Allied Irish has joined the cortege:
Ireland’s High Court said Allied Irish Banks Plc can be taken over by the government without shareholder approval, as the lender became the fourth bank to fall under state control since 2008.
Finance Minister Brian Lenihan secured approval from the Dublin-based court today to inject 3.7 billion euros ($4.8 billion) into the lender by Dec. 31 and raise its stake to 92 percent from 19 percent, the Finance Ministry said in a statement. Allied Irish, Ireland’s biggest company by market value in 2007, recorded its biggest share price drop in 22 months in Dublin trading. Worth almost 21 billion euros at its peak, the bank’s market value today was 341 million euros.
In Hungarian news:
Fitch cut Hungary’s long term foreign currency credit rating to BBB- with a negative outlook on Thursday, warning that the lack of a coherent medium-term fiscal strategy undermined confidence in the sustainability of public finances.
“The reversal of pension reforms and lack of a coherent medium-term fiscal strategy undermines confidence in the long-term sustainability of the public finances,” it said in a statement.
The Bank of Canada has published a few working papers of note lately … I haven’t gone through them carefully (they’re in a HUGE pile, marked “later”), but the first one is by H. Evren Damar, Césaire A. Meh and Yaz Terajima, titled Leverage, Balance Sheet Size and Wholesale Funding:
Some evidence points to the procyclicality of leverage among financial institutions leading to aggregate volatility. This procyclicality occurs when financial institutions finance their assets with non-equity funding (i.e., debt financed asset expansions). Wholesale funding is an important source of market-based funding that allows some institutions to quickly adjust their leverage. As such, financial institutions that rely on wholesale funding are expected to have higher degrees of leverage procyclicality. Using high frequency balance sheet data for the universe of banks, this study tries to identify (i) if such a positive link exists between the assets and leverage in Canada, (ii) how wholesale funding plays a role for this link, and (iii) market and macroeconomic factors associated with this link. The findings of the empirical analysis suggest that a strong positive link exists between asset growth and leverage growth, and the use to wholesale funding is an important determinant of this relationship. Furthermore, liquidity of several short-term funding markets matters for procyclicality of leverage.
The second one is by Étienne Bordeleau and Christopher Graham, titled The Impact of Liquidity on Bank Profitability:
The recent crisis has underlined the importance of sound bank liquidity management. In response, regulators are devising new liquidity standards with the aim of making the financial system more stable and resilient. In this paper, the authors analyse the impact of liquid asset holdings on bank profitability for a sample of large U.S. and Canadian banks. Results suggest that profitability is improved for banks that hold some liquid assets, however, there is a point at which holding further liquid assets diminishes a banks’ profitability, all else equal. Moreover, empirical evidence also suggests that this relationship varies depending on a bank’s business model and the state of the economy. These results are particularly relevant as policymakers devise new standards establishing an appropriate level of liquidity for banks. While it is generally agreed upon that banks undervalued liquidity prior to the recent financial crisis, one must also consider the tradeoff between resilience to liquidity shocks and the cost of holding lower-yielding liquid assets as the latter may impact banks’ ability to generate revenues, increase capital and extend credit.
OSFI released a final version of the Capital Adequacy Requirements Guidelines A-1 and A for deposit taking institutions.
Volume in the Canadian preferred share market eased off to merely average levels, but the rally spluttered along, with PerpetualDiscounts up 1bp and FixedResets gaining 22bp.
There is an early close on the Toronto Stock Exchange tomorrow, as all the players have to rush home and tell their mommies how hard they work. It is also the last day of trading for settlement in 2009, which is important for tax purposes, so watch the clock as closely as if you worked for a fundco!
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
|||||||
| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1852 % | 2,310.4 |
| FixedFloater | 4.81 % | 3.52 % | 30,601 | 18.98 | 1 | -1.3100 % | 3,495.6 |
| Floater | 2.59 % | 2.36 % | 56,449 | 21.34 | 4 | 0.1852 % | 2,494.6 |
| OpRet | 4.79 % | 3.28 % | 71,127 | 2.37 | 8 | 0.1296 % | 2,395.7 |
| SplitShare | 5.35 % | 1.25 % | 880,611 | 0.96 | 4 | 0.1010 % | 2,444.6 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1296 % | 2,190.6 |
| Perpetual-Premium | 5.70 % | 5.51 % | 155,902 | 5.34 | 27 | 0.0612 % | 2,012.7 |
| Perpetual-Discount | 5.41 % | 5.46 % | 290,751 | 14.71 | 51 | 0.0141 % | 2,020.9 |
| FixedReset | 5.22 % | 3.39 % | 352,467 | 3.12 | 52 | 0.2169 % | 2,269.7 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| MFC.PR.C | Perpetual-Discount | -1.91 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-12-23 Maturity Price : 20.55 Evaluated at bid price : 20.55 Bid-YTW : 5.52 % |
| NA.PR.L | Perpetual-Discount | -1.52 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-12-23 Maturity Price : 23.02 Evaluated at bid price : 23.26 Bid-YTW : 5.27 % |
| BAM.PR.G | FixedFloater | -1.31 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-12-23 Maturity Price : 25.00 Evaluated at bid price : 22.60 Bid-YTW : 3.52 % |
| GWO.PR.I | Perpetual-Discount | 1.14 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-12-23 Maturity Price : 21.25 Evaluated at bid price : 21.25 Bid-YTW : 5.32 % |
| SLF.PR.G | FixedReset | 1.19 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2020-07-30 Maturity Price : 25.00 Evaluated at bid price : 25.60 Bid-YTW : 3.72 % |
| FTS.PR.G | FixedReset | 1.30 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2013-10-01 Maturity Price : 25.00 Evaluated at bid price : 26.40 Bid-YTW : 3.19 % |
| POW.PR.D | Perpetual-Discount | 2.19 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-12-23 Maturity Price : 22.70 Evaluated at bid price : 22.90 Bid-YTW : 5.46 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| SLF.PR.D | Perpetual-Discount | 61,159 | TD crossed blocks of 16,000 and 12,000, both at 20.12. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-12-23 Maturity Price : 20.07 Evaluated at bid price : 20.07 Bid-YTW : 5.57 % |
| BAM.PR.R | FixedReset | 60,736 | Nesbitt sold two blocks of 10,000 to RBC, both at 25.60, then crossed 25,000 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-12-23 Maturity Price : 23.30 Evaluated at bid price : 25.58 Bid-YTW : 4.58 % |
| SLF.PR.A | Perpetual-Discount | 34,254 | TD crossed 20,000 at 21.59. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-12-23 Maturity Price : 21.37 Evaluated at bid price : 21.37 Bid-YTW : 5.59 % |
| CM.PR.D | Perpetual-Premium | 31,967 | TD crossed 25,000 at 25.25. YTW SCENARIO Maturity Type : Call Maturity Date : 2011-05-30 Maturity Price : 25.25 Evaluated at bid price : 25.22 Bid-YTW : 4.63 % |
| CM.PR.H | Perpetual-Discount | 29,202 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-12-23 Maturity Price : 22.27 Evaluated at bid price : 22.44 Bid-YTW : 5.34 % |
| BAM.PR.K | Floater | 28,500 | Nesbitt crossed 10,000 at 18.20. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-12-23 Maturity Price : 18.20 Evaluated at bid price : 18.20 Bid-YTW : 2.88 % |
| There were 31 other index-included issues trading in excess of 10,000 shares. | |||