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China’s Credit Squeeze Relaxes as Interest Rates Drop

June 21, 2013 by Leave a Comment

The central government made no official announcement on the situation, and it was unclear whether policy makers had intervened, but short-term interest rates fell sharply Friday from a day earlier, when they had reached some of the highest levels in a decade.

Still, the Chinese financial markets remained under pressure. Rates for institutions that were seeking interbank funding on Friday were still substantially higher than a few weeks ago. Financial experts expressed skepticism that the government would do more to aid banks that were temporarily starved for cash.

The reluctance of policy makers to act comes amid growing concerns that China’s economy is weakening and that the government has abandoned its longstanding policy of responding to any hint of an economic slowdown by expanding credit.

By signaling a new restraint in monetary policy, Beijing seems to be tackling what analysts say is the growing risk of poor lending practices and overcapacity in the economy.

Louis Kuijs, an economist at the Royal Bank of Scotland, said Friday that the government’s response to weak cash flows in the interbank market, where banks make short-term loans to one another, was a sign of the government’s new resolve.

“It was the shift in the stance of the P.B.C. that made all the difference,” he said, referring to the People’s Bank of China, the central bank, acting in a way that had sent interest rates higher. “The government at the moment wants to signal, ‘we’re working on reform — we’re not interested in short-term stimulus,’ like China did in the past.”

The apparent decision not to pump more cash into the economy rocked China’s financial markets Thursday. Investor worries were compounded by newly released economic data indicating that manufacturing activity was contracting and export and job growth were tepid.

As credit markets began to freeze up and mistrust among banks spread, rumors circulated of defaults. Late Thursday, the Bank of China, one of the country’s biggest lenders, issued a statement on its Web site denying local news reports that it had defaulted on interbank payments.

By late Friday, the markets had settled somewhat. The overnight lending rate between banks had dropped to 8.49 percent, down from a record high of 13.44 percent on Thursday, but still much higher than last month’s levels of less than 4 percent.

Another benchmark rate for borrowing costs between banks, the seven-day repurchase rate, opened Friday at 8.1 percent, briefly soared as high as 25 percent and closed at 5.5 percent.

Few analysts expect the liquidity strains to lead to a financial or economic crisis because Beijing has the tools to avert a serious slowdown, with its tight control over the banking and financial sector.

But experts say the risks are rising and the choices are grim: if the government pulls back on lending, the economy could suffer in the short term; if it pumps more money into the economy to avert a slowdown, it could do long-term damage to an economy that many believe is already suffering from overinvestment.

There are also growing concerns about China’s huge shadow banking sector, with some financial experts warning of hidden liabilities tied up in local government projects, as well as the so-called wealth management products that are sold to investors through banks and trust funds but do not appear on the financial companies’ balance sheets.

“Persistent tight liquidity conditions in China’s financial sector could constrain the ability of some banks to meet upcoming obligations on maturing wealth management products on a timely basis,” the credit ratings agency Fitch Ratings said in a report Friday.

Joe Zhang, a longtime banker and the author of “Inside China’s Shadow Banking: the Next Subprime Crisis?,” said the decision by China’s central bank to discipline banks by allowing the rates to rise this week was necessary.

“Effectively, they are telling commercial banks to go and sort out their problems,” he said in a telephone interview Friday. “The banks have lent out too much money. And what happens over time? You go from prime to subprime to silly loans. This is what happened with the U.S. subprime crisis. Banks start lending to bad projects. We’ve been too reckless.”

Neil Gough contributed reporting from Hong Kong.

Article source: http://www.nytimes.com/2013/06/22/business/global/chinas-bank-lending-crunch-eases.html?partner=rss&emc=rss

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DealBook: Co-operative Bank Turns to Bondholders to Fill Capital Shortfall

June 17, 2013 by Leave a Comment

LONDON – The British lender Co-operative Bank announced plans on Monday to raise an additional £1.5 billion ($2.4 billion) to replenish a capital shortfall.

Under the terms of the deal, junior bondholders will be asked to swap their debt securities for shares in the Co-operative Bank. The agreement represents the first time that a so-called “bail in” of bondholders has been used to recapitalize a British bank since the financial crisis began.

The move contrasts with previous efforts by local banks to raise capital, including the multibillion-dollar state bailouts of lenders like the Royal Bank of Scotland and the Lloyds Banking Group.

By requiring bondholders to exchange their debt securities for shares, Co-operative Bank is trying to avoid turning to the British government for help.

The Co-operative Bank, whose credit rating was downgraded last month to junk status by Moody’s Investors Service because of questions over its capital reserves, said the agreement would increase its so-called common Tier 1 equity ratio, a measure of a firm’s ability to weather financial shocks, to 9 percent by the end of the year.

The Prudential Regulatory Authority, a British regulator, has called for all of the country’s banks to have a common Tier 1 equity ratio of at least 7 percent by the end of the year under the accountancy rules known as Basel III.

British lenders must raise a combined £25 billion by the end of the year to meet the capital shortfall. Regulators will announce details on Thursday of how much each bank must raise by the end of the year.

The Co-operative Bank said on Monday that it planned to raise £1 billion this year through the bondholder swap, and increase its reserves by an additional £500 million next year.

“This announcement is good news for the Co-operative Group, the Co-operative Bank, its customers,” Euan Sutherland, chief executive of the Co-operative Group, said in a statement. “This solution, under which they will own a significant minority stake in the bank, will then allow them to share in the upside of the transformation of the bank.”

As part of the move to raise capital, the Co-operative Bank also plans to sell its general insurance unit. This year, the bank sold its life insurance and asset management businesses to the British pension company Royal London for around £220 million.

The Co-operative Bank’s financial difficulties stem from a mistimed acquisition in 2009 of a local rival, Britannia Building Society, that left the bank with a large pool of delinquent commercial real estate loans.

The bank also ran into trouble this year when its plan to buy part of the Lloyds Banking Group’s branch network collapsed. The move was an effort to increase its capital base, while also expanding across Britain to compete with larger lenders like Barclays and HSBC.

This post has been revised to reflect the following correction:

Correction: June 17, 2013

An earlier headline with this article misspelled the name of the bank. It is Co-operative Bank, not Co-operaritive Bank. The article also misspelled a company name. It is Moody’s Investors Service, not Moody’s Investor Services.

Article source: http://dealbook.nytimes.com/2013/06/17/co-operaritive-bank-turns-to-bondholders-to-fill-capital-shortfall/?partner=rss&emc=rss

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DealBook: Chief of Unit Overseeing Britain’s Bailout Investments Resigns

April 25, 2013 by Leave a Comment

LONDON – Jim O’Neil, who has been in charge of the British government’s stakes in Royal Bank of Scotland and the Lloyds Banking Group, resigned on Thursday to return to Bank of America Merrill Lynch.

Mr. O’Neil had been the chief executive of United Kingdom Financial Investments, the Treasury unit set up in 2008 to recoup the government’s investments in banks that had to be bailed out during the financial crisis. The office has yet to name a successor.

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Mr. O’Neil, an American, will rejoin Bank of America Merrill Lynch as co-head of the global financial institutions advisory business later this year. He will stay in London and run the unit together with William Egan, who is based in New York.

It is taking longer than initially expected to sell the British government’s 82 percent stake in R.B.S. and 40 percent in Lloyds. The market value of the investments in the two banks continues to be below the government’s initial investment costs. The debt crisis in the euro zone and banking scandals, including the improper sale of an insurance product to clients that could not benefit from it, has delayed the banks’ recovery and weighed on their share prices.

Pressure has increased lately to come up with a new plan for the government’s holdings in the bailed out banks as some lawmakers became impatient. Some politicians suggested breaking up Royal Bank of Scotland, while others said the government should hand out shares directly to taxpayers.

Mr. O’Neil has been meeting regularly with the boards of both banks to ensure that their strategies were in the interest of British taxpayers and the government.

The Treasury unit said in a statement that it saw the role of the U.K.F.I. “as critical in maximizing the value of its shareholdings in R.B.S. and Lloyds Banking Group and in returning both banks to the private sector.”

Before joining U.K.F.I. as head of market investments in 2010, Mr. O’Neil was head of corporate finance outside the Americas at Bank of America Merrill Lynch.

Article source: http://dealbook.nytimes.com/2013/04/25/chief-of-unit-overseeing-britains-bailout-investments-resigns/?partner=rss&emc=rss

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DealBook: Senior R.B.S. Executive in Japan Expected to Resign in Libor Scandal

April 11, 2013 by Leave a Comment

Japanese authorities are seeking to punish Royal Bank of Scotland over its role in Libor manipulation.Peter Macdiarmid/Getty ImagesJapanese authorities are seeking to punish Royal Bank of Scotland over its role in manipulating benchmark rates.

LONDON – A senior executive at the Royal Bank of Scotland’s Japanese investment banking unit is expected to resign in the wake of a rate-rigging scandal, according to a person with direct knowledge of the matter.

Ryusuke Otani, who runs R.B.S.’s investment banking business in Japan, will probably step down by the end of the week, added the person, who spoke on the condition of anonymity because he was not authorized to speak publicly.

The resignation of Mr. Otani, a former Citigroup banker, follows moves by Japanese authorities to punish Royal Bank of Scotland over its role in the manipulation of the London interbank offered rate, or Libor.

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The Securities and Exchange Surveillance Commission of Japan asked local regulators last week to issue a so-called administrative action against R.B.S., which is based in Edinburgh, after some of its traders attempted to alter a key benchmark rate for financial gain.

The Royal Bank of Scotland, in which the government holds a stake of about 81 percent after providing a bailout during the financial crisis, reached a $612 million settlement in February with American and British authorities in connection with the Libor scandal. As part of the agreement, the firm’s Japanese unit was required to plead guilty to criminal wrongdoing.

Global authorities already have fined three banks – Barclays, UBS and Royal Bank of Scotland – a collective $2.6 billion for their roles in the manipulation of Libor.

Other major financial institutions, including Citigroup and Deutsche Bank, are still under investigation in the rate-rigging scandal, which affected complex financial products worth trillions of dollars.

In the latest regulatory action against Royal Bank of Scotland, Japanese authorities said on April 5 that some of the firm’s traders had tried to profit from altering rate submissions to yen Libor from 2006 to 2010. The British bank also was sanctioned for failing to spot the wrongdoing over the five-year period.

Japanese regulators have taken similar steps against UBS and Citigroup after investigations found that some of the banks’ traders had attempted to manipulate key benchmark rates in the country.

Royal Bank of Scotland’s chief executive, Stephen Hester, apologized in February for the bank’s role in the scandal, adding that six people had been fired because of their role in manipulating rates. An additional eight bankers left before the wrongdoing was discovered, while six other individuals have been disciplined but remain with the bank.

A derivatives trader, Simon Green, was fired last month in connection to the Libor scandal, according to a person with direct knowledge of the matter.

A spokesman for Royal Bank of Scotland declined to comment.

Article source: http://dealbook.nytimes.com/2013/04/11/senior-r-b-s-executive-in-japan-expected-to-resign-after-libor-scandal/?partner=rss&emc=rss

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Report Urges Lifetime Ban for Former HBOS Chiefs

April 5, 2013 by Leave a Comment

LONDON — A “colossal failure” of three top managers was to blame for the collapse of the British mortgage lender HBOS in 2008, a parliamentary review concluded Friday, increasing pressure on regulators to punish individuals who played a role in the demise of their institutions.

The report specifically mentioned Andy Hornby, who was chief executive of the bank until its demise; his predecessor, James Crosby; and the chairman, Dennis Stevenson. The report asked regulators to consider barring them from taking any roles in the financial sector. After the publication of the report, Mr. Crosby stepped down as an adviser to the private equity firm Bridgepoint.

“The HBOS story is one of catastrophic failures of management, governance and regulatory oversight,” Andrew Tyrie, a Conservative member of Parliament and chairman of the review commission, said in a statement.

Leading up to the financial crisis, HBOS was the largest provider of mortgages in Britain, and had expanded aggressively at home but also in Ireland and Australia. But many of the loans were of poor quality and risky and left it with a large exposure to commercial real estate and noninvestment-grade assets.

Losses piled up and HBOS had to be merged into Lloyds Banking Group, which in turn needed a government bailout of more than £20 billion, or about $31 billion at current exchange rates. The government’s holding in Lloyds is worth about £5 billion less than its initial investment.

The review is fanning public anger against bank managers, who oversaw huge losses at companies that became costly for shareholders and taxpayers, but who have remained largely unpunished. Fred Goodwin, the former chief executive of Royal Bank of Scotland, and other executives were sued Thursday by a group of investors over allegations of misleading shareholders before the bank’s collapse.

“Why competence levels on the board were so weak before the financial crisis is still a major question,” said Pete Hahn, a finance professor at the Cass Business School in London. “Maybe there should be a list available worldwide of directors from failed financial institutions.”

The review blamed Mr. Crosby for developing a strategy that supported “reckless lending policies” that left HBOS too exposed to British real estate. Mr. Hornby failed to address the matter when he took over in 2005 and Mr. Stevenson did not raise any concerns as chairman, the report said.

“The combination of higher risk assets and risky funding represents a fundamentally flawed business model and a colossal failure of senior management and of the board,” the 69-page report said.

Britain’s Financial Services Authority “should examine, as part of its forthcoming review of the failure of HBOS, whether these three individuals should be barred from undertaking any role in the financial sector,” the report said.

Peter Cummings, the former head of commercial lending, is the only former HBOS manager sanctioned by the Financial Services Authority. Mr. Cummings is prohibited for life from working in the financial industry again after the regulator found in 2012 that his division was guilty of misconduct. He was also fined £500,000.

The review, which has included numerous interviews with employees and the regulator since October, also criticized the former management for failing to fully understand its role in the lender’s failure.

“We are shocked and surprised that, even after the ship has run aground, so many of those who were on the bridge still seem so keen to congratulate themselves on their collective navigational skills,” the report said. “Lord Stevenson, in particular, has shown himself incapable of facing the realities of what placed the bank in jeopardy from that time until now.”

Article source: http://www.nytimes.com/2013/04/06/business/global/report-urges-lifetime-ban-for-former-hbos-chiefs.html?partner=rss&emc=rss

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DealBook: As Losses Mount, R.B.S. Unveils Plan to Sell Assets

February 28, 2013 by Leave a Comment

A branch of the Royal Bank of Scotland in London.Facundo Arrizabalaga/European Pressphoto AgencyA branch of the Royal Bank of Scotland in London.

LONDON – The Royal Bank of Scotland, hammered by losses, announced plans on Thursday to sell assets and pare back its investment banking business, in an effort to appease regulators and its biggest shareholder, the British government.

R.B.S. said it planned to sell a stake in the Citizens Financial Group, the American lender it bought in 1988, through an initial public offering in two years. The bank will also continue to reduce its investment banking operations, with plans to cut risky assets and eliminate jobs.

The moves are designed to help bolster the bank’s capital levels and refocus its operations, part of a multiyear turnaround effort initiated by its chief executive, Stephen Hester. In the end, R.B.S. will emerge a much smaller bank, largely focused on Britain.

“R.B.S. is four years into its recovery plan,” Mr. Hester said in a statement, “and good progress has been made. We are a much smaller, more focused and stronger bank. Our target is for 2013 to be the last big year of restructuring.”

Like many rivals, R.B.S. is struggling with the legacy of the financial crisis and a spate of legal issues. On Thursday, it reported a bigger-than-expected loss, in part tied to its legal troubles.

The bank, in which the British government holds an 82 percent stake after a bailout in 2008, posted a net loss of £5.97 billion ($9 billion) in 2012, much larger than the £2 billion loss recorded in 2011. Analysts had been expecting a loss of £5.1 billion. For the last quarter of 2012, R.B.S. reported a £2.6 billion loss, up from a £1.8 billion loss in the period a year earlier.

The rising losses reflect the bank’s regulatory and legal problems.

R.B.S. said on Thursday that it had set aside an additional £1.1 billion to compensate clients to which it improperly sold insurance products, bringing the total provision to £2.2 billion. It also estimated it would have to pay £700 million to compensate small businesses to which it improperly sold some interest-rate hedging products.

The bank agreed this year to pay $612 million to British and American authorities to settle accusations of rate-rigging. Since then, Mr. Hester has promised to tighten controls at the bank to limit the risk of future rate manipulation.

The head of R.B.S.’s investment banking division, John Hourican, resigned at the beginning of February as a result of the scandal related to manipulating the London interbank offered rate, or Libor. The bank plans to pay its fine with money clawed back from bonuses.

‘‘Along with the rest of the banking industry we faced significant reputational challenges,’’ Mr. Hester said in the statement. ‘‘We are determined to overcome the cultural and reputational baggage of precrisis times with the same focus we have applied to the financial cleanup from that era.’’

Eager to get back some of the £45.5 billion it invested in R.B.S., the British government recently increased pressure on the bank’s management to speed up the reorganization.

Some analysts said the government could start selling parts of its investment in the bank, even at a loss, before the next general election, which is set for 2015. R.B.S.’s shares are still trading at about half what the government paid for them in 2008. Some lawmakers said they would favor handing out shares to the public instead of a possible sale of the stake on the open market.

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said there were signs that Mr. Hester’s efforts to turn around the bank had started to pay off, but that “the ongoing absence of a dividend and overhang of the government stake are negatives which need to be resolved.”

Article source: http://dealbook.nytimes.com/2013/02/28/as-losses-mount-r-b-s-unveils-plan-to-sell-assets/?partner=rss&emc=rss

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DealBook: Osborne Promises More Regulatory Power to Split Up British Banks

February 4, 2013 by Leave a Comment

Britain's chancellor of the Exchequer, George Osborne, spoke Monday in Bournemouth, southern England.Stefan Wermuth/ReutersBritain’s chancellor of the Exchequer, George Osborne, spoke on Monday in Bournemouth, on the south coast of England.

LONDON – British regulators will have the power to split up banks that fail to separate risky trading activity from retail banking, George Osborne, the country’s chancellor of the Exchequer, said on Monday.

As part of an overhaul over how the country’s banks operate, the British finance minister said regulators would be able to forcibly separate firms that failed to maintain a division between their retail banking and investment banking units.

The so-called ring-fencing of consumer deposits from risky trading activity is an effort to reduce the exposure to the wider British economy if one of the country’s largest banks goes bust.

Many of Britain’s largest banks have been engulfed in a series of scandals, and Mr. Osborne said the public was right to be angry over abuses in the country’s financial industry.

The spotlight is now focused on the Royal Bank of Scotland, which is expected to announce a settlement over the manipulation of a key benchmark rate as early as this week.

The bank, in which the government holds an 82 percent stake after providing a bailout, is said to be facing a fine of more than $650 million and a guilty plea against an Asian subsidiary related to the manipulation of the London interbank offered rate, or Libor.

Mr. Osborne said troubling behavior by those in Britain’s financial industry was unacceptable.

“Irresponsible behavior was rewarded, failure was bailed out, and the innocent – people who have nothing whatsoever to do with the banks – suffered,” Mr. Osborne said in a speech in Bournemouth, on the south coast of England.

During the recent financial crisis, a number of British banks, including the Lloyds Banking Group and Northern Rock, received multibillion-dollar bailouts after they ran into trouble because of exposure to risky assets.

To reaffirm the separation between retail and investment banking divisions, Mr. Osborne said on Monday that banks would have to appoint different senior managers to oversee each division. The new powers to forcibly split up banks are in response to fears that firms would try to find ways around dividing their retail and investment banking operations.

“No more rewards for failure. No more too big to fail. No more taxpayers forking out for the mistakes of others,” Mr. Osborne said.

Critics of the planned changes, however, say the separation of banks’ operations will make it harder for them to raise capital and provide financial support to British companies.

“This will create uncertainty for investors, making it more difficult for banks to raise capital, which will ultimately mean that banks will have less money to lend to businesses,” Anthony Browne, chief executive of the British Bankers’ Association, a trade body criticized for its role in the Libor scandal, said in a statement.

The changes, which form part of new banking legislation being submitted to Parliament on Monday, mirror similar efforts in the United States and Europe to reduce the effect of banks’ risky trading operations on the broader economy. The so-called Volcker Rule, which forms part of the Dodd-Frank Act and would prohibit banks from making risky bets with their money, is also nearing regulatory approval in the United States.

In Britain, authorities are going a step further by dividing the Financial Services Authority, the country’s financial regulator, into two separate units, as part of the widespread reforms.

In April, oversight of the country’s banks will be returned to the Bank of England, the central bank, while a new consumer protection agency will monitor market abuse.

The changes come after a series of recent settlements by British banks over illegal activity.

HSBC and Standard Chartered have agreed to pay a combined fine of more than $2 billion to American authorities related to money laundering allegations. Barclays reached a $450 million settlement with United States and British regulators in June related to the manipulation of Libor. And, in total, many of Britain’s largest banks have been required to pay billions of dollars of penalties after inappropriately selling loan insurance to customers.

“Our country has paid a higher price than any other major economy for what went so badly wrong in our banking system,” Mr. Osborne said on Monday.

Article source: http://dealbook.nytimes.com/2013/02/04/osborne-promises-more-regulatory-power-to-split-up-big-banks/?partner=rss&emc=rss

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DealBook: Hilco Takes Control of Music Retailer HMV

January 22, 2013 by Leave a Comment

Students listen to CDs in a HMV store in Hong Kong.Philippe Lopez/Agence France-Presse — Getty ImagesStudents listen to CDs in a HMV store in Hong Kong.

12:04 p.m. | Updated

LONDON – The private equity firm Hilco Consumer Capital has bought the debt of the struggling British music retail chain HMV, according to three people with direct knowledge of the matter.

The debt deal gives Hilco effective control over HMV, which entered into administration, a form of bankruptcy, last week. The music retailer, with its well-known trademark of a dog next to a gramophone, has been hurt by weak consumer spending in its British home market.

HMV had outstanding debt of $279 million on Oct. 27, the latest figures available, although Hilco is understood to have paid around $190 million to purchase the debt.

Hilco was appointed on Monday as an adviser to the accountancy firm Deloitte, which is overseeing HMV’s restructuring, and bought the company’s outstanding debt from a consortium of banks led by Royal Bank of Scotland and the Lloyds Banking Group, the people said, who spoke on the condition of anonymity because they were not authorized to speak publicly.

Hilco has a track record of acquiring struggling retail brands. In 2009, it bought the assets of Polaroid for $85.9 million in cash and equity, and it acquired the brand name and logos of the home-furnishings chain Linens ‘n Things for $1 million.

HMV, whose name stands for His Master's Voice, uses a dog next to a gramophone as its trademark.Peter Macdiarmid/Getty ImagesHMV, whose name stands for His Master’s Voice, uses a dog next to a gramophone as its trademark.

The firm also picked up HMV’s Canadian operations in 2011 for $3.3 million, and already has relationships with many of HMV’s suppliers. Hilco is expected to decide within the next month about the future of HMV’s 240 stores across Britain, Ireland, Singapore and Hong Kong, according to one of the people with direct knowledge of the matter.

The deal is the latest stage in the history of the British music retail chain, which can date its origins back to the early 20th century. HMV, whose name stands for His Master’s Voice, opened stores across North America in the 1980s, but eventually closed its final outlet in New York in the early 2000s.

As consumers have increasingly bought music and movies from online retailers like Amazon.com and Apple’s iTunes, HMV and other retailers have struggled to match their rivals on cost. Last week, the British division of the entertainment retailer Blockbuster also entered administration, which is equivalent to Chapter 11 bankruptcy in the United States.

Article source: http://dealbook.nytimes.com/2013/01/22/hilco-takes-control-of-music-retailer-hmv/?partner=rss&emc=rss

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DealBook: More European Bank Loan Sales Expected

January 4, 2013 by Leave a Comment

11:45 a.m. | Updated

LONDON – At the start of 2013, European banks are cleaning out their closets.

The Continent’s largest financial institutions, including HSBC and Deutsche Bank, are expected to sell a combined 60 billion euros, or $78 billion, of so-called noncore loans this year, a 33 percent rise compared with 2012, according to estimates from the accounting firm PricewaterhouseCoopers released on Friday.

The renewed effort to offload unwanted assets comes as European banks are eager to reduce costs and shrink their balance sheets to comply with tougher capital requirements demanded by regulators. Europe’s persistent financial problems also have altered the industry’s economics, leaving many banks with bloated balance sheets and reduced profitability.

A string of recent scandals, including multibillion-dollar fines for the British bank Barclays and its Swiss counterpart UBS related to the manipulation of benchmark interest rates, have placed increased pressure of firms to pull back from underperforming and risky business units.

Many of Europe’s largest banks also have announced wholesale jobs cuts, particularly in their investment banking divisions, while the number of people working in financial services in London, Europe’s financial capital, has fallen to its lowest level since the mid-1990s, according to the British research organization Center for Economics and Business Research.

The fire sale has already included the Royal Bank of Scotland‘s sale of property loans to the private equity firm Blackstone Group and its aviation leasing business to the Sumitomo Mitsui Financial Group, the Japanese bank, for $7.3 billion. HSBC also is considering the sale of United States real estate and personal loans worth a combined $6 billion after it already offloaded a number of operations in emerging markets like Pakistan and Colombia to local competitors.

“Banks have been doing the right thing by selling off loan portfolios,” said Richard Thompson, a partner at PricewaterhouseCoopers in London. “Some of stronger firms also may now be looking to pick up assets on the cheap.”

PricewaterhouseCoopers said that it expected that European banks would focus on corporate and real estate loan disposals, particularly in countries like Spain where prices in the local housing market fell 15 percent annually in the third quarter of last year, according to the latest available government figures.

The creation in Spain of a so-called bad bank that will oversee the sale of up to 60 billion euros of unwanted assets like delinquent mortgages and unsold real estate on behalf of local banks is also expected to draw interest from potential buyers.

European banks are keen to sell, but bankers and lawyers say financial institutions continue to demand high prices for assets despite the glut of loan portfolios up for sale. So far, analysts add that differences over price have kept potential buyers, including private equity firms that specialize in distressed assets, from picking up more underperforming loan assets because the firms believe they remain overvalued.

Last year, the average discount on loans for a range of unwanted European bank assets was 20 percent to 50 percent, according to PricewaterhouseCoopers. That percentage is expected to rise this year, though analysts say the banks’ access to cheap short-term financing from the European Central Bank has given them some breathing room to demand higher prices for their unwanted assets.

“In 2012, we saw a large number of different banks bringing their portfolios to market,” Mr. Thompson said. “The issue of price will clearly remain a key challenge in future for sellers.”

European banks still have a lot of work to do.

PricewaterhouseCoopers estimates that firms still have more than 2.5 trillion euros of noncore loans that they are looking to sell. As the 60 billion euro estimate for loan portfolio sales in 2013 represents just 2.4 percent of that total, Europe’s banks are likely to remain eager sellers for many years to come.

Article source: http://dealbook.nytimes.com/2013/01/04/more-european-bank-loan-sales-expected/?partner=rss&emc=rss

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DealBook: R.B.S. Sells Pub Business to Heineken

December 3, 2011 by Leave a Comment

The Punch Bowl in London is part owned by Guy Ritchie, the movie director and Madonna's ex-husband.Punchbowl LondonThe Punch Bowl in London is part owned by Guy Ritchie, the movie director and Madonna’s ex-husband.

LONDON — The Royal Bank of Scotland announced Friday the sale of its British pub chain to the Dutch brewing giant Heineken for £412 million, or $646 million.

The deal is part of an aggressive sale of noncore assets by the struggling British bank, which is 83 percent own by the government after receiving a £20 billion bailout in 2008.

R.B.S. bought the chain of 918 pubs, known as the Galaxy Pub Estate, in 1999 and 2000, as the bank looked to expand its operations into property to take advantage of rising prices of British commercial real estate. The pubs include the Punch Bowl in Mayfair, an expensive neighborhood in London, which is part owned by Guy Ritchie, the movie director and Madonna’s ex-husband.

With the worsening economic climate, R.B.S. has tried to reduce its exposure to assets that aren’t part of its traditional bank business. As of the end of September, R.B.S said it had reduced the bank’s so-called noncore assets to £105 billion, compared with £258 billion in 2009. The bank says it’s on track to reduce the figure to below £100 billion by the end of the year.

Along with the sale of traditional loan portfolios, including R.B.S.’s aviation financing unit, the bank also has been offloading assets not traditionally associated with a financial institution. In September, R.B.S. announced that it had sold a Hilton hotel property, the five-star Hilton Hotel in Glasgow, for £35.7 million to the property investment firm Topland Group. Earlier this year, the British bank also sold the Priory Group, a chain of care homes and hospitals, to the private equity firm Advent International in a deal worth £925 million.

The disposals haven’t helped to shore up the bank’s stock price. Since the beginning of the year, R.B.S.’s shares have fallen 49 percent, compared with a 9 percent drop for the FTSE 100 index.

RBS Corporate Finance and Sapient Corporate Finance advised R.B.S. on the transaction. Nomura Freshfields advised Heineken.

Article source: http://dealbook.nytimes.com/2011/12/02/r-b-s-sells-pub-business-to-heineken/?partner=rss&emc=rss

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