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November 2002

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  • All the global cash management banks continue to concentrate on the small pool of top-tier multinationals where there are opportunities to cross-sell but where competition is most intense. These most demanding of cutomers are driving down margins. The global players might be overlooking other sources of revenue.
  • Investment bank research is bad for your health, says one of Asia's top bankers.
  • The Islamist AKP fought Turkey’s elections fuelled by discontent with political corruption and incompetence. All the aspirants to power were promising the earth, but can they deliver?
  • Russia
  • The sovereign debt restructuring mechanism is the most contentious proposal ever to come out of the upper echelons of the IMF. It is almost universally opposed by the private sector, most emerging-market borrowers think it a very bad idea indeed, and before it has even been drafted it has already been blamed for tens of billions of dollars of decreased capital flows to emerging markets.
  • There was a huge rally in global equities in the middle of October after markets reached six-year lows. The catalyst was the third-quarter earnings reports of US corporations. Most seemed to beat consensus forecasts.
  • Ford has $40 billion in total back-up facilities, with room to do another $5 billion in the unsecured commercial paper market and about $7 billion extra capacity in external ABS conduits. So it can increase short-term debt if need be.
  • While many bankers are tightening their belts in the expectation of tiny Christmas bonuses, some are still merrily living it up. One trader flew the flag recently by hiring out the Café de Paris for his birthday bash (house champagne: £350 a bottle).
  • Citigroup is the most successful cash management bank in nearly every region of the world. But when asked to rank banks on different aspects of the cash management business, treasurers often rate the likes of Deutsche Bank, JPMorgan, Standard Chartered, and BNP Paribas higher than Citi.
  • Securities lending
  • Serbia
  • At the start of the year Lucine Kirchhoff took a bold position. The price of high-grade loans, she said, was destined to increase: "Look for investors to focus more on drawn pricing to compensate for the appropriate risk they are taking," said Kirchhoff, the head of loan syndicate at Banc of America Securities. It would be a similar story for undrawn costs. Higher pricing ought to have been inevitable given the recession, a rise in defaults, rating-agency downgrades and fallen angels, and the uncovering of corporate frauds. Banks would surely be looking for a much better return for the risks they were taking, which would imply a wholesale change in prices rather than just a slight increase.
  • Ambitious efforts are under way to bring order to sovereign debt work-outs. But private-sector lenders just don’t see what problem the IMF’s sovereign bankruptcy court is supposed to solve. Felix Salmon reports
  • Frank Sixt, chief financial officer of Hutchison Whampoa, spoke to Euromoney’s Chris Cockerill about his company’s aborted euro market bond issue and its plans for developing 3G telecoms technology.
  • What's red, green and disliked by most Germans? Answer: the new - or old - coalition government. In fact, it's something of a mystery who voted for Gerhard Schröder. Most Frankfurters grimace at the mere mention of his name. Just as when Bush won the US election, it's as if Germany has had a momentary lapse of concentration and lumbered itself with a government it didn't really want.
  • The International Accounting Standards Board is planning to change its approach to the treatment of assets in securitizations. But many feel the new proposals don’t improve on the confusion they replace
  • Multinationals stand to gain substantially from a reorganization of their treasuries to a regional structure and a rationalization of the number of cash management relationships. A regional structure allows for substantial cost reductions through better liquidity management, reduced treasury teams, and lower network maintenance costs. These benefits are big: according to a recent survey by PricewaterhouseCoopers, a 1% improvement in liquidity management could improve a corporate's share price by 120 basis points.
  • German banking
  • Hutchison publicly blames its abandonment of a foray into euro bonds on adverse market conditions. But the company and its advisers seem to have neglected to weigh up specific reasons for investor caution.
  • The Brazilian presidential elections were a triumph for democracy. The winner, Luis Inacio Lula da Silva, became the first leftist ever elected president. And in an election notable for its transparency he won the largest ever share of the vote.
  • The Turkish banking sector is undergoing a revolutionary transformation. For decades the playground of crooked bankers and the politicians and bureaucrats they funded, the sector is now being cleaned up.
  • In the unseemly and increasingly desperate scramble by the leaders of Wall Street firms to do a deal with the SEC, Eliot Spitzer and the whole posse of state prosecutors pursuing them over bent research and IPO spinning, common sense was ditched long ago.
  • Foreign exchange
  • Dozens of former bankers are on trial in Turkey for allegedly stealing $17 billion from the 20 banks that have been seized by the government since the end of the 1990s. None of the trials has ended, while some of the cases have entered their third year. If Murat Demirel's case is typical, it seems they might go on for ever.
  • Large investment-grade corporate borrowers have increasingly turned to securitization as rating downgrades and investor risk aversion have pushed spreads on normal bonds to junk levels. Can asset-backed markets meet these giant issuers’ funding needs?
  • Japan
  • Deteriorating credit quality has combined with structural illiquidity in the credit market to produce extreme volatility. For now, small deals from rare borrowers are faring better than large, liquid deals from frequent issuers.
  • How much would you pay to dine with your CEO? Too much and you'll be seen as a creep, too little and you can wave goodbye to that promotion. That's the quandary facing Merrill Lynchers, who can bid for a tête-á-tête with Stan O'Neal - CEO in waiting.
  • Nordic mortgage bonds have been tipped as a major growth area for some time. Denmark and Sweden in particular have long-established, stable markets that have been steadily attracting interest from outside over the past few years. Swedish mortgage bonds are not strictly covered, since the collateral loans remain on the issuer's balance sheet. Many covered bond participants see them as still primarily a domestic play with sporadic foreign interest at best. But bankers in the Nordic markets say the paper is attracting more and more demand from non-traditional buyers. The Danish market's long end is made up of callable bonds similar to the most liquid part of the US MBS market. It has long attracted considerable interest from US accounts, which find the callable structure comfortably familiar. In 1997 and 1998, these accounts started taking big tickets in long-dated Danish paper. Many of them were hurt badly by the Danish mortgage crisis. US accounts retain a large share of the market and trade actively, but are no longer net buyers. The high option-adjusted premia that originally attracted them have now fallen slightly.