Archive for category Financial Market
RBS Led Dubai World Lenders; HSBC Most at Risk in UAE
Posted by admin in Financial Market, World News on November 28th, 2009
By Vivian Salama and Gavin Finch
Nov. 27 (Bloomberg) — Royal Bank of Scotland Group Plc was the biggest underwriter of loans to Dubai World, the state company seeking to reschedule debt, while HSBC Holdings Plc has the most at risk in the United Arab Emirates, according to JPMorgan Chase & Co.
RBS, the largest U.K. government-controlled bank, arranged $2.3 billion, or 17 percent, of Dubai World loans since January 2007, JPMorgan said in a report today, citing Dealogic data. HSBC, Europe’s biggest bank, has the “largest absolute exposure” in the U.A.E. with $17 billion of loans in 2008, JPMorgan said, citing the Emirates Banks Association. Abu Dhabi Commercial Bank PJSC may be owed $1.9 billion by Dubai World, making it the largest creditor outside the emirate, said two people familiar with the companies.
“The market is very nervous about exposure to Dubai and RBS’s name has been associated with it as both a lender and a book runner,” said David Williams, a banks analyst at Fox-Pitt Kelton Ltd. in London. “People are concerned it’s going to produce a new wave of losses. Dubai is driving everything in the market at the moment.”
Stocks around the world have slumped for two days on concern a debt restructuring by Dubai World, with $59 billion of liabilities, will add to the $1.72 trillion of losses and writedowns from the global credit freeze. British banks have the most to lose among international lenders from a crisis in the United Arab Emirates, with a combined $49.5 billion of loans outstanding, according to a report from RBS that cites Bank for International Settlements data published in June.
‘Disruption and Uncertainty’
U.K. Prime Minister Gordon Brown’s government is monitoring the situation in Dubai, his spokeswoman said today.
“Clearly the restructuring announcement has caused disruption and uncertainty in world markets,” Brown’s spokeswoman Vickie Sheriff told reporters in London. Brown’s “view is that U.K. banks are well capitalized having undergone rigorous stress testing,” she said.
Dubai World, controlled by the emirate’s ruler, Sheikh Mohammed Bin Rashid Al-Maktoum, borrowed from more than 70 lenders to buy assets ranging from stakes in Las Vegas casino company MGM Mirage to London-based Standard Chartered Plc through Istithmar PJSC. The government said this week it will seek a “standstill” agreement to delay repayment of its debt, including $3.52 billion of bonds due Dec. 14 from property unit Nakheel PJSC.
In Contact
“We are in touch with Dubai World, and we have been in discussions more than once today and yesterday,” Ala’a Eraiqat, the chief executive officer of Abu Dhabi Commercial, the third- largest lender in the United Arab Emirates, said in a telephone interview yesterday. He declined to comment on specifics. “We have a lot of assurances which is a good thing.”
RBS spokesman Piers Townsend in London declined to comment. The bank had 4.98 billion pounds ($8.15 billion) of loans and advances outstanding to the UAE at the end of the first half, according to company filings. That included 2.7 billion pounds of corporate loans, 1.65 billion pounds to banks and financial institutions and 596 million pounds to consumers.
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U.S. banks less exposed to Dubai than European rivals
Posted by admin in Financial Market on November 28th, 2009
by Alistair Barr - Nov. 27, 2009 04:15 PM est
MarketWatch.com
SAN FRANCISCO (MarketWatch) — U.S. banks are probably less exposed than European rivals to a potential debt default by Dubai World, but a lack of transparency and the interconnectedness of the modern financial system make it difficult to know which institutions are ultimately exposed, analysts said this week.
Dubai said late Wednesday that it would restructure Dubai World, a sprawling conglomerate behind many of the largest construction projects in the Persian Gulf emirate.
Dubai World owes roughly $60 billion and has payments of billions of dollars due in coming weeks. Instead, Dubai announced a six-month “standstill” on repayments. Extending payment deadlines like this is considered a default by many fixed-income investors. Read about Dubai World’s potential default.
Shares of banks and other financial-services stocks fell Friday as investors worried about which institutions have lent Dubai World money and now face the prospect of not being paid back on time. See Financial Stocks.
However, U.S. bank shares declined less than European-based institutions because lenders in Europe are generally more exposed to the Middle East.
Cross-border banking exposure for the United Arab Emirates as a whole totaled $123 billion at the end of June, according to Brown Brothers Harriman, which cited data from the Bank for International Settlements. Yet this excludes the bond debt that Dubai World is trying to reschedule, the firm said.
Of that total, European banks hold 72%, with the United States and Japan only holding 9% and 7% of the exposure, respectively. France and Germany each account for around 9%. The United Kingdom is by far the biggest creditor with a share of 41%, Brown Brothers Harriman said.
Foreign banks accounted for $90 billion, or 22%, of the $413 billion in banking assets in the United Arab Emirates at the end of 2008, according to Jason Goldberg, a U.S. banking analyst at Barclays Capital, who cited official UAE data. “The majority appears held at European banks,” he wrote in a note.
U.S. banks also have to disclose which cross-border outstandings account for more than 0.75% of assets. Dubai, UAE and other Mideast nations aren’t listed in any banks’ annual regulatory filings, Goldberg added. “Given U.S. banks have minimal direct exposure, investors looking for exposure to the space could view any stock-price weakness as a potential opportunity.”
Why Investors Should Be Excited for a Bank Breakup
Posted by admin in Financial Market on November 23rd, 2009
by Sean Ryan - Nov. 23, 2009
The Motley Fool
With people from former Federal Reserve Chairmen Paul Volcker and Alan Greenspan to former Citigroup (NYSE: C) Chairman and CEO John Reed suggesting that banks viewed as “too big to fail” should be broken up, it is worth looking at the history of government-mandated corporate breakups and the results.
In doing so, two common themes emerge. First, break-ups of corporate monoliths seem to be a boon to shareholders; the sum of the parts tends to be greater than the whole. Second, break-ups tend to be undone over time, as constituent parts reunite.
John D. Rockefeller’s Standard Oil (1911)
Probably the most well-known such break-up was that of the Standard Oil Company, which in 1900 controlled 90% of the refined oil in the U.S. On May 15, 1911, a unanimous Supreme Court decision mandated the breakup of John D. Rockefeller’s company within six months. It was duly divided into 34 separate companies, including what would ultimately become ExxonMobil (NYSE: XOM) and Chevron.
In a recent speech to the Council on Foreign Relations, former Fed Chairman Alan Greenspan said, “In 1911 we broke up Standard Oil — so what happened? The individual parts became more valuable than the whole.”
Evidently, that came as no surprise to Rockefeller. According to biographer Ron Chernow, upon being informed of the Supreme Court decision, Rockefeller “turned to his golfing partner and said, ‘Father Lennon, have you some money?’ And the priest was very startled by the question and said, ‘No.’ And then he said, ‘Why?’ And Rockefeller replied, ‘Buy Standard Oil.’”
While pre-World War I stock data isn’t easy to come by, some have asserted that the break-up doubled the value of Standard Oil stock.
How Fed let AIG banks off easy
Posted by admin in Financial Market on November 17th, 2009
by David Goldman - Nov. 16, 2009 07:18 PM ET
CNNMoney.com
NEW YORK (CNNMoney.com) — Federal regulators, in rushing to rescue AIG last year, failed to use their clout to negotiate concessions from business partners of the troubled insurer, a bailout overseer said on Monday.
As a result, $62.1 billion of taxpayer and AIG funds were essentially funneled to 16 banks, which were counterparties to AIG insurance contracts, according to a report by Neil Barofsky, special inspector general for the $700 billion bailout.
The amount paid to the 16 banks represented the full-dollar amount of the underlying assets that the counterparties had insured through AIG. The news that the Fed paid 100 cents on the dollar for the assets caused a big stir among lawmakers and taxpayers.
In his report, Barofsky said the Fed had given up significant leverage to force AIG’s counterparties to accept less than the full amount for the assets. Barofsky does not suggest that the Fed acted improperly, he argued that, as a regulator, the Fed still had power to get AIG’s counterparties to fall in line.
“Once they bailed AIG out, the Fed said it lost a lot of leverage, because it couldn’t threaten to put AIG into bankruptcy anymore,” Barofsky told CNNMoney in an interview. “But with GM and Chrysler, the government still played hardball with their creditors.”
Though the situation was slightly different, Barofsky noted that Treasury was able to negotiate substantial concessions from GM and Chrysler’s creditors after the government bailed them out last year.
After the housing bubble burst in summer 2007, the value of subprime home mortgages began to tumble. AIG insured against losses on assets backed by subprime mortgages with insurance contracts called credit-default swaps.
Poor man’s gold may be an investor’s treasure
Posted by admin in Financial Market, World News on November 13th, 2009
by Myra P. Saefong - Nov 13, 2009 7:00 AM est
MarketWatch.com
Silver’s a severely undervalued ‘investment opportunity of a lifetime’
TOKYO (MarketWatch) — Silver’s not so much a poor man’s gold anymore and investors may soon realize that the white metal’s the real treasure.
True, at $17 per ounce, silver is cheap — trading around 60 times less than gold’s record price of more than $1,100. But year to date, it’s climbed 52% in value compared with gold’s rise of around 25%, according to data from FactSet Research.
Silver is a precious metal, after all, one that has historically outperformed gold in a bull market and doubles as an industrial metal — and supplies of it are depleting at a much more rapid pace.
“Silver is unique in terms of being both a monetary and an industrial metal,” the Bullion Services Team at GoldCore said in a recent report, pointing out that it’s severely undervalued. “Silver remains the investment opportunity of a lifetime.”
Gold’s prices have climbed nearly 11% in the last two months. In that same time span, silver’s up by only 3.1%.
And “investors looking for returns continue to wager on higher gold prices, whether it be on concerns over equity or currency markets … or to make quick short-term profits,” according to CPM Group’s latest Precious Metals Advisory.
But investors would be better served to turn their eye toward silver.
“Silver is highly correlated to the safe haven of gold and is, in effect, a leveraged sister of the precious yellow metal,” according to GoldCore, an international bullion dealer. “Thus, informed investors use gold more for wealth preservation purposes and silver in order to make a return.”
That’s particularly important to keep in mind as investors change the way they perceive the paper-asset markets.
As stocks, currencies, bonds and other paper assets have begun to disappoint investors, investor attitudes have been shifting, said Mark Leibovit, chief market strategist for VRTrader.com.
“What begins as a trickle ends as a tidal wave when the panic peaks [and] when public revulsion at the U.S. dollar begins, the tidal wave will become a tsunami,” he said.
Former bankers look to buy failing banks: report
Posted by admin in Financial Market on November 13th, 2009
Market Mix Up
Nov. 13, 2009 12:45 am PST
Reuters.com
(Reuters) - Some former bankers are planning to bid for failing banks in the Federal Insurance Deposit Corp auction process, and getting financial backing from Wall Street firms like Goldman Sachs Group Inc and Deutsche Bank AG, the Wall Street Journal reported citing sources.
JPMorgan Chase & Co’s former Chief Executive William Harrison, former Wachovia Corp CEO Robert Steele and Herb Boydstun, former CEO of Hibernia Corp were among the banking veterans considering such plans, the paper said citing people familiar with the situation.
Last month, former executives at Citizens Financial Group Inc, a unit of Royal Bank of Scotland Group PLC, raised $1.15 billion in a private placement and formed NBH Holdings Corp in an effort to buy battered banks, the Journal said.
Other bankers who are looking for investors to enter the auction include Charles Rinehart, former chairman and CEO of H F Ahmanson & Co and Daniel Healy, former finance chief of North Fork Bancorp, the Journal said citing sources.
(Reporting by Supantha Mukherjee in Bangalore; Editing by Valerie Lee)
Find a Credit Union With Lower Interest Rates and Fees
Posted by admin in Financial Market on November 11th, 2009
by Elisabeth Leamy- Washington - Nov. 10, 2009 6:38 AM
ABCNews.com
If you receive a notice saying your credit card company is raising your rate, often you can get the rate hike reversed by calling the company. Many rate increase notices are computer generated and if you can and speak to a real live human operator, they may have the power to cancel the increase – especially if you threaten to take your business elsewhere.
You can also opt out of the rate increase by following the instructions in the notice you receive. A new rule requires credit card companies to allow you to pay off your existing balance at your old interest rate. Usually the bank then cancels your card or allows you to keep using it only it until it expires and then cancels it. If you are going to want to replace it with another card, it’s a good idea to apply for that card before opting out and canceling the original one. Why? Because canceling existing accounts can lower your credit score, because it affects the ratio of the amount of debt you have compared to the amount of credit you have available to you. One good source of credit cards with lower interest rates and fees is credit unions. A Pew Charitable Trusts study found credit union interest rates are approximately 20 percent lower than commercial bank rates. It’s not as difficult to qualify for membership in a credit union as it used to be. To find one you are eligible to join, check the website www.findacreditunion.com.
