Financial Times (December 19)
“The conspiracy to fix Libor appears more extensive than had been previously thought. This was not just a question of massaging submissions to make UBS’s financial position look stronger than it was after the crisis. The settlement also points to a co-ordinated effort across banks to manipulate market rates for profit.” Collusion and anti-trust charges may lead to class-action suits. Libor may become “the banks’ ‘tobacco moment’, when long-running bad behaviour is finally rumbled and the lawsuits roll in.”
Tags: Anti-trust, Banks, Class-action, Collusion, LIBOR, Tobacco, UBS
The Economist (November 3)
Even as profits have tumbled, balance sheets have soared as companies across the globe put more cash aside. “The financial crisis has made firms more skittish about relying on banks or securities markets for funds.” At least in Japan, this “urge to save may be lessening. Japanese firms, with few growth prospects at home, have been making foreign deals. Marc Zenner of JPMorgan Chase notes that in the past 18 months firms that announce acquisitions have been rewarded with higher share prices.”
Tags: Balance sheets, Banks, Cash, Foreign acquisitions, Japan, Profits, Share price
New York Times (October 12)
“Bank bailouts were supposed to be followed by financial reform to limit the banks’ destructive power. Instead, bailed-out banks are bigger than ever and have resisted reforms to limit their size and complexity.” Fortunately, there are some promising signs of change. The most recent arrived in a report from a committee led by Erkki Liikanen for the European Commission. Should the recommendations be approved “the lack of progress, however, may yet give way to change.”
Tags: Bailouts, Banks, Complexity, Erkki Liikanen, European Commission, Reform, Size
Reuters (June 30)
The S&P 500 closed June with a bang, despite posting the first loss in 3 quarters. “Stocks surged on Friday to close out a sour quarter on a high note as investors cheered an agreement by European leaders to stabilize the region’s banks, a pact that helped remove some of the uncertainty that has plagued markets. The broad rally was the S&P 500’s best day since December 20 and helped the benchmark index trim its quarterly loss to 3.3 percent.”
The S&P 500 closed June with a bang, despite posting the first loss in 3 quarters. “Stocks surged on Friday to close out a sour quarter on a high note as investors cheered an agreement by European leaders to stabilize the region’s banks, a pact that helped remove some of the uncertainty that has plagued markets. The broad rally was the S&P 500’s best day since December 20 and helped the benchmark index trim its quarterly loss to 3.3 percent.”
Tags: Banks, Europe, Investors, S&P 500, Uncertainty
Wall Street Journal (June 21)
In a move that “could add to the unease plaguing global markets,” Moody’s “downgraded more than a dozen global banks, including the five largest U.S. banks with global trading arms, to reflect declining profitability in an industry that is being rocked by soft economic growth, tougher regulations and nervous investors.”
Institutional Investor (June 8)
Jamie Dimon “may well have signaled the end of an era for big global banks.” The JP Morgan Chase CEO admitted his bank had lost at least $2 billion in derivatives trades. “For three decades the fixed income, commodities and currencies business has been the cash cow of investment banks.” Demand for FICC, as this cash cow is commonly known, products has been slumping and banks have been struggling to comply with stricter capital requirements. “And now, thanks to JPMorgan’s losses, heightened demands for restrictions on virtually any proprietary trading or risky hedging, will impact the FICC business at most banks, hurting their profits and forcing them to rethink their strategies. Some business lines are likely to be closed or sold off.”
Jamie Dimon “may well have signaled the end of an era for big global banks.” The JP Morgan Chase CEO admitted his bank had lost at least $2 billion in derivatives trades. “For three decades the fixed income, commodities and currencies business has been the cash cow of investment banks.” Demand for FICC, as this cash cow is commonly known, products has been slumping and banks have been struggling to comply with stricter capital requirements. “And now, thanks to JPMorgan’s losses, heightened demands for restrictions on virtually any proprietary trading or risky hedging, will impact the FICC business at most banks, hurting their profits and forcing them to rethink their strategies. Some business lines are likely to be closed or sold off.”
Tags: Banks, Derivatives, FICC, Jamie Dimon, JP Morgan
New York Times (May 24)
“With Greece in meltdown, raising fears of cascading bank insolvencies and deepening recession, Europe’s leaders failed again this week to agree on the ambitious initiatives needed to quell the crisis.” If they don’t quickly wise up and promote growth, “the consequences could be disastrous — for their countries and the rest of the world.”
New York Times (May 20)
“The major powers have imposed increasingly strong sanctions aimed at Iran’s banks and oil trade. It is crucial to maintain that cohesion as a second round of negotiations opens this week in Baghdad.” The Iranians want the sanctions to end. This would be premature. “If Iran makes credible gestures, sanctions should be eased, but not significantly until it takes irreversible steps to roll back its nuclear activities.”
Forbes (March 30)
Derivatives contributed to the last financial crisis and “may still endanger the financial system.” Based on FDIC records, U.S. banks hold derivative instruments with “a nominal value of $250 trillion – or about 150 times the aggregate balance sheet equity of these same banks.”
Tags: Banks, Derivatives, FDIC, Financial Crisis, U.S.
Forbes (February 28, 2012)
U.S. banks “took in nearly $120 billion in net income last year, the most since 2006, but that doesn’t mean they are back in their glory days.” What’s the problem? “Banks can’t seem to increase their top line numbers.” Profits are stemming from layoffs, cost cutting and loss provisions. “Banks are having a tough time making money off the loans they make.” Net operating revenue has actually dropped during three of the last four quarters and “full-year net operating revenue declined for only the second time since 1938.”U.S. banks “took in nearly $120 billion in net income last year, the most since 2006, but that doesn’t mean they are back in their glory days.” What’s the problem? “Banks can’t seem to increase their top line numbers.” Profits are stemming from layoffs, cost cutting and loss provisions. “Banks are having a tough time making money off the loans they make.” Net operating revenue has actually dropped during three of the last four quarters and “full-year net operating revenue declined for only the second time since 1938.”
Tags: Banks, Loans, Loss provisions, Net income, Operating revenue, U.S.