Davos Notebook

Will Goldman’s new BRICwork stand up?

RTXWLHHJim O’Neill, the Goldman Sachs economist who coined the term BRICs back in 2001, is adding four new countries to the elite club of emerging market economies. But does his new edifice have the same solid foundations?

In future, the BRIC economies of Brazil, Russia, China and India will be merged with those of Mexico, Indonesia, Turkey and South Korea under the banner “growth markets,” O’Neill told the Financial Times.

Hmmm.  Doesn’t quite grab you like BRICs, does it? The Guardian helpfully offers an amended branding banner of  “Bric ‘n Mitsk” (geddit?). But which ever way you cut it, it’s hard to see a flood of investment conferences and funds floating off under the new moniker.

Ten years ago, Goldman had this field to itself. Now more and more acronyms are being bandied around by  banks  seeking to pique investors’ appetite for higher returns.

Goldman has already launched the N-11, or Next Eleven countries, and other contenders include the VISTA economies (Vietnam, Indonesia, South Africa, Turkey and Argentina), the CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa) and the EAGLES (Emerging and Growth-Leading Economies).

Italian CEO says retail banks need time to adapt

Yesterday I spoke to Antonio Vigni, CEO of Siena-based Banca Monte dei Paschi di Siena, the world’s oldest bank. Below are two video clips of Vigni answering questions on lending in Italy and the hot topic of regulation.

In this first clip, Vigni says bank lending is holding up in Italy and he sees improvement.

In the next clip, Vigni says that retail banks may need more time to adapt to the brave new regulatory world.

Banks to be disintermediated? or is that just replaced?

Is it actually distintermediation if the thing being disintermediated has ceased to function?

Henry Kravis of Kohlberg Kravis Roberts said in Davos that, as in essence banks aren’t playing their role of intermediating debt capital for buyouts, he would be going straight to the source, doing deals directly with investors who want to fund debt for deals.

Of course many of the institutions that used to fund buyouts, CLOs and CDOs for example, no longer exist and many like hedge funds have lower appetite. He acknowledged that leverage has “come down tremendously,” which might get the prize for biggest understatement of the week.

Overheard in Davos

One of the best things about Davos is the conversations you overhear. It’s like no place else.

Sitting minding my own business, typing away I became aware of a central banker from a medium sized emerging market sitting nearby. He was joined by a gentleman from a bank in his home country. After a few muffled preliminaries the central banks said:

“So, how much trouble are you in?”

The banker responded in what sounded like soothing tones but I couldn’t make out exactly what he was saying. The only other line that came through clearly was that after a long speech the banker said to the central banker, with an air of exasperation.:

Bankers – Ever thought about working for Big Pharma?

    Are you an out-of-work banker looking for a new job with
some stability? Considered the drugs industry?

    Daniel Vasella, chief executive of Swiss pharmaceuticals
company Novartis, reckons his sector is a pretty good place
to work when compared to “mercenary” banking.

    “We are not in a banking industry, where they fire a
thousand investment bankers
and then a year after they hire
a thousand investment bankers,” Vasella told Reuters.