09.29.08
Credit crisis bankparade interactive.
Now credit crisis events are spreading to Europe an update of the extensive credit crisis overview was necessary. Follow this link to the guided analysis for an interactive experience or follow this link for a graphical view on the crisis. Investors assume that all problems are credit crisis related. The Fortis problems are however the result of a bad timed take-over of ABNAMRO, bad communication of capital ratio recovery actions and lack of trust in the capability of Fortis to obtain the required investments in time. From an operational perspective the bank claims it is a healthy business still generating revenues. The issues in England are different from those in Belgium and the Netherlands. The housing market in England is also deteriorating and combined with the lack of confidence in banks this has resulted in the take-over of several mortgage lenders. However, prudent banking is still there. Another company that participated in the ABNAMRO take-over has enough cash to roam the financial world for interesting bargains. Santander already showed after the take-over of ABNAMRO it is able to act swiftly, decisively and with success. As part of the take-over it acquired the Brazilian bank Banco Real and the Italian bank Antoveneta. It quickly sold Antoveneta to another Italian bank and now has the power to profit from the opportunities the credit crisis offers. Today it was announced Santander only had to pay 600 million euro for 21 billion euro in deposits and acquired also the branches of Bradford and Bingley. Earlier this year it obtained the European banking assets from General Electric. It shows the big differences between banks that joined the team that bought ABNAMRO one year ago.
09.16.08
Merrill take-over by BofA, an informed decision?
Yesterday I expressed my concerns regarding the rational behind the take-over of Merrill Lynch. Today several commentators are wondering why BofA is willing to pay much more than the market value. It seems obvious there is more to it than the public at this moment knows. What is in it for BofA? Maybe there is a reason to share this with BofA’s shareholders? The initial view of analysts is that it probably is a forced deal and I’m inclined to agree with this. One day after the “deal” the is a general concern whether or not BofA can absorb Merrill’s troubles. It is almost impossible to make an informed decision on such a short notice. What guarantees have been given to BofA to take this risky jump in the dark? Another interesting question is whether or not it is possible to manage two take-overs in a period that is causing serious problems for every company in the financial industry.
From a BofA perspective a Lehman take-over would have been much more transparent. Although the risk management of Lehman proved to be inadequate, the management of Lehman in general has a much better track record when you look at business ethics or management integrity.
In the past year Merrill has been accused of many things except high moral standards. I’m really curious how many billion dollar surprises will emerge once BofA really takes over control. Revisiting the credit crisis events show that a reduced level of management integrity proved to be a reliable key risk indicator of corporate failure in difficult economic times. To substantiate this I’ve included a list of Merrill events covering the last 12 months. This list was extracted from the Riskfriends guided analysis. BofA shareholder read and think again!
|
Date |
Event |
Detail |
|
2008-09-14 |
Take over |
Bank of America did take over Merrill although it was |
|
2008-08-21 |
Law suits |
Agreed to buy back $ 12 billion of ARS and pay a fine of $ |
|
2008-08-04 |
Integrity concerns |
Merrill suspected of colluding with UBS manipulating the |
|
2008-07-29 |
Capital ratio recovery |
Planning to raise another $ 8.5 billion |
|
2008-07-29 |
Investment lost |
Lone Star Funds buys CDO’s from |
|
2008-07-23 |
Law suits |
Los Angeles |
|
2008-07-18 |
Capital ratio recovery |
Sold Bloomberg part back to the company for $ 4.4 billion. |
|
2008-07-18 |
Write off |
Totaling $ 9.4 billion, 30 percent CDO, 30 percent credit |
|
2008-07-07 |
Capital ratio recovery |
Selling parts of Bloomberg and Blackrock to raise another $17 |
|
2008-06-26 |
Prediction |
$ 4.2 billion write off predicted for the second quarter |
|
2008-04-18 |
Law suits |
Pension fund CtW investment |
|
2008-04-18 |
Job cuts |
2900 jobs in reaction to write down |
|
2008-04-17 |
Write off |
$9.5 bllion |
|
2008-04-02 |
Capital ratio recovery |
$12.2 billion raised so far |
|
2008-03-18 |
Liquidity issues |
Wachovia states that the exposure of Merrill is 3.3 the |
|
2008-03-11 |
Integrity concerns |
Congress questions Stanley O’neal |
|
2008-03-06 |
Job cuts |
Merrill Lynch said that it would stop making subprime |
|
2008-02-27 |
Investment lost |
Auction rate securities from Merrill |
|
2008-02-26 |
Management leaves |
CEO O’Neal steps down |
|
2008-02-08 |
Investigation |
SEC received request for information from the federal |
|
2008-02-07 |
Integrity concerns |
Accused by Massachusetts of fraud |
|
2008-02-01 |
Investment lost |
Merrill buying back $ 14 million of CDO’s |
|
2008-01-16 |
Write off |
$ 9.8 billion loss, write down $14.1 |
|
2008-01-15 |
Capital ratio recovery |
$ 6.6 billion cash raised issueing |
|
2008-01-14 |
Integrity concerns |
Finra investigating possible |
|
2008-01-11 |
Portfolio deterioration |
$15 billion write down expected |
|
2008-01-04 |
Integrity concerns |
Accused from hiding losses while merger was pending |
|
2007-12-24 |
Capital ratio recovery |
$ 7.5 billion acquired selling shares 13% below market |
|
2007-11-08 |
Integrity concerns |
SEC starts investigation investments |
|
2007-11-07 |
Portfolio deterioration |
Expected write offs 4th quarter another $9.4 according to CreditSights |
|
2007-11-03 |
Integrity concerns |
Merril not aware of |
|
2007-10-31 |
Law suits |
Lawsuits by shareholders |
09.08.08
Dutch insurance sharks II.
Although there is plenty of water surrounding the Netherlands you will not find any sharks there. The sharks surfaced several years ago in the Dutch insurance world. These insurance sharks sold over thousand different investment products promising high returns. Pension, mortgages, life insurances, saving accounts combined with investment constructions etc. After a while some investors got disappointed with the performance of their investments and started an investigation. This showed that the main reason for the bad performances were hidden costs the sharks charged the unknowing investors.
It also found more sharks floating in the Dutch investment and savings sea eating themselves fat with easy prey. Over 6.500.000 products were sold. Almost every household in the Netherlands is involved in this issue. In some cases over 40 percent of the deposited money was never invested and booked under costs.
In 2006 two foundations, backed by home owner and investor organizations, started to organize support for a class act like approach. The “Stichting Verliespolis” and “Claim Woekerpolis” by now have over 100.000 members. Most of the Dutch financial institutions are on the target list of these two foundations. The Dutch minister of Finance is involved and has been asked to put some pressure on the financial institutions. There is a risk that the foundations cannot bring the cases to court in time.
September 8th the foundations reported a breakthrough in one of the negotiations with an insurance company named Delta Lloyd. The insurer will pay back an amount of 300 million euro. Extrapolating this amount to the other institutions results in compensations totaling 6 billion euro.
At this stage the possible settlement is already criticized because major components are excluded (life insurance premium) and the insurer is not forced to adjust its cost structure. This means that in the end the customers pay there own compensation. November the 21st a second company called Nationale Nederlanden, a subsidiary of ING, settled with the foundations and agreed to pay back 365 million euro.
The Dutch financial institutions have lost one major source of income. Consumers have lost trust and effectively stopped buying their investment products. It also makes me wonder whether this business practice is typical Dutch or common in other countries too.
Sources: Stichting Verliespolis”, nu.nl
09.07.08
Fannie Mae and Freddie Mac history!
This sunday will become in retrospect a remarkable financial date. The American government takes over control of two financial companies and replaces their CEO’s. The intention is to calm down the US financial market. The intervention signals great concerns and I wonder how the markets will react. The investors that once thought they were investing in shares with a low risk profile by now have learned a very expensive lesson. Fannie and Freddie lost over $ 120 billion in share value since October 2007.
When you want to view the Fannie and Freddie events that led to this historical event, just look here for Fannie and here for Freddie . Follow the OLDER link when you want travel back in time. You can initiate directed searches yourself, for instance by typing in “paulson freddie” without the quotes in the search box.
This event was also a signal to update the guided analysis. This covers by now over 500 credit crisis events! You can use this facility to analyze the credit crisis categorized events yourself.
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