Category Archives: banking

John Mack: Overrated

Posted on March 14, 2008 by Felix

Dan Colarusso takes his stiletto knife to John Mack today, and I’m very happy he did. As Dan shows, Mack has a long history of pulling defeat from the jaws of victory, and it’s far from obvious why he’s the … Continue reading →

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The Price-to-Book League Table

Posted on March 13, 2008 by Felix

It’s not just Bear Stearns which is trading below book value. Here are some closing prices from Yahoo Finance: Bank Price/Book Countrywide 0.19 Bear Stearns 0.73 Wachovia 0.74 Citigroup 0.93 JP Morgan Chase 1.06 Lehman Brothers 1.12 Bank of America … Continue reading →

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Crazy Like a Bear

Posted on March 13, 2008 by Felix

Bear Stearns stock first traded this week at $70.28 a share. Earlier today it was at $50.48 a share: basically a $20 drop in the space of three and a half trading sessions. Right now, it’s at $54.68, which puts … Continue reading →

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Should the US Government Buy Bank Equity?

Posted on March 13, 2008 by Felix

David Wessel has been hanging out with Myron Scholes, who wants the US government to start buying equity in US banks. Yikes! Should the government (the U.S. government, that is, not foreign governments’ sovereign wealth funds) put capital into banks? … Continue reading →

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Stock Volatility Datapoint of the Day

Posted on March 11, 2008 by Felix

Bear Stearns stock today has traded between a high of $68.24 (before the Fed’s new facility was announced) and a low of $55.42. That’s an intraday move of $12.82 per share, or more than 23% of Bear’s value at its … Continue reading →

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Vikram Pandit Forced to Bail Out His Own Unit

Posted on March 11, 2008 by Felix

How great of an executive is Citigroup’s Vikram Pandit? Well, he’s good at making a lot of money: he sold his young hedge-fund shop, Old Lane Partners, to Citi for something north of $600 million. Old Lane was then incorporated … Continue reading →

Posted in banking | 1 Comment

SocGen gets its New Equity Capital with Ease

Posted on March 11, 2008 by Felix

The €5.5 billion SocGen rights offering has received more than €10 billion in demand, putting to rest any doubt about the bank’s ability to survive the Kerviel crisis – and also proving that banks have more options than simply running … Continue reading →

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Why the Fed’s Interventions Aren’t Working

Posted on March 8, 2008 by Felix

If you’re a bank and you need to shore up your capital base, you have the option of raising new equity, by selling shares to the public or to your friendly local sovereign wealth fund. There are other options, too. … Continue reading →

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Merrill’s Financing Strategy: Harming Shareholders

Posted on March 6, 2008 by Felix

A bank issues a bond, which has a maturity date. When the bond matures, the bank needs to essentially roll over the debt: it issues a new bond for the same amount of money, at (these days) a higher interest … Continue reading →

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Tim Geithner on the Financial Crisis: A Mock Interview

Posted on March 6, 2008 by Felix

I popped uptown this afternoon, to the Council on Foreign Relations, to hear NY Fed president Tim Geithner give a big speech on the current financial crisis. Geithner is the central banker closest to the markets, but he’s been pretty … Continue reading →

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The Downside of Marking to Market

Posted on March 5, 2008 by Felix

Holman Jenkins has an excellent column today headlined "Mark to Meltdown?" on the degree to which mark-to-market accounting standards have exacerbated the current crisis. Certainly the present system is pro-cyclical, helping both to inflate credit bubbles and make their bursting … Continue reading →

Posted in accounting, banking | 1 Comment

Citi Trading Below Book

Posted on March 5, 2008 by Felix

Citigroup stock fell below book value yesterday – which is either despite or because of a long series of write-downs which served to lower that very value. Citi’s market capitalization is now $115 billion, which compares to, say, $177 billion … Continue reading →

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When Banks Don’t Manage Their Bankers’ Risks

Posted on February 28, 2008 by Felix

Dear John Thain has a thought-provoking piece up today about the way that risks and revenues are managed at investment banks. Think of banks as being divided in two: on the one side are the bankers, who generate fee income … Continue reading →

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Phibro: Beneficiary of Citi’s Benign Neglect

Posted on February 28, 2008 by Felix

Sticking with Citi, Ann Davis has a fantastic front-pager in today’s WSJ on Andrew Hill, who runs commodity-trading subsidiary Phibro. Go read it, it’s full of wonderful details, like Hill’s thousand-year-old castle in Germany, which recently housed a massive Schnabel … Continue reading →

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More Musical Chairs at Citi

Posted on February 28, 2008 by Felix

Michael Grynbaum, it turns out, was prescient back in November, when Citigroup replaced its long-time chief risk officer David Bushnell with safe-pair-of-hands Jorge Bermudez. The move seemed unconvincing, mainly because Bermudez is a commercial banker, not an investment banker: Mr. … Continue reading →

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Blackstone to Banks: We Don’t Need You

Posted on February 27, 2008 by Felix

Blackstone has decided to disintermediate its banks when it comes to raising money for leveraged loans. Hell, Blackstone is a bank, I’m just surprised it’s taken them this long to take this step. Yes, it’s easier to just mandate a … Continue reading →

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Paying M&A Bankers by the Hour

Posted on February 27, 2008 by Felix

Should M&A bankers be paid by the hour? William Cohan thinks so, on the grounds that they would then give more impartial advice, rather than being incentivized to close every deal. The Epicurean Dealmaker, naturally, begs to differ: The average … Continue reading →

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When Trusted Advisors Have Their Clients Over a Barrel

Posted on February 27, 2008 by Felix

When times are good, investment bankers love to shower their clients with relationship guff. "We’re not just selling products," they say, "we’re building a relationship". They talk a lot about being a "trusted advisor," and the older ones might even … Continue reading →

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Is JP Morgan Conflicted in the Visa IPO?

Posted on February 25, 2008 by Felix

Floyd Norris is worried about conflicts of interest in the Visa IPO: The lead underwriters for the offering are JP Morgan Chase and Goldman Sachs. JP Morgan may have set the modern record for conflicts of interest by a lead … Continue reading →

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Visa IPO to Help Recapitalize US Banks

Posted on February 25, 2008 by Felix

The Visa IPO, which could raise as much as $18.8 billion, is going to dwarf what until now was the largest IPO in US stock market history, AT&T Wireless’s $10.6 billion offering at the height of the dot-com boom in … Continue reading →

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Is Mark-to-Market a Doomsday Machine?

Posted on February 25, 2008 by Felix

John Dizard has a very good column in the FT today, comparing the rules about marking to market in the banking industry to the Doomsday machine in Dr Strangelove. He also has some ideas about how the vicious cycle can … Continue reading →

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Lloyds TSB: Not an Insurer

Posted on February 22, 2008 by Felix

Let me be the second (after Carrick Mollenkamp) to congratulate Eric Daniels of Lloyds TSB on sidestepping the credit crunch and reporting 2007 profits up 17%. I am a bit confused however why Mr Mollenkamp chose to illustrate his blog … Continue reading →

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Investment-Banking Bullshit Watch, Global Coordinator Edition

Posted on February 20, 2008 by Felix

Lauren Goldstein Crowe has a question: J.P. Morgan Chase & Co. and Mediobanca will be the global coordinators on the Ferragamo IPO. UBS is the joint book-runner. And no, I don’t know what that means either. The answer is that … Continue reading →

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From Financial Supermarket to Supermarket

Posted on February 20, 2008 by Felix

Citi, it seems, is exiting its consumer-finance business – at least in the key foreign markets of Japan, Mexico, and the UK, according to the WSJ. And Citi’s loss might well be Wal-Mart’s gain. The move gives some insight into … Continue reading →

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The Credit Suisse Writedown: Less Than Meets the Eye

Posted on February 19, 2008 by Felix

Credit Suisse has $34 billion in CMBS, RMBS and CDO exposures. Or, hang on a minute, cut that by $2.85 billion: apparently there were some "mismarkings" going on. There seems to be a lot of people who are very shocked … Continue reading →

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