May 2013
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LATEST ARTICLES
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Amanda Staveley earned an astonishing £30 million fee for her role in helping to secure Abu Dhabi’s £3.5 billion investment in Barclays in 2008, a deal on which Sheikh Mansour made a profit of more than £3 billion. Euromoney reveals the extraordinary tale behind that trade, the battle for £110 million in fees paid by Barclays to Mansour, and just how close-run a deal which saved the bank from part-nationalization was – which is currently the subject of an investigation by the Serious Fraud Office.
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As a struggle for control nears a resolution, Turkcell’s strong operational and financial performance should return to centre stage, along with the management team that has delivered it.
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The Sub-Saharan Africa survey is comprised of two parts: Best Sub-Saharan Africa research house and the Best managed companies in Sub-Saharan Africa.
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The aftermath of the country’s margin-lending crisis and ensuing clean-up has given way to a rump of five big banks. So what differentiates them, and how will each fend off those determined to usurp them? Euromoney speaks to their CEOs in Lagos.
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FX banks fear duopoly pricing power of EBS and Reuters; ParFX shows focus on low-cost trading.
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Fewer and fewer banks can still claim to compete as full-service foreign exchange providers on a global basis.
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The history of the Euromoney FX survey shows that periods of apparent stasis often give way to sudden and marked shifts.
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The senior FX trader at one of the top-15 banks in this year’s survey smiles grimly at his phone. He has been telling how the bank recently devoted several man-years to compiling and delivering vast files of historical data on FX trades, running to billions of individual items, to one of the US regulatory agencies. It had been sniffing around the market for evidence of banks failing to provide best execution to customers. There is no single source for historical price and trade data in the over-the-counter FX market and so the regulator had approached several large banks to supply it. The banks’ pleas that the regulator was looking in the wrong place for the wrong kind of evidence in a market that had functioned well throughout the financial crisis were dismissed. The regulator wanted the data and the banks would be ill advised to cross it.
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Deutsche Bank holds on to top spot from resurgent Citi
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For all the fragmentation in the FX market, the top four banks further consolidated their dominance of customer business, according to the 2013 Euromoney foreign exchange survey. As volumes rise again in FX, volatility returns and banks’ earnings from it recover, margins are still compressing. Customers are focused on cutting transaction costs. Banks face big demands on scarce IT resources.
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As the leading FX banks increase their grip on end-user volumes, their customers should take note of the banks’ own aversion to high market share among key providers.
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Fragmentation and phantom liquidity bedevil the foreign exchange market with its proliferation of trading venues. Investors and corporates want to see the true depth of the market and what amounts they can really trade at the enticing prices being flashed at them. In a low-return world, these end-users are getting rigorous on trading cost analysis. Banks are developing new technology to respond.
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After a poor 2012, the central bank forecast growth of 4% for 2013; it has already cut this to 3.1%. International investors are going elsewhere in the region. With domestic investment falling, Brazil will do well even to hit that target.
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With Brazilian inflation now above the target rate, in mid-April the central bank announced a rise in interest rates for the first time since July 2011. But the move, in the face of stubborn and diffuse pressure (over 70% of the country’s inflation basket is now affected by inflation) was dovish – just a 25 basis point increase in the face of the market expectations of 50bp. The minutes from the central bank’s monetary policy committee meeting also showed that two of the eight members voted against any rise.
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Finance minister Nizar Baraka says he can – and must – bring down Morocco’s gaping fiscal deficit. But after a debut dollar bond in December, how much can he change the country’s financial model in the midst of pan-Arab revolt?
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Education is high on the agenda for some of the banks in South Sudan. Ivory Bank often makes national radio broadcasts on Friday mornings to educate people about their banking products. The South Sudan Micro Finance Development Facility gives grants and loans to microfinance institutions to help them reach potential borrowers. But the lack of human capital in South Sudan creates another barrier to a thriving banking environment. Government regulations state that all banks must employ at least 90% local people, but with only 27% of the population literate, it is difficult to hire the right expertise.
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All the roads on the approach to central Juba have been cordoned off. Heavily armed military personnel and police line the roads and prevent cars, motorbikes and pedestrians from completing their journeys. Frustrated and hot, many people who didn’t make the journey to work early enough are forced to return home. Others, mindful of short-tempered officials, try to edge their way forward, eager to catch a glimpse of the action ahead. Heightened security signals the arrival of Omar Bashir to town. This is the first time the president of Sudan has visited his neighbour in the south since independence on July 9 2011. In January 2012, South Sudan stopped transporting oil via Sudan as political tensions and a heated dispute over export fees escalated.
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Independent for just under two years, South Sudan still suffers from pervasive insecurity. Commercial banks have sprung up in the capital, selling themselves as a safe place for people to keep their money. But how are they making bumper profits when they are often little more than a place for deposits?
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Engrossed in a book at the Frankfurt airport departure gate on a chilly March evening, Euromoney found ourselves the last passenger called to the BA flight back to London.
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After my March column had been published, I suffered a pang of writer’s remorse. Had I been too harsh when I criticized the “crony capitalist culture” at Barclays’ investment bank and accused group chief executive Antony Jenkins of hypocrisy?
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“Our funding costs will go up. But I’m quite happy to see that and our CDS spreads widen if that’s the price of demolishing the myth that we are dependent on state support” A eurozone bank CEO sees upside from the Cyprus depositor bail-in, although that’s easy to spot at a national champion bank
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Hedge funds are a curious bunch. Take Dromeus Capital Group, which last November trumpeted the launch of its Greek-focused hedge fund, Dromeus Greek Advantage Fund, to bet on the recovery of Greek assets.
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Euromoney prides itself on having international reach, but it seems that there is one corner of the world that our reputation hasn’t stretched to. On a recent trip to South Sudan, the world’s newest country, a senior bank official at a local bank branch in Juba misinterpreted Euromoney’s request for an interview on the growth of the banking system there.
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It is not only bankers and asset managers figuring out new ways to finance the Mittelstand; so are the companies themselves. In February a group of entrepreneurs launched a new subordinated debt fund manager to address the problems firms have in sourcing debt at this level. The new firm, called Rantum Capital, was founded by Joachim Hunold, founder of Air Berlin, together with Michael Rogowski, former president of the BDI (Federation of German Industries); Wolfgang Hartmann, CEO of the Frankfurt Institute for Risk Management and Regulation; Heinz-Peter Schluter, founder of Trimet; media entrepreneur Karlheinz Kogel; Hans-Joachim Korber, former CEO of Metro; and Lothar Steinebach, former CFO of Henkel.
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After a deluge of negative headlines from the eurozone this year, why are policymakers in emerging Europe still queuing up to pledge their allegiance to the single currency?
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The Turkish central bank governor’s unorthodox policies have riled, muddled and, say some, outsmarted markets. He thinks they work. But is he trying to do too much with so many different instruments and targets?
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Sberbank CEO German Gref says he has led Russia’s biggest bank through a thorough transformation. It has grown onto the international stage and bulked up in investment banking. What are his objectives, and how does he see its role at home and in the region?
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The SMEs that dominate the German economy continue to rely heavily on local relationship banks for finance. But the special circumstances of some companies and the eagerness of non-bank lenders to get into the market mean that funding through such instruments as Mittelstand-focused bonds, Schuldscheine and subordinated debt is becoming more prominent.
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The Cyprus solution is inadequate as well as sending the wrong messages on depositors’ risks and free capital flows. Then there’s Slovenia... and Italy.
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Strong international demand but investors might soon seek better pricing.
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Standard & Poor’s met its late-April deadline for a response to a US Justice Department suit accusing the agency of fraudulently rating CDOs with an energetic rebuttal of the case for the prosecution.
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BTS soars on opening day; regional pipeline strong.
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Macro hedge funds back with a vengeance; return to trading on fundamentals.
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Economy recovering; high-quality companies in pipeline.
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FICC and DCM earning boost might not last; JPMorgan report says ROE growth will not come from investment banking.
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Assertion that private funding is vital challenged but private skills might be essential.
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Among several strange press releases received by Euromoney this month, one stood out. It posed the important question: “Can cocaine really be to blame for the recent financial crisis?” The release, put out by the soppily named Love PR, is a response to controversial Imperial College professor David Nutt’s recent assertion that cocaine use makes bankers “overconfident”, leading them to take greater and unnecessary risks. Now, we’re no experts, but anecdotal evidence suggests this is indeed the case.
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Potential participants question current proposals; repo market could shrink by 66%.
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In a July 2007 email exchange cited in the US government’s current case accusing Standard & Poor’s of defrauding investors with its CDO ratings, a recently hired analyst told an investment banking contact about the view among many employees that senior management at S&P had prevented downgrades to avoid alienating clients.
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New fund to spread wealth locally; effort to boost local bourse.
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Prompt for bank deposit and bond repricing... or a catalyst to accelerate bank harmonization efforts.
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Value hard to find among corporates; financials likely to be hit by heavier regulation.
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The central bank-driven global money-go-round has been turning ever faster since last summer. Now the Bank of Japan has turbo-charged it. So far, investors are enjoying the ride. But a bout of nausea cannot be ruled out.
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Cyprus’s problems stem in part from doing business in Russia. But the Russian state’s attitude doesn’t make keeping money at home enticing.
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Koc, Arcelik tap dollar buyers; more deals in the pipeline.
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Stock market reaches all-time high; long-awaited Eurobond debut expected.
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Leverage up, covenant protection down; up to 15 new CLOs in Europe by year-end.
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With concern growing over the credit risk embodied in many sovereign bonds, fixed-income investors need to think harder about how they assess risk.
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Goldman displaces JPMorgan in Europe; Record underwriting revenues up 60%.
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Bleak economic outlook hampering activity; bank deleveraging main driver of supply.
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Christopher Laskowski is a busy man. He was recently appointed head of corporate and investment banking for Citi in Hong Kong. In this role he will cover Hong Kong-based clients and the Hong Kong investment banking team will report to him. He will also continue to head the Asia-Pacific private equity advisory practice known as the Alternative Assets Group and be the chief operating officer of the corporate and investment bank for the region.
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State seeks bailed-out bank sales; mooted deals get mixed reception.
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Speculation about Barclays’ capital raisings from Qatar and Abu Dhabi will only grow following Euromoney’s revelations. CEO Antony Jenkins should draw a line under the episode by revealing all.
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Euromoney can reveal that advisers to Sheikh Mansour were courting other strategic parties to invest in Barclays at a time when the bank was marketing the importance of the cornerstone Abu Dhabi investor, raising questions about market confidence and disclosure. The revelations also shed light on the frustrations of China Investment Corporation about the transaction and the fund’s approach to dealmaking.
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Euromoney reveals how former British politician David Mellor, adviser to Amanda Staveley’s PCP Capital Partners, agitated for his cut of the Barclays fee, and the role of the former head of the CBI Digby Jones.
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Commerzbank issued a five-year €500 million covered bond backed by SME loans at the end of February – a landmark deal for the market given the atypical structure.
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In the US, business development companies were created in 1980 as a form of publicly traded private equity. BDC funds are open to small investors and provide capital to start-up and venture capital-type opportunities.
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Regulators hope they can transform the retail bond market into a regular source of funding for mid-caps - and the smaller firms.