompts th=hs analysis. Results fr 2015 were flat after an expected US$1,9bn  4Q pre-tax profit turned into a loss of US$858m.

As at August 2015, Asia accounted for 69% of HSBC’spre-tax profits. And HK, China is where the money is minted.

Well these show that ang mohs and Indians: people and assets are lazing in the sun.

 

HSBC

Yes India is in Asia but look at the number of Indians employed, more than the Honkies. HK is the place that HSBC makes its money, not india but there are more Indians working for HSBC than Hongkong people.

Related post: StanChart’s very own Little India.

Update at 10.45 am: http://blogs.reuters.com/breakingviews/2016/02/22/hsbc-shares-weighed-down-by-fear-of-future/

Update at 4.30pm; From NYT Dealbook: HSBC’S FOURTH-QUARTER LOSSES HSBC, Britain’s largest bank by assets, posted a loss of $1.33 billion for the three months ending Dec. 31,Chad Bray reports in DealBook. It had posted a profit of $511 million in the fourth quarter of 2014. Before taxes, the bank posted a loss of $858 million.

The bank also revealed in its earnings statement that it was under investigation by the Securities and Exchange Commission over its hiring practices in Asia. Several banks are under scrutiny after the commission opened an inquiry into whether JPMorgan Chase hired the children of powerful officials to help win lucrative business contracts.

HSBC did not give any further details on the investigation.

Its results were weighed down by restructuring costs, provisions for legal and regulatory matters, loan impairment charges and provisions for credit risk.

The bank is in the process of reshaping its operations, shedding tens of thousands of jobs, selling underperforming businesses and shrinking its global investment banking business.

“China’s slower economic growth will undoubtedly contribute to abumpier financial environment, but it is still expected to be the largest contributor to global growth,” Douglas Flint, the HSBC chairman, said in a news release.

Why banks sell-off is worrying

In Banks, Financial competency on 12/02/2016 at 6:00 am

This NYT Dealbook piece  appeared on Tuesday morning NY time. Relevant given what keeps happening since then. Gd description of the worries

INVESTOR NERVOUSNESS OVER BANKING GIANTS Worries about the world’s biggest banks have already played out in the stock markets as their shares have plunged, but there are also ominous signs in markets used to bet on the creditworthiness of large financial firms, Peter Eavis reports in DealBook.

The KBW Nasdaq Bank Index, a benchmark for the banking sector, was down more than 3 percent on Monday and had lost nearly 20 percent of its value this year.

Investors are rushing into benchmark government bonds, too. The yield on the 10-year Treasury note has declined, while the price of gold is rising. TheVix volatility index, also known as Wall Street’s fear gauge, has risen.

When investors sell bank shares or bet against the banks in credit markets, it can be a signal of more serious turbulence. It suggests that banks – usually the gears of an economy, transmitting credit to firms and households – are becoming more vulnerable to market volatility and underlying economic weaknesses.

The declines in bank shares may not indicate that banks are particularly fragile, but that investors are skeptical about their abilities to earn solid profits in the future, partly because of ultralow interest rates around the world.

Still, it doesn’t look too optimistic with Citigroup’s stock trading at nearly half the bank’s book value and European banks grappling with their own problems, which have contributed to the recent deep declines in their stock.

Fears about the health of the world’s banks continued to drag stocks down in Asia and Europe on Tuesday, Reuters reports. The Nikkei plunged more than 5 percent and investors stampeded for haven assets like the yen and gold.

Fears about the global economy also pushed the yield on Japanese 10-year bonds, the benchmark of government borrowing, down to zero for the first time, as Jonathan Soble reports in The New York Times. They quickly fell into negative territory, meaning some investors were buying bonds despite knowing that if they held them until maturity, they would come away with less money than they paid.

HOHONOHO: StanChart’s expected results

In Banks, China, Commodities, Emerging markets, Temasek on 26/01/2016 at 4:24 am

StanChart which suffered the biggest share price falls this year, will announce its results on February 23. Analysts expect it to report an 85%  fall in earnings per share, FT reports.

Last yr it was the second worse performer on FT100, down 47%, I think.

One analyst says there is debate that its business model is fundamentally broken. Another says that its strategic review released in Nov shows that it’s a collection of biz, none of whch cover their cost of capital.

Whatever China and other emerging mkts are in trouble and StanChart is an emerging markets bank. Until these mkts recover, StanChart can only cut costs (Sack more staff from Little India Marina Bay? Move jobs from London and S’pore?) and be more efficient.

HoHoNoHo

Updated at 5.00am

Chart: Troubled EM debt at record high

HoHoHo, PM must be proud

In Banks, China, Temasek on 19/01/2016 at 7:03 am

DBS, StanChart kanna mark by China for gaming the Chinese FX regome:

FT reported last week:

The latest tightening comes after the central bank temporarily suspended some foreign banks in China, including Standard Chartered, Deutsche Bank and Singapore’s DBS, from conducting certain foreign exchange transactions designed to arbitrage the gap between the onshore and offshore renminbi exchange rates.

HSBC is really an old friend of China. It may be the bank of choice for Chaqco and other Mexican drug lords, but it doesn’t game PRC regulations.

HoHoHo, StanChart’s a nightmare BUT don’t panic

In Banks, China, Temasek on 06/01/2016 at 1:09 pm

StanChart yesterday fell a further 1.7%, although it remained off the previous session’s intraday low.

In 2015, it was the second worst performer in the UK’s FT 100 index, falling 47%

From FT

Matthew Sutherland, investment director for Asian equities at Fidelity International said wild rides in regional stocks are likely to be the norm for 2016. “We’d better get used to it,” he said.

It’s important that investors don’t panic on weak days, but continue to take a disciplined and calm approach to investing. This is particularly true with regard to China. Yes, China’s growth is slowing, but the quality of that growth (in other words more consumption and less debt-fuelled investment) is far more important, and the difficulties are more than discounted in cheap valuations.

Accentuating the positive, he adds:

The really good thing is that the Chinese stock markets are very broad, which enables us to find lots of great bottom-up ideas irrespective of the macro environment.

Coming back to StanChart, on 15th Dec it led a London market rally on after JPMorgan Cazenove argued that the bank is at least 50 per cent undervalued versus peers.

Capital concerns have been addressed by StanChart’s $5.2bn rights issue, said JPMorgan, which was joint co-ordinator and underwriter to the cash call.

It forecast that, even if loan defaults return to the levels of the 1997 Asian crisis, StanChart’s capital buffer will remain within management’s target range.

Downside protection comes from StanChart’s new strategy to shrink risk-weighted assets by a third and move away from low-return business, with rising US interest rates providing a tailwind, JPMorgan said.

Yet the shares are trading at half their 2016 tangible net asset value and are on less than 10 times next year’s earnings, falling to just five times earnings in 2018, it forecast.

JPMorgan repeated an 870p target price on StanChart, which gained 6.4 per cent to 512.7p.

(FT)

 

“Prudent banker” is an oxymoron

In Banks, Financial competency on 04/01/2016 at 2:29 pm

Here’s a comment from an FT reader which promoted the above headline.

Where do we find bankers that understand prudent lending?

“What is wrong with lending more money into the Chinese stock market?” Chinese banker recently

“What is wrong with lending more money into real estate?” Chinese banker last year

“What is wrong with lending more money to Greece?” European banker pre-2010

“What is wrong with a NINA (no income no asset) mortgage?” US banker pre-2008

“What is wrong with lending more money into real estate?” US banker pre-2008

“What is wrong with lending more money into real estate?” Irish banker pre-2008

“What is wrong with lending more money into real estate?” Spanish banker pre-2008

“What is wrong with lending more money into real estate?” Japanese banker pre-1989

“What is wrong with lending more money into real estate?” UK banker pre-1989

“What is wrong with lending more money into the US stock market?” US banker pre-1929

It’s a global problem.

HoHoHo, StanChart’s rights issue is juz first-aid

In Banks, Financial competency, Temasek on 18/12/2015 at 12:59 pm

Temasek is willing to give Standard Chartered (STAN.L) time to work on its turnaround before deciding on the fate of its underperforming $4 billion (3 billion pounds) stake in the UK bank as part of a portfolio reshuffle, people familiar with the matter said.

“Temasek is giving them time. They’ve had a lot of engagement with the board, and Bill has sort of managed expectations in terms of turning this ship around,” said one of the people familiar with Temasek’s thinking.

Temasek declined to comment.

It was not clear how long Temasek will wait to see the results of the restructuring.

By subscribing this month to its allotted portion of Standard Chartered’s $5 billion share sale, the Singapore investor has buttressed that position for now. But Temasek may become increasingly uncomfortable with the investment if shares in the bank do not recover.

Its paper loss on the Standard Chartered investment was $1.2 billion, excluding dividends, just on the 12 percent stake it bought in 2006, according to calculations by Reuters. Temasek raised its stake to 18 percent in December 2007. Since then Standard Chartered’s shares have lost about two-thirds of their value.

http://uk.reuters.com/article/uk-temasek-strategy-idUKKBN0U003N20151217

StanChart completed its rights issue late last week. What the local MSM doesn’t tell us

StanChart .. has suffered because of poor peer-market conditions since it priced its shares. But investors, even though they took up almost all of their rights, are also giving a vote of diminished confidence. After StanChart old shares were shorn of the right to buy new shares on Nov. 23, the stock fell to 15 percent below its theoretical settling price. And the 9.8 percent further fall since then is worse than the decline in the Euro Stoxx Banks index.

That’s perhaps not surprising. StanChart, under new boss Bill Winters, is years from earning a return above its cost of equity. Since the new money will mostly go to bolstering the balance sheet rather than promoting productive lending, the return on the new money may be even lower. That might explain why, while Lonmin seemingly faces graver challenges, it’s StanChart to whom the market has blown a bigger raspberry.

 

 

HoHoFo: StanChart gets E grade in UK test

In Banks, Temasek on 02/12/2015 at 4:41 am

Royal Bank of Scotland and Standard Chartered were the weakest of Britain’s seven largest lenders in a Bank of England stress test.

For the second year, the central bank has subjected the UK’s biggest lenders to tests to measure whether they would survive a financial shock.

This time, it was assumed that oil had fallen to $38 a barrel and that the global economy had slumped.

No bank was ordered to come up with a new capital plan.

Out of the seven banks tested, RBS and Standard Chartered were found not to have enough capital strength, but both took steps to raise capital …

Standard Chartered’s chief executive Bill Winters said: “The results of the test demonstrate our resilience to a marked slowdown across the key markets in which we operate.

“The test was conducted on our balance sheet as at the end of 2014. Since then we have made further significant progress in strengthening our capital position.

“We are operating at capital levels above current minimum regulatory requirements and have a number of additional levers at our disposal to further manage capital.”

http://www.bbc.com/news/business-34972092

HoHoHo, next yr’s test will be harder still.

http://www.bbc.com/news/business-34972092

The UK’s banking sector is heavily (relatively) exposed to China much more so than other countries by a country mile. The exposure is concentrated between HSBC and Standard Chartered. Loan exposure to China represents around 30% of their loan books.

By compaeison our local banks’ exposure is “peanuts”.

Btw, Aberdeen Asset Mgt is a top 10 shareholder in both banks.

US banks: Here we go again

In Banks on 27/11/2015 at 2:21 pm

Banks seem to lurch from ome crisis to another. From NYT Dealbook

BANKS WEIGHED DOWN BY PILES OF LEVERAGED LOANS Investors have grown skittish about buying the debt of companies with weak credit ratings, leaving big Wall Street banks stuck with piles of debt, Peter Eavis and Leslie Picker report in DealBook. They are starting to book multimillion-dollar losses writing down the value of these positions.

Banks make loans to companies with junk credit ratings in the hope of selling the debt on to investors that include mutual funds, hedge funds and entities called collateralized loan obligations. Investors snap up the debt obligations, attracted by high returns.

The investment banks that focus on the market appear to be sitting onpotential losses that may exceed $600 million.

Private equity firms finance their purchases of companies with the loans, then put the debt on the balance sheet of the acquired company.

A large part of the paper losses comes from debt issued by Veritas, the software company that Carlyle Group is buying in a $5.5 billion leveraged buyout. Morgan Stanley and Bank of America led the transaction and a lack of demand for the debt has left it on the books of the banks.

The hits are a fraction of those suffered by the banks in the 2008 financial crisis and the market for such debt may well recover, but this could weigh on merger activity. Banks that are unable to sell debt may become more stringent in their lending for acquisitions.

If the Federal Reserve raises interest rates next month, that could limit the flow of money that has buoyed speculative markets, including the one for leveraged loans, in recent years.

Banking regulators had discouraged leveraged loan deals that would overburden companies with debt after the crisis, but the market has still ballooned.

Banks do put financial cushions in deals to protect themselves, but on some deals the prospective prices have fallen so far that they might havedropped through those buffers, leaving the banks at a loss.

End of private banking boom in Asia?

In Banks on 23/11/2015 at 12:56 pm

Citigroup plans to double the number of wealth management clients in Asia in the next five years to one million, as the bank seeks to capitalise on an emerging middle class in the region.

Going by Citi’s track record in joining any party when it’s about to end (sub-prime lending, commerical property lending etc) our local banks who are trying to get big in privaye banking should be wary.

DBS’ private banking arm is now the eighth largest in the Asia Pacific, according to a widely followed industry ranking released on Friday (Oct 16), after assets under management (AUM) grew by by 35 per cent last year.

Private Banker International (PBI), an industry journal, said DBS’s AUM for high-net-worth clients rose 35 per cent to US$73 billion last year, helped by the Singapore lender’s acquisition of Societe Generale’s Asian private banking business.

“Other factors that contributed to (DBS’) success are a focus on digital banking, innovation, and the ability to retain customers as their individual wealth grows,” it added.

PBI had ranked DBS number nine in its previous ranking. Overall, PBI estimates that total AUM in Asia Pacific increased by 12 per cent to US$1.54 trillion last year.

(CNA sometime back)

Crying all the way to the bank

In Banks on 12/11/2015 at 2:17 pm

Despite a bad yr with losses mounting.

Or should this be “Laughing all the way to the bank with the investors’ money”?

From NYT’s Dealbook

BONUS PAY ON WALL STREET LIKELY TO FALL Bonuses in the financial industry this year are expected to fall 5 to 10 percent, Nathaniel Popper reports in DealBook. It will also be the first year since 2011 thatcompensation for the whole industry is expected to drop, according to a report by the compensation consulting firm Johnson Associates.

There are still some bright spots in private equity and mergers-and-acquisition work, but most of the industry is struggling. The report expects end-of-year compensation in investment and commercial banking to be down 30 percent from 2009 levels.

Business lines requiring less capital, often because they are considered less risky, are seeing better returns and bonuses. For bankers advising on mergers and acquisitions, incentive payments are expected to be 15 to 20 percent higher.

Asset management requires less capital but will experience a 5 percent drop in bonuses this year as the business struggles with tepid markets and economy. The sharpest decline is expected in fixed income, where bonuses are predicted to drop 10 to 20 percent this year.

Finance remains one of the most generously paid industries in the world. The average securities industry bonus was $172,860, according to the New York State comptroller’s office.

But it is facing challenges from new regulation, slow economic growth and competition from new, technologically oriented competitors.

European banks have had to cut back and make changes to management.American banks have fared better, but companies like Goldman Sachs and Morgan Stanley have been turning in disappointing results. Alan Johnson, founder of Johnson Associates, said companies would have to cut costs significantly in the months ahead.

He noted that the ripple effects mean that Wall Street is losing its allure for the most talented young potential recruits who receive better offers from tech companies in Silicon Valley.

“In the last few years, it’s become a real issue,” he added.

A TOUGH YEAR FOR HEDGE FUNDS, BUT NOT REAL ESTATE Hedge funds have had a tough year with volatile markets, but hedge fund managers remain incredibly wealthy, Alexandra Stevenson and Matthew Goldstein report in DealBook. Larry Robbins, the hedge fund manager who founded Glenview Capital Management, bought a Manhattan penthouse on the Upper East Side with sweeping views of both the Hudson River and the East River for $37.9 million this summer.

Mr. Robbins’ real estate deal comes at a trying time for his $8.8 billion hedge fund. Last week, he apologized to investors for losing 15 percent of their money so far this year.

“I’ve failed to protect your capital,” he wrote in the seven-page mea culpa. He promised to forfeit his pay for this year.

Mr. Robbins has still managed to profit handsomely over the years from his firm’s performance and has a net worth of $2.3 billion.

His new apartment in the Charles condominium on First Avenue will be used as a second home. His primary residence is a sprawling estate on over four acres of land in Alpine, N.J.

Mr. Robbins is neither the only one splashing out on property, nor the only one whose hedge fund is struggling.

William A. Ackman, the founder of Pershing Square Capital Management, is part of a group of investors that this year closed a deal to pay $91.5 million for a six-bedroom apartment at One57, a luxury residential tower in Manhattan. Pershing Square is down 19 percent so far this year.

Last Deepavali in Marina Bay’s Little India?

In Banks, Holidays and Festivals, Humour on 10/11/2015 at 12:52 pm

A CNA story* on Sunday said that StanChart will be cutting jobs here in Technology and Operations. Now this is an area dominated in StanChart by FTs from India like two-timing New Citizen Raj**

That brings to mind the following:

FT reported that India is so impt to StanChart that it’s planning to set up a subsidiary so that it can expand its branch network there. A wag commented: “In Singapore there is an area known as “Little India” (I had lunch in the area yesterday). Go into the offices of StanChart’s regional office here and any S’porean would think that “Little India” has expanded into the Marina Bay area.”

Marina Bay’s Little India, will be no more? This will be the last Deepavali in StanChart’s Marina Bay office? Next yr will be the first Chinese New Year there?

——————————-

*Following Standard Chartered’s announcement that it will axe 15,000 jobs globally, the bank has declined to reveal how many of these job losses will come from Singapore.

However, recent high-profile departures are said to include the bank’s global head of FX research Callum Henderson and global head of aviation finance Simon Perkins.

A source familiar with the Asia-focused British lender told Channel NewsAsia on condition of anonymity that Technology and Operations is an area in Singapore targeted for cuts.

When contacted by Channel NewsAsia on Friday (Nov 6), a StanChart spokesperson said a large number of the total headcount reductions will be through attrition. The spokesperson said the bank was unable to provide further details at this point in time.

Standard Chartered currently employs around 7,000 people in Singapore.

The bank on Tuesday said it will cut 15,000 of 86,000 jobs around the world, meaning that nearly one in five employees will lose their jobs.

**I understand that New Citizen Raj works in StanChart.

StanChart: What ST doesn’t tell S’poreans

In Banks, Corporate governance, Temasek on 06/11/2015 at 4:26 am

And neither did BT or MediaCorp.

The constructive, nation-building media should have reported or analysed or quoted analysts that

— Temasek could have prevented the problems from growing out of control by kicking previous mgt’s ass* when yellow lights were flashing Ang moh tua kee isit? HoHoHo);

— the shake-up restructuring plans are underwhelming investors (shares have fallen over 11% this week; and

— the changes will not be that rewarding.

It’s not me, or TRE cybernuts or Uncle Redbean (they too didn’t), it’s the UK’s Guardian that writes:

The big long-term shareholders – Temasek, from Singapore, and our own Aberdeen Asset Management – are obliged to sound supportive, swallow the lack of a final dividend and back the rights issue. But they should also look in the mirror. The market smelled trouble at Standard Chartered for at least two years, but the pressure from the wings rarely rose above the level of mumbles. Temasek and Aberdeen were too willing to believe the boasts from the highly remunerated boardroom about Standard Chartered’s specialness.

The consequences of delay are now horribly clear: a decade of chasing growth will be followed by half a decade of clean-up and cost-cutting. This story could have been different.

http://www.theguardian.com/business/nils-pratley-on-finance/2015/nov/03/standard-chartered-fails-to-realise-resilience-boasts

Yup it could have been different. Temasek has an over 20% stake in StanChart which should give it a strong voice, if it uses it.

And the MSM doesn’t tell us that some analysts are not impressed by the plans to launch a capital raising, cut 15,000 jobs, slash almost 30% of its $10bn cost base and restructure almost a third of its US$315bn risk-weighted assets.

In fact credit rating has juz been downgraded by Fitch Ratings in the latest sign that the new strategy is not being well received.

And finally the MSM doesn’t tell us that the clean-up will not bring great rewards

Yet these rewards are humdrum and distant. StanChart expects return on equity to remain below 10 percent until 2020. That’s no better than troubled investment banks like Deutsche Bank. A further economic slowdown in its main markets, or increased regulatory demands, could throw it off course. Even after a 10 percent drop on the morning of Nov. 3, StanChart shares trade on about 80 percent of tangible book value, after adjusting for the rights issue. With a long slog ahead, it’s hard to see much upside.

http://blogs.reuters.com/breakingviews/2015/11/03/stanchart-faces-years-of-pain-for-humdrum-gain/

Here’s another interesting insight

Never believe a big bank that boasts that its culture is so different: its lending principles conservative, its business immune to the traditional banking vices of over-confidence, over-expansion and bad behaviour.

For a decade, Standard Chartered told us that its rising income and profits flowed from a unique winning formula. Here was chairman John Peace in the annual report a few years ago describing the supposed magic: “2012 was another year of good performance for Standard Chartered, thanks to a consistent strategy, a stable management team, supportive clients, customers and shareholders, and, above all, our great people.”

(Guardian)

——————————–

*It was already unhappy over corporate governance over the number of executive directors on the biard and had expressed its unhappiness publicly by voting against the  reappointment of the executive directors yrs ago when the bank was a jewel in the Temasek portfolio and management were considered geniuses.

HoHoHo: Relying on mgt incompetence at StanChart

In Banks, China, Emerging markets, India, Temasek on 11/10/2015 at 6:22 am

Standard Chartered has to hope that a quarter of its top brass really aren’t very good at their jobs. That is the portion of the UK-listed emerging markets bank’s 4,000 most senior staff who will find themselves surplus to requirements, Reuters reported on Oct. 9. Although StanChart could gain from a big cull, it’s a risky move.

http://blogs.reuters.com/breakingviews/2015/10/09/stanchart-takes-bet-on-management-incompetence/

So should HoHoHo and us S’poreans.

Will ang mohs or Indians get terminated? Not many Chinese to sack despite 50% of revenues related to China business. (Related post: StanChart is Little India)

More for HoHoHo to ponder when she returns to work

StanChart’s shares have underperformed the European peer group by 30 percentage points this year. The bank’s 7.7 percent return on equity in 2014 was unacceptable, especially as it was earned on a relatively low 10.7 percent Basel III capital ratio.

— Some bearish analysts reckon Winters should completely cover the bank’s $8.7 billion of non-performing loans to better match Asian peers like DBS. That would cost $4 billion, more than StanChart’s expected $3.1 billion of forecast 2015 pre-tax profit.

HoHoHo: StanChart’s capital shortfall

In Banks, China, Emerging markets, Temasek on 09/10/2015 at 1:08 pm

FT reported earlier today:

Goldman Sachs analysts predicted on Thursday that StanChart would face an estimated capital shortfall of $4bn in the Bank of England’s stress tests, which measure how the lender would fare in an emerging markets crisis.
But Goldman estimated that StanChart could cover this shortfall by selling its stakes in several Asian lenders and exiting low-returning clients and businesses, such as its smaller retail branch networks.

Related post: Why Little India now includes Marina Bay

But let’s be fair: When emerging mkts and commodities (StanChart has high levels of lending to the crumbling commodities sector) were fashionable 9lucrative) it was the right bank to be invested in. FYI according to Nomura 50% of its revenue is related to China.

Given  the exposure to China by HoHo Ho and GIC, ttme for Ah Loong to call Xi and offer him advice on how to fix the Chinese economy? Can lend him Tharman who is lauded in int’l circles.

HSBC: Dividends/ StanChart is “Little India”

In Banks, India on 07/10/2015 at 10:01 am

From NYT Dealbook:

Skeptics of HSBC Dividend Are in for a Surprise The bank’s prospective dividend yield of about 6.5 percent is high, but investors worried about its payout shouldn’t fret much, Paul J. Davies writes in the Heard on the Street column.

FT reported that India is so impt to StanChart that it’s planning to set up a subsidiary so that it can expand its branch network there. A wag commented: “In Singapore there is an area known as “Little India” (I had lunch in the area yesterday). Go into the offices of StanChart’s regional office here and any S’porean would think that “Little India” has expanded into the Marina Bay area.”

StanChart: Did you know?/ Glencore: Sinking fast

In Banks, China, Commodities, GIC, Temasek on 29/09/2015 at 1:06 pm

It was reported last week in the FT that Standard Chartered awarded Bill Winters, its CEO, shares worth more than 6 million pounds, or about $9 million, to compensate the bank’s new CEO for income he forfeited by leaving the hedge fund he founded. The upfront payment comes as the shares have hit new six-year lows.

Meanwhile GIC must be ruing not selling out of Glencore because on Monday in London

Shares in commodity giant Glencore plunged 30% after analysts raised fears about lower metal prices.

The company’s shares dropped to a new record low of 69p on Monday, helping push the FTSE 100 down 2%.

Analysts warned slumping metal prices could leave Glencore shares almost worthless because of its heavy debts.

http://www.bbc.com/news/business-34380490

Why did everything go wrong for Glencore? 

Whatever both StanChart and Glencore are suffering from China’s slowdown. And HoHOHO is still betting big on China (see previous story)?

Temasek, DBS buying into Chinese PosBank?

In Banks, China, Temasek on 29/09/2015 at 4:32 am

China’s Postal Savings Bank Said to Be Near $6.5 Billion Sale. Postal Savings Bank of China, which has the most outlets of any lender in the nation, is nearing an agreement to raise more than $6.5 billion from investors including UBS Group and Temasek Holdings ahead of a planned initial public offering, Bloomberg News reports, citing people familiar with the matter.

(NYT Dealbook last Thursday)

The story also says that DBS will buy a stake.

HohoHo still bullish on China it seems and doubling her bets down. The problem for us is that these stakes cannot be divested completely without upsetting the Chinese. The ang moh banks were able to divest their cornerstone stakes in Chinese banks. They like Temasek got their stakes at “special” prices, but unlike them Temasek is stuck with these stakes, only able to add or decrease at the margins.

Meanwhile rights issues are expected necause of expected bad loans.

China Contrarians

In Banks, China, Private Equity, Property on 24/09/2015 at 3:20 pm

HSBC to Add 4,000 Jobs in 4 Years in China HSBC is planning a 30 percent increase from 13,000 employees in the Pearl River Delta in spite of the bank’s three-year plan to cut global headcount by 50,000 and reduce annual costs by up to $5 billion. (NYT Dealbook)

HSBC has been given permission to issue a Panda bond (a first foe a foreign bank). The greater ability  to access to local fundraising bodes well for the bank’s Pearl Delta plans.

What is most striking about George Osborne’s Chinese tour is he is doubling his political and economic bet on the world’s number two economy at a time when that economy is looking its most fragile for 30 years.

His calculation is that China’s economy will slow in a relatively contained way to a more sustainable rate – perhaps 4% or 5% a year compared with the official target of 7% – without a devastating crash that would damage a large number of client economies and engender social unrest in China itself (in employing the great Goldman bull of China Jim O’Neill as his commercial minister, Osborne could hardly wager otherwise).

The chancellor’s calculation is that the Chinese will remember who stuck by them when the going got tougher.

And he is also presuming that as the returns from investing in China itself diminish, Chinese institutions – many of them still loaded – will increasingly think owning a bit of Britain isn’t such a crazy idea after all.

http://www.bbc.com/news/business-34311675

Blackstone Hunts for Property Opportunities in China “Volatility can be your friend if you have a medium-to long-term perspective,” said Christopher Heady, head of the private equity firm’s Asia real-estate business.

(NYT Dealbook)

HoHoHO: StanChart upsets US again

In Banks, Temasek on 22/09/2015 at 1:40 pm

Documents seen by the FT suggest that the bank continued to seek new business from Iranian and Iran-connected companies after it had committed to stop working with such clients in 2007.

The US authorities are looking into the matter.

Rogue bank strikes again? Think got Temasek as major shareholder can be as yaya papaya as Amos Yee?

HoHoHo: Temasek & GIC China plays

In Banks, China, Commodities, Emerging markets, GIC, Temasek on 14/09/2015 at 11:03 am

Reason for Glencore (GIC) and StanChart (HoHoHo back at work at Temasek soon) on the chart

Glencore

Even small changes in demand from China’s vast economy can have a knock-on effect on prices.

As Glencore has found out to its cost.

http://www.bbc.com/news/business-34208070

StanChart

FT reports that according to Nomura, half of StanChart’s Asian revenue in the first half of 2015. More https://atans1.wordpress.com/2015/09/10/hohoho-two-brokers-views-on-stanchart/

NYT Dealbook last Tuesday.

MORE SIGNS OF A SHARPER SLOWDOWN IN CHINA Once the world’s workshop, China’s exports are facing their most protracted declines since the global financial crisis, Neil Gough writes in The New York Times. China’s trade slump deepened in August – an indication of a sharper industrial slowdown at home and weaker demand from overseas. Exports fell 5.5 percent in August and 1.4 percent in dollar terms in the first eight months of the year.

The country’s manufacturing sector is losing competitiveness as labor costs rise and the renminbi remains relatively strong despite its devaluation, making Chinese goods more expensive for foreign buyers.

Imports are falling even more steeply. They fell for the 10th month in a row in August, recording a drop of 14 percent by value. Economists blame the rout in commodity prices, but imports have fallen in volume too. The falling imports of industrial raw materials point to weakening domestic demand, driven by a slump in manufacturing and new housing construction.

The weak trade data weighed on markets, with Japan’s main index, the Nikkei 225, closing 2.4 percent lower. In Shanghai, stocks initially fell when the trade figures were released, but heavy buying in the afternoon set off a rally. Shares closed 2.9 percent higher – a pattern seen often in recent weeks, as China’s government appears to continue its efforts to support the slumping stock markets.

China’s leadership made the surprise decision last month to devalue the currency by about 3 percent, the renminbi’s sharpest drop in two decades. But the central bank has since intervened in the markets on a massive scale, fighting pressure to weaken the currency further by selling dollars and buying renminbi.

As a result, China is burning through foreign exchange reserves at the fastest pace yet. Reserves fell by nearly $100 billion in August alone, though they are still huge at $3.56 trillion.

Still, analysts say that the recent devaluation was most likely too modest to give China’s exports much of a boost, and that the exchange rate is still stronger than China’s slowing economic growth would otherwise support.

HoHoHo: StanChart has another problem

In Banks, China, Emerging markets, Temasek on 27/08/2015 at 1:42 pm

StanChart is expected to call for a rights issue by yr end. But mkt turmoil will make this difficult and expensive.

FT reports

“StanChart has been one of the hardest hit by the market turmoil. Shares in the bank, which is listed in London but specialises in Asia, the Middle East and Africa, have fallen a quarter this month and are down two-thirds in the past two years.

‘One investment banker said worries about slowing Asian growth and falling commodity prices risked creating “a perfect storm” for StanChart that would make it “much tougher to sell new shares” to investors.”

Note that FT reports that according to Nomura, half of StanChart’s Asian revenue in the first half of 2015 and less than 10% of HSBC’s came from China proper.

And that “from trading at more than double its tangible book value, its market value is now a third less than its assets, a discount even to big victims of the financial crisis, such as Royal Bank of Scotland.”

HoHoHo

HSBC shareholders juz got lucky/ China blues

In Banks, China on 25/08/2015 at 1:42 pm

Bozo Gulliver earlier this yr decided to pivot towards the Pearl Delta estuary, cutting fat from other places to build muscle here. The collapse in July in the Chinese stock markets had him back-pedalling about becoming big in China.

Now with China in retreat, he’d be a real Bozo to put money into China.

We shareholders had a narrow escape. Thanks to luck rather than good management.

But we will still suffer

FT reports that according to Nomura, less than 10 per cent of HSBC’s came from China proper.

… could be in for a rough ride if the swing in China’s currency is the start of a prolonged devaluation

The most obvious effect of a weaker currency is valuation losses on banks’ loans and trading assets in China, which many have used as a bridgehead in the world’s second-largest economy. A lower currency could also spell trouble for customers in China who have borrowed US dollars or euros but are earning renminbi — the “classic FX mismatch,” in the words of Keith Pogson, senior partner of EY’s Asia-Pacific financial services team.

Western banks also face risks from domestic Chinese counterparts which have borrowed dollars to lend to their own clients. “Asian banks are extremely used to borrowing cheap dollars through interbank markets and then relending it,” said one London-based banker. “In the next couple of years there could be bigger problems if China’s going to carry on devaluing.”

And let’s hope the cash from Brazil will not be squandered by Bozo.

 

Commentary at http://www.economist.com/blogs/graphicdetail/2015/08/daily-chart-9

Not HoHoHo’s kind of banks

In Banks on 19/08/2015 at 1:42 pm

BRAZIL BANKS BOOM IN GOOD TIMES AND BAD Although Brazil’s economy has been bumped by the ups and downs of global commodity prices and the manufacturing sector has stagnated, the nation’sbanking industry has been making impressive gains, Dan Horch writes in DealBook. The combined annual profits of Brazil’s four biggest banks have grown more than 850 percent to just more than $20 billion, from $2.1 billion, in the 12 years of Workers’ Party rule.

Brazil’s largest and third-largest banks, Banco do Brasil and Caixa Econômica Federal, do not even have profit as their sole mandate. The government controls both and obliges them to engage in less profitable operations as a public service.

The two giant private sector banks, Itaú and Bradesco, consistently earnreturns on equity – a measure of how much a company can earn out of each dollar invested – of about 20 percent. Big banks in the United States usually manage only about half as much.

The banks face little competition. A banking crisis in the 1990s threatened scores of financial institutions with insolvency and the authorities have encouraged a string of mergers and acquisitions. The four biggest banks have more than 70 percent of the banking system’s total assets. Bradesco’s deal to acquire HSBC’s operations in Brazil for $5.2 billion will bringalmost 75 percent of total assets under the control of the top four banks – near the maximum that the central bank established in 2012.

They have been helped by government policies and economic trends. Interest rates are high: In the free credit market, which excludes government subsidized loans for housing and infrastructure, Brazilian consumers pay on average 58.6 percent interest, and businesses pay 27.5 percent to borrow money.

A history of high inflation, sharp currency fluctuations and large government budget deficits makes it expensive for the government to borrow money. The central bank’s basic rate, which it pays on the local equivalent of Treasury bills, is 14.25 percent.

The average spread – the difference between what banks pay to gain access to capital and what they charge to lend it out – is 30.7 percent in the free credit market.

Not all of that is profit. Taxes and regulatory cost are high and about to get higher – the government just announced a plan to further increase taxes on bank profits. Default is also a serious risk. Nearly 56 million Brazilians, more than a quarter of the country’s population, have missed enough debt payments to be on the blacklist of Serasa Experian, a credit reporting bureau. The spreads are easily wide enough to compensate for that.

When times are bad, the banks can also get support from the government. The Treasury sells bonds that protect investors against inflation, as certain United States Treasury bonds do. It also offers bonds that increase their payouts when interest rates rise or the currency devalues.

When banks sense a deterioration in the economy, they can scale back on loans and move toward these government-backed investments. As a result, the recent inflation of nearly 9 percent, the plunging currency and the rise in interest rates have all helped bolster bottom lines at banks. As Luiz Fernando de Paula, an economics professor at Rio de Janeiro State University, says, “The government pays the price instead.”

NYT Dealbook

HoHoHo StanChart goes on a wild sled ride

In Banks, China, Currencies, Temasek on 18/08/2015 at 1:31 pm

FT reports that according to Nomura, half of StanChart’s Asian revenue in the first half of 2015 and less than 10 per cent of HSBC’s came from China proper.

Both “could be in for a rough ride if the swing in China’s currency is the start of a prolonged devaluation

The most obvious effect of a weaker currency is valuation losses on banks’ loans and trading assets in China, which many have used as a bridgehead in the world’s second-largest economy. A lower currency could also spell trouble for customers in China who have borrowed US dollars or euros but are earning renminbi — the “classic FX mismatch,” in the words of Keith Pogson, senior partner of EY’s Asia-Pacific financial services team.”

Western banks also face risks from domestic Chinese counterparts which have borrowed dollars to lend to their own clients. “Asian banks are extremely used to borrowing cheap dollars through interbank markets and then relending it,” said one London-based banker. “In the next couple of years there could be bigger problems if China’s going to carry on devaluing.”

HSBC and karma

In Banks, China on 31/07/2015 at 12:51 pm
When I read in FT “Corporate giants sound profits alarm over China slowdown”, I tot of Gulliver’s plans to expand in the Canton region  https://atans1.wordpress.com/2015/06/11/hsbc-desperately-seeking-home-grown-john-cryan/

HSBC needs a new CEO.

But maybe after that glorious era of three great executive chairmen Sandberg, Purvis and Bond, we got to go thru Greens and Gulliver. That gut in between  the two G’s wasn’t too bad.

Which reminded me of this from NYT’s Dealbook:

WHY BARCLAYS C.E.O. WAS OUSTED In his three years as chief executive of Barclays, Antony Jenkins worked to change the bank’s culture to make it more risk-averse and to improve the bank’s capital, but that wasn’t enough for the bank’s directors, Chad Bray writes in DealBook. John McFarlane, the Barclays chairman, noted on Wednesday that the stock price was still around the same level it was six years ago and that the company’s dividend remained flat. Management’s plans to reward shareholders were “too far out in the future,” he said. Mr. Jenkins also differed with Thomas King, the head of the investment banking business, over the unit’s strategic direction, people with knowledge of the discussions told Mr. Bray.

 

HoHoHo, StanChart got wrong CEO?

In Banks, Emerging markets, Temasek on 24/07/2015 at 1:04 pm

But first, shumething from the respected Terry Xu of TOC http://www.theonlinecitizen.com/2015/07/leaked-cables-on-the-failed-leadership-transition-of-temasek-holdings/

Standard Chartered Shakes Up Management Structure The British bank will be organized around three business lines, and top managers will report directly to the new chief executive, William T. Winters.

Did the recruiters at Standard Chartered and Credit Suisse get their dossiers mixed up?

Bill Winters is beginning his tenure as the new boss of the London-based emerging market lender at around the same time that Tidjane Thiam takes charge of the Swiss bank. Both are capable financial executives, but their experiences seem uncannily to better suit the other’s job. That they’ve wound up where they did, rather than where their resumes would suggest they should have, may say more about where the institutions they lead are headed.

Winters, who on July 19 reshaped StanChart’s management structure so that the heads of its major business units now report to him directly rather than to deputy Mike Rees, made his career leading JPMorgan’s investment bank in London … This would appear to eminently qualify him to run Credit Suisse. Its investment bank – stronger in the United States than elsewhere – competes directly with JPMorgan. And its private bank needs to more aggressively poach the very rich folks that Renshaw Bay, the firm he founded, calls customers.

Instead, $48 billion Credit Suisse got an insurance executive, French-educated Ivorian Thiam. True, he showed an affinity for deals as chief executive of Prudential, the UK insurer: an aborted attempt to snatch American International Group’s Asian operations was particularly bold. Private banking arguably should be run more like insurance than investment banking or trading.

Similar thinking prevailed when Barclays named a retail banker to the helm three years ago. But the British lender let Antony Jenkins go on July 8 partly because it needs someone capable of making an investment bank hum.

Though Credit Suisse may not be pre-eminent in Asia, Thiam’s experience there could help rectify that. Of course, that’s the region where $39 billion StanChart is strongest. And Africa, where Thiam was born, is one of StanChart’s prime growth areas. By contrast, Winters’ orientation has been to developed markets – places his bank shows zero interest in pursuing.

http://blogs.reuters.com/breakingviews/2015/07/20/shouldnt-credit-suisse-and-stanchart-swap-ceos/

HSBC’s 1979 gift keeps paying for itself

In Banks, China, Emerging markets, Hong Kong, Uncategorized on 01/07/2015 at 1:33 pm

Li ka-shing accounted for 70% of HSBC’s global M&A advisory work in 2015 according to the FT.

HSBC sold him its stake in Hutchison Whampoa at a very special “For you only” price in 1979. This gave him face and showed that HSBC was aligning itself with the Chinese tycoons not the ang moh houses like Jardines. The then Oz CEO of Hutch said he could have gotten a better price for the stake. He was told by HSBC to mind his own business because he was an employee. HSBC had hired him to turn round Hutch which he.

Long term greed.

Shareholders need to find a new Sandberg and Purvis combination, with John Bond assisting. We know the damage (think sub-prime and Safra) that Bond can do when not supervised by adults. But I’m to harsh. During his tenure, HSBC had a one-for-one bonus and the ex-bonus share price almost reached the cum price. And there was a deeply discounted share issue to pay for the losses in the US.

But at the very least we need a  home-grown John Cryan*. Off with Gulliver’s head.

Gulliver sucks, like Anshu Jain and has to go. Capital markets investment bankers are not usually rational, cold and deep thinkers

As Lex rightly pointed out a few weeks ago, Hongkong Bank is trying to cut fat and grow muscle. Us sporty fatties know that this is real hard work and often fails. Taz why we are still fatties. Gulliver failed to trim fat and is lousy at PR (When Blatter said he couldn’t be expected to know everything at FIFA, I tot of Gulliver’s remarks on managing HSBC.). And now he wants to cut fat and grow muscle?

Failed in cutting costs and now wants to do something even hardEer? Pigs are likely to fly first. Or i’ll lose some serious fat and put some muscle.

He’d likely cut muscle and grow fat. Maybe expansion into the industrial heartland that is the Pearl Delta estuary isn’t the greatest idea? “Poll shows 25% of foreign businesses plan China job cuts,” is the top FT headline on my PC screen.

—-

*And if there’s no-one homegrown do what the Germans did, go find someone and put the chap in charge of the board’s audit committee. Great hands-on experience and sreep learning curve.

I always believe that in most cases there is always someone inhouse in a company with a strong corporate culture who can do the CEO’s job: the problem is finding the guy and the board having the balls to appoint the “unknown”.

US Marshalls make Christ’s vicar bow down

In Banks on 16/06/2015 at 1:35 pm

Vatican to Comply With U.S. Tax Evasion Law. The Vatican has agreed to comply with Foreign Account Tax Compliance Act, which means banks operating there will have to transmit information on accounts held by American taxpayers to American authorities,

NYT Dealbook

HSBC: Desperately seeking home-grown John Cryan

In Banks, China, Corporate governance, Emerging markets, Hong Kong on 11/06/2015 at 10:19 am

As a long suffering Hongkong Bank shareholder (But to be fair, I was there when John Bond called a bonus issue and the share price post bonus issue almost reached the pre bonus share price and I was there when the bank called for a massive deeply discounted during the crisis rights issue), who is the inhouse John Cryan*?

John Cryan the incoming UBS boss is rational, cold, deep thinker and no show-off(NYT Dealbook).

Hongkong Bank needs a rational, cold, deep thinker who is not accident-prone.

Gulliver sucks, like Anshu Jain and has to go. Capital markets investment bankers are not usually rational, cold and deep thinkers

As Lex rightly points out, Hongkong Bank is trying to cut fat and grow muscle. Us sporty fatties know that this is real hard work and often fails. Taz why we are still fatties. Gulliver failed to trim fat and is lousy at PR (When Blatter said he couldn’t be expected to know everything at FIFA, I tot of Gulliver’s remarks on managing HSBC.). And now he wants to cut fat and grow muscle?

Failed in cutting costs and now wants to do something EVEN hardER? Pigs are likely to fly first.

He’d likely cut muscle and grow fat. Maybe expansion into the industrial heartland that is the Pearl Delta estuary isn’t the greatest idea? “Poll shows 25% of foreign businesses plan China job cuts,” is the top FT headline on my PC screen.

—-

*And if there’s no-one homegrown do what the Germans did, go find someone and put the chap in charge of the board’s audit committee. Great hands-on experience and sreep learning curve.

I always believe that in most cases there is always someone inhouse in a company with a strong corporate culture who can do the CEO’s job: the problem is finding the guy and the board having the balls to appoint the “unknown”.

HSBC should return to its roots

In Banks, China, Emerging markets, Hong Kong on 09/06/2015 at 1:28 pm

No not as a narco-bank for the modern day equvalent of the Jardines, Mathesons and Sassons who were the drug barons of the early 19th century smuggling opium into China

https://atans1.wordpress.com/2012/07/29/hsbc-doing-gods-work/#comments

https://atans1.wordpress.com/2012/12/23/hsbc-great-customer-shareholder-service/

It should remember that the HS stands for Hongkong and Shanghai and that it was once known as Hongkong Bank (when it was kicked out of China) https://atans1.wordpress.com/2013/04/02/hsbc-london-greater-china-bank/#comments

HSBC should focus on its jewel in the East

Here’s a good idea that (almost certainly) will not be announced by HSBC at its big strategy day on Tuesday: split the bank in two, and let only the Asian business base itself in Hong Kong.

UBS analyst John-Paul Crutchley is the author of the inspired demerger idea, which starts by arguing that “taking the accumulated baggage of the last three decades home may not be the best course of action”.

Baggage may seem a harsh description of the non-Asian parts of HSBC, including its UK retail banking operation, but Crutchley reckons the Hong Kong Asia-Pacific bank accounts for 80% of HSBC’s market valuation while deploying less than half the equity. It is the jewel. Indeed, the analyst reckons HSBC’s share price could be twice the current 619p if the group had decided in the 1980s to stick with its Asian franchise and not pursue all the deals and acquisitions elsewhere.

That observation illustrates the fact that HSBC management’s head-scratching over where to base the bank is something of a sideshow. Dodging the full impact of the UK bank levy by redomiciling the whole shebang to Hong Kong might save $1bn a year. But, even if one assumes such a saving is worth $12bn in today’s money, that’s only the equivalent of 44p on the share price. The bigger question is: what’s the best way to manage this vast sprawling group?

A demerger is not a cure-all but it would deliver a few advantages. The Hong Kong end could concentrate on combating increased competition from Chinese banks. Rump HSBC could be more vigorous in allocating capital to the parts of the business generating better returns. And, since regulators are piling heavier capital and compliance costs on very big global banks, both bits might benefit from being part of smaller organisations.

It’s an idea HSBC is highly unlikely to adopt. But a dose of bold thinking is arguably exactly what it needs to awaken a slumbering share price. Flogging the Brazilian and Turkish operations – Tuesday’s likely highlights – probably won’t be enough to excite shareholders.

From Guardian

StanChart has Middle Eastern personnel problems

In Banks, Emerging markets, Temasek on 04/06/2015 at 12:04 pm

Standard Chartered Said to See Exodus in Mideast Operations The high-profile departures at Standard Chartered include the global head of Islamic banking, the chief executive for the United Arab Emirates and the chief executive for Bahrain, Bloomberg News reports, citing people with knowledge of the matter.

(From over a week ago)

Ho, Ho, Ho, StanChart should do this too

In Banks, Emerging markets, Temasek on 03/06/2015 at 2:10 pm

Up to 20,000 people (8% of current work force) could be sacked at HSBC as the chief executive attempts to pacify investors by reducing costs to improve profits (see below): Us shareholders getting shirty.

Temasek, Aberdeen and other major shareholders should tell StanChart to cut its headcount. Although an ang moh bank, many of its senior and middle managers are “countrymen”, especially here in S’pore (Brits and Hongkies don’t love FTs that much). Ask presedential candidate Tan Jee Say and PAP FT MP Ms Foo: They had Indian FTs ahead, behind and beside them. Rumour has it that Indian FTs sacked both for non-performance, replacing them with less experienced and qualified “countrymen”.

The chief executive of HSBC, Stuart Gulliver, is expected to signal next week that thousands of jobs are to be cut when he outlines his latest strategy for the global banking business, according to reports.

After he took the helm in 2011, Gulliver outlined the need for 25,000 job cuts from a global workforce that then stood at 296,000. The annual report for 2014 puts the current number of employees at 266,000, or 257,600 full-time equivalents.

Another 10,000-20,000 cuts are reported to be on the cards as Gulliver attempts to pacify investors by reducing costs in an effort to bolster profitability. He is also expected to use the strategy day on 9 June to provide an update on plans to further retrench internationally, including from Brazil and Turkey.

http://www.theguardian.com/business/2015/jun/01/hsbc-boss-stuart-gulliver-expected-announce-thousands-job-cuts

What Citi and UBS pleaded guilty to

In Banks, GIC on 26/05/2015 at 1:12 pm

Below is a summary of what Citi and UBS (Harry’s “forever” investments) pleaded guilty to from NYT’s Dealbook

HEAVY FINES FOR FOREIGN EXCHANGE COLLUSION At big banks, foreign exchange trading seemed like the ideal business – relatively low risk for solid revenues. But “what seemed like the perfect business turned out to be the perfect breeding ground for crime,” Michael Corkery and Ben Protess write in DealBook. Citigroup, JPMorgan Chase, Barclays and Royal Bank of Scotland pleaded guilty to a series of federal crimes over a scheme to manipulate the value of the world’s currencies, the Justice Department said Wednesday. A fifth bank, UBS, was also accused of foreign currency manipulation but was not criminally charged because it had alerted the Justice Department to possible misconduct. However, the accusations cost the bank an earlier nonprosecution agreement related to the manipulation of the London Interbank Offered Rate, or Libor.

Prosecutors said traders at the five banks colluded from at least 2007 to 2013. “To carry out the scheme, one trader would typically build a huge position in a currency, then unload it at a crucial moment, hoping to move prices. Traders at the other banks would play along, coordinating their actions in online chat rooms,” Mr. Corkery and Mr. Protess write. The foreign exchange business may have been particularly susceptible to manipulation because it can be less profitable than other forms of trading, which increases the pressure for the traders to look for alternative ways to pad their returns, analysts said. Also, no one government agency is responsible for policing the currency market, creating a regulatory void.

The five banks, which also struck civil settlements with the Federal Reserve, the Commodity Futures Trading Commission, a British regulator and New York’s financial regulator, agreed to pay $5.6 billion in penalties. That is in addition to the $4.25 billion that some of these banks agreed to pay in November to many regulators. Together, the amount nearly equalsthe foreign exchange revenue generated at 10 of the world’s largest banks last year, which was $11.6 billion, according to Coalition, a financial analytics provider.

WILL PENALTIES CHANGE BANKS’ BEHAVIOR? What’s notable in the currency manipulation case is the ethos articulated by the traders involved. They called themselves “the mafia” and “the cartel,” and one Barclays trader wrote in an online chat room, “If you aint cheating, you aint trying.” In the White Collar Watch column, Peter J. Henning asks whether the guilty pleas and penalties will make a difference in how banks do business, noting that “even as penalty after penalty is paid by big banks in various cases, it seems as though the same cast of corporate characters keeps reappearing.”

He notes that guilty pleas from the big banks are “noticeably tougher” than the enforcement actions of the past, when violations drew only deferred or nonprosecution agreements. Yet the act of pleading guilty doesn’t carry the same stigma as it did in the past, Mr. Henning writes, because the government has tried to keep a guilty plea from hindering a bank’s operations. The Justice Department has also been demanding the identities of the employees behind the violations, but it’s unclear whether it will actually prosecute those people. “To change corporate culture and prevent violations from happening in the future, prosecutors may have to go beyond just demanding cooperation and threatening ever larger fines,” Mr. Henning contends.

Two of LKY’s “forever” banks are criminals

In Banks, GIC on 25/05/2015 at 1:02 pm

Shortly before Temasek sold, MM had said that S’pore Inc’s investments in Citi, UBS, and Merill Lynch had a time-frame of 30 yrs. Temasek held its ML investment for over a yr. GIC still owns shares in Citi (profitable), and UBS (big loss). https://atans1.wordpress.com/2011/01/17/mm-got-it-right-temasek-got-it-wrong/

UBS and Citi are still owned by GIC are now big time crooks. Recently, JP Morgan, Barclays, Citigroup and Royal Bank of Scotland – pleaded guilty to criminal charges in the US relating to the rigging of currency markets.

The four, and Switzerland’s UBS, which pleaded guilty to a different charge, agreed to pay $5.7bn (£3.6bn) in fines.

 

StanChart: Ho, Ho, Ho on a wing and a prayer

In Banks, Emerging markets, Temasek on 20/05/2015 at 1:21 pm

Last yr when Temasek gave a media presentation on its results, the question on StanChart elicited a BS reply but which when viewed today tells a lot about Temasek’s strategy in dealing with dogs with fleas: “Everything will be alright in the long term”. Err remember Keynes said in the long run, we are all dead.

QUESTION: Could you give us some comments on how do you see StanChart performing in your portfolio because over the last few years, especially in the last year and a half and looking at the outlook as well, they seem to be finding it quite challenging and there was a profit warning as well. What is your plan for StanChart? Do you think that… is that something that you would like to exit in the long term or you would treat StanChart as another Olam where you could actually try to take over?

RS: So look, it’s obviously not fair for us to comment on individual companies but all I would say is that yes, a lot of our stocks go through volatility. Standard Chartered is an emerging markets bank and like all emerging markets banks, the stock over the last year has been quite volatile. We, however, see ourselves as long term investors, short term volatility doesn’t concern us. We look at our investments over a longer term and use our value test to decide whether what we do with those stocks and we remain as an active investor always engaged with the companies.

S’poreans hanna do NS for China: Ho Ho Ho

In Banks, China, Temasek on 18/05/2015 at 2:05 pm

We (or rather Temask but then even Ho Ching has said Temasek’s money is our money, something Roy and his fellow cybernuts pretend she never said) have a big bet on Chinese banks.

And recently I reported some bad news: https://atans1.wordpress.com/2015/05/03/temaseks-china-banks-strong-headwinds-2/

More bad news:

Chinese policymakers have ordered banks to keep lending to local government projects under construction, in a sign of concern that a crackdown on shadow financing has reduced municipalities’ spending and is hurting the economy.

Financial institutions which signed legally binding contracts before the end of 2014 to loan to money to construction projects backed by local government financing vehicles (LGFVs) must not stop lending or reduce the loan size, a document posted on the State Council website Friday said.

“It is necessary to support the financing needs of LGFV projects under construction and ensure an orderly continuation,” the regulators said in the document.

“This will help meet reasonable funding demand of the real economy, as well as effectively prevent and resolve fiscal and financial risk.”

http://www.reuters.com/article/2015/05/15/us-china-debt-lgfv-idUSKBN0O00JM20150515

LKY: Hegemon’s pet?/ How China treats a really old friend?

In Banks, China on 13/05/2015 at 4:20 am

This is what his pal, Henry Kissinger (US Secretary of State, National Security Adviser) said in tribute to LKY: “His theme was the indispensable U.S. contribution to the defense and growth of a peaceful world.”

Doesn’t the Kissinger comment sound like a pat on the head for the US’s pet? Remember, even a “weak” president like Obama believes that the US is the world’s “indispensable power”.

And even LKY’s own words show that he can sound like a cheer leader for the US: that the US really won the Vietnam war. The Economist recently wrote:

After the [Vietnam] war, the region boomed. American intervention in Vietnam no longer looked such an unmitigated disaster. Lee Kuan Yew portrayed it almost as a triumph: without it, South-East Asia would probably have fallen to the communists. America bought the region time and, by 1975, its countries were “in better shape” to stand up to them. The prosperous emerging-market economies they have become “were nurtured during the Vietnam war years”.

No wonder the US delegation was led by an ex-US president while China sent an unranked portlibtro member, showing how important LKY was to China and the respect it accorded him

If you want to see how China treats ‘lau peng youu”, think about this.

The Hong Kong Monetary Authority says that it “takes a positive attitude should HSBC consider relocating its headquarters back to Hong Kong”, where it is the largest bank. HK is willing to be lender-of-last-resort to HSBC a bank with US$2,6 trillion in assets, despite HSBC being almost 9 times bigger than HK’s GDP.(More background: https://atans1.wordpress.com/2015/04/28/govt-sees-stanchart-as-risky-lkys-30-year-investments-revisited/)

To do such a thing Peking must have given its chop.

This reminded me that many years ago I read “Wayfoong” (The Chinese name for Hongkong Bank and the title of a book on HSBC’s 100 yrs of existence: this yr it’s 150). A fair chunk of the book (which interesting I borrowed from a public library in Sydney) was devoted on how it was a good friend of China in the late 19th century and early 20th century: it raised foreign loans for building the railway system and stabilising the currency. I tot, “What a lot of bull. Hongkong Bank was an exploiter of China and the Chinese. It was founded to finance the opium trade.

Well we know that the CCP has a long memory and an even longer grievance lis: witness Japan.

At least to me now the book is more believable than what the PAP and LKY said about his ties with the Chinese leaders.

 

 

Robin Hoods? Our private bankers/Why ministers may need a pay rise after GE?

In Banks, Energy on 11/05/2015 at 1:24 pm

They make rich S’porean clients poorer, taking from the rich to give to their even richer employers? They are really the “Princes of Thieves”, better than “Robin Hood “Prince of Thieves”.

Remember these bond deals pay good commissions to the private banks (and their private bankers): they get fees from their clients (for giving them access to these now toxic products), and the issuing companies (for stuffing their mullets with junk).

Go KPKB to CASE, CAD and the central bank. Hehehe. Wonder if millionaire ministers kannsa burnt? They’ll need a pay increase.

Remember DBS’ Indian FT blowing up its Treasured clients with credit notes? This could be alot worse for the private clients.

Singapore’s richest investors are hoping that “never” means about three years in the bond market.

Holders of perpetual notes with no set maturity face the island’s first redemption options in September, when three companies including oil services firms Ezra Holdings Ltd. and Swiber Holdings Ltd. can choose to repay securities sold in 2012. While Ezra says it plans to pay off the notes and refinance, their yield has surged more than 200 basis points over the last year to 14.2 percent, suggesting it may be costlier to replace them. Swiber faces the same test after saying it plans to redeem its bonds, which have added more than 230 basis points.

Private banks have snapped up the bulk of Singapore’s S$9.5 billion ($7.1 billion) of corporate perpetuals on behalf of wealthy clients, reckoning the companies would repay the notes at their soonest chance rather than incur higher interest rates when a so-called step-up coupon takes effect. While that would offer some compensation if the debt stays alive, any mishaps could shake faith in securities that have funded about 15 percent of the island’s corporate debt over the last four years.

If any issuers choose not to pay in September, “there would be some discomfort among investors when they realize that what they’ve been holding is not necessarily going to be paid off at the time they expected,” said Vishal Goenka, the Singapore-based head of local currency credit trading at Deutsche Bank AG. “There is nothing right or wrong, issuers have already told them from the beginning the option was there, but there would be some confusion.”
And
Demand for higher returns in Singapore bonds from the city’s swelling private banking industry has brought with it greater risks.

Three out of every 10 notes sold last year are yielding more than 6 percent. Halcyon Agri Corp. went to debtholders last month asking them to waive interest cover requirements before it’s even had to stump up a coupon payment. Bloomberg’s default model shows that VTB Capital SA has an almost 50 percent chance of reneging on its debt.

“The recent swings have been a good wake-up call,” said Vishal Goenka, the Singapore-based head of local currency trading in Asia for Deutsche Bank AG. “Investors need to analyze the credit quality of issuers more thoroughly.”

Junk-rated companies in Singapore must find funds to repay $2.1 billion of debt this year, up from $1.7 billion in 2014 and $1.1 billion in 2013, according to data compiled by Bloomberg. That accounts for 35 percent of all bonds maturing in Singapore in 2015. Wealthy clients of the island’s private banks snapped up 86 percent of the highest-yielding http://www.bloomberg.com/news/articles/2015-01-05/singapore-alert-to-risks-as-cracks-emerge-for-junk-asean-credit
And then there is the probability of a rise in US rates in September.

Temasek: If only chose Apple, not StanChart

In Banks, China, Temasek on 04/05/2015 at 1:48 pm

The big concentration on financials is to play the rising Asian middle class theme. A lot of the exposure goes into China banks (not looking good going forward) and StanChart.

Err should have juz bot Apple leh? Look at its price since 2005 when Jobs returned https://sg.finance.yahoo.com/q/bc?s=AAPL&t=my&l=on&z=l&q=l&c= Ho Ching became CEO of Temasek in 2004, and Temasek started buying StanChart in 2006. She should have bot Apple.

Here’s why based on her thinking of riding the expansion of the Asian middle class (Not Italic bits below are my tots, snide comments).

What do two big American and European multinational corporations have in common? Not much on the surface when comparing consumer giant Apple to the FTSE-listed Standard Chartered bank.

However, both have been significantly affected by emerging markets in their first-quarter earnings. And how they’ve been affected is revealing of the way emerging economies have matured, particularly in Asia.

The emerging markets-focused bank, Standard Chartered, reported a big fall in pre-tax profits of more than one-fifth in the first quarter (22% to $1.47bn) as revenues fell by 4% and costs rose by 1%.

By contrast, Apple had a strong quarter where revenues rose by 27% to $58bn, driven by a 40% increase in sales of iPhones. More than 61 million were sold globally, and notably, the biggest market was China for the first time and no longer the US. [Demand from China’s middle classes, iPhone sales leapt 40% to 61.2m units.]

But iPad sales fell sharply by 29%, reflecting a weak spot in their figures. [Apple fixing this introducing new model for Jap aging market. If works in Jap, another big global winner.]

So, it’s a really tale of two emerging markets. [Ho, Ho, Ho]

One side of emerging economies is a concern over their slowdown in growth, which raises risks over loan repayments, not just in Asia but also commodity exporters in Africa and the Middle East.

These are Standard Chartered’s key markets. Indeed, Standard Chartered took a $476m charge on bad loans, which is 80% higher than the first quarter of last year, although loan impairments were lower than in the previous six months.

[Ho, Ho, Ho]

However, there’s also the consumer side of emerging markets to consider.

For Apple, China’s rapidly growing middle class generated an impressive 72% increase in sales of iPhones. And Greater China has even overtaken Europe to become Apple’s second largest market for the first time with revenues rising by 71% in that region to $16.8bn, which accounts for much of Apple’s strong performance. Net profit was a third higher at $13.6bn for the quarter.

So, as emerging markets, particularly in Asia, become middle income countries, companies that sell to those emerging consumers are well-positioned to benefit.

But the period of rapid economic growth, particularly via debt-heavy investment, of key emerging markets is seemingly over. And companies, particularly banks, are liable to struggle as those economies restructure toward being increasingly driven by consumption.

[Ho Ho Ho: so waz Temasek doing to get into the consumption plays? Olam? Asians eating more peanuts?]

http://www.bbc.com/news/business-32495200

My serious point that by focusing so much on financial services (30% of portfolio and not on consumer plays (outside of the Telecoms, Media & Technology sector: 24%), Temasek has for the last few years been betting on a three-legged horse. Other consumer plays are only a subset of Life Sciences, Consumer & Real Estate: 14%)

Temasek’s China banks: Strong headwinds

In Banks, China, Temasek on 03/05/2015 at 4:36 am

Temasek has stakes in three of the five major Chinese banks. See details here http://temasekreview.com.sg/en/major-investments/financial-services.html

An FT working for Reuters recently wrote

The biggest five banks reported a miserable sub-2 percent increase in earnings for the quarter, year on year. Two rate cuts have pressured their lending rates, and fees from other lines of business have slowed. A bigger drag is borrowers who can’t or won’t pay up. While bad debt levels are still low, charges for credit that hasn’t yet gone bad but might are leaping. These items increased by 73 percent year on year at China Minsheng Bank, and more than 50 percent at Agricultural Bank and Industrial Bank of China.

The valuations of big banks like ICBC, China Construction Bank and Bank of China are also burdened by the lenders’ role in big government schemes that are still not properly sketched out. Take the plan to reform local government finances by swapping some of the estimated 16 trillion yuan ($2.6 trillion) borrowed by regional authorities into new bonds. The new securities could leave banks holding the same credit risk in a different form, at deceptively low rates of interest.

China’s ambitions for global greatness also raises questions. Plans to roll out infrastructure under the clunkily named “one belt, one road” strategy are likely to involve hefty lending commitments. That may bring glory, but also pressure on banks to lend to projects that may take years to generate cash flows. In the meantime, if growth slows more at home, further rate cuts will add pressure to lenders’ margins.

http://blogs.reuters.com/breakingviews/2015/04/30/banks-are-designated-drivers-at-china-market-party/

Below is a Q&A from reported on Temasek’s website. It was asked, last yr,  at a media conference on Temasek’s 2014 Review

QUESTION: Can you confirm if the Chinese banks are the major drag on your relative underperformance last year and then what are your views and plans for them? Thanks.

WYB: The banking stock has been volatile. I would not say the Chinese banks are the major drag on our performance. They do fluctuate from time to time. Chinese economy – we remain very optimistic over the long term. The financial institutions we believe have ample capability to weather the current storm and be able to adjust to the risks they’re facing. So, we remain comfortable with our stakes and we will continue to invest in the financial institutions because they are good proxy for the long term growth for Chinese economy.

RS: If I could just add to that, as you would have seen in our presentation, we had mentioned that about half our portfolio consists of listed stocks in Singapore and stocks that are listed on the H-share in Hong Kong and you saw even the Straits Times Index over the last year had negative returns, so it was not any one set of stocks, it’s just that some of the areas that we had invested in had weak market performance. And again, you know, these are results as of a particular date, March 31st. You mentioned the Chinese banks. Since March 31st, they rebounded by 10 to 12% or even if you look at the Straits Times Index, that’s up about 4%. So, you know, we really look at long term returns and look at investments over the long term horizon and are fairly comfortable with short term market volatility.

Derivatives: where the next crisis is coming?

In Banks, Financial competency on 30/04/2015 at 5:12 pm

Citi and Merrill Lynch used to be known as the the banks that always joined a party when it was just about to go wrong. The sub-prime crisis proved the point.

Well Merrill Lynch no longer exists but Citi survived, just. Now it’s big in derivatives, very big and GIC still has a stake in it (It’s one of LKY’s forever investments). Let’s hope it’s not curtains Citi when derivatives tank.)

CITIGROUP’S RESURGENCE Seven years after Citigroup teetered on the brink, the bank’s traders and investment bankers have come roaring back,Peter Eavis writes in DealBook. The bank’s resurgence on Wall Street, which has involved acquiring huge amounts of derivatives, comes as many of its rivals pull back in the face of new regulations intended to make the financial system safer. But even as the bank has surged ahead, it has not trumpeted its comeback. Instead, its most senior executives have largely emphasized streamlining operations that have little to do with Wall Street, like agreeing to sell a unit that focuses on subprime loans.

Citigroup’s investment bank is no longer involved in the toxic activities that were most dangerous to the bank’s health, Mr. Eavis writes. The bank also has higher levels of capital, the financial buffer that reflects a bank’s ability to absorb losses. Such steps have helped it slowly regain favor with regulators. “Still, figures for Citigroup’s Wall Street operations show a bank that is on something of a tear,” Mr. Eavis adds. The unit that encompasses the firm’s investment bank, for instance, had $1.06 trillion of assets at the end of last year, a 12 percent increase from the level in 2010.

“Perhaps most astonishing is Citigroup’s meteoric growth in derivatives, the financial contracts that allow banks and investors to place bets without actually owning an underlying stock, bond or currency,” even as new rules have persuaded many banks to cut back on the amount of derivatives they hold,” Mr. Eavis writes. Citigroup has flexed its muscles behind the scenes to protect its derivatives business from certain new rules. But the growth of Citigroup’s investment bank and its derivatives business has raised concerns among financial specialists who support tougher regulations.

(NYT’s Dealbook some months back)

Temasek bidding for China’s POSB?

In Banks, China, Temasek on 27/04/2015 at 11:33 am

Bidders Seen for Stake in Postal Savings Bank of China UBS, BNP Paribas and Temasek of Singapore are said to be among the preliminary bidders seeking to buy 10 percent of Postal Savings Bank of China ahead of an expected initial public offering next year that could raise $25 billion.

NYT Dealbook

Ho Ching has a problem; so have our local banks

In Banks, China, Temasek on 09/04/2015 at 6:54 am

As readers will know Ho Ching has big markers on StanChart and Chinese banks.

Once regarded as a proxy for the growth of Asian markets in commodity-rich nations like Indonesia, StanChart has today become a victim of the reversal of fortune suffered by many emerging markets and their heavily indebted corporate borrowers …

Much of the lending to Asia outside of China assumed the region would grow on the back of insatiable demand from China. Much of the lending to China itself was based on that same expectation. That faulty thinking was then compounded by assuming that the value of the Chinese property used to back the loans would also continue to rise. But local banks in China, such as Agricultural Bank of China, are beginning to report that their bad loans have doubled — although officially they remain under 3 per cent. (Excerpt from recent FT article)

Ho Ho HO.

But it’s our problem too now that Tharman is now using projected long term returns from Temasek to spend our money on ourselves. Cybernuts might want to note that their heloo, Ong Teng Cheong, wanted to lock-up all the returns from the reserves (more LKY and Dr Goh). It was Ah Loong that fought him. Ah loong is the real people’s hero. if Ong had his way, we’d be pressing our noses on the iron bars guarding our reserves: Money, money everywhere/ Not a cent to spend/ Give thanks to Ong Teng Cheong

But the pix’s not that great for our local banks either: what with DBS’s exposure to Greater China and Indonesia, OCBC’s exposure to Greater China, and UOB’s and OCBC’s exposure to M’sia. Btw, OCBC has FTs as its Chairman and CEO, while DBS and UOB have true blue S’porans (Yes, I’m counting Gupta as a local. He’s a real talent.)

And if property prices tank here …

Serious instability at StanChart?

In Banks, Temasek, Uncategorized on 06/04/2015 at 1:42 pm

Following the coming change in CEOs, the resignation of a very senior manager and a planned change of chairman, Viswanathan Shankar (new citizen and a real talent like DBS’s Gupta), head of the bank’s Europe, Middle East, Africa and Americas business, is said to be planning to start a private equity fund. The bank it seems wanted to give him additional responsibilities. This not not good as the deputy CEO (passed over for the job) is also expected to leave.

Temasek and other major shareholders wanted change. May be they’ll end up with serious instability.