European banks are frantically raising cash:
European banks, under pressure from regulators to bolster capital, are selling some of their fastest-growing businesses to competitors from outside the region — at the expense of future profit and economic growth.
Spain’s Banco Santander SA (SAN), Belgium’s KBC Groep NV (KBC) and Germany’s Deutsche Bank AG are accelerating plans to exit profitable operations outside their home markets. Santander, which said in October it needs to plug a 5.2 billion-euro ($6.9 billion) capital gap, sold its Colombian unit last week to Chile’s Corpbanca for $1.16 billion. Deutsche Bank is weighing options including a sale of most of its asset-management unit, while KBC may dispose of businesses in Poland.
The MF Global inquiry continues:
Henri Steenkamp, chief financial officer of MF Global, and Bradley Abelow, the firm’s president and chief operating officer, said in testimony prepared for a Senate Agriculture Committee hearing today that they still don’t know the location of the funds.
Jon S. Corzine, former chairman and chief executive officer of the broker, is scheduled to testify at the same witness table, after telling U.S. House lawmakers last week that he never intended to authorize any misuse of client money.
“I do not know why these funds cannot be accounted for, but based on the fact that no shortfalls had been reported to me previously, it appears that any irregularities were likely caused by events that occurred shortly before the bankruptcy filing,” Steenkamp said in the testimony.
I’ve expressed doubts about all this before, and continue to believe that if there actually were nefarious activities, then by now the trustee would be able to testify that “On November X there was a transfer from MF Account Y to a third party account Z instigated by Mr. A” … but that’s not happening. Instead, everybody’s muttering darkly about ‘missing funds’. I suspect that this is mostly, if not entirely, regulatory theatre.
Why do I suspect this? Because that’s what always happens. Nobody’s name will be cleared until nobody cares any more, and in three years we’ll just be left with a hazy memory of executive misconduct foiled by the heroic efforts of dedicated regulatory staff.
But now there’s a theory!
One working theory for the missing money is that it was taken from customer accounts and not replaced with equal collateral, as mandated by law, according to the people familiar with the investigation. Then, they said, after the funds were moved to the broker-dealer unit of MF Global they may have been used to pay margin on the repurchase agreements.
Unless the books are complete spaghetti, I don’t see how that could possibly take more than a day or two to confirm.
The FOMC statement was cheery:
Information received since the Federal Open Market Committee met in November suggests that the economy has been expanding moderately, notwithstanding some apparent slowing in global growth. While indicators point to some improvement in overall labor market conditions, the unemployment rate remains elevated. Household spending has continued to advance, but business fixed investment appears to be increasing less rapidly and the housing sector remains depressed. Inflation has moderated since earlier in the year, and longer-term inflation expectations have remained stable.
…
The Committee also decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.
…
Voting against the action was Charles L. Evans, who supported additional policy accommodation at this time.
DBRS confirmed BNA at Pfd-2(low):
The downside protection available to the Class AA Preferred Shares is approximately 66.0%, based on the market value of the BAM Shares as of November 25, 2011. The dividend coverage ratio is approximately 1.1 times. As a result, the Company will initially be able to fund the Class AA Preferred Shares distributions without relying on other methods for generating income or reverting to the sale of common shares in the Portfolio. In the event of a shortfall, the Company will sell some of the BAM Shares or write covered call options to generate sufficient income to satisfy its obligations to pay the Class AA Preferred Shares dividends.
The Pfd-2 (low) ratings of the Class AA Preferred Shares are primarily based on the downside protection and dividend coverage available to the Class AA Preferred Shares.
S&P has applied revised methodology to North American banks, which has had an effect on TD, BMO, CM, BNS and RY. NA escaped unscathed.
It was a strong day for the Canadian preferred share market, with PerpetualDiscounts winning 18bp, FixedResets up 12bp and DeemedRetractibles gaining 12bp. Volatility was good. Volume was a little below par.
| 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 | -0.3444 % | 2,038.3 |
| FixedFloater | 4.91 % | 4.66 % | 34,707 | 17.03 | 1 | -0.8709 % | 3,138.9 |
| Floater | 3.27 % | 3.56 % | 66,943 | 18.39 | 3 | -0.3444 % | 2,200.9 |
| OpRet | 4.92 % | 1.52 % | 57,286 | 1.42 | 6 | 0.5970 % | 2,482.8 |
| SplitShare | 5.80 % | 6.54 % | 61,860 | 5.11 | 3 | 0.4965 % | 2,528.5 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.5970 % | 2,270.3 |
| Perpetual-Premium | 5.50 % | 2.87 % | 89,932 | 0.85 | 18 | -0.0065 % | 2,166.4 |
| Perpetual-Discount | 5.23 % | 5.19 % | 104,401 | 15.09 | 12 | 0.1838 % | 2,318.2 |
| FixedReset | 5.10 % | 3.04 % | 219,116 | 2.49 | 64 | 0.1179 % | 2,342.9 |
| Deemed-Retractible | 5.03 % | 4.19 % | 192,062 | 3.31 | 46 | 0.1229 % | 2,230.0 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| SLF.PR.I | FixedReset | -1.51 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-12-31 Maturity Price : 25.00 Evaluated at bid price : 23.51 Bid-YTW : 4.91 % |
| SLF.PR.G | FixedReset | -1.26 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.81 Bid-YTW : 4.40 % |
| PWF.PR.O | Perpetual-Premium | -1.09 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2018-10-31 Maturity Price : 25.00 Evaluated at bid price : 26.21 Bid-YTW : 5.11 % |
| BAM.PR.J | OpRet | 1.15 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-31 Maturity Price : 26.00 Evaluated at bid price : 26.75 Bid-YTW : 3.77 % |
| IAG.PR.A | Deemed-Retractible | 1.29 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.79 Bid-YTW : 5.77 % |
| BAM.PR.O | OpRet | 1.54 % | YTW SCENARIO Maturity Type : Option Certainty Maturity Date : 2013-06-30 Maturity Price : 25.00 Evaluated at bid price : 25.63 Bid-YTW : 3.17 % |
| BNA.PR.E | SplitShare | 1.59 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2017-12-10 Maturity Price : 25.00 Evaluated at bid price : 23.00 Bid-YTW : 6.54 % |
| CIU.PR.B | FixedReset | 1.71 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-01 Maturity Price : 25.00 Evaluated at bid price : 27.37 Bid-YTW : 2.82 % |
| BAM.PR.X | FixedReset | 2.93 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-12-13 Maturity Price : 23.11 Evaluated at bid price : 24.93 Bid-YTW : 3.35 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| ENB.PR.D | FixedReset | 127,251 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-12-13 Maturity Price : 23.16 Evaluated at bid price : 25.18 Bid-YTW : 3.61 % |
| RY.PR.F | Deemed-Retractible | 109,371 | RBC crossed blocks of 50,000 shares, 39,000 and 11,000, al at 25.24. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-05-24 Maturity Price : 25.00 Evaluated at bid price : 25.21 Bid-YTW : 4.32 % |
| CM.PR.E | Perpetual-Premium | 97,905 | TD bought 17,100 from Nesbitt at 25.30, then crossed 40,000 at the same price. RBC crossed 14,400 at the same price again. YTW SCENARIO Maturity Type : Call Maturity Date : 2012-10-31 Maturity Price : 25.00 Evaluated at bid price : 25.28 Bid-YTW : 5.07 % |
| TRP.PR.C | FixedReset | 66,073 | RBC crossed 40,500 at 25.70. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-12-13 Maturity Price : 23.44 Evaluated at bid price : 25.67 Bid-YTW : 2.89 % |
| CIU.PR.B | FixedReset | 66,000 | Nesbitt crossed 65,000 at 27.55. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-01 Maturity Price : 25.00 Evaluated at bid price : 27.37 Bid-YTW : 2.82 % |
| BMO.PR.L | Deemed-Retractible | 35,212 | TD crossed 30,000 at 27.20. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-05-25 Maturity Price : 26.00 Evaluated at bid price : 27.19 Bid-YTW : 2.53 % |
| There were 27 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| GWO.PR.M | Deemed-Retractible | Quote: 25.80 – 26.20 Spot Rate : 0.4000 Average : 0.2604 YTW SCENARIO |
| MFC.PR.C | Deemed-Retractible | Quote: 21.11 – 21.53 Spot Rate : 0.4200 Average : 0.3177 YTW SCENARIO |
| PWF.PR.O | Perpetual-Premium | Quote: 26.21 – 26.49 Spot Rate : 0.2800 Average : 0.1937 YTW SCENARIO |
| CU.PR.B | Perpetual-Premium | Quote: 25.70 – 26.00 Spot Rate : 0.3000 Average : 0.2254 YTW SCENARIO |
| MFC.PR.A | OpRet | Quote: 25.25 – 25.44 Spot Rate : 0.1900 Average : 0.1209 YTW SCENARIO |
| SLF.PR.I | FixedReset | Quote: 23.51 – 23.70 Spot Rate : 0.1900 Average : 0.1237 YTW SCENARIO |