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Posts Tagged ‘HSBC’

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

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.

 

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”.

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

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

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.

 

 

Govt sees StanChart as risky?/ LKY’s 30-year investments revisited

In China, Hong Kong, Temasek on 28/04/2015 at 4:42 am

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.

HSBC WEIGHS MOVE FROM LONDON HSBC was established in Hong Kong 150 years ago and moved its headquarters to London in 1993. Now it is considering a return trip. Citing changes in regulation, HSBC says it will study whether to relocate its headquarters out of London, reports Chad Bray in DealBook.

A big part of the issue is Britain’s bank levy, which was instituted in 2010 to help pay for the government’s financial crisis bailouts. While all banks operating in Britain pay the tax, Mr. Bray writes that “The levy hits British-based banks particularly hard, however, as they are taxed on their global balance sheets.” HSBC’s announcement could become a political issue as Britain nears a general election on May 7.

(NYT’s Dealbook)

Hongkong Bank is a HK quitter. It moved to UK in 1993, juz before PRC regained HK in 1997. But all is forgiven.

Both HK have S’pore have similar sized economies (about US$300bn in GDP).

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.

Yet the S’pore authorities, it’s clear from hints in the FT, are unwilling to have StanChart HQed here (only 1.1 trillion in assets), despite Temasek being the largest single shareholder (which will benefit from reduced tax: HSBC shares were up 6% in HK yesterday), and despite many of StanChart’s operations being run from here.

The PAP administration is afraid of another of Temasek’s investments blowing up? After all StanChart is not as safe as our local banks: https://atans1.wordpress.com/2015/03/25/stanchart-not-as-solid-as-local-banks/

It also has weaker capital ratios than HSBC and the big US banks. So weak that the new CEO is expected to call for yet another massive rights issue.

Remember LKY and his bank investments that are forever? OK 30 yrs leh) Even longer than Buffett’s investments, he once said

In 2007/2008, our SWFs’ bot into UBS (GIC), Citi (GIC) and Merrill Lynch (Temasek) in a big way that ST characterised then as showing S’pore was a tua kee investor.

We lost serious money in two of the 30-yr investments by 2009.

— Estimate of Temasek’s realised losses on ML and Barclays:

https://atans1.wordpress.com/2010/08/04/swee-say-said-that-gd-temasek-lost-billions/

— Estimate of GIC’s loss on UBS as at 2011:

https://atans1.wordpress.com/2011/07/26/gic-not-reported-in-st-cna-or-today/

(BTW, Temasek’s 2012 purchase of Credit Suisse mandatory bonds:

https://atans1.wordpress.com/2012/07/22/third-time-lucky-temasek/)

 

 

 

HEADACHES AT HSBC

In Banks on 25/02/2015 at 6:03 pm

The British bank HSBC is facing battles on multiple fronts. Already forced to apologize for helping clients hide their income from tax authorities, the bank also had to explain on Monday why its chief executive, Stuart Gulliver, went to lengths for years to hide his bonus, at least from his co-workers, Jenny Anderson writes in DealBook. On top of all that, HSBC, which generates much of its income from Asia, reported abysmal results for 2014, saying that its profit fell 15 percent, to $13.7 billion, compared with $16.2 billion in 2013.

The Guardian newspaper reported late Sunday that Mr. Gulliver held at least 5 million pounds, or $7.7 million, in a Swiss account through a Panamanian company until 2003. Mr. Gulliver said on Monday that the account was legal and that he had paid all the required taxes, but his maneuvers nevertheless compound a problem for the bank’s reputation, which is still dealing with the fallout from efforts by its Swiss private banking arm to help wealthy clients evade taxes, Ms. Anderson writes.

Mark Gilbert of Bloomberg View writes: “The cascade of recent revelations suggests HSBC still hasn’t learned its lesson and is more of a social menace than a social good. Mr. Gulliver’s personal tax arrangements may not be illegal, but they are surely ill-advised and inappropriate.” Unless Douglas Flint, HSBC’s chairman, “pulls off an Oscar-worthy performance at Wednesday’s parliamentary hearing, HSBC will only have itself to blame if the authorities decide the bank is too big to regulate and respond by seeking its dismemberment.”

NYT Dealbook

Update on 26 Feb 2015 at 6.30 am

More than a tax problem : http://www.bbc.com/news/business-31590613

Major shareholders getting cranky: http://www.bbc.com/news/business-31618032

HSBC, Superman and another Cina superhero

In Banks, Emerging markets, Hong Kong on 04/02/2015 at 2:10 pm

(Or “HSBC and the right Chinese tycoons”)

HSBC is traditionally Li’s go-to bank for financing deals with its dominant local presence and a dedicated team to cover Li’s companies earned US$136 million in fees.Goldman Sachs has emerged as Li’s favored bank, pulling in an estimated $220 million in fees from Li’s two main companies Hutchison Whampoa and Cheung Kong Holdings since 2000.

http://www.reuters.com/article/2015/01/25/us-likashing-fees-idUSKBN0KY0YR20150125

Do remember that HSBC’s fees are on top of the interest it gets on its loans to these cos.

HSBC sold him Wharf once upon a time (the ang moh MD of wharf was angry as he said he could have arranged a better price) and both never looked back.

Which reminds me of the man who laid the foundation that made HSBC a global bank. Lee Quo-wei, the former chairman of Hong Kong’s Hang Seng Bank Ltd died on 12th August 2013, age 95

After joining Hang Seng Bank in 1946, Mr Lee was among those who transformed Hang Seng into the second-largest Hong Kong-based lender from a money-changing shop founded 13 years earlier. He helped Hang Seng end a bank run in 1965 with a capital injection from Hongkong & Shanghai Banking Corp, now HSBC. Four years later he was part of the team that created the Hang Seng Index.

Mr Lee was appointed executive chairman of Hang Seng Bank in 1983, according to a statement from current chairman Raymond Ch’ien. He retired in 1998, becoming honorary chairman and later honorary senior adviser.

If Hongkong Bank did not buy Hang Seng (at a good price from Hongkong Bank’s perspective, Mr Lee used to say to HSBC’s ang moh executives), HSBC, would not have become so entrenched into the HK economy. Look at StanChart and taz the best HSBC would have become.

As a shareholder of HSBC, I thank him.

Btw, It may be hard to imagine but once upon a time Bangkok Bank, OCBC were the rising banks while StanChart and HSBC were seen as the relics (albeit still powerful and rich) of colonialism.

StanChart’s looking dysfunctional/ Problem for ang moh banks

In Banks on 04/09/2014 at 4:41 am

One problem after another. Can’t do anything right. Please American regulators, upset an Arab one.

Standard Chartered Could Face U.A.E. Legal Action Standard Chartered’s unit in the United Arab Emirates may face legal challenges after the British bank agreed to close some accounts as part of a deal with New York State’s banking regulator. Standard Chartered agreed on Tuesday to pay a $300 million fine for running afoul of a 2012 settlement to resolve accusations that the bank processed transactions for Iran and other countries blacklisted by the United States.

Fine inflation

Star British fund manager Neil Woodford sold his fund’s stake in HSBC (HSBA.L) last month, citing concerns about the impact of potential fines from several industry-wide investigations on the banking group.

Banks in Europe and the United States have been fined for a variety of transgressions as regulators increase their scrutiny of financial institutions

“I am worried that the ongoing investigation into the historic manipulation of Libor and foreign exchange markets could expose HSBC to significant financial penalties,” Woodford said in a blog posting on his fund’s website.

“Not only are these potentially serious offences in the eyes of the regulator, but HSBC is very able to pay a substantial fine,”

For Woodford, who began building a stake in the UK’s biggest lender in 2013 after avoiding the sector since 2002, HSBC was “a different beast” to its peers, many of which still had problems over the quality of their loan books, capital adequacy and high leverage ratios.

In spite of the fact he considered HSBC a “conservatively-managed, well-capitalised business with a good spread of international assets”, Woodford said he had become concerned in recent weeks about the threat of “fine inflation”.

From the $1.9 billion paid by HSBC in 2012 over money laundering to the $16.7 billion set to be paid by Bank of America over its role in selling toxic mortgages, fines were increasing, Woodford said, and looked to be based on a company’s ability to pay “rather than the scale of the transgression”.

With the size of any potential fine “unquantifiable”, Woodford said he was concerned about HSBC’s dividend payouts. The stock currently yields 4.8 percent, against a FTSE100 average of 3.8 percent.

“A substantial fine could hamper HSBC’s ability to grow its dividend, in my view. I have therefore sold the fund’s position in HSBC, reinvesting the proceeds into parts of the portfolio in which I have greater conviction,” he said. Reuters

For the record, HSBC is trading at 1.1x book, its European peers are at 0.9, while StanChart is at 1.03. Our banks are at 1.3.

Impt of Indonesia to Jardine’s and other local listcos

In Indonesia on 15/04/2014 at 6:03 am

Inonesia was the largest revenue generator for many Singapore-listed companies in their most recent financial year, according to Singapore Exchange (SGX).

One in 10 stocks listed on SGX reported revenues specifically from Indonesia. Of those 80 companies, slightly more than a quarter reported Indonesia as the country that accounted for their largest revenue share.

This excludes stocks which segment revenue to South-east Asia, Asia and the Middle East, or Asia-Pacific regions, such as Jardine Matheson Holdings and Wilmar International.

Jardine Cycle & Carriage (JC&C), a member of the Jardine Matheson group and part of the Straits Times Index, has an interest in Indonesia-listed conglomerate Astra. Together with its subsidiaries and associates, JC&C employs people across Indonesia, Malaysia, Singapore and Vietnam. It has a total market capitalisation of $17.3 billion and a year-to-date total return gain of 35 per cent.

(BT 10 April)

JC&C is the Jardine group’s crown jewel, which reminds me, “Jardine [Matheson] shares have multiplied 10 times in 12 years, never mind the dividends,” according to a recent FT piece. I missed this. In early noughties, I tot of selling HSBC and buying Matheson or Strategic. Never did. Well HSBC (bought in 84) outperformed Jardines in 80s and 90s but went AWOL or MIA in noughties.

I had tot that based on history, Jardines would goof when I decided against the switch. In its attempts to diversify out of HK before the reds came in and ruined HK, it bot rubbish in Hawaii and elsewhere. HSBC backed people like Superman and other local tycoons while diversifying out of HK and into the US and UK. A sensible strategy more in line with Perfidious Albion. In the noughties, it was HSBC that crashed buying a US subprime lender. The losses there would have ruined a Citi or any other more efficient manager of capital. Happily HSBC had lots of fat to lose. And a massive rights issue almost doubled my holding. HSBC is getting its act together.

Still, Jardines would have been better .

Open letter to HSBC S’pore on Anton Casey

In Banks on 22/01/2014 at 6:58 am

(Update on 23 January 2014: TOC has confirmed that his present employer is Crossinvest*: Mr Casey’s firm Crossinvest Asia is investigating his comments and is set to take “appropriate action” once the review is completed, British newspaper, The Independent reported.

In a statement, Managing director Christophe Audergon said: “Crossinvest does not condone the comments. We believe they were made in poor taste.”

I’m very certain, he will be moving on from Crossinvest given that: The Company was created out of a Swiss single family office with almost three decades of leading experience and presence in Switzerland. We operate based on the finest Swiss Private banking traditions. 

Well among the finest Swiss Private banking traditions are

— discretion; and.

— operating in the shadows, leaving no fingerprints behind.

Don’t see Casey meeting these standards.

As to my thinking he worked at HSBC, it was an honest mistake.)

Dear Sirs,

I am a long-time shareholder (since 1984) and a client (since 1981), and am someone who has had friends working there: locals and international officers, and am writing this letter more in sorrow than anger.

I hope HSBC does the right thing by S’poreans especially its local customers, and moves on the FT (where T stands for Trash not Talent) by the name of Anton Casey out of the bank. His so-called attempt at humour does not reflect well on the bank because he is holding a senior position in wealth management.

One would be reasonable in wondering of the quality and discretion of HSBC’s management when such a senior executive exercises such an appalling lack of judgement and sensitivity.  Especially since HSBC prides itself on being the “global local bank”.

His behaviour also insults the international officers. I knew and worked with a few of them in the early 1980s on various projects. They were all minor public school boys who would never ever stoop to such insulting behaviour which they would have rightly called ‘hooliganish” and “racist”.

HSBC has always had a tradition of good customer service: it even built larger-than-usual cashier windows in Mexican branches to get more notes through, making it easier for the drug barons to deposit cash.https://atans1.wordpress.com/2012/07/18/hsbc-returned-to-roots/

So in the spirit of serving the customer and being the “global local bank”, move him out of the bank. His apology should not excuse his most unbecoming behaviour.

Yours faithfully,

CI aka E.K. Tan

HSBC: London & Greater China Bank

In Banks on 02/04/2013 at 5:16 pm

The map shows HSBC’s biz in terms of loans made as of 2010. S’pore is up there with China, Brazil, Oz and UAE. After the UK, Greater China (HK, China and S’pore) comes second. The bank is running down its US loan portfolio with continuing sales and write-downs.

BTW, the Argies are trying to shake down HSBC, accusing it of money laundering.

HSBC lords it over its peers in Asia

In Banks, Uncategorized on 14/03/2013 at 3:01 pm

StanChart also does well in Asia (wholesale banking profits in Asia rose 10% over 2010-12). but it is a minnow compared to these banks.

And investment banks are looking increasingly for deals in Asean region. In the IPO league table in 2012with KL at 5th place and HK at 4th. SGX with two FTs leading it was nowhere.

Contrast HSBC with StanChart

In Banks, Uncategorized on 10/03/2013 at 6:16 am

Both were narco banks. They were founded in the 19th century to finance the trade in opium between British India and Manchu China. They moved on with HSBC becoming one of the biggest banks in the world while StanChart remained like HSBC, once was, a an emerging markets bank. But HSBC returned to its roots: HSBC was fined for providing help to the Mexican drug cartels (bank counters were made bigger to facilitate the handing over of bank notes). StanChart was fined for a technical offence.

HSBC’s Profit Fell 17% in 2012 on Money Laundering Fine. HSBC has since hired the former chief of the US Treasury department’s sanction unit to assist with compliance.

https://atans1.wordpress.com/2013/03/06/bang-balls-temasek-haters-standard-chartereds-profit-rises-despite-u-s-fine/

 

 

HSBC: great customer & shareholder service

In Banks on 23/12/2012 at 10:12 am

Among the details to emerge in the US investigation of HSBC as the narco barons banker of choice were the larger-than-usual cashier windows in Mexican branches to get more notes through. Nice to see that the bank that I use and invest in is so customer-friendly.

And its continuing to try to improve investor returns:

— The selling selling of its entire 15.6% stake in Ping An Insurance, the big insurer based in Shenzhen, to Charoen Pokphand Group* means HSBC has sold more than 40 noncore assets since the beginning of 2011 and booked about $4 billion in gains on those sales this year alone, DealBook reports.  HSBC expects to book an after-tax gain of US$2.6 bn on the Ping An sale (more than enough to pay the US$1.9bn US fine).

— In October, it announced that it will close its Islamic finance operations in six markets, maintaining its presence only in Saudi Arabia, Malaysia, and a scaled-down operation in Indonesia.

*controlled by the Thai billionaire Dhanin Chearavanont. The deal is to be financed partly by the state lender China Development Bank,

HSBC: Better than the average bank

In Banks on 06/11/2012 at 6:14 pm

While many bank chiefs have scaled back their financial ambitions, HSBC’s chief executive is persisting with the goals he set for the lender 18 months ago.

 

 

HSBC: Doing God’s Work?

In Banks, Humour on 29/07/2012 at 6:51 am

On 25 July, Mexican regulators have imposed a fine of  US$27.5m on HSBC for its failure to comply with money-laundering regulations. The fine is the highest ever imposed by Mexican regulators. It constitutes 51.5% of the 2011 annual profit of HSBC’s Mexican subsidiary.

The week before, a United States Senate committee found that HSBC had provided a conduit for “drug kingpins and rogue nations”. HSBC’s head of compliance, David Bagley, resigned at the Senate committee hearing over allegations that the bank ignored warnings that Mexican drug money was being allowed to pass through the bank.

The US department of justice is conducting a criminal investigation into HSBC’s operations.

HSBS is expected to be fined heavily by the US.

So as a shareholder, I was upset that it didn’t use the defence that it was doing God’s work by laundering narco money. As the latest issue of the Economist writes: A gleaming chapel in Hidalgo state recently put up a bronze plaque thanking Heriberto Lazcano, head of the Zetas, for a donation. When the pope raised an eyebrow about such “narco alms”, a Mexican bishop, Ramón Godínez, replied that when Mary Magdalene washed Jesus’s feet with expensive perfume, he didn’t ask her how she paid for it. “There is no reason to burn money just because its origin is evil. You have to transform it. All money can be transformed, just as corrupted people can be transformed,” he said. With God as its money launderer, Mexico’s dirtiest industry should stay on a high.

HSBC: Being the drug barons banker of choice has its privileges

In Banks, Humour on 25/07/2012 at 10:04 am

If HSBC can surmount its current troubles, it has extraordinary opportunities. The year-long investigation was cited by the Senate as a test case. There is abundant evidence of other global banks having similar problems. Creating a compliance system that can satisfy regulation will not be cheap or simple. Companies in poor countries may find that their costs for routine transactions soar. But the rare banks that have the scale and the resources to operate in this environment will have a business niche to themselves. http://www.economist.com/blogs/schumpeter/2012/07/hsbc%E2%80%99s-grilling

As a shareholder with a barbed sense of humour, I can laugh all the way to the bank.

Earlier post: https://atans1.wordpress.com/2012/07/18/hsbc-returned-to-roots/

HSBC: Returned to roots

In Banks, Humour on 18/07/2012 at 1:32 pm

As a shareholder of HSBC and shumeone with a barbed sense of humour, don’t know whether to cry, or laugh and commend HSBC.

The present CEO is trying to get HSBC back to its Asian (i.e Chinese) roots, out of adventures in the US and Latin America. Funny thing is that in these places it was returning to its roots. 

HSBC was used by “drug kingpins”, says the US Senate, something the bank agreed with. It will be fined heavily. But in the 19th century it was banker to Jardine Matheson and the other British and Indian drug lords who were selling opium into China.

Great ad slogan, “Trust us.  The Mexican and Columbian drug cartens trusted us”. Or “Banker of choice to the drag barons of East & West throughout the ages”.

Why our local banks shld stop wasting resources on China proper

In Banks, China, Investment banking, Temasek on 07/06/2012 at 5:14 am

(Or “Why Temasek’s big bet on Chinese banks makes sense“)

DBS is the 6th largest foreign bank in China proper. It has a strategy of expansion into China. So have UOB and OCBC.

Well, its a tough biz to be in. Non-Chinese banks have only 2% market share. Even HSBC, StanChart and Citi have problems http://www.bloomberg.com/news/2012-06-04/china-wall-hit-by-global-banks-with-2-market-share.html

DBS, OCBC and UOB shld juz not bother abt China.

“Subsidy” is NOT a four letter word

In Financial competency, Political economy, Political governance on 06/03/2012 at 5:33 am

Many bloggers are upset that the govmin is giving S$1.1bn to SMRT and ComfortDelgro to help improve bus services. Seems to them, “subsidy” is a dirty word. Hmm, didn’t they get the idea that subsidies are always bad from the PAP idea, particularly one LKY?

But maybe, the PAP has changed its mind that the word “subsidy” is a dirty word. Reminds me of what Keynes is supposed to have said In response to an accusation of inconsistency: Keynes is often reported to have said “When the facts change, I change my mind — what do you do, sir?”. More to the point, he is reputed to have said: “When circumstances change I change my mind. What do you do?”

Well the facts and circumstances have changed. The PAP’s share of the popular vote is only 60% and its perceived presedential candudate won by just 7000 votes or less than 1%.

I’m not complaining that the PAP is being pragmatic by addressing the hot issue of overcrowded public transport: I take the bus. I’m not one of those who don’t take the bus regularly, has one car per family member, doesn’t pay income tax, and bitches abt this subsidy.

BTW, I don’t own shares in either company, nor in SBS Transit. I never bot as I tot dividends might not be sustainable. Juz look at the share prices in recent years. The yield remains highish because share prices have collapsed i.e. dividend payments have fallen.

But now the 2011 dividend payments for ComfortDelgro and SBS Transist look sustainable.

Anyway, here’s an example of a subsidy. I own shares in HSBC which I’m glad took advantage of the European crisis to get a subsidy from the European Central Bank. Let the BBC’s Robert Preston tell the story,

“HSBC, widely perceived to be the strongest of the UK’s banks and one of the strongest in the world, borrowed €5.6bn from the ECB … The reason it may be controversial that British banks have borrowed so much from the ECB – a bit less than 4% of all the money on offer – is that the interest rate is so low, just 1%. So arguably eurozone taxpayers are subsidising UK financial institutions.

HSBC: Which number to focus on?

In Accounting, Banks, Financial competency on 01/03/2012 at 1:55 am

 (Or “HSBC: Glass half empty or half full?” or “The difficulty of analysing a company esp a bank”)

HSBC Holdings, one of Europe’s biggest banks, said on Monday that its profit rose 27 percent last year in part because of greater demand for loans in the developing world.

(“Profit” here means profit attributable to shareholders)

http://dealbook.nytimes.com/2012/02/27/hsbc-profit-rises-on-demand-from-emerging-markets/?src=dlbksb

But FT preferred to focus on the 6% fall in pre-tax underlying profits to US$17.7 bn.

But pre-tax profits actually rose 15% to US$21.9bn. But FT, rightly in my view, took out the US$13.9bn gain in the value of the bank’s own credit. This is Alice-in-wonderland accounting that banks have to use (some happily, some reluctantly). The weaker banks love it.

HSBC is currently the most profitable Western bank, with its nearest rival, JP Morgan having profits 15% lower.

HSBC Asia Pacific posted profits before tax of US$13.3 billion – 15% more year on year. The region accounted for 61% of the group’s total pre-tax profit.

As regards HSBC S’pore, it posted a pre-tax profit of US$595 million for FY2011, up 14% from a year ago.  A lot better than OCBC’s and UOB’s S’pore operations. I plan to blog on how well Citi’s, HSBC’sand StanChart’s S’pore operations compare to our three local banks, one of these days. BTW StanChart juz reported that its pre-tax profit from it’s S’pore operations has hit US$1bn, up 40%.

HSBC: Cutting the fat

In Banks on 02/08/2011 at 9:42 am

HSBC has said it will cut 30,000 jobs by 2013 and exit operations in 20 countries as it looks to save billions of dollars.

The announcement came as the bank reported pre-tax profits for the first six months of the year of $11.5bn (£7bn), up 3% on the $11.1bn the bank made a year earlier. A very decent set of results.

As a shareholder, I can only say “about time”.

Gd analysis  http://dealbook.nytimes.com/2011/08/01/hsbc-to-cut-25000-more-jobs/?nl=business&emc=dlbka8

HSBC: Plans don’t impress

In Banks on 12/05/2011 at 10:13 am

HSBC’s CEO said that it would now focus its wealth management business on 18 key economies, and limit retail banking to markets where it can achieve profitable scale.

The bank is also streamlining IT operations and the operational structure. It hopes to save up to $3.5bn (£2bn; 2.4bn euros)

The bank said it would be directing investment into fast-growing national economies including Mexico and Turkey, and to certain wider regions, such as Asia and the Middle East. Asia means China (including Taiwan and HK), India, Indonesia,  Malaysia and S’pore.

The UK remains a core market.

Market was not impressed with HSBC shares down 0.8%. Analysts and investors were disappointed that the bank did not come out with more details e.g. the number of jobs that would be lost to show that the bank is serious.

HSBC: 44% price rise?

In Banks, Uncategorized on 22/04/2011 at 9:15 am

HSBC shares may rise by at least 44% if it focuses on markets that generate higher returns according to an analyst at Investec Securities, Bloomberg reports.

HSBC could climb to about 950 pence a share if Gulliver commits to ensuring all businesses generate a return on equity exceeding 10 percent, Gareth Hunt, a banking analyst at Investec Securities in London, wrote in a note to investors today. The London-based bank needs to cut costs in the U.K., reallocate capital at its U.S. division and sell parts of the business that aren’t profitable enough, he wrote. Gulliver, who took over as CEO in January, will brief analysts on his plan for the bank on May 11.

HSBC: Asia flying

In Banks on 02/03/2011 at 7:41 am

HSBC said its Asian operations can sustain return on equity of as much as five percentage points above the lender’s global target as growth outpaces other regions. It’s global target is 15%.

Bloomberg report.

BTW the 2008 financial crisis enabled me to double my holdings in HSBC via its rights issue. But there were times when my balls shrunk.

HSBC: Returning to its Chinese roots

In Banks, China on 18/12/2010 at 7:03 am

Remember the “S” stands for “Shanghai” and “H” for Hongkong.

Growth in China has averaged around 10 percent a year for the last decade and shows little sign of slowing. As trade flows with the rest of the world increase — HSBC says they will reach $5 trillion by 2015, which means growth of 13 percent a year — more of China’s cross-border trade will be settled in yuan.

On paper, HSBC is well placed to take a good chunk of business in that yuan-denominated trade. It is often one of the first foreign entities to win key licenses in China. It was the first to settle a cross-border yuan trade last year, the first to handle a yuan-denominated interest rate swap in Hong Kong in October, and it became the first international bank to complete yuan settlements in six continents with a deal in Brazil last month. … Read the rest of this entry »

StanChart has no plans to buy DBS

In Banks on 11/11/2010 at 5:28 am

The CEO of StanChart’s SE Asian operations said recently that Standard Chartered had no plans to spend the proceeds of a £3.3bn (US$5.3bn) rights issue on a significant acquisition in Asia. The bank planned to expand in the region largely through organic growth, rather than acquisitions.

The bank was not looking for any “transformational transactions” in SE Asia, although it might seek to acquire small businesses specialising in sectors or products that would add to its operations.

This would rule out a bid for DBS. Many had speculated (self included) that the bank might be preparing to spend part of the rights issue proceeds on a large acquisition. A very few (self included) speculated that DBS was a target, given that DBS is so badly managed and Temasek is a controlling shareholder in both.

DBS reminds me of StanChart in the 70s and 80s, when the latter got almost everything wrong. Only in the 90s did it get its act together. For younger readers, in the 60s Hongkong Bank and StanChart were roughly the same size, even though the former was already the leading bank in HK.

Standard Chartered bought two smallish S’pore-based businesses

— an aircraft leasing business in 2008; and

— a small factoring business earlier this year.

In 2008, it bot the private banking business of American Express in £430m.

HSBC’s view of emerging mkts

In Africa, China, Economy, Emerging markets on 09/11/2010 at 6:04 am

Mkts are flying what with Aug- Oct passing without a mkt collapse and the Fed pumping money into the system. Time to join the party. I’ve sat on the sidelines so far this yr, so I’ll sit on my hands a bit longer. Must admit its hard not to want to do something.

The CEO of HSBC, said late last week, there were likely to be “some bumps in the road ahead” in developing countries, especially in China. Reminder: HSBC generates most of its earnings growth in Asia.

“Our latest data from emerging markets points to a slowdown in the rate of recovery,” he said in a statement. But the bank added that it still expected growth in the region to outpace that of the developed world for the foreseeable future.

He gave a positive outlook for the rest of the year, saying that “the global economy is in better shape than many expected a year ago.” But that “while fears of a double dip in the West may be overplayed, the passage from downturn to upturn is clearly taking longer than previous cycles.”

HSBC said pretax profit in the third quarter was “well ahead” of the period a year earlier, as reserves for bad loans reached its lowest quarterly level since early 2007. Its lending business in the United States accounted for the biggest share of improvements. Business in October was “in line with third-quarter trends,” HSBC said. HSBC does not give detailed earnings figures on a quarterly basis.

The investment banking unit of HSBC also reported a drop in trading. HSBC said performance of the business was “robust although trading activity was lower.”

DBS safer than OCBC and UOB

In Banks on 13/09/2010 at 5:53 am

According to Global Finance, DBS is the world’s 23rd safest bank. In Asia, HSBC is the safest bank (19th). But in Asia Pacific region,  Oz banks are even safer with National Australia Bank, Westpac,  and Commonwealth Bank (at 11, 12, and 13 respectively)

French, Dutch and German banks occupy most of the top positions in the Global Finance survey, which uses  long-term credit ratings from agencies Moody’s, Standard & Poor’s and Fitch, and analysis of total assets owned by the 500 largest banks in the world to do the survey.

The safest bank is Germany’s KfW , followed by Frances’s CDC and Bank Nederlandse Gemeenten (BNG) of the Netherlands.

US banks are dogs (and taz insulting dogs), with BNY Mellon at position 30,  JP Morgan Chase (40), Wells Fargo (42) and US Bancorp (47).

HKEx: Plan B when Shanghai overtakes it

In Uncategorized on 11/03/2010 at 5:48 am

Sounds (see below) bit like SGX’s strategy of playing second fiddle (although perish the tot of SGX admitting that it is  pursuing second tier status).

And it doesn’t need a Plan B, yet. Note that Prudential said that has made its application to the exchange for an introduction and said it would not offer any new ordinary shares. It had previous said it would apply for a dual listing after it stakeover of AIA. French cosmetics group L’Occitane is getting ready for an IPO in Hong Kong next month in a move that highlights rising consumer demand in Asia for luxury goods. It  could raise up to US$700m to bankroll its Asian expansion plans.And FT reports further, “A successful listing could re-ignite interest among other European luxury goods companies, including Prada and Ferragamo, which abandoned Hong Kong IPO plans ahead of the global downturn.”

Contrast this with SGX. It has now only started marketing to the Ruskies. Let’s hope some decent R-Chips come our way.Thinking of S-Chips: Sino-E and friends, I have my doubts.

From Reuters Breakingviews:

The Hong Kong Stock Exchange is the world’s second-biggest by market capitalization. Call it the China factor. Yet as the mainland’s own exchanges get bigger, Hong Kong can’t count on winning prize listings forever. It’s time for a Plan B.

Hong Kong has long been the destination for public offerings of China’s state-owned companies, because mainland rivals were deemed too small. But now, China wants to develop an international financial center on the mainland. Even Hong Kong stalwarts, like the lenders HSBC and Standard Chartered, plan to issue shares over the border. The next big bank to list, Agricultural Bank of China, may eschew Hong Kong altogether.

Hong Kong can’t get away from its Chinese roots. Efforts at diversification from Chinese public offerings have had little success. In 2009, mainland enterprises still accounted for more than 82 percent of all public offering money raised. The failure of the American International Group’s Asian life insurer, A.I.A., to go through with a planned listing may cut Hong Kong’s pipeline in half.

Charles Li, the exchange’s new chief executive — and a mainlander — says the exchange seeks to position itself against competition from London, New York and Shanghai by doing things that others can’t do. One way would be to focus less on initial public offerings and more on other businesses, like derivatives. As China’s own capital market deepens, the need for more sophisticated products will increase.

The real gold mine, though, could be for Hong Kong to focus on becoming China’s offshore renminbi capital. China is keen to push the renminbi internationalization agenda, but progress has been slow, mainly because of a lack of products for investment. Trading renminbi bonds offshore could be a good start. Stocks priced in renminbi could follow.

Hong Kong would need Beijing’s approval, and might have to accept a future without blockbuster public offerings. But better a partner than a rival.

ROB COX and WEI GU

Earlier posting on Shanghai’s ambitions https://atans1.wordpress.com/2010/03/01/spore-hk-have-competition/

Standard Chartered: more copycating of HSBC

In Temasek on 10/03/2010 at 5:57 am

Now that Standard Chartered has followed HSBC in saying that it wants to get a China listing–  just  after  its CEO  said it will donate his bonus to charity, ala HSBC’s CEO — maybe it will announce that it wants to buy a bank in China: what HSBC was reported as planning.

Some people are surprised that Temasek did not quash the bonus plan. You can only guess why they tot Temasek would be upset. But remember Temasek says it does not interfere with its investee cos’ commercial decisions.

Where shld Standard Chartered base its CEO?

In China, India, Temasek on 04/03/2010 at 5:28 am

Last sat ST reported that analysts were saying  that Standard Chartered will be forced to relocate its CEO into Asia in imitation of HSBC.

If it does, it will be a test of Temasek protestations that it does not interfere with the commercial decisions of its investee companies. Remember it is the single largest shareholder in SC (195 ), and all the other big shareholders are “peanuts” as Mrs SM might put it.

The logical place for the CEO is to base himself in HK, SC’s biggest market and which is part of China: it and HSBC are targeting China as the biggest driver for growth.

But could Temasek or its shareholder resist the temptation to have  SC’s CEO here. Singapore is way behind HK in IPOs, hedge fund HQs (Soros prefers HK as his Asia HQ), fund mgt,   and in wealth mgt where S’pore wants to be a global player, the head so HSBC and JP Morgan’s private bank are basing themselves in HK, or thaz what reports are saying.

Already the private bank’s  and PE’s global HQs of SC are here, giving SC  the perfect excuse for relocating its CEO here.And S’pore’s nearer India, another big driver for SC’s future growth. As  to HK and China, he can fly there on SIA, not Cathay, of course.

And relocating here will give our MSM the excuse they need to exult the merits of this government before the expected early general elections.  Hard for the MSM to laud the government given the growing inability of ministers to avoid contradicting one another.

Note the news that SC’s CEO will also donate his bonus to charity, came only after it was reported that HSBC’s CEO would donate his. SC is always playing catch up to HSBC. At one time they were the same size, but one is a global player, the other is 19% owned by Temasek. But then OCBC was once on par with HSBC.

I’m a shareholder of HSBC for over 25 yrs.

BTW the relative sizes of both and how both had a gd crisis:

“The ranking three years ago and for most of the preceding few years saw HSBC as the biggest bank, Barclays and Royal Bank of Scotland chasing its tail, Lloyds some way behind that and Standard Chartered as the enthusiastic, fast-growing puppy.

‘Today HSBC isn’t just the biggest British bank. Its market value of more than £120bn is more than that of all the other four added together. It’s in a league of its own.”

“Today the market value of Standard Chartered, at an almost unbelievable £32bn, is only £2bn less than Lloyds’ and £5bn less than Barclays. And it is £11bn more than RBS (although that’s to ignore all the “B” shares that RBS has flogged to taxpayers).”

Excerpt from http://www.bbc.co.uk/blogs/thereporters/robertpeston/2010/03/the_new_banking_hierarchy.html

and if you want to read why HSBC and SC did so well a gd read.

A problem with int’l trade credit, again?

In Economy on 14/12/2009 at 5:45 am

I came across the following extract from a BBC Online article. The writer, “Laura” works in a British commercial bank.

If what she says applies in places like S’pore, HK, USA etc, we could see a second dip soon.    Note after the collapse of Lehman, int’l trade almost stopped for a few months because banks stopped accepting letters of credit from banks that they thought could collapse.

“I have had a growing worry over international finance over the last few months. Since the crunch started, confidence in other banks has been knocked. The most obvious manifestation of this was LIBOR being thrown out of kilter. Whilst this has now settled it only shows the picture of banks operating in the UK. What can’t be seen easily is the reduction or extinction of the willingness of banks to accept letters of credit from foreign banks which many customers who export or who have sister companies abroad need to trade round the world.

‘There are some countries now which have no banks which UK organisations are happy to accept a letter of credit from. Letters of credit are, in simplistic terms, one bank saying our customer is good for the money. This letter says we guarantee that so please let them have the goods and pay after delivery. If your customer then doesn’t pay you, their bank has to honour the letter of credit they approved. If your bank doesn’t have faith that they would honour that then the whole system falls down. Which it virtually has.

‘This situation hasn’t notably improved for some countries and I think this is a real threat to economic growth to UK Plc next year, as low exchange rates should mean good times for exporters. If they can’t get funding, however they won’t be able to capitalise on this.”

But banks that have global networks and strong franchises in trade financing like HSBC (I got shares here), Citi (after US government bailout) and Standard Chartered are minting money.

Where value investing can go wrong

In GIC, Investment banking, Investments, Temasek on 24/11/2009 at 8:25 am

“A study by Standard & Poor’s, one of the world’s leading credit rating agencies, has raised questions over the financial strength of some of the biggest banks ahead of new rules that could require them to raise more funds.

‘The analysis by S&P showed that HSBC is the best capitalised bank in the world, while Switzerland’s UBS, Citigroup of the US and several of Japan’s biggest banks are among the weakest.”: an excerpt from the FT.

No the purpose is not to show that highly paid managers at GIC goffed, or how smart I am. I have been a shareholder of HSBC since the 1980s. Even during Green’s (Christian + McKinsey, a lethal combination that always leads to problems) tenure as CEO, I kept the faith.

Now that the CEO is a man who joined the bank as an International Officer from a minor public school with I think A-levels, and he is basing himself in HK, one can only expect the return to the values that made HSBC great during the tenures of Sandberg, Purvis and Bond. Oh Purvis won the Military Cross in Korea, when he disobeyed orders to withdraw. He claimed he couldn’t hear the radio messge.

Sorry I am digressing. When Temasek bought into Merrill Lynch and Barclays and  GIC into UBS and Citi, I realised that they were buying into highly efficient banking machines. There was just enough capital for regulatory reasons and to provide a buffer for some things going wrong.  They needed a bit more cushion and GIC, Temasek were providing it.  Risky but history was on their side.

When the world recovered from the credit crunch of 2006, 2007, GIC and Temasek would reap the rewards of these finely tuned cash machines. They were the equivalent of the best of the best F1 cars.  I thought we had smart boys and gals. And that the risk would pay off.

But then came Bear Sterns, Lehman Brothers and AIG, and the rules changed. The winners were the better capitalised banks. If HSBC had as little capital as Citi, I’d be a poor man. The amounts it had to write-off on US sub prime would have shmed Citi. But it had capital.

So value investing doesn’t always pay off.

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