US eyes larger stake in Citi Citigroup is pressing for a new capital injection that would raise the US government's stake in the troubled bank to as much as 40% but stop short of outright nationalisation. The talks come after Citi's shares fell last week to below $2 on nationalisation fears. A decision is expected within weeks but could come sooner if Citi shares fall further. Citi executives and regulators at the weekend discussed plans for the government and other shareholders to convert up to $75bn of preferred shares into common stock. Citi could also try to raise fresh equity with a public share offering. See this article online.
http://ftalphaville.ft.com/blog/2009/02/23/52752/us-eyes-larger-stake
| EU leaders turn to IMF European leaders called Sunday for a doubling of the IMF's resources, to $500bn, to tackle escalating problems in eastern Europe, reports the NYT. In a statement clearly aimed at hedge funds and other private pools of capital, the leaders said "all financing markets and participants" must be regulated and vowed to clamp down on tax havens. The FT meanwhile quotes former IMF officials warning the Fund is too small to cope with the prospect of contagion from eastern Europe's problems. More FT analysis here. See this article online.
http://ftalphaville.ft.com/blog/2009/02/23/52751/eu-leaders-turn-to-i
| Asia agrees $120bn currency pool Asian nations will form a $120bn pool of forex reserves that can be used by countries to defend their currencies in an expansion of efforts to battle fallout from the global financial crisis, reports Bloomberg. Finance ministers from Japan, China, South Korea and 10 Southeast Asian nations agreed to the fund at a weekend summit in Phuket, Thailand. The amount is 50% more than was proposed last May, and a broadening of the current arrangement called the Chiang Mai Initiative that allows only bilateral currency swaps. No date was set for completion of the new pool. See this article online.
http://ftalphaville.ft.com/blog/2009/02/23/52750/asia-agrees-120bn-cu
| Swiss warn US on bank secrecy Switzerland's finance minister has accused US authorities of "shock" tactics to compel holders of undeclared UBS accounts to come forward, but warned that court action to discover the names of thousands of clients would not succeed. Hans-Rudolf Merz, finance minister and Switzerland's head of state under its rotating presidency said the disclosure last week of some 250-300 account holders suspected of tax fraud did not mean UBS, or the Swiss government, would bow to a separate US drive to identify all the bank's American clients with offshore accounts in Switzerland. See this article online.
http://ftalphaville.ft.com/blog/2009/02/23/52749/swiss-warn-us-on-ban
| RBS to slash balance sheet Royal Bank of Scotland will this week unveil plans to shrink its balance sheet by up to 25% over three to five years as Stephen Hester, chief executive, sets out a strategy to return the state-controlled bank to the private sector as a smaller retail and commercial bank focused on the UK and US, reports the FT. Hester is to announce Thursday a new, separate division for assets worth £250bn-£300bn to be wound down or sold over the next few years.The Times says the shakeup could mean up to 20,000 job losses. See this article online.
http://ftalphaville.ft.com/blog/2009/02/23/52748/rbs-to-slash-balance
| RBS, Lloyds agree to UK scheme RBS will this week become the first bank to sign up to the UK government's proposed asset protection scheme, which will cap the bank's future losses on loans worth £200bn-£250bn. Lloyds Banking Group, which includes HBOS, is also expected to seek cover for hundreds of billions of pounds of assets. Treasury will in coming days finalise details of the scheme, the centrepiece of the government's plan to kick-start bank lending. See this article online.
http://ftalphaville.ft.com/blog/2009/02/23/52747/rbs-lloyds-agree-to-
| Fears rise on Russian foreign debt Western bankers are increasingly anxious about Russian companies' ability to repay $500bn in foreign corporate debt after the government said this month it was suspending a $50bn bail-out programme due to dwindling reserves. Bankers are demanding clarity after Igor Shuvalov, first deputy prime minister, said in a closed-door briefing this month that Russia was going to switch focus from bailing out tycoons to supporting the banking system. See this article online.
http://ftalphaville.ft.com/blog/2009/02/23/52746/fears-rise-on-russia
| Hands buys out investors Guy Hands has bought three cash-strapped investors out of their holdings in his Terra Firma private equity fund at a heavily discounted price that underlines concerns about its indebted investments, notably music group EMI. The highly unusual move means Terra Firma's management company, tightly controlled by Hands, has taken over the three investors' €25m ($32m) holding in his latest buy-out fund. The price was thought to be close to zero, underlining the investors' desperation to escape their obligation for an additional €25m of commitments not yet called in. See this article online.
http://ftalphaville.ft.com/blog/2009/02/23/52745/hands-buys-out-inves
| Cerberus to close HK office Cerberus, the US buyout firm, is in advanced discussions to close its Hong Kong office in the latest sign of industry giants scrambling to reduce costs amid the global economic slowdown. Cerberus's move comes less than two years after it opened the Hong Kong office in expectation of a steady rise in China-related business. See this article online.
http://ftalphaville.ft.com/blog/2009/02/23/52744/cerberus-to-close-hk
| Northern Rock to launch drive Northern Rock is to embark on a £14bn mortgage sales drive to resuscitate Britain's sluggish housing market, fuelled by a hefty injection of fresh government funding for the state-owned lender to be announced Monday. Northern Rock will split into a "good bank/bad bank" structure, allowing it to lend about £5bn of new mortgages in 2009 and £9bn from 2010, depending on market demand and funding, the government said Sunday night. See this article online.
http://ftalphaville.ft.com/blog/2009/02/23/52743/northern-rock-to-lau
| UAE to lend Dubai up to $10bn The UAE is to lend Dubai $10bn to ease the emirate's debt repayment schedule in an effort to rescue the struggling economy. The UAE central bank subscribed to half a $20bn five-year bond programme launched by the Dubai government, which said the deal would enable it to meet its financial obligations. The unsecured paper yields a 4% dividend. The loan should ease the cost of insuring against a default, which in recent weeks saw five-year credit default swaps on Dubai debt rising to levels similar to Iceland. See this article online.
http://ftalphaville.ft.com/blog/2009/02/23/52742/uae-to-lend-dubai-up
| De Beers mothballs diamond mines The world's biggest and most valuable diamond mines have been mothballed since the start of the year when De Beers put its Botswana production on hold as sales of the precious stones slumped. The mines, source of half the group's supply of rough diamonds and nearly a quarter of the world's by value, sold no diamonds in November and very little in the subsequent two months. Global sales, which trade through auction houses and private placements rather than commodity markets, have fallen to a standstill. See this article online.
http://ftalphaville.ft.com/blog/2009/02/23/52741/de-beers-mothballs-d
| Barton to head McKinsey In Categories: People Posted at 04:21 by Gwen Robinson McKinsey & Co, the management consultancy, will announce on Monday that Dominic Barton, its Shanghai-based Asia head, has been chosen by his peers to take over as managing director. McKinsey's 400 senior partners elected Barton, 46, to serve a three-year term when Ian Davis retires in June. He defeated long-time contender Michael Patsalos-Fox in the final run-off and will be the 11th partner to head McKinsey since it was founded in 1926. See this article online.
http://ftalphaville.ft.com/blog/2009/02/23/52740/barton-to-head-mckin
| Weekend catch-up In case you missed these stories: - Kirin sets sights on 49% stake in San Miguel
Kirin on Friday unveiled plans to acquire up to 49% of San Miguel Brewery in a deal that highlights the Japanese beer company's overseas ambitions. - Lafarge and Saint-Gobain launch rights issues
Lafarge and Saint Gobain, two of France's biggest construction materials companies, on Friday announced rights issues of €1.5bn ($1.9bn) each, underlining the deteriorating global outlook for construction. - Japan's Norinchukin to raise up to $20bn
Norinchukin, the agricultural lender that pools the funds of Japan's farm and fishery co-operatives, on Friday unveiled plans to raise up to Y1,906bn ($20.3bn) in new capital to offset its exposure to securitisation products. - Moody's lowers rating on Qantas
Qantas on Friday became the latest international airline to be downgraded by Moody's, which warned about the Australian carrier's debt, falling profits and cash flow. - Fears for BofA and Citi rattle markets
Fears that Citigroup and Bank of America would be nationalised shook global markets on Friday, prompting the Obama administration to reaffirm its commitment to private ownership of financial institutions. _________ See this article online.
http://ftalphaville.ft.com/blog/2009/02/23/52739/weekend-catch-up-25
| Overnight markets: Weak start Asian stocks were mixed on Monday, although technology and finance companies rose largely on speculation that the US government will raise its stake in Citigroup to ease the global financial crisis. Futures on the US S&P500 Index rallied 1.2% following the Citi news, after the index dropped 1.1% on Friday.
Asian markets (Mon)
04:10am GMT
Nikkei down 51.49 (-0.69%) to 7,364.89
Topix down 8.41 (-1.14%) 731.12
Hang Seng down 230.27 (1.81%) at 12,929.44 US markets (Fri)
DJIA down 100.28 (-1.34%) at 7,365.37
Nasdaq down 1.59 (-0.11%) at 1,441.23
S&P500 down 8.89 (-1.14%) at 770.05 European markets (Fri)
FTSE100 down 129.31 (-3.22%) at 3,889.06
Eurofirst 300 up 28.06 (-3.67%) at 735.74 Currencies
03:37 GMT
€/$ 1.2923 (1.2583)
$/¥ 92.87 (94.10)
£/$ 1.4523 (1.4215) Commodities (updated)
03:35 GMT
Brent Crude (Apr09) up $0.06 at $41.95
Light Crude (Mar09) $0.14 at $40.17
100 Oz Gold (Apr09) down $13.20 at $989.00
Copper (3M 24hr) down $15.00 at $3,225.00 10-year government bond yields (%)
US 2.81 (2.80)
UK 3.41 (3.51)
Germany 3.01 (3.09)
Japan 1.26 (1.27) Sources: FT, Reuters See this article online.
http://ftalphaville.ft.com/blog/2009/02/23/52724/overnight-markets-we
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