Receiving Wide Coverage ...
Suisse Weighs Spinoff: Credit Suisse may spin off a part of its fixed-income trading business. The Swiss lender is considering selling a stake in its Wake USA subsidiary to outside investors and making it an independent operation, according to anonymice. The move would be "designed to cut its capital costs, as banks around the world face declining revenues from trading bonds," the Financial Times reports. The Wall Street Journal has a similar read on the idea, noting that the fixed-income trading game has gotten more expensive for banks because of new regulations on risk and capital. Meanwhile, reduced market volatility has dragged down trading profits.
Parsing BNP's Potential Penalty: As BNP Paribas stares down the barrel of a potential $10 billion penalty for allegedly violating U.S. sanctions, pundits are mulling over possible repercussions. The Journal's Paul Davies figures BNP could take the hit and stay above its required 10% minimum capital ratio. But the French bank would likely have to suspend dividends to meet minimum capital requirements a move unlikely to please its investors. BNP's position could also be upset by its performance in Europe's upcoming stress tests and by a possible ban from performing U.S. transactions, according to Davies. Meanwhile, the FT mulls the prospect of BNP's hefty penalty and attempts to take a measured view. The bank's "alleged offences may justify sweeping financial penalties," according to an unsigned editorial. "But the authorities should take care not to undermine the bank." The editorial does not delve into the reasons why U.S. regulators should avoid putting a dent in BNP, although it does briefly cite BNP's systemic importance in France.
TSB Priced for IPO: Lloyds Banking Group has priced the initial public offering for its TSB Banking Group subsidiary. The price range, set at 2.20 pounds to 2.90 pounds, is below the book value of the business, according to the New York Times and the FT. The mid-point of the range gives TSB a market capitalization of £1.28 billion ($2.15 billion). That's about 15% lower than TSB's book value, according to the papers. "A below book-value pricing wasn't unexpected as the white-hot market for initial public offerings in London has appeared to cool somewhat in recent weeks," Chad Bray writes in the Times. The Journal's coverage skirts analysis and does not compare the IPO's pricing to book value.
Wall Street Journal
Banks including Citigroup and Standard Chartered are investigating suspected fraud at metal warehouses in China that may have impacted their metal-backed loans to trading firms.
Wall Street is getting anxious about stagnant worker wages, according to a commentary by E.S. Browning. "Without a real acceleration in wages it is hard to get a meaningful pickup in consumer spending," Michelle Meyer, a senior U.S. economist at Bank of America Merrill Lynch, tells Browning.
President Obama is expected to announce an expanded student debt relief plan on Monday. The move would allow five million more Americans to qualify for the government's "Pay As You Earn" program, which limits borrowers' monthly federal student loan payments to 10% of their income. Any remaining debt could be forgiven after 20 years.
Barclay's executive chairman for mergers and acquisitions, Ed King, has resigned after just four months at his post in the U.S. His exit is the "latest in a wave of departures from the British bank's investment banking arm."
U.S. banks have backed away from debt tied to real estate over the past few years, according to John Carney. But he says that lenders' caution over risky real estate exposure may lack longevity. "Making more mortgages, including riskier ones, produces profits investors can see easily," Carney writes. "Meanwhile, there is likely to be diminishing returns to further reductions in real-estate exposure."
