Sandy fiasco reveals investor-customer disconnect
By Robert Cyran The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Hurricane Sandy revealed a massive disconnect between the shareholders of electric utilities and their customers. The storm that caused up to $50 billion of damage across the American East Coast left 8 million people without power – and extra ornery. Politicians are hopping mad, too. Yet the market values of the region’s three listed monopolies barely took a hit. That may be rational today, but in the long term cannot last.
The combined market value of PSE&G, Consolidated Edison and Northeast Utilities, which serve customers in New Jersey, New York and Connecticut, has fallen less than 3 percent since Sandy first churned up in the Caribbean. Investors appear to be calculating that customers can’t take their business elsewhere. And while politicians may talk tough, they won’t crack the whip. Instead, extraordinary storm-related costs to the utilities will be deferred and eventually recouped through higher rates.
VW relaunches mandatory convertible market
By Neil Unmack
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Volkswagen is dusting off a sexy financing model. The German carmaker’s 2.5 billion euro mandatory convertible bond is the first from a European corporate since 2009. For issuers looking to protect their credit rating, the route could be more widely followed.
HSBC still aiming at its moving targets
By Peter Thal Larsen
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Stuart Gulliver is sticking to his targets. That makes him stick out. While many bank chiefs have scaled back their financial ambitions, HSBC’s chief executive is persisting with the goals he set for the lender 18 months ago. But if one-off charges for UK mis-selling and U.S. money-laundering keep repeating, HSBC may yet need to lower its sights.
Japan risks consumer electronics death spiral
By Peter Thal Larsen
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
“We are among the losers in consumer electronics.” That frank assessment by Panasonic president Kazuhiro Tsuga sums up the state of Japan’s once world-beating electronics industry. The economy is partly to blame for slumping demand for Japanese gadgets, but so are rivals like Apple and Samsung. The worry is that the financial squeeze undermines product development, leaving Japan ever further behind.
Barclays needs a decisive UBS-style strategy shift
By George Hay and Dominic Elliott
The authors are Reuters Breakingviews columnists. The opinions expressed are their own.
Barclays needs a decisive, UBS-style change of direction. While rivals like Deutsche Bank and Credit Suisse saw revenue in fixed income, currencies and commodities spike in the third quarter, Barclays’ normally strong FICC business underperformed. Worse, the results also included two fresh regulatory probes. It shows why new chief executive Antony Jenkins should consider changes as radical in tone as UBS’s root-and-branch restructuring.
UBS euphoria overdone
By Dominic Elliott
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Investors are taking a rosy view of UBS’s ability to execute a radical strategy to hack back its investment bank. The Swiss wealth manager’s market capitalisation is up 4.4 billion Swiss francs ($5 billion) since the plan emerged. While UBS deserves applause, it may be getting too much credit up front.
Three reasons China’s banks deserve their derating
By John Foley
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
China’s banks enjoy valuations most Western rivals would kill for. But compared with the earnings they are throwing off, their share prices look miserly. The country’s seven biggest banks trade at an average of 1.2 times their most recently reported book value, according to Reuters Eikon, despite aggregate returns on equity above 20 percent. Five years ago, lesser returns allowed them to command multiples above 4.5 times book. Though the derating is harsh, it’s justified.
Frankenstorm is salient risk management reminder
By Rob Cox
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
The Frankenstorm battering the east coast of the United States provides a salient lesson in the virtues of risk management. When it comes to natural disasters, there’s no such thing as too much preparation. The same is true in business, particularly banking: calamities often strike without warning – and there’s no such thing as too much capital.
UBS rethinks the impossible
By Dominic Elliott
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
UBS is going where no bank has yet dared to tread. The Swiss wealth manager and investment bank is poised to reveal a radical strategy that could see it pull out of fixed-income trading. Such a plan would be expensive and slow to execute – that’s why rivals typically think such moves are impossible. But the decision could prove an industry game-changer.
Credit Suisse keeps on finding more costs to cut
By Dominic Elliott
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Credit Suisse is used to leading the pack on cost-cutting. The Swiss bank has been ahead of its peers since last year, when it made the first of three announcements that will see it reduce expenses by a cumulative 3 billion Swiss francs before the end of next year. Like an over-eager surgeon, it’s at it again – opening the European banks’ results season by announcing another 1 billion francs of cuts by the end of 2015. But with unrelenting pressure for more capital, investment banking remains a tough business.
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FEATURED VIDEO
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Breakingviews: Wall St gets a thumpNov. 7 - The election of Elizabeth Warren to the Senate shows the anti-bank message still resonates strongly in the U.S., says Reuters Breakingviews.Video
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Breakingviews: Americans head to the pollsNov 6 - Rob Cox, Edward Hadas and Richard Beales discuss the likelihood of a clear winner emerging from the U.S. presidential election and his priorities from the get-go.Video
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