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Spos

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  1. One thing to consider is the accounting for derivatives. In IFRS, the banks have to put gross derivatives assets on the balance sheet (with an offsetting liability), while in US GAAP they just put net amount. This can make a big difference in the leverage ratio.
  2. http://www.cityam.com/263414/rbs-talks-bank-england-over-share-buyback-plans- Buying back shares from the government is the best thing they can do. They've announced a small dividend, but they should focus on this and buy back as much as they can in shares if the government is willing to do it at these prices. CET ratio is 16.1% and should keep increasing so there is a lot of excess capital.
  3. "Has anyone seen anything on the terms of the financing for the MBO? I'm guessing Fairfax will have structured it well and to their benefit." I've only seen the press release which does not give the terms. But I am not sure what happens to the warrants in a privatization given that the strike price is $33.75. If Fairfax gives up on the possibility of the share price ever going back to the strike price, would they not ask for very onerous terms on the financing of the MBO? But then why would management accept those terms? Is it because the company is near bankruptcy? Or is Fairfax thinking of an eventual return of AGT to public markets (and is that why PointNorth is going along as well)? Not sure about any of this, but the press release felt a little light on detail, although it is a non-binding offer.
  4. I had looked at this before the big drop in the share price. Never liked the leverage and the capital allocation (too many acquisitions, too high of a dividend). The core lentils processing business seems good but there was way too much debt during the good times for a cyclical business like this. Once the downturn hit, they were in a very tough spot. They got very lucky with the financing they got from Fairfax last year, but even with that, they we were going to breach covenants. Fairfax was always going to move to protect its investment, so the risk for shareholders was that the business does not turn around quickly enough and the company taken out at a low price or needs to go get more dilutive financing. I feel there is one more year of tough conditions for the lentils business. Prices are low so I think lentils seeding was low this year. Given that, I think $18 is a good price.
  5. The thing that surprised me was how fans from Latin America outnumbered European fans in the stands. Even tiny Uruguay seemed to have more supporters than France when the 2 sides met. Given the geographic proximity to Europe and the higher income levels there, this was strange. It's too bad no South American team made it past the quarterfinals.
  6. I agree with most of the comments on this thread. When I looked at American banks last year, the things that jumped out at me were the historically high capital ratios, low NIMs, high liquidity, low delinquency rates and the above mentioned consolidation and regulatory issues. Some of these factors are present in some European markets. The two I’ve looked at closer, the UK and Ireland, now look more like Canada in terms of concentration, yet their ROA’s are significantly lower. I wonder what the chances of them moving towards Canada-like returns on capital are. FWIW, the one I am liking is RBS. It feels like BAC from 3-4 years ago: grew into a very complex organization before the financial crisis, endless fines, litigation and restructuring expenses masking a profitable core business, unsuccessful stress tests. But it now has a strong capital position, a very nice core business -which is now mainly retail and commercial banking in the UK-, is winding down its “bad bank” and with the agreement with the DOJ on the RMBS issues, seems to be past most of its legal and restructuring costs. A dividend is likely later this year when (if?) they pass the next stress test. Nicer would be share repurchases. The government owns a majority of RBS, not sure if they would be able to buy back some of the government’s holding.
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