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April 2009

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  • Zurich reported net income of $3 billion for 2008. More impressive was its return of 1% on its investments. Helen Avery spoke to Martin Senn, CIO.
  • AIU, the rebranded general and commercial insurance division of AIG, tops every global category in Euromoney’s insurance poll. Holding on to customers and staff in the wake of AIG’s collapse into the arms of the US taxpayer has been a tough challenge. AIU chief executive Nicholas Walsh explains to Peter Lee the latest plans to create a separate identity for the division and an eventual IPO.
  • The demise of AIG has inflicted an identity crisis on the insurance industry. But insurers face exposure to distressed assets, accounting and valuation issues and a potential shortage of capital. Sounds familiar? Helen Avery reports on how insurers believe they will avoid the same fate as the banks.
  • "It will not happen and if it happens ... we will deliver the appropriate answer to a problem which will not occur"
  • Axa’s Gerald Harlin tells Helen Avery about the benefits of balance.
  • Off the record is a collection of unattributed quotes from the market.
  • A select group of emerging market equity fund managers is aiming to do something different – outperform developed markets in a prolonged global downturn. Staying clear of the crowd will be crucial to success. Chloe Hayward profiles seven leading investors and asks where they will make money in 2009.
  • Governments on both sides of the Atlantic have announced ambitious infrastructure spending commitments. But they will have to negotiate a much-changed bank lending market to realize their plans. Louise Bowman reports.
  • Senior and junior noteholders are at war, navigating a complex legal web to extract some value from Europe’s unravelling CMBS market. Louise Bowman explains the limited options available to the servicers stuck in the middle.
  • Custodians have become one of the few safe havens of the financial markets. If they can manage securities lending without putting assets at risk, their power and influence among clients is set to grow. Helen Avery reports.
  • In a period of financial crisis corporates are particularly concerned about avoiding risk, but are also keen to get their cash working at a time when credit is hard to raise. Competition between top providers is fierce, while there are new opportunities for the second tier. Laurence Neville reports.
  • Italy’s UniCredit made a €4 billion net profit in 2008, down 38% on the previous year but not as bad as some analysts feared. However, the bank, which is the biggest lender in central and eastern Europe, also recorded an almost 50% jump in bad debt provisions to €3.7 billion. The bank plans to sell up to €4 billion of hybrid debt to the Italian and Austrian governments, as well as private investors, to lift its core tier 1 capital ratio to 7.2% from 6.5%.
  • People wanted to believe ponzmeister Madoff because they crave stable, compounding returns. After his spectacular fall from grace, calls to shine a light on the opaque world of hedge funds will be irresistible.
  • In two deals in as many days, Korean firms reopened Asia’s capital-raising markets. International issuance thus far this year has generally been limited to triple-A rated banks and financial institutions but deals from steelmaker Posco and SK Telecom reopened the straight debt and convertible bond markets respectively. SK was first out on March 19 with a $300 million convertible bond that caused something of a stir in the market for the way in which lead bookrunner Nomura behaved – see the separate story for full details. Posco followed on March 20 with a $700 million five-year bond that was the first dollar deal for an Asian company in eight months. Posco had initially marketed the deal with a guidance yield of 9.5% but in a piece of good fortune for the issuer an announcement by the US Federal Reserve that it would buy back some $300 billion in treasuries triggered a recovery in global bond prices that let Posco’s deal price at 8.95%.
  • Standard Chartered has arranged and underwritten the first ever RMBS transaction for a state-owned entity in the Philippines. The Ps2.1 billion ($43.6 million) deal for the country’s National Home Mortgage Finance Corp comes in the form of notes with an average duration of five years priced at 8.4437%. There are two classes: senior notes aimed at institutional investors, and subordinated notes that the issuing entity will retain. Margarito Teves, secretary of the country’s department of finance, said that the bonds opened the door for further similar deals. Who said mortgage-backed securities were dead?
  • Mexican cement company Cemex has initiated talks with its core banks to renegotiate the majority of its outstanding debt: $14.5 billion in syndicated and bilateral obligations.
  • Brazil’s federal power holding group, Electrobras, has approved its 2009-12 strategic plan for R$30.2 billion ($13.2 billion) of investments.
  • The marketing campaign for the first-ever initial public offering from Armenia has been launched despite the fact that the country recently had to abandon attempts to support its currency, the dram, which depreciated by 25% in March.
  • Latvia’s Parex bank, which was rescued by the government in December after it hit liquidity problems, has agreed a loan restructuring agreement with foreign creditors. The bank is restructuring two loan facilities worth €775 million in total as part of a state-funded agreement. One loan, for €500 million, was due in June and the €275 million facility was due in February. The new terms means that the bank will stagger repayments to nearly 60 different banks over three years. The first tranche, for €232.5 million, was due last month. Parex is only paying a small restructuring fee but its benchmark borrowing costs will rise more than five times. The European Bank for Reconstruction and Development is to take a €100 million stake in Parex too.
  • Saudi British Bank, which is part of HSBC, has appointed a new managing director and chairman. Richard Groves will replace John Coverdale as managing director. Coverdale is heading to Hong Kong to become HSBC’s global co-head of commercial banking.
  • Good timing means telecoms transaction greeted with enthusiasm.
  • The exploitation of natural gas resources looks set to transform Papua New Guinea’s wealth profile and social structure. The downside is the possibility that its undeveloped infrastructure and institutions will be unable to cope with rapid change. Chris Wright reports.
  • With the business models of many of the largest financial firms destroyed by rapid deleveraging, it suddenly looks smart to be a purveyor of independent advice. The biggest, Lazard, finds corporations, governments and other banks desperate for help in repairing their balance sheets. Peter Lee reports.
  • As the Philippines faces the Legacy scandal, president Gloria Macapagal-Arroyo is trying to reassure the world that her country is better placed to withstand the global crisis, after the lessons of 1997. She talks to Lawrence White about Asian regional cooperation, trying to beat corruption and why she’s letting Legacy fail.
  • Fixed-income markets stand at a crossroads. The traditional model is broken. A new breed of debt advisory and trading boutiques believe they hold the key to the future. Some of the biggest names in the bond market are jumping on the bandwagon. Alex Chambers examines whether this is the day of the independents.
  • Billions of dollars of foreign investment flooded into fast-growing manufacturers and real estate developers at the height of the China boom. Now, as the economy slows, many badly judged, rushed deals are unravelling, with investors unlikely to recoup more than a tiny proportion of their funds. Elliot Wilson reports.
  • Agustin Carstens, the Mexican finance minister, has confirmed that Citi does not have to sell its Mexican unit, Banamex, following the US government’s investment in the US bank.
  • Chinese banks need to grow new income sources from fee-based services such as private banking, cash management, trade finance and investment banking. But they must balance a need to grab market share with their desire to avoid creating another banking bubble. Lawrence White reports from Beijing and Shanghai.
  • With many of its banks among the worst hit by the financial crisis in the Middle East, Bahrain now looks as if it might be a nucleus of GCC financial services consolidation. As elsewhere in the Gulf, there are too many banks in Bahrain considering the size of its economy. Bahrain’s economy is relatively precarious because it has smaller foreign reserves than its neighbours and the government has made large increases in expenditure in recent years. The island is also home to many banks with a regional focus.
  • Germany’s commitment to the EU project will guarantee bailouts for weaker eurozone members. But it’s a different story for hard-pressed central and eastern European states and their banks.