British Banks

[PlanMaestro]

Another  very interesting situation to watch, and they do not have the euro straightjacket.

 

Early flotations might leave RBS adrift

http://www.ft.com/intl/cms/s/0/a95c95dc-92df-11e1-b6e2-00144feab49a.html#axzz1tX0xqhyN

 

But achieving maximum value for the business right now is impossible. Some RBS managers try to put a brave face on the forced sale – divestment will simplify the group’s structure, they say, and the boost to group capital will be welcome given the ever tougher regulatory requirements on banks. That argument is simplistic – under current regulations the business merely operates using double-counted bank capital, so the economic benefit of selling will be limited. For a bank that has been swinging between a slim profit and a big loss for the past year or two, being deprived of half a billion pounds of income will hurt, too. At the very least Mr Hester should argue for a delay to the sale timetable and use the interim to rake in profits from the business, only floating it once equity markets look healthy again.

 

All of the above would be “nice-to-have” concessions. For RBS the “must-have” change in the EU sanctions relates to the so-called “dividend access share”. This abstruse construct, which defines the terms under which the bank may pay dividends on ordinary “A” shares (owned by government and private-sector alike) and preferentially treated “B” shares (owned only by the government), is a dangerous obstacle to RBS ever being reprivatised. Essentially, it makes it prohibitively expensive for RBS to pay dividends to the private sector. Unless it is renegotiated, no potential investor – from Abu Dhabi to Singapore – would go anywhere near the government’s RBS stock.

 

If only for this reason, both Mr Hester and the British government should make it a priority to head to Brussels – and Lloyds’ António Horta-Osório might as well go along for the ride. Banks in Belgium, the Netherlands and Germany can clearly persuade the EU authorities that the worse-than-expected crisis should mean a slackening of penalties. The UK should be arguing for the same boost for its part-nationalised banks.

 

 

[Uccmal]

Hi Plan, I have held the "p"preferred shares for some time.  I bought them much cheaper than today.  Assumming the dividend is announced in the next couple of weeks, these should take another nice pop.  I have looked in reasonable detail at RBS.  I dont quite know what to make of it right now. 

 

Briefly

 

Cons:

- massive share count and government overhang (dont appear to be able to afford what AIG has been doing).  i dont like share consolidations.

- Ireland division is the big chain around the leg

- Euroland exposure.  They took a bath on their Greek bonds.  They hold more in P/S.

-Euro/UK - not nearly as far along as the US

 

Pros:

- Citizens bank

- Ireland write downs may be slowing subject to Richie Boucher comments last week about a possible double dip.

- Stephen Hester

- large global footprint

 

I figure they may be where BAC is in 1.5 years or so. 

 

[PlanMaestro]

I like how you put it Uccmal: as BAC is today 1.5 years from now plus a similar overhang as AIG w/o the will and instruments to solve it.

 

Considering how cheap they are, maybe just enough to keep in the watchlist for a review a year from now. But the American banks are in better shape as Parsad correctly likes to remind us.

 

Another article from the FT today. LYG and RBS have some interesting non-core assets they are being forced to sell (Warren are you awake?). The first and largest direct auto and home insurer in the UK, and the creators of the life insurance business.

 

http://www.ft.com/intl/cms/s/0/20f83cbc-92b4-11e1-9e0a-00144feab49a.html#axzz1tZYW3XLB

 

Boldness is a good quality in an entrepreneur. So the rumoured interest of financier Edi Truell in Direct Line and Scottish Widows  is to his credit. However, the owners – Royal Bank of Scotland and Lloyds, respectively – have slung cold water on the gossip, saying they have no intention of selling to Tungsten, the cash shell that the financier plans to float by the end of May, or to anyone else.

 

RBS is at least readying Direct Line for an initial public offering of its own, at the insistence of European trustbusters. The first tranche of shares is due to hit the market this autumn. That gives Mr Truell an outside chance of intervening. Eamonn Flanagan of Shore Capital values the motor insurer at close to its net asset value of £4.5bn. Assuming Tungsten can raise a mooted £1bn in equity for a deal, debt might supply the balance.

 

Buying Scottish Widows may be where Mr Truell’s aspirations really shade into pipe dreaming. The life and pensions company, bought for about £7bn in 2000, makes solid returns for the struggling bank – some £886m in pre-tax profits in the UK alone last year. Lloyds is under no current pressure from regulators to sell this strong brand. Mr Flanagan believes it would fetch less than an embedded value of £6bn. But the buy would still be a big stretch for Tungsten, albeit that it might pay partly in shares.

....

 

Direct Line is Britain’s biggest personal motor insurer by number of policies. Its brands include Churchill and car breakdown service Green Flag. The home and motor insurer swung into profit in 2011, posting an annual operating profit of £454m after rising bodily injury claims pushed it to a £295m loss a year earlier.

 

 

[Kiltacular]

Plan,

 

I thought I previously recalled Buffett showing interest in Direct Line.  I found this old article.  Perhaps a second bite at the apple.

 

http://articles.economictimes.indiatimes.com/2010-08-29/news/27585228_1_insurance-business-insurance-arm-rbs

 

 

[PlanMaestro]

Thx for the article Kiltacular.

 

Lloyds LYG just released earnings:

 

http://www.ft.com/cms/s/0/ae862572-9308-11e1-aa60-00144feab49a.html#ixzz1tcxUZcu7

 

Lloyds was hampered by an extra £375m charge to cover the cost of compensating customers for mis-sold PPI, a form of loan cover that was once a big earner for banks. It had already set aside £3.2bn for the purpose last year.

....

 

Mr Horta-Osório said that one in four of the claims submitted to Lloyds by such companies involved people who had not even held a PPI policy with one of the bank’s brands.

“It is fraud and I think we should stop that,” he said, adding that the complaints trend had been more stable in April. However, he also accepted that the way Lloyds had sold PPI had been “unacceptable”.

.....

 

On a “combined businesses” basis – a Lloyds-devised measure of underlying performance – it posted a £628m pre-tax profit, up from £284m a year earlier.

 

Lloyds has been talking to the Co-operative Group about the potential sale of 632 branches that it must shed to satisfy EU rules on state aid.

 

 

[Uccmal]

RBS is re-instating dividends on the preferred shares.  I bought my "p" shares at $11 averaged.  The face value is 25.  The yield on my PP is 14%.  Hard to beat that over the long haul.

 

http://www.bloomberg.com/news/2012-05-04/rbs-resumes-dividend-payments-as-emergency-government-aid-repaid.html

 

[PlanMaestro]

One thing I like about LYG's new management team is its Banco Santander pedigree. But a two month medical leave for exhaustion?

 

http://www.ft.com/cms/s/0/af5b1cf6-9dca-11e1-9a9e-00144feabdc0.html#ixzz1usOjgytn

 

Mr Horta-Osório has favoured external candidates, however, as he has sought to cut ties with Lloyds’ past and rebuild the bank following its ill-timed acquisition of HBOS during the financial crisis.

 

Another piece of the management jigsaw will be in place later this week when George Culmer is due to start as finance director. Mr Culmer is set to join Lloyds on Wednesday, a day ahead of its annual shareholder meeting in Edinburgh.

 

He was appointed last November but was not able to leave his post at insurance group RSA until this week.

 

Other hires by Mr Horta-Osório include Alison Brittain, who joined Lloyds in September to lead the retail business, Antonio Lorenzo, who is in charge of group strategy, and Juan Colombas, chief risk officer.

 

The chief executive reduced the number of group executive committee members from 14 to 11 after he returned in January from a two-month period of medical leave, triggered by exhaustion.

 

[PlanMaestro]

The Financial Times interviews Philip Hampton, chairman of the Royal Bank of Scotland.

http://video.ft.com/v/1680563473001/RBS-chairman-most-troubled-by-Ireland

 

 

[PlanMaestro]

Barclays: Bob Diamond resigns. 7x earnings and 0.38x BV.

 

Jumping to a completely unrelated thing: there is no libor scandal in the USA

http://www.bloomberg.com/news/2012-07-03/wall-street-supporters-in-congress-unmoved-by-libor-probe.html

[MrB]

Barclays: Bob Diamond resigns. 7x earnings and 0.38x BV.

 

Jumping to a completely unrelated thing: there is no libor scandal in the USA

http://www.bloomberg.com/news/2012-07-03/wall-street-supporters-in-congress-unmoved-by-libor-probe.html

 

Why buy a European bank when you can buy a British bank and why buy a British bank when you can buy a US bank...worth considering.

[oddballstocks]

Barclays: Bob Diamond resigns. 7x earnings and 0.38x BV.

 

Jumping to a completely unrelated thing: there is no libor scandal in the USA

http://www.bloomberg.com/news/2012-07-03/wall-street-supporters-in-congress-unmoved-by-libor-probe.html

 

Why buy a European bank when you can buy a British bank and why buy a British bank when you can buy a US bank...worth considering.

 

This has been my line of reasoning, there are some cheap European banks but there are similarly cheap and much safer American banks.

[PlanMaestro]

Why buy a European bank when you can buy a British bank and why buy a British bank when you can buy a US bank...worth considering.

 

Bravo.

[PlanMaestro]

 

Barclays splashed into the U.S. investment-banking business when it agreed to take on the core of the investment-banking franchise of Lehman Brothers in the midst of Lehman's 2008 bankruptcy. That move greatly expanded its investment-banking unit, Barclays Capital, now known simply as Barclays.

 

The investment bank is Barclays's largest profit generator, earning $16 billion in total income in 2011. Barclays shot up the investment-banking rankings globally after the Lehman deal, especially in the underwriting of debt. Barclays ranks second globally in debt capital markets, behind J.P.Morgan, according to data firm Dealogic. It ranked 6th in 2006.

 

Barclays this year cracked the top five in global mergers & acquisitions advisory, but its global equity capital markets and loan volumes are ranked ninth.

 

Barclays was not part of the U.K. government's bailout of its banks in 2008. Barclays took injections of private capital from investors in Qatar and Abu Dhabi, as well as BlackRock related to the sale of the ETF business. Collectively these entities still controlled over a fifth of the total voting rights in Barclays PLC as of the end of 2011.

 

[PlanMaestro]

Here we go again, now it's the turn of squeaky clean Standard Chartered.

 

http://ftalphaville.ft.com/blog/2012/08/07/1109481/a-regulator-gone-rogue-maybe-maybe-not/

 

At pixel time, shares in Standard Chartered were down 31 per cent from the point at which this was published — an “Order Pursuant to Banking Law No 39,” issued by the New York State Department of Financial Services.

 

In lurid detail, this sets out the claim that the London-based EM bank willfully evaded US sanctions against Iran over the course of a decade.

 

Now, quite a few people (including this correspondent) are owning up to not having heard of the New York State DFS previously. Jonathan Guthrie, in a lucid Lombard note, reckons this might partly explain the grandstanding tone of the order: the department was only created last year (by New York governor Andrew Cuomo) and needs to make a name for itself…

 

...

 

StanChart, for its part, is acting all shocked and hurt. A hastily drafted statement, issued at about 1am London time, protests that what the DFS calls “wire-stripping” — changing docket details to disguise the parties involved — was actually accepted practice under the so-called “U-turn” arrangements that allowed Iran to sort of trade normally, internationally, in the years up until 2008.

 

In November that year (just as Wall Street was melting) the U-turn arrangements were revoked and sanctions against Iran were tightened up considerably. Over this period, StanChart appears to accept that it made some transgressions. These were being investigated and the matter has been under discussion with a whole battery of US regulators. But going on the bank’s figures, the suspect trades are in the region of $14m, rather than the $250bn flashed around by the DFS.

 

The clear implication is that the real story here is about a regulator gone rogue.

 

...

 

Yet the StanChart share price is not saying this is about pots and kettles. The markets are actually pricing in the possibility that this bank might lose its New York banking license, along with its ability to clear US dollar transactions – something that would effectively cripple an institution whose business is largely based on international trade finance.

 

Why so? Sandy Chen of Cenkos sums it up nicely. It’s about trust. Investors feel they have been kept in the dark…

 

 

 

 

 

 

[PlanMaestro]

Credit Conditions Survey

http://www.bankofengland.co.uk/publications/Documents/other/monetary/ccs/creditconditionssurvey120628.pdf

 

Housing

http://www.jrf.org.uk/sites/files/jrf/housing-markets-volatility-full.pdf

 

Why is their recovery better than ours? (Even though neither is good enough)

Adam Posen

http://www.bankofengland.co.uk/publications/Documents/speeches/2012/speech560.pdf

 

Is the British economy supply constrained II? A renewed critique of productivity pessimism

Centre for Business Research, University of Cambridge

http://www.cbr.cam.ac.uk/pdf/BM_Report3.pdf

[PlanMaestro]

Highly recommended. (Capital ratios, Volcker, Libor, RWA, …)

 

Bill Winters, former co-CEO of Investment Banking, at the UK Banking Commission.

http://www.parliamentlive.tv/Main/Player.aspx?meetingId=12518&wfs=true

 

 

[PlanMaestro]

Contrarian sees potential in Barclays stock.

http://www.ft.com/intl/cms/s/0/86d75d62-78fd-11e2-930b-00144feabdc0.html#axzz2LB2XYyNj

 

Jenkins sets out Barclays reinvention.

http://www.ft.com/intl/cms/s/0/470553ce-7542-11e2-b8ad-00144feabdc0.html#axzz2LB2XYyNj

 

Taming the Barclays behemoth. (video)

http://video.ft.com/v/2160149852001

 

At a dinner hosted by one of the UK’s biggest investment companies last week, a group of portfolio managers were asked to pick one stock that could outperform all others over the next decade – perhaps even matching the 6,500 per cent share price rise of computer company Apple over the past 10 years.

 

Of the five fund managers to respond, Ian McVeigh almost apologetically suggested shares in Barclays, the scandal-hit UK bank.

 

Most of the journalists in the room laughed. But Mr McVeigh, who runs one of the biggest UK equity funds for the dinner’s hosts, Jupiter Asset Management, is taken seriously by his peers – as many other fund managers supported his view that bank stocks are back.

…

 

 

He adds that Barclays is a good example of a cheap stock with strong potential for further gains. It has a share price to tangible book value ratio of 0.86 today, compared with 3.91 in 2005, and a forward price/earnings multiple of 8.57 times, compared with 11.23 eight years ago. “Barclays offers great value at current prices,” he argues.

 

At Jupiter’s dinner, it was not just Barclays that was singled out as a potential star stock. Royal Bank of Scotland was mentioned, too. Both banks have chief executives that investors appear to like: Antony Jenkins at Barclays and Stephen Hester at RBS.

 

“They are both committed to turning their banks into responsible institutions but at the same time offering shareholders strong returns,” said one fund manager. “They can’t afford to be complacent. They have to get it right, and I think they will.

[SharperDingaan]

How much exposure to banks can you really have? Adding that .. nth bank in currency X or Y really isn't going to add much, & the instrument has to at least offer the leverage of a long term option (warrant, etc).

 

A Barclay's without BarCap will not generate the media sound bites - but it will be a lot smaller, easier to run, cheaper (lower earnings), backed by better quality earnings, & more likely to avoid nationalization.

 

What isn't recognized is that whatever you buy; you are going to have to marry, as you are locking in today's low price in expectation of a rising dividend yield & a future higher share price. Today 3% dividend yield becoming 10-15% 5 yrs out .... & then because it is so high - leveraging against today's purchase to buy the next security. ie: Buy & hold ... forever.

 

For this kind of an investment she had better be worth it!

 

SD 

[PlanMaestro]

RBS Under Pressure to Sell Assets, Prepare for Sale.

http://www.bloomberg.com/news/2013-02-26/rbs-under-pressure-to-sell-assets-prepare-for-sale.html

 

RBS (RBS) will this week announce plans to sell a stake in Citizens Financial Group Inc. and shrink assets at its investment-bank by as much as 30 billion pounds, said a person with knowledge of the plans, who asked not to be identified because the matter is private. As recently as August, Hester said he didn’t intend to sell the U.S. consumer and commercial lender it acquired in 1988.

 

[PlanMaestro]

Lunch with the FT: Stephen Hester

 

http://www.ft.com/intl/cms/s/2/6f05854c-ce98-11e2-8e16-00144feab7de.html#axzz2VZfbDGkx

[PlanMaestro]

Lunch with the FT: Stephen Hester

 

http://www.ft.com/intl/cms/s/2/6f05854c-ce98-11e2-8e16-00144feab7de.html#axzz2VZfbDGkx

 

And he now resigns? Weird.

[PlanMaestro]

"Changing Banking for Good" – Parliamentary Commission on Banking Standards

 

http://www.parliament.uk/business/committees/committees-a-z/joint-select/professional-standards-in-the-banking-industry/news/changing-banking-for-good-report/

[meiroy]

 

http://www.bloomberg.com/news/2013-06-20/five-banks-must-raise-21-2-billion-in-fresh-capital-boe-says.html

 

"Five U.K. banks must submit plans to raise another 13.7 billion pounds ($21.2 billion) of additional capital by the end of 2013 to withstand possible losses on loans, fines and risk models, the Bank of England said.

The central bank found a capital shortfall of 27.1 billion pounds when it previously assessed the strength of lenders’ balance sheets and banks have already submitted plans to raise 12.5 billion of that amount.

Barclays Plc (BARC), the U.K.’s second-largest bank by assets, must raise an additional 3 billion pounds in fresh capital, Lloyds Banking Group Plc (LLOY), and Royal Bank of Scotland Group Plc (RBS) must boost capital by 8.6 billion pounds and 13.6 billion pounds, the U.K. central bank said in an e-mailed statement today."

 

[PlanMaestro]

http://www.investorschronicle.co.uk/2013/06/20/shares/news-and-analysis/capital-shortfalls-eclipse-bank-reprivatisation-talk-UfCW11ZqdXyKT95WTnOgZJ/article.html

[PlanMaestro]

Are we having fun yet? (PPI scandal)

John Lanchester on the banks’ barely believable behaviour

 

http://www.lrb.co.uk/v35/n13/john-lanchester/are-we-having-fun-yet

 

http://blogs.reuters.com/felix-salmon/2013/07/01/adventures-with-free-checking-transatlantic-edition/