LONDON (Reuters Breakingviews) - Oh dear. Lloyds Banking Group is ending its misssold payment protection insurance scandal as it began – with an almighty slap in shareholders’ faces. The UK’s largest domestic-focused bank on Wednesday revised down full-year returns on tangible equity after it posted a 7% decline in first-half pre-tax profits due to a higher than expected PPI charges. Such ‘one-off’ costs should roll off after an August deadline. But it’s still a dent to CEO Antonio Horta-Osorio’s credibility.
LONDON (Reuters Breakingviews) - A misfiring investment bank could be the least of Sergio Ermotti’s problems. The UBS chief executive on Tuesday also reported a drop in wealth management profit during the second quarter. Overall, with revenue subdued, further cuts to high group costs may be Ermotti's only way to hit 2021 targets.
LONDON (Reuters Breakingviews) - When in need, help can come from unexpected places. Just ask Christian Sewing. As part of the Deutsche Bank chief executive’s bumper restructuring announced on Sunday, the European Central Bank allowed the lender to cut its common equity Tier 1 ratio target by 50 basis points. A sharp uptick in the yields of Deutsche’s equity-like debt instruments implies this is a mixed blessing.
LONDON (Reuters Breakingviews) - Any cocksure child knows that owning up to mistakes is part of growing up. By that metric, Deutsche Bank is just beginning to mature. Boss Christian Sewing on Sunday effectively called time on the lender’s multi-decade attempt to create a global investment bank with a swingeing plan to shrink its trading unit and put 288 billion euros of assets into runoff. But the retreat depends on friendly markets and an absence of blunders.
LONDON (Reuters Breakingviews) - Christian Sewing can’t catch a break. The Deutsche Bank boss has seen the German lender’s market value shrivel to just 13 billion euros. Now he is preparing to take the axe to its underperforming investment bank. Rock-bottom expectations give him scope to spring a positive surprise.
LONDON (Reuters Breakingviews) - HSBC’s first-quarter results shore up its rich valuation. The global bank reported a robust 10.6 percent return on tangible equity in the first three months of the year, buoyed by a lending spike. Investors were already assuming that the bank hits its 2020 return targets. Potential for more buybacks in the second half provide additional firepower.
LONDON (Reuters Breakingviews) - Thank goodness for traders. Such gratitude is likely to be a novelty for BNP Paribas Chief Executive Jean-Laurent Bonnafé given how woeful these bankers’ performance was in some of the previous quarters. Still, a boost to volatile trading income reported on Thursday helped lift the French lender’s return closer to its 2020 target. Bonnafé will have to maintain the improvement in revenue growth if he is to hit that goal.
LONDON (Reuters Breakingviews) - Banco Santander has made shareholders in its Mexican unit a proposal they can refuse. The Spanish bank on Friday offered investors in Santander Mexico the chance to swap their shares for stock in the parent company. Despite a 14 percent premium, the deal is unenticing. Investors should hold out.
LONDON (Reuters Breakingviews) - European Central Bank President Mario Draghi is considering ways to ease the financial pain that negative interest rates impose on banks. However, such measures would at best only modestly boost lenders’ profits and do nothing to remedy their bigger challenge: high costs.
LONDON (Reuters Breakingviews) - “I trade therefore I lose.” This version of René Descartes’ famous maxim is probably not what Société Générale had in mind when naming its proprietary trading unit after the 17th Century French philosopher. Yet low returns are what the division tended to deliver. Closing it down, and pulling out of commodities trading, is a logical but insufficient response to SocGen’s mediocre investment banking performance.