Chillin' out till it needs to be funded
The Bank rally could have well and truly peaked but for the fact that European Banks are shrinking their credit assets at almost 10% for the last 4-5 quarters and US banks despite the challenges in trading have been able to pull through on business volumes and have been updated on Capital and Liquidity ratios. A small hitch in the final leg of a $200 Bln gap would also be easily crossed by the US majors. The Europeans on the other hand, flagged off by a recalcitrant Credit Suisse, may have shown irreparable shrinkage of business only in Fixed Income Trading but are bleeding much more. More we can say however only when Global Bank HSBC completes reporting on Monday next.
Meanwhile Amazon filibustered its critics again the so called loss including $1.4 Bln in Office investments in Seattle almost to a measure predicted in the operational cash flows and Twitter has settled to its NYSE listing at a price range of $17-20 coming this week. Apple reports its full year results today with $37 Bln in Sales this quarter and $8 earnings per share even as it continues to buyback and the new retail CEO Angela Ahrendts has luxury vintage from none ither than Burberrys. This year Apple opens its own retail in Brazil after the China launch of the latest 5s model and the 5c variant took oening week sales to a record 9mln. Amazon earlier reported $17 Bln in topline Sales and Holiday sales could even double from that given its past record. The company has guided $26.5 Bln on the higher end for the fourth quarter and 70000 US Jobs in the works at its FCs
Meanwhile, known problem banks are led by Barclays and Deutsche looking to follow up on their already successful rights issues as European Banks look at a shortfall of Capital ans further shrinkage of assets of EUR 660 Bln just in the Top 10 Banks while the industry overall looks at shrinking another Eur 2 Tln in the coming three years. Basel II has already amended standards to include contingent capital that devolves on investors like Equity as “Additional Tier I” and investors are unlikely to let the opportunity pass again as shadow banks are yet to find other better if not failsafe investments than the Banking sector. SocGen may be better off being one of the first to sign the approved version of CoCos to investors, but Barclays is still paying off another USD 550 mln for a MBS break they managed that side of the pond and some think them and Deutsche should also split pressures to shrink assets further to the two ends of raising new Capital further to issues
Deutsche reports Tuesday with UBS and Standard Chartered, the last of which is already diversified in businesses nd lending exposure outside Europe to continue to real lending again thought the bank seems to have foregone a lot of lending book growth whil revenues and profits have been consistently bettered every quarter including in India. Deutsche Bank , the other significant one may probably we think try their hands at growing Transaction Banking which has been standing like a wall as CIB remains in restructuring mode in the split off division with IT rationalisation bringing in most of the productivity gains and Asia business a focus that is yet to deliver. The disappointment from Credit Suisse though headlined in terms of Trading was actally showing through in the now step-motherly treatment to the entire Corporate and Investment Banking division as the bank’s Wealth Division, not just your average private banking but Swiss Banking seems to have grown overall assets by almost 25% in the last 12 months.
Meanwhile back home, Pending Home sales dropped 5.6% and the cracks are beginning to show in the Housing recovery. Another spanner in the works is the to be templated JP Morgan settlement worth $13 Bln of which the non FHFA / DOJ $8.1 Bln includes the bank’s wholesale investors (clients) like Blackrock and Neuberger who are already under pressure contesting eminent domain in California and want the banks to cough up more having appeal the settlement with BofA an increased that share to $8.5 Bln earlier in 2012. Over and above that JP Morgan is still not getting FDIC cover on most of the settlement though it includes assets from WaMU and Bears Stearns that were decidedly not the Bank’s fault.
Even as Morgan Stanley welcomes the return of Smith Barney and grows back in its favorite business MS and GS remain in the meantime only survivors still good to take the sector higher as the No Taper situation also gets cemented this week with the FOMC starting tomorrow. The data for the end of the month will still bring cheer as the recovery has continued to transgress these events except for the leading indicators close to giving up for more than 15 months now and holiday sales signs still making waiting investors and consumers jittery.
American Industrial production was a non story despite the barrage of concern heaped on the data as traded deficit last week and the industrial production Data for the month was consistent and positive, the trade deficit a mere $38 Bln after a $19.4 Bln services surplus for the second month and the 16 Day shutdown delyed most Economic reporting including the Jobs Data which though was a little below expectations at 145k but goes on to show the limits o fthe recovery which will continue to keep pace to an almost 3% annual rate. The Housing data shows a steep month on month drop for the second month but coming sales data next week is likely to be significant in confirming if the numbers are indeed going down comared to last year or the healthy annual rate of growth safe till now is still continuing to keep the recovery steadya fter the refi deluge passing away. Prices have been firm an more than 2 mln homes were last reported by NAR as having crossed from negative equity i.e. above their loan valuations. The NAR dta on Pending Home Sales hows a break in yerly growth after a good 29 months
Across the pond, Draghi will be holding rates at 1.5% but the good data run is almost over and Spain, Belgium and Italy report a long awaited positive GDP figure in the Q3 still expected to be at best a low 0.1% thus limiting the Eurozone’s further prospects for good as restructuring focus requires more compromises and Debt plus interest ratios again lean on the GDP for the core 17 nations. But then the currency is still in demand closing in on the year end target of 1.40 with 1.3787 already there and FX trading volumes are set to increase after a 4 year hiatus and extending price wars(Euromoney) most European sovereign stories have stabilised despite the limitations of growth and constraints of sacrifice for the common currency and if not a Banking Union, the continent llooks forward to many years without hankering for growth looking to exit what it shows the world to be the Disease of Development led slowdowns as Germany and UK dominate i n residual growth with trade partners locked in and London still keeping most Financial business thriving despite four years of reform.