Wall Street Not Worried About Citi - shares edge up

At a Barclays' investor conference,Citigroup's Chief Financial Officer,John Gerspach,said that Citi's Q3 revenue would probably fall by 15% on the year.Barclays' own analyst,Jason Goldberg,had forecast a 12% drop in Citi revenue,so Mr.Gerspach wasn't saying anything the Street didn't already know.The decline is related to lower market volatility,meaning people are trading less often,being more confident in their positions as US presidential election and Brexit fears have abated.*
Mr.Gerspach also expressed optimism about Citi's investment banking business.As well,he is pleased that regulatory reform is on the table in Washington,although the talks are going more slowly than he would like,with several finance-related government posts being vacant.*
Citigroup shares were up 1.54 on the day as of press time,or 2.33%,to 67.71,with the yield at 1.89%.*
Citigroup,Inc (C)

Merger of Middle East Banking Powerhouses

The National Bank of Abu Dhabi is set on merging with FGB (First Gulf Bank) to create a 175 billion dollar institution.It will be the biggest bank in the Middle East and North Africa.The combined bank will be larger than Germany's Deutsche Bank.*
Both banks are substantial holdings of the royal families of the UAE.The deal is the first big merger since Abu Dhabi made an effort to diversify away from oil and its declining value.The merger,involving a share swap,could result in a cost savings of about 30%.The mammoth transaction,resulting in the most sizeable lender in the Middle East,could spur more financial mergers and acquisitions in the region.*
Wisdom Tree Middle East Dividend Fund (GULF)

Leading Banking Analyst Cautions Investors During Downtrend

Unless buying materialises,says Richard X. Bove,vice president of equity research at Rafferty Capital,LLC in a note to investors,there is nothing to stop a massive move to the downside due to the lack of liquidity in the markets.At this moment,I would strongly caution to remain on the sidelines until a definable source of new funding is determined to maintain or bolster stock prices.
At its base,the key problem is that the historic protections that once existed in the markets to prevent massive downslides have been removed.This country's claim that it has deep and liquid markets is being put to the test.*
Mr.Bove is bitterly critical of the plethora of new regulations that have been imposed on the banking industry post-financial crisis.These include the US Congress passing the Dodd-Frank Act;Basel III,Supplementary Leverage Ratio;Liquidity Coverage Ratio;and the Orderly Liquidation Authority;and the Total Loss-Absorbing Capital Regulation.The impact of these regulations,rules and pieces of legislation has been the complete takeover of the banking industry by the government.In my view,the industry has been effectively nationalised,Dick Bove said in a December 2014 interview,in which he also predicted that banking industry regulations would limit the earnings of banks in the long term.It is these regulations that have also ultimately restricted the flow of funds to the point of making the markets vulnerable to collapse.

HSBC,Changing With the World

HSBC,Europe's largest bank,has reported first half pretax profits of 13.6 billion dollars on a strong Hong Kong performance,up from 12.3 billion a year ago.The bank was helped by its brokerage customers using the Stock Connect link to the Shanghai stock exchange earlier in the year,when Chinese shares were still hot.Indeed,HSBC may move its headquarters from London to Hong Kong,pending completion of a review of the matter by year's end.
By contrast,its businesses slowed in Europe,the US and other emerging markets apart from Hong Kong.HSBC is selling its underperforming Brazilian operations to Banco Bradesco SA for 5.2 billion.It is also considering selling its lagging Turkish business to the Netherlands' ING Group.
HSBC set aside 1.3 billion to cover legal costs stemming from regulatory investigations into the rigging of foreign exchange markets by banks worldwide.On the plus side,its investment bank saw a 21% rise in FX trading revenue.The British retail bank also did well.You should work on the assumption that it is a bank we would like to keep,said chief executive Stuart Thomson Gulliver,because it's got excellent returns from what we see going forward and the UK is a profitable banking market.*
HSBC is in the process of moving its UK retail operations headquarters to Birmingham within three years.This British bank will be renamed and have a staff of 22,000.*
We don't see anything alarming coming from what has happened recently in China,Mr.Gulliver added,but there will be some muted impact on our business both from the sell-off in the stock market and from the more reduced economic activity we have seen.Now it's less than two months since our investor update where we unveiled our actions to capture the value of our international network in the changed world.Executing these actions is our number one priority.Work is proceeding in all of these areas,in particular those aimed at reducing risk-weighted assets,cutting cost,and turning around or disposing of underperforming parts of the business.
In order to maintain broad-based growth and a diversified profile,we expect around half of incremental risk-weighted assets to be redeployed to Asia,with the rest spread across Europe,the Middle East,and North America including Mexico,Mr.Gulliver noted in a conference call following the earnings release.*
HSBC wants to boost its growth in Asia by expanding its insurance business in the Pearl River Delta region of China,and seeks to return its global banking and markets division to profitability.Overall,it wants to save 4.5-5 billion dollars annually by the end of 2017,shedding 8,000 jobs in the UK and 25,000 worldwide,although it has added 2,200 compliance staff.
HSBC has increased shareholder value by initiating a five billion dollar buyback and raising its dividend by 124% to 0.28 a share.*
HSBC Holdings PLC ADR (HBC)

Out in the Cold:Microsoft Abandons Windows XP

Unless you are a big bank or subscribe to a cyber security service that has committed to protecting you,you are as of now on your own if you are a Windows XP user.This blog tested whether Norton Security,made by Symantec Coporation,would protect a client's Windows XP machine,and it seems to be robustly doing so.Norton's Quick Scan feature indicated several new Windows-oriented checks were being carried out.Despite this,Norton strongly recommends that its clients switch to a new operating system.*
Some 20-30% of Windows machines still run the Windows XP operating system.This includes computers in millions of homes and businesses.Most ATMs are still running on Windows XP.Microsoft has failed to convince many people to shell out the cost to upgrade to its newer products.They are satisfied with the old reliable system they have always used.Windows XP is still utilised by police departments,banks and law offices,among many other places.Microsoft's new products just aren't very popular.*
The big banks,including Citi,PNC,Bank of America and Chase,are all paying Microsoft to keep securing their ATMs while they go through the process of adjustment.About 95% of ATMs are relying on Windows XP and they,along with countless others,need security patches as new threats to the OS arise.It is believed that,without the security updates,hackers will worm their way into Windows XP computers and disrupt them,while also stealing the owner's personal data.*
Symantec(SYMC),Microsoft(MSFT)

ATM Technology Being Upgraded

To better serve their customers and drum up business,banks are adding new technology to their ATMs.If not presently,you may soon be able to use an ATM touch screen to:
1.Apply for a loan.
2.Video conference with a banker even outside of business hours.
3.Pre-stage ATM transactions with a mobile phone at your location,so that it is almost complete when you get to the ATM.
4.Pay bills.
5.Send money to friends.
6.Increase your ATM withdrawal limit.
7.Withdraw one,five and 10 dollar bills,not just 20s and 50s.
8.Do retirement planning.
One possible drawback of the more sophisticated machines is longer wait times at ATMs if someone is video conferencing or doing multiple transactions.

What Bernanke's Testimony Means

The stock market is at all-time highs,but markets tend to seize on what they want to hear and run with it.A case in point is Federal Reserve Chairman Ben Bernanke's testimony before Congress last week,which was assessed by Mohmamed El-Erian,CEO of leading asset manager PIMCO.This testimony is rather dovish,Mr.El-Erian said.Bernanke was saying that 1.The unemployment situation is unsatisfactory.2.Don't worry about inflation;it is too low.3.We have a number of instruments we can use. He's trying to strike a difficult balance between confidence and excessive risk-taking.The journey is full of ifs.The market extrapolates this to the destination.Markets are different from the Fed.They want to know where we are going,and when we're going to get there.1.The unaddressed cost and risk of unconventional policies.2.You've convinced other central banks to follow you,but does it make sense if everybody does it? The underlying economy is still fragile.The fundamentals with the technicals would call for lower yields from here.1.The real economy is weak.2.Banks have reduced risk exposure,so their ability to earn is less.It will be interesting to see how sustainable their earnings are. Mr.El-Erian,who formerly managed the Harvard endowment, is also co-Chief Investment Officer of PIMCO,along with founder Bill Gross.

Asia This Day:Qantas and Emirates Join Forces;Japanese Hiring Up

Japan's Tankan business confidence survey was up less than expected,from -12 in February to -8 in March,although it was the best quarterly improvement in two years.At the same time,China also reported a slight miss in estimates as the Purchasing Managers Index rose to 50.9 in March from 50.1 in February.HSBC's China PMI reading rose to 51.6 from 50.4,a little stronger improvement than the government's version.
Asian markets were lower on the mildly disappointing data,with the MSCI Asia-Pacific index falling 0.74% in early Monday trading.Markets in Hong Kong,Australia and New Zealand remain closed till Tuesday for the Easter holiday.
Chinese authorities told Beijing and Shanghai to place new restrictions on home buying in an attempt to limit skyrocketing prices.Homeowners were not to be granted credit to buy second or third homes.
Australia's airline Qantas and the UAE's Emirates Air have inaugurated their new alliance with a symbolic first flight .It will now be possible for Qantas passengers to fly to 65 international destinations from Melbourne and Sydney with one connecting flight in Dubai,as opposed to only five destinations in a previous alliance with British Airways.This will shave two hours off of flights to Europe.
Bookings to Europe are up six-fold on the new routes,which Goldman Sachs believes will be worth about Australian 90 million dollars to Qantas-or US 94 million.Qantas has cut its deficit from A262 million to A91 million in the first half of the fiscal year on retiring old planes and cutting unprofitable routes.CEO Alan Joyce has pledged to return the carrier to profitability.
For the first time in three years,Japan Airlines graduated about a thousand new hires in a JAL hangar in Tokyo.The workers stood stock-still in formation at the ceremony Monday.
Nomura Securities has hired the most new graduates in four years on the strength of the banking industry.

Consultant:The Outlook for Banking-should you buy bank shares

For the next 10 years,we probably will be seeing much tighter regulations for banks,says Dino Kos of consultancy Hamiltonian Associates.The returns probably will be lower for the next decade.Regulators want to see capital cushions-and the more the better-to absorb losses,and that's gonna have an effect on return on equity. Some of the banks are shrinking,but I don't see that the industry or big banks as a whole are going to be shrinking.For banks with legacy issues,such as Bank of America with housing,it's gonna take several quarters-perhaps a number of years-to resolve them,Mr.Kos believes. Hamiltonian Associates Ltd. is a consultancy specialising in analysis of recent economic and political developments in a relevant,timely and incisive way.It has associates in New York,London and Singapore.Dino Kos is former Executive Vice President of the New York Fed. Bank of America(BAC)