Mission somewhat accomplished. Read more »
At Yahoo’s shareholder meeting today, a scuzzy shareholder [named George Polis] said to Marissa Mayer, “I’m Greek and I’m a dirty old man, and you look attractive.” He then asked about a dividend. [BI, HP]
One reason that you’re in for seven lean years in the investment banking business is that bank capital requirements are going up due to Basel III, and “capital is expensive” in some loose sense, so banks will have less money to use to make loans and/or pay you. Some people think that this is mostly bull, because capital is not actually any more “expensive” than any other form of funding, though those people often actually don’t care that much about paying you so it may not be worth listening to them. In any case here is the abstract to an amusing new paper by Karlo Kauko of the Finnish central bank, because yes I make a point of being up to date on everything published by the Finnish central bank:
Bank managers often claim that equity is expensive relative to debt, which contradicts the Modigliani-Miller irrelevance theorem. … An opaque bank must signal its solvency by paying high and stable dividends in order to keep depositors tranquil. This signalling may require costly liquidations if the return on assets has been poor, but not paying the dividend might cause panic and trigger a run on the bank. The more equity has been issued, the more liquidations are needed during bad times to pay the expected dividend to each share.
Don’t worry if you don’t get that name dropping, it doesn’t matter. Also don’t worry too much about the paper itself, which is amusing but also sort of nuts.* The basic idea to come away with is that bank equity is where the bank puts all its hopes and dreams, and that, if banks are more or less reflections of hopes and dreams, the people who provide the real funding for the banks – repo counterparties and clearing banks and suchlike – are going to be inordinately influenced by reading equity tea leaves. Because what else are they going to read? Read more »
Banking Industry Should Feel Free To Slash, Hip Check General Population Into Boards Again, Says BarCap AnalystBy Bess Levin
The Fed plans to notify financial institutions that passed a second round of stress tests that they can begin returning money to their shareholders, an important sign of the banking system’s speedy recovery. Banks are expected to review the Fed’s findings with their boards and could put out a flurry of announcements as early as Friday afternoon detailing their plans. In the first wave, JPMorgan Chase increased its dividend payout to 25 cents a share and announced plans to buy back $15 billion of stock. Wells Fargo said it will pay a special dividend of 7 cents per share and plans to purchase 200 million shares. “It signals the banking industry is back on its feet,” said Jason Goldberg, a banking analyst Barclays Capital. “Once out of the penalty box, we look for the dividend payout ratios and earnings to grow over time.” [Dealbook]