Currencies

China capital curbs reflect buyer’s remorse over market reforms

Last year the reformist head of China’s central bank convinced his Communist party bosses to give market forces a bigger say in setting the renminbi’s daily “reference rate” against the US dollar. In return, Zhou Xiaochuan assured his more conservative party colleagues that the redback would finally secure coveted recognition as an official reserve currency […]

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Capital Markets

Mnuchin expected to be Trump’s Treasury secretary

Donald Trump has chosen Steven Mnuchin as his Treasury secretary, US media outlets reported on Tuesday, positioning the former Goldman Sachs banker to be the latest Wall Street veteran to receive a top administration post. Mr Mnuchin chairs both Dune Capital Management and Dune Entertainment Partners and has been a longtime business associate of Mr […]

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Banks

Financial system more vulnerable after Trump victory, says BoE

The US election outcome has “reinforced existing vulnerabilities” in the financial system, the Bank of England has warned, adding that the outlook for financial stability in the UK remains challenging. The BoE said on Wednesday that vulnerabilities that were already considered “elevated” have worsened since its last report on financial stability in July, in the […]

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Currencies

China stock market unfazed by falling renminbi

China’s renminbi slump has companies and individuals alike scrambling to move capital overseas, but it has not damped the enthusiasm of China’s equity investors. The Shanghai Composite, which tracks stocks on the mainland’s biggest exchange, has been gradually rising since May. That is the opposite of what happened in August 2015 after China’s surprise renminbi […]

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Financial

Hard-hit online lender CAN Capital makes executive changes

The biggest online lender to small businesses in the US has pulled down the shutters and put its top managers on a leave of absence, in the latest blow to an industry grappling with mounting fears over credit quality. Atlanta-based CAN Capital said on Tuesday that it had replaced a trio of senior executives, after […]

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Categorized | Banks

BoE stress tests reactions: ‘No room for complacency’


Posted on November 30, 2016

The results of the Bank of England’s toughest ever stress tests are in, and it’s safe to say results have been mixed; RBS was forced to present a new plan to bolster its capital position, while Barclays and Standard Chartered also failed to meet some of their minimum hurdles.

Here’s a roundup of what analysts and investors are saying in response:

Lucy O’Carroll, chief economist at Aberdeen Asset Management, said that, despite some weaknesses, the tests show the banking sector overall is “broadly well capitalised” :

The individual vulnerabilities show that the job of ensuring our banks are capable of withstanding shocks remains challenging. The tests give banks no opportunity for complacency. Which is a good thing. This year has illustrated how the apparently unthinkable can happen and we all need banks that can absorb the inevitable unforeseen shocks.

Raul Sinha at JP Morgan stressed the relatively positive results for Barclays and Standard Chartered.

Both Barclays and StanChart were not required to submit a new capital plan which is the key outcome from a market perspective.

Overall, we conclude that capital return expectations from Lloyds and HSBC will remain underpinned following this test and believe investors should overweight Lloyds given the potential to positively surprise on capital return at at 4Q’16 or a highly accretive acquisition.

Meanwhile, UBS’s Jason Napier didn’t see much new in RBS’s plan to bolster its capital position by at least £2bn.

We believe this plan, which includes cost cuts, asset disposals and further capital management, mostly is the formal inclusion of measures planned and known by the market. We expect a bigger cost and restructuring plan in February – with associated capital costs – and colour around non-core, low return assets within the Commercial Bank, including £8.5bn in risk-weighted assets.

With uncertainty around timing and cost of Williams & Glyn and Department of Justice residential mortgage-backed securities, we think RBS remains under pressure to deliver on core profits, principally by achieving further significant cost cuts.