Commentaries
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Barclays risky assets move a little too cozy
Barclays has come up with an interesting way to solve an optical problem. Concerned that the bank’s shareholders are nervous about possible future writedowns of wobbly assets with a value of $12.3 billion, it has sold them to its own employees.
This isn’t necessarily a bad idea. But there are two things to dislike about this deal. First, it looks pretty cozy to sell to your own workers. And second, the deal looks potentially very favourable for the purchasers.
The deal does not remove the assets from Barclays’ balance sheet. What it does is allow the bank to pull them out of its mark-to-market book, where their carrying value is contingent upon the financial health of some monolines with whom Barclays has taken out credit insurance.
To do this it makes a loan to an entity, which then buys these assets. The loan still sits on Barclays’ books but does not have to marked to market. Even so its value is ultimately still tied to the performance of the assets.
Credit Suisse pulls ahead of UBS
UBS has always looked down its nose at its cross-town rival, but Credit Suisse under Brady Dougan has turned the tables on the blue-bloods. As UBS remains mired in a potentially catastrophic legal tussle with America’s tax collectors, CS is winning market share across the board.
With its second quarter results, Dougan has shown that the storming first quarter was no flash-in-the pan. Stripping out various one-offs (including a counter-intuitive 1.1 billion Swiss franc loss thanks to an improvement in the value of its own debt), Credit Suisse’s net income increased 62 percent on the first quarter, to 2.5 billion Swiss francs. That is equivalent to a boom-like 27 percent-plus return on equity.
from Alexander Smith:
Is Jefferies right to be bullish on M&A in AM?
A bull(ish) note from growing investment banking group Jefferies Putnam Lovell predicting "a steady flow of M&A activity in the global asset management industry" for the second half of 2009.
Jefferies is basing its view on the following factors:
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divestitures by larger financial groups shoring up their capital baseÂ
pure-play asset managers looking to bulk up
private equity firms drawn not least by lower capital requirements
And the firm is putting its money where its mouth is. It has recently been hiring scores of senior bankers from rival firms as it seeks to build itself a major presence.
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The Wall
