|Bid||0.0000 x 0|
|Ask||0.0000 x 0|
|Day's Range||3.3900 - 3.4400|
|52 Week Range||2.4700 - 7.1500|
|Beta (5Y Monthly)||1.48|
|PE Ratio (TTM)||4.15|
|Forward Dividend & Yield||N/A (N/A)|
|Ex-Dividend Date||May 23, 2019|
|1y Target Est||2.40|
A group of 16 euro zone banks on Thursday said a "truly European" unified payments system is expected to be up and running in 2022. "The solution aims to become a new standard means of payment for European consumers and merchants in all types of transactions including in-store, online, cash withdrawal and 'peer-to-peer' in addition to existing international payment scheme solutions," the banks said in a joint statement.
The startup had previously raised €10.8 million ($12.2 million) in total from Daphni, Kima Ventures, XAnge and various business angels. If you’re not familiar with Shine, the startup has been building a challenger bank for freelancers and small companies in France. When it comes to receipts, you can also open a card transaction and attach a receipt to that transaction.
The U.S. broker-dealer unit of France's Societe Generale has agreed to pay $3.1 million to settle charges of providing deficient data to U.S. regulators, statements from American authorities said on Wednesday. SG Americas made numerous deficient submissions in key trading information known as "blue sheet data" for more than five years, the U.S. Securities and Exchange Commission (SEC) said. The failures were largely due to undetected coding errors, resulting in missing or incorrect data for approximately 27.6 million transactions, the SEC said.
Societe Generale's Australian securities business faces restrictions on new customers if it does not comply with new licensing conditions related to client money laws, Australia's corporate regulator said on Monday. The Australian Securities and Investments Commission (ASIC) imposed the new conditions on the financial services licence of the Societe Generale business after charging it with criminal offences in March over alleged failure to separate clients' money in authorised bank accounts. If Societe Generale Securities Australia does not comply with the new conditions, the unit would need to refrain from charging brokerage fees for futures transactions involving client money and would have to stop taking on new customers if it involved receipt of client money, the watchdog said on Monday.
A U.S. judge on Thursday said institutional investors, including BlackRock Inc <BLK.N> and Allianz SE's <ALVG.DE> Pacific Investment Management Co, can pursue much of their lawsuit accusing 15 major banks of rigging prices in the $6.6 trillion-a-day foreign exchange market. U.S. District Judge Lorna Schofield in Manhattan said the nearly 1,300 plaintiffs, including many mutual funds and exchange-traded funds, plausibly alleged that the banks conspired to rig currency benchmarks from 2003 to 2013 and profit at their expense. "This is an injury of the type the antitrust laws were intended to prevent," Schofield wrote in a 40-page decision.
Equity markets rallied on Wednesday, lifted by enthusiasm for the European Union's plans for a 750 billion euro ($823 billion) recovery fund, but crude prices slid on concerns about unrest in Hong Kong over Beijing's proposed national security laws. The euro edged higher against the dollar on the European Commission's proposed stimulus plan to bolster economies ravaged by the coronavirus pandemic, which boosted risk appetite and reduced demand for safe-haven bonds and gold.
A banking lobby group called on Tuesday for the European Union to further soften a capital measure to ensure banks do not run out of headroom to help companies hit by the coronavirus crisis. The Association for Financial Markets in Europe (AFME) said the European Central Bank (ECB) has estimated that such measures will free up 120 billion euros ($131 billion) to support 1.8 trillion euros of additional lending. "The question is are these changes going to be sufficient to furnish banks with enough capacity to provide the support to their customers that is going to be needed in the coming downturn, let alone the recovery?" Michael Lever, head of prudential regulation at AFME, said in a blog post.
China presented a mixed picture of its recovery on Friday as it reported industrial production and retail sales data for April. Industrial production increased 3.9% year-on-year, beating analyst forecasts of a 1.5% increase prepared by Investing.com. Meanwhile, retail sales slumped 7.5% year-on-year, against predictions of a 7% decrease.
Investments banks cut jobs at the fastest pace in six years during a first quarter in 2020 even though the coronavirus pandemic triggered a surge in volatility and boosted revenues to a five-year high, data published on Wednesday by research firm Coalition showed. While investment banks have benefited from the short-term increase in trading, they are expected to be hit hard by a global recession triggered by the COVID-19 crisis and have already imposed hiring freezes. Coalition's data showed that the banks' revenues from fixed income, currencies, and commodities had their strongest first quarter since 2015, surging 20% to 22.7 billion dollars, as the financial turmoil from the coronavirus crisis prompted a spike in trading.
(Bloomberg Opinion) -- An outsider’s attempt to storm Paris has failed after the French establishment pulled rank. London-based hedge fund Amber Capital U.K. LLP didn’t win enough support to replace the board of Lagardere SCA, owner of the Hachette publishing house, at Tuesday’s annual meeting. Lagardere’s independent shareholders have regrettably missed the chance to have some influence over the company at a critical moment in its history.The shares fell upon the news, and it’s not hard to see why. The vote largely preserves an existing board that has overseen abysmal returns for investors. That poor performance over such a long period provided a sufficient argument for overhauling the company’s governance. But Amber, headed by former Societe Generale prop trader Joseph Oughourlian, also shone a light on the deficiencies of its so-called commandite partnership structure. This has kept managing partner and 7% shareholder Arnaud Lagardere richly rewarded, even as outside investors suffered. Meanwhile, the supervisory board went along with the situation and lacked the power to forcibly change management.The activist campaign gained traction amid the broad endorsement of proxy voting firms. That, however, prompted a reaction from Lagardere’s allies. Vivendi SA, the media conglomerate controlled by billionaire Vincent Bollore, took a big stake in the company last month. So did French investor Marc Ladreit de Lacharriere, Les Echos reported. They likely rejected Amber’s resolutions. The key poll results would otherwise have hung in the balance rather than being split roughly 60:40.It is a shame for outside shareholders that not even one of Amber’s eight nominees were elected. The board could have used an immediate injection of outsiders. Sometimes a partial victory is as good as it gets in activism. Might Bollore have been open to supporting a handful of candidates if the campaign had not become so heated? Perhaps. What happens next? Lagardere’s shares continue to suffer amid measures to curb the coronavirus, given the firm’s reliance on the advertising and travel businesses. So the board needs to be ready to defend the company against opportunistic bids for all or part of the business.The company would be in a stronger position if it ended the commandite, thereby rebooting the standalone investment case. That requires the board to make Arnaud Lagardere an offer, probably in the form of an additional stake, that persuades him to give up the structure. It would be a wrench to cede control of an institution that bears his family name. Much will depend on his personal financial situation, especially as the company is no longer in a position to pay the generous dividends he previously received.Both a sale of the commandite and any deal for all or part of the group would present challenging negotiations. Outside shareholders will want a board that delivers substantially better results for them than it has in the past. The French establishment may have saved Lagardere from outright humiliation, but this protest vote should not be ignored.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- Investors are particularly wary of European banks. Since February, shares in the region’s lenders have lost more than 40% of their value to hit lows not seen even in the depths of the global financial crisis. The concern is that a fragmented industry still grappling with meager profitability will be crippled by the pandemic-inflicted economic slump, notwithstanding all the government assistance.How banks are preparing for the inevitable buildup of bad loans isn’t helping confidence, either. Some took their bitter medicine in the first quarter, making large provisions that ate into profit. Others, perhaps encouraged by regulators, took a more benign view of the impact of the worst economic contraction in living memory.The result? While banks’ loan books differ from each other — with varying exposures to different geographies and industries, and to secured and unsecured borrowers — it will take time to convince investors that things are OK. The mountain of bad loans that plagued lenders after the previous crises took years to reduce. Whether lenders have become truly more prudent remains to be seen.Take France’s BNP Paribas SA. Its outlook is much brighter than that of the markets. The last of Europe’s big banks to report first-quarter earnings said on Tuesday that it only expects a drop of net income for the year of between 15% and 20%. Analysts have been forecasting a 30% drop or more for 2020.Profit fell by a third to 1.3 billion euros ($1.4 billion) in the first three months of 2020, after the bank set aside an additional 502 million euros for the hit from the pandemic, chiefly for its corporate bank and consumer finance businesses. For the rest of 2020, the lender sees net-interest income offsetting a decline in fees. At the same time, BNP said more cost savings would help soften the blow of what it has to set aside for deteriorating credit.The bank expects to lend more, filling a vacuum left by some banks that are less keen to extend credit into Europe. And it plans to capitalize on its shift into automation by not replacing employees who leave.Still, when asked what bad loans will look like over the coming quarters, Chief Financial Officer Lars Machenil told Bloomberg Television it’s “a tad too early to say.” On a call with analysts, executives also declined to share details on the assumptions for gross domestic product that the bank has used. For shareholders, this lack of clarity will remain a cause for concern. Government backing of companies with loan guarantees and grants will help, but the speed with which economic activity will resume is still largely unknown.And there are always the one-offs. BNP missed out on the Wall Street trading bonanza where its peers posted their best quarter in eight years. Instead, its equities revenue was wiped out. The firm lost $200 million on equity derivatives, and unspecified amounts on misfiring hedges and building reserves. Blaming European authorities for restricting dividends, which caused BNP’s bets on payouts to backfire, was a feeble attempt to deflect attention from the real issue. The bank was caught on the wrong side of the market.BNP said there were nine instances in which its trading profits or losses exceeded what its internal “value-at-risk” models had predicted, a sign of the strain the trading business came under in the quarter. Luckily, regulators have lent a hand, easing the capital requirements for banks that get caught out like this.Investors will also take comfort that the bank has a more diverse business than its domestic rival Societe Generale SA, which lost money on similar derivatives bets and plunged into the red for the quarter. BNP trades at 40% of its tangible book value, or twice SocGen’s multiple. The gap has widened, but it’s a stretch to say BNP is a safe bet.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Elisa Martinuzzi is a Bloomberg Opinion columnist covering finance. She is a former managing editor for European finance at Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Moody's Investors Service, ("Moody's") has today revised the outlook to negative from stable for the Baa1 long-term local currency and Baa3 long-term foreign currency deposit ratings of the following three Romanian banks: BRD -- Groupe Societe Generale (BRD), Banca Comerciala Romana S.A. (BCR) and Raiffeisen Bank SA (RBRO). Concurrently, Moody's affirmed the banks' Baa1 long-term local currency and Baa3 long-term foreign currency deposit ratings. The rating action follows Moody's decision to affirm the Government of Romania's long-term issuer ratings of Baa3 and change its outlook to negative from stable on 24 April 2020.
Banks are dusting off their no-deal Brexit plans as concerns deepen that Britain and the European Union won't agree a trade deal by December as the COVID-19 pandemic compounds fundamental disagreements over future relations. Financial services exports to the EU are worth about 26 billion pounds ($32.51 billion) a year, and although Britain left the bloc in January it still has unfettered access until the end of December under a transition agreement, allowing banks, asset managers and insurers to continue serving their biggest export market. If it wants an extension to the transition period, it must ask Brussels by the end of June.
(Bloomberg Opinion) -- Global banks, fitter than they’ve ever been, were going to be the doctors of the economy during the Covid-19 pandemic, Societe Generale SA Chief Executive Officer Frederic Oudea said confidently just a few weeks ago. For now, the French lender is looking more like a patient.Derivative bets that backfired and a surge in bad-loan provisions pushed SocGen into its first quarterly loss in almost eight years. Now it’s having to scramble to deliver yet more cost cuts in 2020. Ending the company’s overreliance on volatile trading won’t be easy.SocGen lost 200 million euros ($218 million) on equity derivatives linked to shares and corporate payouts, the bank said on Thursday, confirming a report by my Bloomberg News colleagues. Essentially, the bank’s bet went wrong because companies scrapped their dividend payments as economies shut down. The firm’s equities-trading revenue — typically its biggest source of trading income — was effectively wiped out as counterparty defaults and higher reserves for its structured products also took a toll.Oudea put this all down to the “extraordinary dislocation” of the financial markets in second half of March. BNP Paribas SA, another big French bank, reportedly lost money on similar trades. Yet Wall Street competitors including JPMorgan Chase & Co. and Citigroup Inc. managed to make more money in equity derivatives amid the mayhem of March. This is a reminder of how wild market swings can play out very differently between even the most sophisticated investment banks. Structured trades — complex financial instruments that use derivatives — don’t give you a business that you can rely on every quarter.There was better news for SocGen in fixed income, where revenue rose 32%, in line with peers. While that cushioned some of the trading blow, there was more pain elsewhere.Charges on two fraud-related cases — SocGen is one of the banks exposed to troubled Singapore oil trader Hin Leong Trading — and provisions for the probable buildup of bad loans cost the firm 820 million euros. All told, it posted a 326 million-euro loss, compared to a profit of 686 million euros this time last year.To protect profitability for the rest of 2020, the bank is eyeing another 700 million euros of net savings. It will deliver these by banning travel and events, which is not so difficult at present, and by cutting bonuses and freezing recruitment. The bank has promised not to make any new job cuts until September, however, which does limit its room for maneuver on reducing expenses during this particular economic crisis.At least the bank’s capital has held up. At 12.6%, its key common equity Tier-1 ratio still gives SocGen a comfortable buffer before it faces restrictions on how it can use its capital. Even if the ratio fell to 11%, and there were further bad-loan provisions of as much as 5 billion euros this year, that buffer should be preserved, the bank said.The trouble with SocGen, as I’ve argued before, is that under Oudea — the longest-standing CEO among Europe’s top lenders — it has made strategic missteps that aren’t easily reversible. Crucially, having scaled back in asset management, it is less diversified than its rivals. The bank’s traders showed in the quarter that they can’t always be relied upon, and pressure is building on SocGen’s commercial and consumer banking divisions because of rock-bottom interest rates and recession. With more bad loans on the way, SocGen is showing exactly where its weaknesses lie.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Elisa Martinuzzi is a Bloomberg Opinion columnist covering finance. She is a former managing editor for European finance at Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
"We're going to do it in a way where employees feel comfortable coming back in," said Mark Fedorcik, head of Deutsche Bank's investment bank, where around 84% of staff are currently working from home. Goldman Sachs had about 25% of its Hong Kong employees back in the office this week and has a target of 35% by May 11 and 50% by May 25, according to a source with direct knowledge of the plans.
Banks should rein in bonuses to boost their capacity to help businesses and households hit by the coronavirus crisis, the European Union's executive said on Tuesday. The European Commission set out a package of temporary "quick fixes" offering capital relief that would support extra lending potentially worth up to 450 billion euros ($490 billion)to companies struggling as a deep recession looms. "We are using the full flexibility of the EU’s banking rules and proposing targeted legislative changes to enable banks to keep the liquidity taps turned on, so that households and companies can get the financing they need," the EU's financial services chief Valdis Dombrovskis said in a statement.
(Bloomberg Opinion) -- When this week's guest on Masters in Business, James Montier, was hired at GMO UK Ltd., co-founder and chief strategist Jeremy Grantham told him to "pound the table" when he believes "things get cheap."That is just what Montier has been doing recently. A member of GMO’s asset-allocation team, Montier was arguing that it was time to buy during last month's sharp sell-off. He says that emerging markets looked cheap as did Europe. The reason for his enthusiasm was valuation: “This was one of those examples where prices and fundamentals were getting dislocated."We also discuss the impact of fear on investing. Montier mentions a study of people with damage to the amygdala, the part of the brain that registers emotions. This led these people to make better risk-based decisions because they were free of feelings. A few weeks ago, he wrote a piece on this called "Fear and the Psychology of Bear Markets."Before joining GMO in 2009, he was the co-head of global strategy at Societe Generale. Montier has written several books including “Behavioural Investing: A Practitioner’s Guide to Applying Behavioural Finance”; “Behavioural Finance: Insights into Irrational Minds and Markets” and “The Little Book of Behavioural Investing.”His favorite books are here; a transcript of our conversation is here.You can stream and download our full conversation, including the podcast extras, on Apple iTunes, Spotify, Overcast, Google, Bloomberg and Stitcher. All of our earlier podcasts on your favorite pod hosts can be found here.Next week, we speak with Christopher Whalen, an investment banker and former Federal Reserve researcher, and author of "Inflated: How Money and Debt Built the American Dream."This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Barry Ritholtz is a Bloomberg Opinion columnist. He is chairman and chief investment officer of Ritholtz Wealth Management, and was previously chief market strategist at Maxim Group. He is the author of “Bailout Nation.”For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Frédéric Oudéa has been the CEO of Société Générale Société anonyme (EPA:GLE) since 2008. This analysis aims first to...
(Bloomberg Opinion) -- How can we determine the state of the housing market when we lack data? That is the challenge facing those in the real-estate industry today, says this week's guest on Masters in Business, Jonathan Miller, co-founder of Miller Samuel and a master appraiser and consultant to the industry. The contract data we do have reflects transactions entered into a month or so ago, before most of the shelter-in-place orders were adopted.Miller’s expertise on real-estate appraisals and transactions comes from the data he assembles and analyzes. He has created a variety of real-estate data analytics for regional and national markets. He is sought after as the go-to appraiser for the most expensive dwellings in Manhattan. Miller, who also writes at the Matrix Blog, explains how real estate is responding to the lockdown: The industry move to online listing services, such as Street Easy and Zillow, is all but complete. But some online sites are removing crucial data from their listings, including “days since listed” that show how long a property has been on the market. We also discuss the challenges appraisers are having doing interiors inspections, now in New York City but eventually the rest of the country. Appraisals that are “desktop” by computers, or “curbside” drive-bys are becoming more common, he said.Part of the problem the residential market is facing is that the spring selling season most likely is lost; how soon the market returns to normal won't be known until the pandemic passes. Although virtual tours and live videos are an option for some buyers, the human element requires being physically present to see, walk through and even smell a home, which is usually a person’s largest purchase.His favorite books are here; a transcript of our conversation is available here. Our 2014 conversation with Miller can be found here; our 2016 MiB is here.You can stream and download our full conversation, including the podcast extras, on Apple iTunes, Spotify, Overcast, Google, Bloomberg and Stitcher. All of our earlier podcasts on your favorite pod hosts can be found here.Next week, we speak with James Montier, a member of GMO UK Lt.’s asset allocation team. Before joining GMO in 2009, he was co-head of global strategy at Societe Generale. He is the author of several books including “Behavioural Investing: A Practitioner’s Guide to Applying Behavioural Finance”; “Behavioural Finance: Insights into Irrational Minds and Markets” and “The Little Book of Behavioural Investing.”This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Barry Ritholtz is a Bloomberg Opinion columnist. He is chairman and chief investment officer of Ritholtz Wealth Management, and was previously chief market strategist at Maxim Group. He is the author of “Bailout Nation.”For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- Banks insist they’re in much better shape than they were during the run-up to the 2008 financial crisis. This time, as the coronavirus lockdowns wreck output, lenders can be “doctors of the economy,” in the words of one industry executive. True, banks have much larger capital buffers and better access to funding than was the case 12 years ago. How smart they've been at running their trading businesses remains to be seen.Some of Europe’s biggest banks have gone into the worst economic contraction since the Second World War sitting on huge piles of complex, risky trades whose fair value is hard to determine. These are the so-called Level 2 and Level 3 assets, the types of instruments that blew up in 2008.Valuations of Level 2 assets — mainly over-the-counter derivatives and illiquid stocks — are derived from using observable external measures, such as the price of similar instruments traded in the market. Level 3 assets are the most illiquid instruments, whose prices depend on inputs that aren’t observable to outsiders. Unlike Level 1 assets, which have easily viewed market prices, investors have to rely on banks’ internal models, and own judgments, to get a handle on the Level 2 and Level 3 exposure. Fair values for the same instrument might easily differ from firm to firm.The absolute size of these risky asset pots — totaling several hundred billions of dollars at many of the largest banks — is eye-watering. They dwarf the lenders’ capital by many multiples. Take Deutsche Bank AG: Its stock of Level 2 and Level 3 assets is more than 11 times its common equity Tier 1 capital. At Britain’s Barclays Plc, it is just shy of 11 times, at France’s Societe Generale SA it’s seven times and at Switzerland’s Credit Suisse Group AG it’s almost eight times. While plenty has been written about the inevitable build-up of bad loans in the Covid-19 downturn, these piles of interest-rate swaps and collateralized debt obligations need to be considered too. In the recent market rout, every major asset class was upended. U.S. stocks fell into a bear market at record speed, the dollar soared and safe-haven assets such as government bonds were rocked. How banks’ risky assets fared during the unprecedented turmoil is guesswork from the outside. All the banks listed in the table above declined to comment for this piece. One bank executive, who asked to remain anonymous, said the balances of banks’ Level 2 and Level 3 assets and liabilities may both have increased in the quarter, which would be a welcome sign that hedges have been working in the turmoil.For example, the decline in long-term interest rates would have increased the present value of years-old derivatives that swapped fixed rates for floating rates. Interest-rate derivatives tend to make up the bulk of the portfolios, and they may have offset declines in the prices of equities and loans. (That said, some hedges would have been for interest rates and inflation to rise, so they could be heavily in the red.)Less welcome is that banks will probably have to start moving things from Level 2 to Level 3 as price discovery becomes more difficult. Some may decide that observable measures through mid-to-late February are sufficient to keep assets in the Level 2 pot for the first quarter. Each bank has its own model. Lehman Brothers allegedly shifted mortgage-backed securities and other assets from Level 2 to Level 3 in 2008 in an effort to prop up their values.The market became hugely skeptical about these instruments during the financial crisis. A 2015 study published by the Journal of Accounting and Public Policy showed that investors valued Level 2 assets at 85 cents on the dollar and Level 3 assets at 79 cents during 2008. More troubling for the banks sitting on large stocks of Level 2 instruments is that an analysis by Wharton Research Scholars shows they were discounted even more significantly during the crisis than the more opaque Level 3 stuff.Investors should look at how frequently banks turn over their Level 3 assets, according to analysts at Berenberg, who published a report this week saying that France’s BNP Paribas SA, Credit Agricole SA and SocGen have the lowest turnover of Level 3 instruments among 12 banks they studied, which means the assets are probably “stickier and harder to sell.” Credit Suisse has the highest turnover among the group.The French banks, Credit Suisse, Barclays and Deutsche each hold Level 3 assets that are as large as, if not larger than, those of Citigroup Inc. and Bank of America Corp., even though the latter have much bigger trading businesses.The European Systemic Risk Board, the European Union body that monitors the financial system’s stability, has also noted the Level 2 and Level 3 threat — particularly the prospect for “opportunistic behavior” by managers and the overvaluation of assets. “If several banks were to be affected simultaneously at a time of acute fragility in the financial system, concerns could spread to the macroprudential domain and affect financial stability,” a February report from the board warned.What’s more, banks no longer have to use the crisis-era filters that protected their capital positions from movements in the fair value of assets they hold for sale. Without these filters, fair-value gains and losses are directly recognized in banks’ income statements even if they’re unrealized. And as my colleague Ferdinando Giugliano noted, significant risks may lie in smaller banks that may not have been as transparent in their Level 2 and Level 3 disclosures.Equally concerning is the faith being placed in banks’ risk management practices, especially since regulators started loosening the rules because of the Covid-19 crisis. In its 2019 review, the European Central Bank’s Single Supervisory Mechanism, its bank oversight arm, observed a worsening of internal governance, especially among the larger lenders. Regulator’s plans to tackle this area of weakness with a new set of capital rules for trading desks — known as the Fundamental Review of the Trading Book — was pushed back a year to January 2023 as part of the response to the coronavirus lockdowns. By then, it could be glaringly obvious how clever banks have been at managing risk.This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Elisa Martinuzzi is a Bloomberg Opinion columnist covering finance. She is a former managing editor for European finance at Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
French banks, Societe Generale and Natixis joined a cohort of European peers that announced plans to skip 2019 dividends following the European Central Bank's guidance to direct profits toward supporting the economy during the coronavirus crisis. France's third-largest bank Societe Generale said on Tuesday its board has decided to cancel dividend distribution for the 2019 financial year and to drop 2020 financial targets. The bank added it was currently analyzing potential scenarios and their impact on the bank's results from the crisis, as well as "potential corrective measures".
Banks and their supervisors must remain vigilant in light of the evolving nature of the COVID-19 epidemic to ensure that the global banking system remains financially and operationally resilient, global regulators said on Friday. The Basel Committee of banking supervisors from the world's main financial centres said it held a teleconference on Friday and supported measures taken by members so far.
(Bloomberg Opinion) -- The coronavirus outbreak is costing hedge funds billions, as a massive dislocation across asset classes causes a breakdown in traditional relationships. In the past 10 days, bonds, stocks and even gold — a hedge against the prospect of central banks’ helicopter money — are falling in tandem. Funds that rely on computer algorithms and historical global macro trends are hurting.Take the risk parity trade, made popular by Bridgewater Associates LP. Such strategies bet on a near-perfect match between stock rallies and bond sell-offs — and it has worked out very well for the past decade. As of early March, the weekly correlation between the S&P 500 and 10-year Treasury bonds was minus 0.84, the lowest since early 2015, Goldman Sachs Group Inc. estimates. A score of minus 1 would mean there is perfect negative correlation — that is, when stocks rise, bonds would always fall.But the coronavirus shook that landscape. The yield on 10-year Treasuries has doubled in recent days, from 0.54% on March 9 to 1.14% Thursday, even as the Federal Reserve slashed its benchmark rate to zero. We’re seeing the same thing in Japan. Stocks and bonds are falling, dragging the underlying thesis of the risk parity trade down with it.To make matters worse, these trades tend to use leverage to amplify bond exposure, because stocks have historically been more volatile. Risk parity — as the name implies — seeks to equalize a portfolio’s risk exposure in both asset classes. And boy, whoever said bonds are stable hadn't seen anything like the coronavirus. Take a look at the ICE BoA MOVE Index — the bond-market equivalent to the Chicago Board Exchange Volatility Index, or VIX — which is at its most volatile since 2009. It turns out even U.S. government bonds aren’t that safe.Or consider those statistical arbitrage funds that use computer algorithms to scour markets for tiny mispricings. These funds rely heavily on leverage to juice gains. But dollar funding is freezing up as banks hunker down for corporate clients and add to reserves to buffer against market volatility, margin calls and flash crashes. If a fund was only making, say, 10 basis points on illiquid trades, and its broker is now raising lending rates to pare back counterparty risk, it now faces the uncomfortable question of whether to liquidate its position.And forget about relative value trades, which seek to find arbitrage opportunities in mispriced pairs of highly correlated assets. In the currency world, this has unraveled as investors rush to the haven of the U.S. dollar. A sharp weakening of the Australian dollar this month, for instance, might seem overdone, as it tends to follow the Chinese yuan, which has been eerily stable lately. But as Societe Generale SA's currency strategist Kit Juckes wrote, the current market makes a mockery of overthinking trade ideas.Industry titans are getting caught wrong-footed. Bridgewater’s All Weather fund, which pioneered the risk parity trade, is down 12% so far this year. Meanwhile, Izzy Englander’s Millennium Management has closed more than 10 of its “trading pods.” Millennium relies heavily on relative value trades.And these are the pros, who have been through the Long-Term Capital Management bailout in 1998 and the Lehman Brothers Holdings Inc. bankruptcy a decade later. For those too young to remember such violent market dislocations, the bloodbath has probably been even worse. Considering the benchmark S&P Risk Parity Index already tumbled 16.5% this year, Bridgewater’s All Weather fund isn’t even doing that badly.Global markets managed to breathe a little Thursday as major central banks took out the big guns. The Federal Reserve revived a few emergency lending facilities put to sleep after the global financial crisis, and established currency swap lines with emerging markets such as Brazil and Mexico. But is it enough? We have all agreed central banks can’t stop the virus; at best, they can only blunt the blow to financial markets.Ray Dalio, Bridgewater’s founder, famously said that cash is trash. Now, Dalio, who is revered in China, has to get associates there to dispel rumors that his funds have “crashed.” As we’ve argued, the coronavirus is turning all of us — people and companies — into hoarders. All we want is cash. The hedge funds that borrowed piles of the stuff to buy everything around the world can't be feeling too comfortable about the weeks ahead.This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. She previously wrote on markets for Barron's, following a career as an investment banker, and is a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
French banks can weather the current economic storm unleashed by the coronavirus outbreak and are in no need of nationalisation despite the recent collapse in their share prices, the head of France's central bank said on Wednesday. French Finance Minister Bruno Le Maire said on Tuesday the government was prepared to inject capital into strategic companies and even nationalise them if necessary in the face of the financial market fallout from the outbreak. France's biggest listed banks - BNP Paribas, Credit Agricole and Societe Generale - have suffered sharp drops in their share prices in tandem with the broader market plunge.