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Moody’s: ‘Persistent, Elevated’ Credit Risks For All But Strongest Euro-Zone Sovereigns, Banks

Forex-Master — Mon, 10 Oct 2011 13:49:03 +0000

Moody’s Investors Service said Monday it sees persistent and elevated credit risks for euro-zone sovereigns and banks, despite the expected credit-positive impact of further European bank recapitalizations.

In its Weekly Credit Outlook report, Moody’s said recapitalizations and more rigorous stre…
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Published: Mon, 10 Oct 2011 15:49

Germany warns on Greece, banks

Forex-Master — Thu, 08 Sep 2011 17:49:02 +0000

Germany’s finance minister Thursday warned of “worrying news” coming from the eurozone and said Greece must fulfil the conditions required if it wants more help to combat its debt crisis.

Speaking in parliament, Wolfgang Schaeuble said it was “very important, especially given the worrying news fr…
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Published: Thu, 08 Sep 2011 19:49

Switzerland Caves In To IRS Demands – US-FOREX.US

Forex-Publisher — Thu, 20 Aug 2009 03:14:32 +0000

To assist the U.S. government Switzerland has lifted its veil of secrecy and has agreed to give 4,450 banking client names to the Internal Revenue Service. The international crackdown on tax evasion has been gaining ever more momentum as governments, smarting from the economic crisis, seek to claw back as much revenue as they can. As a result, Swiss banking is crumbling and Switzerland’s reputation for financial discretion is suffering as well.The agreement between Switzerland and the United States announced on Wednesday could set a precedent for American authorities to go after more names, from more Swiss banks. Until now, Switzerland has, like other tax haven countries, only shared banking records with foreign law enforcement agencies if they’re investigating an action that would be considered criminal under Swiss law. Switzerland hasn’t changed any of its laws but has changed its interpretation of existing laws that cover “tax fraud and the like.” It won’t be known how far-reaching this precedent will be for another 90 days; Swiss and U.S. authorities are keeping some of it secret because the IRS is hoping that U.S. depositors in tax haven nations will come clean on their own.In its essence, Wednesday’s deal came from a diplomatic dance that saw Switzerland agree to reinterpret what it classed as tax evasion. It allows UBS
to give up account information requested by the IRS to the Swiss Financial Tax Administration to then release to the IRS, without breaking Swiss law. The newly tailored agreement is based on terms of a double-taxation agreement that has existed between the United States and Switzerland since 1996 but which on its own has done little to help the IRS identify tax evaders. Now clauses in the new agreement could allow the IRS go against other Swiss banks if they can assemble similar sorts of information to request of the Swiss government. “There are further avenues for the DOJ and IRS to pursue,” said Richard Murphy of the British tax consultancy Tax Research. Both Switzerland’s and UBS’ reputation for banking secrecy has already been permanently scarred. But confirmation that the IRS will get names from UBS will compel a flood of more wealthy individuals who have Swiss bank accounts to come forward to meet the voluntary disclosure deadline set by the IRS of Sept. 23, a date agency announced on Wednesday. Those who fess up after that deadline will face harsher penalties. Many offshore banking clients have until now been in wait-and-see mode for the outcome of the UBS case. Robert McKenzie, a partner at law firm Arnstein & Lehr and former officer with the IRS Collection Division, is currently advising approximately 50 such clients on the IRS disclosure issue-some are not clients of UBS but of other offshore banks and are concerned about the impact of the Swiss bank’s case.
Yet around 15 of them have wanted to wait for Wednesday’s final announcement. Unbelievably, there was hope that UBS might actually win its case against the IRS. McKenzie says a recurring comment among lawyer circles is that a surprising number of clients have been procrastinating on disclosure. Waiting seems to be a mistake, since UBS will notify only 500 clients within the next 90 days that their account details will be given to the IRS-most UBS clients will still be in the dark on Wednesday about whether they are one of the 4,450. “What happens if the IRS serves Credit Suisse
next,” said McKenzie, “and tells it to give us the clients that meet this criteria meet with Swiss government, and you’re past the Sept, 23 deadline?” Cue harsher penalties. UBS account holders will be allowed to appeal the decision to disclose their names in court, but three sources consulted by Forbes, including one at UBS, suggested that most of these appeals would be unsuccessful. Swiss banking clients may think that the best thing to do is consult their tax advisor, but that’s where things could also get complicated. “Every time I bring a person into the IRS for voluntary disclosure-let’s take a client with a Cayman Islands account-I have to give them the name of the tax advisor, or the people who advised those clients,” said McKenzie. With more advisors coming forward for voluntary disclosure ahead of the Sept. 23 deadline, the IRS has a growing database of advisors from whom it can request names of all U.S. clients they have assisted in setting up offshore banking accounts or trusts. McKenzie says appeals against such requests will fail-his own attempts to prevent the IRS from disclosing the names of tax clients advised by former accounting firm Arthur Anderson failed in September 2003. The DOJ’s recent statement on California resident John McCarthy, the fourth U.S. citizen to turn himself into the DOJ as a client with a secret bank account with UBS, also raises questions about people who have advised clients with such accounts. The DOJ’s statement on McCarthy says that UBS “worked closely with his Swiss lawyer to keep McCarthy’s funds from leaving Switzerland and helped McCarthy move additional monies out of the United States undetected by the federal government.” Assuming that Swiss lawyers who help Americans evade tax services are committing wire offenses, are they subject to extradition proceedings or even arrest if they travel to the United States? “If the U.S. decides to go down that route and make Swiss individuals criminally liable for what they’re doing, that’s going to have a radical impact on practice inside Switzerland itself,” said Murphy. There are currently 929 lawyers listed as financial intermediaries in Switzerland, according to the Swiss Financial Action Task Force.

UBS Needs Talent – US-FOREX.US

Forex-Publisher — Tue, 11 Aug 2009 19:46:28 +0000

When it came to explaining UBS’ woeful performance in the second quarter during a conference call last week, Chief Executive Oswald Gruebel was very blunt about what had gone wrong at his fixed-income division. “I would say the three issues are people, people and people,” he told the analyst who had asked him what the firm would do to “turn around” the fixed-income business. The firm, Gruebel said, didn’t have “especially strong areas in the fixed-income market,” adding that it was in the process of recruiting new management.That recruitment drive is in full swing. In an internal UBS
memo sent around on Monday-and seen by Forbes-the coheads of that FICC division announced a string of senior new hires. The new recruits include Dimitri Psyllidis, the former cohead of Merrill Lynch’s FICC division, who will be responsible for UBS’ FX and Rates trading globally, and Dan Brereton, a former UBS employee who had been snapped up by French bank BNP Paribas. Other new hires came from banks that had not tapped any government for support, including Barclays’ investment banking division, Barclays Capital , and Deutsche Bank .
The FICC division heads Carsten Kengeter and Jeffrey Mayer said the hires, “along with others that will follow” would help the company meet its aim of turning into ” a leading FICC franchise as measured by profitability, client ranking and market share.” According to analysts, there’s a logic to top bankers wanting to sign up to UBS, despite its tattered reputation, and assistance from the Swiss government, which will-in the short term at least-limit its abilities to take on much risk. “It is one of the best opportunities out there,” says Jean Sassus of Raymond James Equities. “Instead of a bank such as Merrill, where you can wonder what are the Bank of America’s actual plans for your business, at UBS you have a clear mandate and a management with a reputation for delivering. They are saying: We are going back into the street, and there is only an upside for you.”
Recruitment fever has returned to banks on both sides of the Atlantic, though particularly with those that have received state aid, it hasn’t been without controversy. Forbes recently revealed that Citigroup
, which has received 45 billion in funds from the U.S. taxpayer, paid guaranteed bonuses to a couple of bankers from Morgan Stanley. UBS, which has put 60 billion of illiquid securities in a fund managed by the Swiss National Bank, declined to comment on whether any of the recent recruitment packages had included guaranteed bonuses. Last week, UBS reported a quarterly loss of 1.4 billion Swiss francs , bucking the trend of investment banks compensating for weaknesses in other divisions. Strengthening fixed income-and equities-will be crucial for UBS if it is to alleviate concerns about its private banking division. Talks with U.S. authorities over data on 52,000 U.S. clients suspected of tax evasion are still ongoing, despite claims that they had reached agreement on the major issues. UBS’ wealth management saw an outstream of money in the second quarter, driven by concern about this dispute.

UBS Caught Up In The Issues – US-FOREX.US

Forex-Publisher — Mon, 10 Aug 2009 17:46:20 +0000

You’d think the issue of international tax evasion was big enough to keep government officials talking for a lengthy amount of time. But American and Swiss authorities have a lot more than that to discuss as they seek an agreement over UBS handing over to the U.S.’ Internal Revenue Service the names of several thousand clients who had previously been promised anonymity. Talks between the two governments are reported to have stalled over when and how Switzerland will actually transfer the client account data, which is protected by strict bank secrecy laws. The Swiss cabinet held an extraordinary general meeting over the issue on Monday; the crucial complication is that while tax evasion is illegal in the U.S., breaching confidentiality is illegal in Switzerland. Switzerland has already capitulated by, in theory, allowing UBS
to pass on the names-not surprising given the international pressure to stamp out tax evasion that was amplified at the G20 meeting in London in January. Though the IRS originally wanted UBS to hand over 52,000 client names who were suspected of tax evasion, recent reports say it is more likely that the bank will have to divulge 5,000 or possibly 10,000 names. Even that amount will severely damage UBS’ reputation as a haven for wealthy individuals who want to squirrel their money away from the eyes of American tax authorities. And the change in perception is already clear in the billions of dollars flowing out from its private banking division. But Switzerland also has some cards to play in multilateral discussions, particularly when it comes to foreign affairs. The country’s diplomats, for instance, have been representing U.S. interests in Iran since 1980. They have most recently been playing an important role in trying to find out what happened to three Americans who were reportedly captured in Iran after wandering in from Iraq’s northern Kurdish region. There’s also trade: The U.S. is the main destination for Swiss direct investment, and Swiss exports to the United States totaled close to 19 billion in 2008, according to Swissinfo.net. “It’s not just a tax issue. There are greater complexities in the international relationship other than tax,” said Richard Murphy, a director of the consultancy Tax Research.
Yet, in spite of the pressure to get information from Switzerland, it is probable that the IRS is not pushing the Swiss or UBS to hurry. Murphy points out that around 400 Americans who have bank accounts with UBS have already come forward to the IRS with their account details in one week. The penalty of doing so is smaller than if the IRS pinpoints tax evasion via a full audit, suggesting many of UBS’ private banking clients are facing a prisoner’s dilemma. “The more who can be persuaded to confess, the better,” said Murphy. “It’s cheaper than a full IRS audit, even without the penalties. This is a game of psychology to get the information.”

Rights Issue A Risk Too Far For Lloyds – US-FOREX.US

Forex-Publisher — Mon, 10 Aug 2009 13:46:19 +0000

Lloyds Banking Group is facing the choice between the prudent approach that it has been long been known for and a big gamble. Should it stay within the government’s asset protection program or attempt to make a bid for independence?The bank, currently 43% in the hands of the British government, is reportedly mulling a 15 billion pound rights issue, as a way of scaling back its involvement in the government program, which limits its potential losses from toxic assets. But the program comes at a price: as much as 16 billion pounds in insurance payments.The instigation for Lloyds to reconsider its options appears to be the prospects of a new chairman: Win Bischoff, who takes over as chairman in mid September, is pushing the bank towards this option, according to reports in Monday’s London Times. A spokeswoman for Lloyds declined to comment on this report, but instead insisted that the firm was “working with the Treasury” to finalize the terms of its intended participation in the scheme. “We expect to conclude those discussions and agree terms that are in the best interests of our shareholders,” she said.While participation in the toxic asset protection will protect the bank from further severe declines in the value of its assets, it is not without its downside. Aside from the pricey premium payments, the bank would also have to sell some of its branch network to alleviate concerns of the European Competition Commission and its tough head, “Nickle” Neelie Kroes, that banks receiving state aid could gain an unfair advantage over banks that do not.However, analysts warn that Lloyds may want to think twice before attempting anything on its own, despite the confidence it recently expressed as it reported its second quarter results. Shareholders would end up with “more dilution and less protection,” warns Sandy Chen of Panmure Gordon. It’s a view shared by Leigh Goodwin of Fox Pitt Kelton, who believes the bank has three options facing it: one is rejecting the insurance scheme altogether and going for a pure rights issue, which would be risky, but would allow the government to maintain its stake in the bank. Another is a reduced participation in the insurance program, backed by a rights issue, which would also struggle to get takers, or would have to take place at such a deep discount that it would be even more dilutive to existing shareholders than the existing government shares. All in all, says Goodwin, shareholders are best off with the final option-the government’s asset protection program-which is actually “quite generous” considering the circumstances. “Lloyds without asset protection is not an attractive stock,” he says.
Goodwin believes that despite the firm’s recent attempt to put a positive spin on its quarterly results, confidence in management’s ability to turn the firm around remains shaky. Shares of Lloyds Banking Group
were down 4.6%, at 97.28 pence , in early afternoon trading in London. Last week, Lloyds Banking Group reported a 6.8 billion loss for the first six months of 2009, after impairments worth 22.8 billion. Most of the troubled assets belonged to HBOS, the mortgage lender it acquired in a controversial deal. The firm had attempted to gloss over its problems somewhat, saying it had been “prudent” in making the markdowns. Nevertheless, there are likely more troubles to come, and Fox Pitt Kelton’s Goodwin believes the bank could start claiming on its insurance policy as early as in the first half of 2010.
In March, Lloyds said it would be placing 260 billion pounds worth of assets into the protection scheme but has since been firming up the exact terms of the deal.

Britains Banking Burden Grows – US-FOREX.US

Forex-Publisher — Fri, 07 Aug 2009 10:46:14 +0000

While most European banks have been celebrating a second-quarter turnaround in investment-banking profits, Royal Bank of Scotland could only look on enviously on Friday. The state-controlled bank reported a whopping 1.7 billion loss for the first six months of 2009, driven by the depressed British economy and deteriorating loan values, and said it would not see a turnaround in results until at least 2011. And with the British government’s “other” part-nationalized lender, Lloyds Banking Group
, also recovering from a six-month loss, don’t expect the state to step out of the way anytime soon. Her Majesty currently owns 70% of RBS and 43% of Lloyds, with both stakes set to rise as a result of the planned “asset protection scheme”-a government-sponsored proposal to insure risky, unwanted assets. The majority of the 13.4 billion in impairments taken by RBS in the first half of the year were on these so-called “toxic” assets. Shares of RBS
slumped 12.9%, or 6.89 pence , to 46.56 pence , during morning trading in London. The loss was worse than expected, but so was the outlook: Chief Executive Stephen Hester warned that economic uncertainty meant results might not substantially improve until 2011, while his turnaround forecasts at the bank looked ahead to 2013.”Hester’s cautious outlook on the U.K. economy is justified,” said Irfan Younus, an analyst with NCB, who rated RBS “reduce.” He said the bank’s share price relative to its net asset value-assuming the asset-insurance scheme went ahead as agreed-looked “too high,” though he recommended selling Lloyds Banking Group first.On Thursday, the Bank of England said it would pump an extra 50 billion pounds into the economy, a higher than expected sum. The expansion represented a “reality check” after hopeful data pointed to a turnaround in Britain’s economy. Although Lloyds and RBS have both suffered from souring loans from corporate and retail clients, the pressures on management are slightly different. RBC Capital Markets analyst Hank Calenti said it was a “tale of two CEOs”: Lloyds’ Eric Daniels was trying to soothe market fears and possibly save his job after leading the bank into its disastrous acquisition of rival HBOS last year, while RBS’ Hester-who only joined the bank after it was bailed out by the government-was downplaying expectations in the hope of a share-price rally later on in his career.

Commerzbank Feels Germanys Pain – US-FOREX.US

Forex-Publisher — Thu, 06 Aug 2009 12:46:17 +0000

It’s not easy being Commerzbank. Whereas other European heavyweights like Barclays, Societe Generale and BNP Paribas have reported strong second-quarter profits, boosted by a turnaround in investment banking, the German lender’s heavier dependence on retail banking resulted in a second-quarter 1 billion loss on Thursday. And with Europe’s biggest economy expected to shrink 6% this year, the pain is not over yet.
Commerzbank
said on Thursday it had sharply increased its loan-loss provisions in the second quarter, to 1.8 billion euros , an increase of more than 300% over the year. Corporate lending was the big culprit, with the German small-to-medium-sized business segment-or “Mittelstand”-throttled by the recession. In April, the latest month for which official data is available, German insolvency filings were up by 7.1% over the year.”I think provisions will increase in the coming quarters,” said Tutku Bagriyanik, an analyst with BHF Bank, who recommended selling Commerzbank shares. “Maybe we will see a peak in the third or fourth quarter.” He added that Commerzbank was unlikely to post a net profit before 2011.Commerzbank said that its loan-loss provisions in 2009 would be on a par with those of 2008, which came in at 3.6 billion euros .Shares of Commerzbank fell 1.2%, or 7 euro cents , to 5.84 euros , during afternoon trading in Frankfurt. The stock had initially rallied after the lender’s results came in better than expected, with a narrower operating loss of 201 million euros . But Bagriyanik thinks investors may have also initially misinterpreted Commerzbank’s promise of returning 5 billion euros in state guarantees as repaying part of the government’s 25% stake in the bank.Once Commerzbank gives up the 5 billion-euro slice of loan guarantees, it will save 440,000 euros per month in payments to the state.
Although Deutsche Bank
also reported heavier-than-expected loan loss provisions in the second quarter, its share price has only fallen 26% over the year, while Commerzbank’s is down 73%. Commerzbank itself admitted that its lower exposure to investment banking revenues was the cause, and said that it and fellow commercial banks would be forced to take “significant” writedowns on their credit portfolios.Commerzbank has pushed to expand its investment-banking exposure by buying Dresdner Bank from Allianz
. The acquisition led to a charge of 216 million euros in the second quarter.

Should Lloyds Bulk Up On Investment Banking – US-FOREX.US

Forex-Publisher — Wed, 05 Aug 2009 17:46:25 +0000

It’s been a rather tragic, double whammy for Lloyds Banking Group: Not only does the lender’s deep involvement in domestic retail banking mean its fortunes are dangerously tied to Britain’s economic ups and downs, it has had to deal with billions of dollars worth of bad assets brought on from its controversial takeover of mortgage lender HBOS. Lloyds, with almost no investment banking operations to speak of, has had to pay the price for bankers that made ill-judged bets on the commercial property market. Hence the lender’s 6.8 billion loss reported on Wednesday and 22.8 billion in loan impairments for the first half of 2009. Misfortune aside, it also begs the question of whether Lloyds should grasp the thorn and diversify itself a little, particularly by building up its presence in investment banking. Richard Hunter, head of equities research at of Hargreaves Lansdown, believes there are gaps in the investment banking market left by Lehman Brothers
that other banks could still fill in Britain. A number of banks have also recently seen a revival in their investment banking operations. Profits at Barclays’ main securities and underwriting division, Barclays Capital, doubled to 1.1 billion pounds for the half year, boosted by the company’s opportunistic takeover of Lehman Brothers’ North American assets last year. Those profits helped to offset a decline in revenues in domestic banking. There was a similar picture at Societe Generale on Wednesday, which reported healthy revenues at its investment banking division that helped make up somewhat for sliding profits at its retail banking arm. But the problem is that other lenders with a sizeable investment banking presence-think Barclays
and HSBC
-will already be elbowing each other to maintain market share in the U.K. “I’m sure Lloyds will be casting an envious eye towards the likes of Barclays and even Royal Bank of Scotland,” Hunter said. “But I wouldn’t have thought it is a step they could take right now.”
Lloyds, once seen as a stable investment that paid high dividends and was consistently cash generative, is enamored with the task of writing down legacy assets from HBOS-with help from the British government’s asset protection program-as well as re-building its presence in the U.K. domestic banking market. Jonathan Newman, a banking analyst at Brewin Dolphin, believes the bank should just stick to those tasks and little else. “It would not be appropriate for Lloyds to think about investment banking when they have a very large U.K. domestic operation to get back on track and make profitable,” he said, adding that if investors wanted to put their money in a British lender with investment banking exposure, they could just invest in Barclays. There may also be little in the way of investment banking expertise that Lloyds can pick up from HBOS, even though the mortgage lender had been very active in trading asset-backed securities before being taken over by Lloyds last year. With the market for those securities now collapsed, Lloyds revealed Wednesday that it was still exposed to 46.2 billion pounds worth of asset-backed securities that are now extremely difficult to sell. A breakdown of revenue at Lloyds also suggests its now-struggling retail division shows more promise: While its investment banking, or “wholesale” division, posted a 5.4 billion loss on Wednesday, mostly thanks to bad loans at HBOS , its retail division brought in a 612 million profit, down from 2.9 billion last year. Lloyds’ wholesale division had brought in just 62.9 million in profit last year. The market for investment banking meanwhile looks highly competitive. Royal Bank of Scotland
is the only British bank to have gained market share among the top 10 lenders in the investment banking arena in Britain, to 9.9% between January and August 2009, from 6.9% last year, according to data provided by Dealogic. Barclays Capital’s market share has meanwhile fallen to 4.7% from 5.2%, while HSBC has dropped out of the top 10 altogether. “I think whatever expertise Lloyds and HBOS might have in investment banking it would not be enough to make a mark on that part of the market,” adds Hunter. Perhaps things are best left as they are.

Oppenheim Opens Its Doors – US-FOREX.US

Forex-Publisher — Wed, 05 Aug 2009 17:46:15 +0000

German financier Salomon Oppenheim, Jr. would be turning in his grave. The private bank he founded 220 years ago, Sal. Oppenheim & Cie., has opened its books for the first time in more than a century to an outside investor-Germany’s Deutsche Bank. The “strategic partnership” being discussed could lead to Deutsche Bank taking a minority stake, but the last time Deutsche took a minority stake-in retail lender Deutsche Postbank-it promised to subsequently take full control.Sources familiar with Sal. Oppenheim’s strategy played down the possibility of allowing anything more than a “minority stake,” arguing that Deutsche Bank wouldn’t want to sacrifice the private bank’s family ownership and close ties with customers. But it’s clear that Luxembourg-based Oppenheim is under pressure and in need of capital, so even though it is an attractive asset that won’t sell itself cheap, the scales seem to be tipped in Deutsche Bank’s favor. How could this happen? Although Oppenheim’s stronghold in asset management seems to have helped it avoid the worst of the banking sector’s toxic debt losses, the financial crisis did hurt its investment banking division and led to a net loss in 2008 of 168.6 million. The bank’s family shareholders clubbed together in December and poured in 200 million euros to help fill the cracks in the balance sheet; at the end of last year, Oppenheim had 1.9 billion euros in equity and a regulatory capital ratio of 12%.But the real “black swan” event for Oppenheim was the collapse of German tourism-and-retail conglomerate Arcandor in June. Oppenheim had taken a 30% stake in the company last September, in a bid to support one of its clients, billionaire Madeleine Schickedanz, who owns around 25% of Arcandor. Although Oppenheim did sell 4% of this stake after Arcandor’s collapse, leaving the rest in the lap of its family shareholders, it suffered a book loss of around 43 million.So with Oppenheim’s owners’ capital health damaged by their 26% ownership of a bankrupt company, and Fitch Ratings’ subsequent downgrade of the bank’s credit rating, to A minus, from A, there were few options left on the table. Sources say BNP Paribas
and Credit Suisse
were interested in Oppenheim, but Deutsche Bank
seems to have won the day.Sources close to the bank think there could be a positive future with a big investor in tow, such as more international opportunities outside of the German-speaking world. But Oppenheim’s situation is not of its own making, and the talks will likely be tinged with more than a hint of regret.