ft.com/alphaville All times are London time
News
There were a few cheeky titbits in an otherwise workmanlike Goldman Sachs note published Wednesday on US banks.
First up for a teasing: French banks. As we know, US banks are sitting ducklings in the middle of the European maelstrom. This is mostly bad news. But there is some good news for Wall Street, of course. Goldman reckons that European banks’ portfolio of US dollar denominated assets will be in the shop window.
European deleveraging "“ a US bank benefit
We believe aggregate US dollar funded assets held by French banks exceed $100 bn, which we expect them to begin to shed. Areas of reduction will most likely focus on (1) aircraft leasing, (2) commercial real estate, (3) equipment financing, and (4) leveraged loans. We believe the US banking system has sufficient capital and liquidity to absorb these assets.
That forecast gently dropped, Goldman moves on. Next up for a gentle prodding: the Vampire Plankton, Morgan Stanley. Its CDS price — which has fallen sharply in the last few days — has not gone unnoticed at Goldman, it seems (emphasis ours):
Morgan Stanley (Neutral, $20 12-m PT) has been among the most negatively impacted firms in the difficult market environment, with its shares down at the low end of its peer group (48% ytd vs XLF down 26%) and its CDS spreads widening to 600 bp-plus versus 200 bp in early August. Although the reasons for declines in share price and gapping of its CDS spreads are varied and potentially overdone, the unfortunate reality of vastly wider credit spreads may be felt in segments of Morgan Stanley's business where counterparty credit and cost to hedge are decisive trading factors. Thus, while the driver of spread widening is unclear, any mid- or long-term continuation of industry-wide CDS spreads is likely to have a real impact on business trends.
Finally, Goldman weighs in on the mystery of US banks’ European exposure. We tried to get a handle on the different ways banks account for this and concluded that we don’t really know anything. Banks ostensibly use the same reporting procedures but it turns out that the way these are adapted for regulatory filings varies from firm to firm, making it hard to see the true exposure picture, never mind separate net and gross. Goldman is similarly wary:
Gross exposures to the periphery are significant; net appears more manageable. However, history says using net exposure assumes high quality of collateral and that hedges work in "tail scenarios," neither of which are certain. We expect US banks to give further detail on both in the coming quarter.
We’re looking forward to it.
Related links: Banks face new European stress tests – FT The mystery of US banks' European exposure – FT Alphaville
WP Cumulus Flash tag cloud by Roy Tanck and Luke Morton requires Flash Player 9 or better.
Or select a previous briefing:
© The financial Times Ltd 2011 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
var oob = new Advert(AD_OOB);oob.init(); var adPop = new Advert(AD_CORPPOP);adPop.init(); var adRefresh = new Advert(AD_REFRESH);adRefresh.init(); clientAds.fetch(AD_MACROAD); clientAds.render(AD_MACROAD); clientAds.fetch(AD_MARKETINGRIB); clientAds.render(AD_MARKETINGRIB); clientAds.fetch(AD_TLBXRIB); clientAds.render(AD_TLBXRIB); clientAds.fetch(AD_DOUBLET); clientAds.render(AD_DOUBLET); clientAds.fetch(AD_INTRO); clientAds.render(AD_INTRO); clientAds.fetch(AD_HLFMPU); clientAds.render(AD_HLFMPU); clientAds.fetch(AD_HMMPU); clientAds.render(AD_HMMPU); clientAds.fetch(AD_TRADCENT); clientAds.render(AD_TRADCENT); clientAds.fetch(AD_MARKETING); clientAds.render(AD_MARKETING); clientAds.fetch(AD_BANLB); clientAds.render(AD_BANLB); clientAds.fetch(AD_MPUSKY); clientAds.render(AD_MPUSKY); clientAds.fetch(AD_MPU); clientAds.render(AD_MPU); clientAds.fetch(AD_WDESKY); clientAds.render(AD_WDESKY); clientAds.fetch(AD_NRWSKY); clientAds.render(AD_NRWSKY); clientAds.fetch(AD_ARTBOX); clientAds.render(AD_ARTBOX); clientAds.fetch(AD_FTHBOX); clientAds.render(AD_FTHBOX); clientAds.fetch(AD_TLBX); clientAds.render(AD_TLBX); clientAds.fetch(AD_FMBUT2); clientAds.render(AD_FMBUT2); clientAds.fetch(AD_LHN); clientAds.render(AD_LHN); clientAds.fetch(AD_MKTBX); clientAds.render(AD_MKTBX); clientAds.fetch(AD_OOB); clientAds.render(AD_OOB); clientAds.fetch(AD_POP); clientAds.render(AD_POP); clientAds.fetch(AD_BXBAR); clientAds.render(AD_BXBAR); clientAds.fetch(AD_DKTALRT); clientAds.render(AD_DKTALRT); clientAds.fetch(AD_DSKTICK); clientAds.render(AD_DSKTICK); clientAds.fetch(AD_PRNT); clientAds.render(AD_PRNT); clientAds.fetch(AD_INV); clientAds.render(AD_INV); clientAds.fetch(AD_MBATOP); clientAds.render(AD_MBATOP); clientAds.fetch(AD_MBABOT); clientAds.render(AD_MBABOT); clientAds.fetch(AD_MBALINK); clientAds.render(AD_MBALINK); clientAds.fetch(AD_SBHEAD); clientAds.render(AD_SBHEAD); clientAds.fetch(AD_FTNT); clientAds.render(AD_FTNT); clientAds.fetch(AD_1x1); clientAds.render(AD_1x1); clientAds.fetch(AD_CURRCON); clientAds.render(AD_CURRCON); clientAds.fetch(AD_CURRBOX); clientAds.render(AD_CURRBOX); clientAds.fetch(AD_CORPPOP); clientAds.render(AD_CORPPOP); clientAds.fetch(AD_REFRESH); clientAds.render(AD_REFRESH); clientAds.render(); setCurrentTime(1232358020000) Assanka.wp.processClipThis(); var gaJsHost = (("https:" == document.location.protocol) ? "https://ssl." : "http://www."); document.write(unescape("%3Cscript src='" + gaJsHost + "google-analytics.com/ga.js' type='text/javascript'%3E%3C/script%3E")); try { var pageTracker = _gat._getTracker("UA-1874623-1"); pageTracker._trackPageview(); } catch(err) {} if (typeof Inferno == 'undefined') { var eid = (document.cookie.match(/EID=(\d+)/)) ? document.cookie.match(/EID=(\d+)/)[1] : 'unknown'; pageTracker._trackEvent('Debug events', 'sr23715', 'Load failure for '+eid); setTimeout(function() { var d = new Date(); document.getElementById('infdebug23715').innerHTML = (''); }, 1000); } var _sf_async_config={uid:14181,domain:"ft.com"}; _sf_async_config.sections = "alphaville"; _sf_async_config.authors = "John McDermott"; (function(){ function loadChartbeat() { window._sf_endpt=(new Date()).getTime(); var e = document.createElement('script'); e.setAttribute('language', 'javascript'); e.setAttribute('type', 'text/javascript'); e.setAttribute('src', (("https:" == document.location.protocol) ? "https://a248.e.akamai.net/chartbeat.download.akamai.com/102508/" : "http://") + "static.chartbeat.com/js/chartbeat.js"); document.body.appendChild(e); } var oldonload = window.onload; window.onload = (typeof window.onload != 'function') ? loadChartbeat : function() { oldonload(); loadChartbeat(); }; })(); Read Full Article »