Barclays is likely to face more tough questions from shareholders over its decision to sell iShares after the buyer said it would look to float the exchange-traded funds business as soon as stock markets recovered.
CVC Capital Partners, the private equity group that has agreed to buy iShares for $4.2bn (£2.9bn), said it would be a good candidate for a stock market initial public offering. The highly profitable business is the world's top provider of exchange-traded funds, which allow investors to track share indices.
Jonathan Feuer, head of CVC's new financial services team, said: "As a market leading company with attractive growth potential, it is a very attractive flotation candidate . . . people that invest in shares are likely to want to invest in iShares too."
The iShares sale will help Barclays shore up its balance sheet and avoid turning to the UK government for capital. Barclays' shares rose 12.5 per cent to 177½p on Thursday's announcement of the deal amid a broad rally in banking stocks. The bank's shares have risen three-fold since their January lows.
Investors may grumble that the bank is hurriedly selling one of its best assets at a depressed price, especially if CVC floats iShares quickly for a big profit.
Bob Diamond, Barclays' president, is set to pocket $6.9m in cash from the sale of iShares.
As head of Barclays Global Investors, the bank's fund management division, Mr Diamond is one of the beneficiaries of a compensation scheme that has given BGI employees shares and options over as much as 10.3 per cent of the division's equity.
BGI is expected to distribute the cash from the sale to its shareholders in the form of a dividend. Barclays stressed that Mr Diamond was not involved in the iShares sale negotiations. The deal values iShares at about 10 times its pre-tax profits of £288m in 2008.
The business increased assets under management by 10 per cent to £226bn last year, even as BGI's assets fell. Barclays' directors are up for re-election at the bank's annual meeting this month. Some big shareholders have expressed frustration over the board's decision last year to raise £7bn of expensive funds from Middle Eastern investors.
Source: FT
Showing posts with label banking system. Show all posts
Showing posts with label banking system. Show all posts
Saturday, 11 April 2009
Saturday, 28 March 2009
Big Banks Pull off The Ultimate Bait & Switch
We’re not quite as healthy as we thought we were. Oops.
Readers may recall that a few weeks ago, those two CEOs—along with Citi’s Vikram
Pandit—said the first two months of the year had been very good:
This was possibly the most nakedly self-serving bullshit the big bank CEOs have offered to date. (”bullshit” being a technical term of course, see Harry Frankfurt)
By February, it was understood that the big banks are all insolvent, certainly Citi and BofA. To deal with them, consensus among the cognoscenti was finally tending to a proper recapitalization: wiping out shareholders and forcing losses onto creditors via debt-for-equity swaps. Call it nationalization, call it preprivatization, call it FDIC receivership, it was clear that losses had to be recognized and by those to whom they properly belong: investors across the banks’ capital structure.
But no one really wanted to do this, not in Congress and certainly not in the Obama administration, where Timmy Geithner has made clear that his priority isn’t a cleansed banking sector, it’s a privately-owned one. For obvious reasons the banks don’t like this solution either. So they offered up their self-serving b.s. regarding January and February, buying just enough time for Congress/Bernanke to badger FASB into changing mark-to-market rules and for Geithner to roll out his private-public partnership plan.
Now whatever losses the banks can’t hide with revised accounting treatments, they can simply fob off on taxpayers via the partnerships. They got what they always wanted: A bad bank! An entity that will actually absorb losses from the asset side of the balance sheet! Shareholders and creditors don’t have to worry about further writedowns, not the ones that can’t be hidden anyway. Taxpayers will pick up the check!
Even better, the Geithner plan is so ridiculously complex—and public disclosure is likely to be so minimal—that toxic asset transfers are likely to happen largely out of view. Maybe Treasury will have to increase its borrowing substantially in order to fund the losses, but by that point everyone will be celebrating that banks have started lending again. Hooray!
By the way, are there ANY substantial protections to prevent banks from gaming this plan? What’s to stop them from acting as the equity investors in the partnerships, ponying up a sliver of equity to effect a transfer of toxic assets from their own balance sheets to the public’s? The FDIC’s FAQ for the legacy loans program doesn’t even address this particular Q. Is it not being frequently asked?*
This is all of a piece. The longer CEO/policy-maker collusion can delay loss recognition, the more time they have to invent ridiculous leverage schemes (more money printing! more government borrowing to fund “stimulus”! more FDIC “guarantees”!) to inflate those losses away…and to continue looting the public’s wealth.
But losses aren’t going away. Trading smaller private liabilities for larger public liabilities in order to artificially inflate asset prices does nothing to repair the economy’s aggregate balance sheet. At the end of the day, we’re still just lending more and more against a dwindling pool of real equity. The unwind is coming. Adding more leverage to delay it will only increase the pain.
Source: Rolfe Winkler
Convenient that they decided to dump this information on Friday afternoon, and at the close of a very good week.J.P. Morgan Chase Chief Executive James Dimon said…that March was a little
tougher than the first two months of the year….Bank of America…CEO Kenneth Lewis also said that March had been a tougher month for his bank.
Readers may recall that a few weeks ago, those two CEOs—along with Citi’s Vikram
Pandit—said the first two months of the year had been very good:
Pandit, March 10th: “We are profitable through the first two months of 2009 and are having our best quarter-to-date performance since the third quarter of 2007.”
Dimon, March 11th: “Jamie Dimon, the chief executive of JPMorgan Chase,
said Wednesday that the bank was profitable in January and February…”
Lewis, March 12th: “We have been profitable for the first two months of
the year,” Lewis told reporters after a speech in Boston today
This was possibly the most nakedly self-serving bullshit the big bank CEOs have offered to date. (”bullshit” being a technical term of course, see Harry Frankfurt)
By February, it was understood that the big banks are all insolvent, certainly Citi and BofA. To deal with them, consensus among the cognoscenti was finally tending to a proper recapitalization: wiping out shareholders and forcing losses onto creditors via debt-for-equity swaps. Call it nationalization, call it preprivatization, call it FDIC receivership, it was clear that losses had to be recognized and by those to whom they properly belong: investors across the banks’ capital structure.
But no one really wanted to do this, not in Congress and certainly not in the Obama administration, where Timmy Geithner has made clear that his priority isn’t a cleansed banking sector, it’s a privately-owned one. For obvious reasons the banks don’t like this solution either. So they offered up their self-serving b.s. regarding January and February, buying just enough time for Congress/Bernanke to badger FASB into changing mark-to-market rules and for Geithner to roll out his private-public partnership plan.
Now whatever losses the banks can’t hide with revised accounting treatments, they can simply fob off on taxpayers via the partnerships. They got what they always wanted: A bad bank! An entity that will actually absorb losses from the asset side of the balance sheet! Shareholders and creditors don’t have to worry about further writedowns, not the ones that can’t be hidden anyway. Taxpayers will pick up the check!
Even better, the Geithner plan is so ridiculously complex—and public disclosure is likely to be so minimal—that toxic asset transfers are likely to happen largely out of view. Maybe Treasury will have to increase its borrowing substantially in order to fund the losses, but by that point everyone will be celebrating that banks have started lending again. Hooray!
By the way, are there ANY substantial protections to prevent banks from gaming this plan? What’s to stop them from acting as the equity investors in the partnerships, ponying up a sliver of equity to effect a transfer of toxic assets from their own balance sheets to the public’s? The FDIC’s FAQ for the legacy loans program doesn’t even address this particular Q. Is it not being frequently asked?*
This is all of a piece. The longer CEO/policy-maker collusion can delay loss recognition, the more time they have to invent ridiculous leverage schemes (more money printing! more government borrowing to fund “stimulus”! more FDIC “guarantees”!) to inflate those losses away…and to continue looting the public’s wealth.
But losses aren’t going away. Trading smaller private liabilities for larger public liabilities in order to artificially inflate asset prices does nothing to repair the economy’s aggregate balance sheet. At the end of the day, we’re still just lending more and more against a dwindling pool of real equity. The unwind is coming. Adding more leverage to delay it will only increase the pain.
Source: Rolfe Winkler
Saturday, 14 March 2009
Markets Rigged
Free markets are meant to be fair, but are they really?
Max Keiser filmed this 2 years ago back in 2007. Interestingly enough it has been shown around the world but been broadcast in the US.
PART 2
Max Keiser filmed this 2 years ago back in 2007. Interestingly enough it has been shown around the world but been broadcast in the US.
PART 2
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