Browsing all articles tagged with balance sheet

Banks In The Dark Over $15 Billion of Promised Rosneft M&A business

Banks that assist Russian oil company Rosneft finance its $55 billion buyout of rival have been left waiting for their payback a share in $15 billion in asset sales projected to follow the deal.

State oil company Rosneft’s takeover of this year aimed to generate a major oil group producing more oil than however it also tightened the Russian government’s grip on the country’s energy sector.

The asset sales promised by Rosneft Chief Executive Igor Sechin would offload less-profitable businesses to turn the company into the major oil player the CEO has stated he wants it to be. The delay demonstrate Rosneft has a lot on its plate integrating and that the sales are on the back burner.

Rosneft had dangled the juicy divestment mandates at the banks in exchange for a $29.8 billion loan the largest in Russia’s history on good terms, all the lending banks are waiting. We thought asset sales and refinancing bonds would kick start straight following the closing.

Rosneft’s slow motion is annoying the banks as they would earn fat fees from advising the oil giant on the asset sales this year, which would assist boost M&A revenues in an otherwise arid deal making landscape.

M&A activity across all sectors is losing 7 percent in Europe, Africa and Middle East since January partly due to the impact of the euro zone crisis on business confidence.

Banks that uphold big balance sheets throughout the financial crisis have been hoping to use this muscle to win lucrative M&A advisory business from competitor which had to shrink partly to meet tough European capital rules.

Banks frequently use their balance sheets to offer cheap loans to corporate clients to secure higher margin business such as share or bond issues or M&A work.

Big balance sheets helped Deutsche Bank and Barclays to achieve number 2 and 3 rankings in M&A league tables previous year, challenging US rival Goldman Sachs which had the top slot.


European Central Bank ‘s Coeure sees euro zone inflation straying off course

Executive Board member Benoit Coeure said that ECB will monitor euro zone inflation carefully over the next 18 months because it threatens to sink further below the ECB’s 2 percent target.

Euro zone inflation fall in March for a third straight month to an annual rate of 1.7 percent, compared to the ECB’s target of close to, however not above 2 percent.

Coeure told reporters that they have a rate of inflation which looks set to move away from the ECB’s 2 percent target over the coming 18 months, adding that a slump in inflation was as worrying as a climb.

Coeure further said that it is still fairly close to the 2 percent target however it is moving below that goal and this is something the board of governors is clearly following because they have a goal of 2 percent.

Current economic statistics is in line with the ECB’s projections for the bloc this year and coming with no bad surprises, saying this justified the bank’s resolution this week not to lower rates, despite doubts regarding weak domestic demand.

The ECB held rates at a record low 0.75 percent on Thursday the maximum level between the world’s major central banks, however ECB chief Mario Draghi stated the central bank stood prepared to act to boost the stalled economy.

Underlining the difficulties receiving credit flowing in the alliance, Coeure stated many banks were discouraged from granting new loans because their balance sheets remained weighed down with assets acquired before the financial crisis which had since lost value.

Though the ECB has provided huge amounts of liquidity to banks, Coeure stated the central bank did not have a position to play in mitigating the risks from banks’ pre-crisis legacy assets.

Monetary policy cannot be the main tool used to attempt and resolve difficulties with credit flows. Monetary policy can contribute however it cannot completely resolve these problems.

The ECB is concerned its low rates are not getting households and companies in the euro zone margin, mainly as banks’ funding costs in crisis-hit countries are higher than those in the core countries pushing up loan costs.


European Central Bank’s Knot backs Jeroen Dijsselbloem comments on bank rescues

Klaas Knot, ECB Governing Council member stated on Friday that there was a little wrong with Euro group chairman Jeroen Dijsselbloem’s method for dealing with future euro zone banking crises.

Dijsselbloem, the head of the euro zone’s finance ministers and similar to Knot a Dutchman stated on Monday that the rescue program decided for Cyprus the first to compel a levy on bank deposits would serve as a model for future crises.

Those comments in which Dijsselbloem afterwards rowed back on, encouraged a market sell off and led two other European Central Bank policymakers, including executive board member Benoit Coeure said on Tuesday that Cyprus was a exceptional case.

However Klaas Knot, who sits on the bank’s main decision making body stated that there is little wrong with Dijsselbloem’s comments.

The content of his comments comes down to an approach which has been on the table for a longer time in Europe. This approach will be component of the European liquidation policy.

Spokesman for the central banker stated Knot’s remarks, reported by Dutch daily Het Financieele Dagblad were precise.

They threaten to additional muddy the waters over an concerns that continues to divide senior politicians and monetary policymaker in the currency alliance who should foot the bill for cleaning up the region’s under performing banks.

In his speech on Thursday night in Amsterdam, Knot said euro zone banks required to clean up their balance sheets by winding down loss making procedures.

He further said initially, there has to be transparency regarding losses in the banking sector. Secondly, banks have to wind down their loss making operations.

Under the Cyprus bailout the bank depositors whose accounts hold more than 100,000 euros face heavy losses.


Euro Smacked 6 week low on ECB loan repayment, Italian elections

Global equity markets recoil on Friday, recuperating some of the preceding session’s sharp losses, however the euro hit a six week low verses the greenback on rehabilitated worries regarding the health of the euro zone’s financial system.

As remarks from Federal Reserve officials allayed fears that the US central bank would limit its stimulus measures.

However for the week, the S&P 500 posted its first weekly turn down for the year. Risk related assets have been upset this week by suggestions the Fed could scale back its monetary support earlier than predictable and by weak euro zone statistics that dashed hopes of an early recovery in the recession hit region.

In a indication that some euro zone banks may still required support, the ECB stated just over 61 billion euros which is equal to $81 billion of the 530 billion it lent at the height of the bloc’s crisis previous year will be pay back when banks get the first opportunity coming week.

That was well beneath the 130 billion euros anticipated by traders and means there remains further than enough cash in the banking system to keep downward stress on money market rates. The news sent the euro to a six week low verses the greenback.

Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington said that the less than expected payback of loans means the ECB’s balance sheet will contract at a slower than probable pace. It further undermined confidence in the state of revival in the euro zone.


17-nation currency Rallies to Highest Since 2011 as ECB Balance Sheet Shrinks

17-nation currency hit the highest level verses the greenback in 14 months as the European Central Bank’s balance sheet contracted as the Federal Reserve stated it would carry on pumping money into the US economy.

Euro added for a second week, its first back to back climb this year, amid statistics that showed Europe’s economy may be improving. The yen knock down against the dollar for a 12th straight week, the greatest since at least 1971, amid bets Prime Minister Shinzo Abe will select a new central-bank governor who will increase monetary stimulus.

Sireen Harajli, a foreign exchange strategist in New York at Credit Agricole SA said that the move in euro has been very dramatic, the statistics in general have been coming up pretty fair in Europe. He believe they are demonstrating the economy in Europe right now at least is stabilizing.

The ECB’s balance sheet knock down to 2.93 trillion euros which is equal to 4 trillion dollars in the week ended Jan. 25, the weakest since February 2012. The central bank has not purchased sovereign debt for 45 straight weeks.

Banks pay back 137.2 billion euros of emergency three year loans to the ECB during this week, the Frankfurt based central bank stated in a statement Jan. 31. Another 3.5 billion euros are probable to be returned subsequent week’s.

The ECB won’t boost its 0.75 percent standard interest rate at its meeting coming week.

The euro rose on Friday as a strengthening US jobs market and bets that the Federal Reserve will maintain stimulus to ensure the recovery boosted investors risk appetite.


Bernanke Perceive Further Scope for Easing to Encourage US Economy

Federal Reserve Chairman Ben S. Bernanke stated the central bank has the capability to take further steps to enhance the economy.

Bernanke stated in a letter dated Aug. 22 to California Republican Darrell Issa, the chairman of the House Oversight and Government Reform Committee that there is possibility for additional action by the Federal Reserve to ease financial conditions and reinforce the economy.

Bernanke repeated the declaration from the Federal Open Market Committee’s Aug. 1 conference that the Fed will offer further accommodation as required. He has a prospect to expand on his vision in an Aug. 31 dialogue at the Kansas City Fed’s annual economic meeting in Jackson Hole, Wyoming.

Bernanke in the letter repeated comments to Congress that monetary policy is not a solution and that other government policy makers should examine steps they could take to promote growth.

Request if political stress would limit the Fed’s capability to lift interest rates, Bernanke stated that the central bank will be resolute in its devotion to encourage maximum employment and stable prices and that he is confident the Fed has the tools to regulate the stance of policy at the suitable time as the strength of the recovery progress.

The Fed chief stated preceding stimulus including the two rounds of quantitative easing in which the Fed bought $2.3 trillion of securities have assist to encourage a stronger recovery than otherwise would have occurred, and to prevent the prospect of a slide into depression.

Bernanke stated the central bank’s most current balance sheet program that is known as Operation Twist, is still working its way through the economic system in the program, the Fed is transaction $667 billion of short term securities for longer term debt.

He further said monetary policy changes naturally take some quarters to achieve their full effect on economic activity.