The Bankwatch

The Euro authorities (CEBS) reviewed 91 banks using two scenarios.  They review against benchmark and adverse scenarios.  Benchmark assumes modest economic recovery, and adverse assumes a double dip recession.  A host of assumption on GDP, unemployment etc were used to assess under those scenarios and are outlined in the document attached.

Spring forecast 2009 publication15048_en

Summaryreport_stress_tests

Bottom line – 7 banks failed to meet the tier 1 threshold of 6% under the adverse test.

1. Hypo Real Estate Holding (Germany)
2. ATEbank (Greece)
3. DIADA (Spain)
4. Espiga (Spain)
5. Banca Civica (Spain)
6. Unnim (Spain)
7. Cajasur (Spain)

This from the report:

As a result of the exercise, under the adverse scenario 7 banks would see their Tier 1 capital ratios fall below 6%, with an overall shortfall of 3.5 bn € of Tier 1 own funds. The threshold of 6% is used as a benchmark solely for the purpose of this stress test exercise.

What struck me though is the large number that are too close to call.  There are another 17 banks who came in within 1% of the 6% threshold for tier 1 capital.  This a total of 24 out of 91 banks – more than a quarter.   Eyeballing it, Spain, Greece and Germany are in worst shape (yes Germany).

If we look at those who are in single digits for tier 1 then that is well over 50%.  All in all not an encouraging assessment despite the claims that the Euro banks are in good shape.  They are still bound to the Euro governments for support to ensure  that the Euro area does not experience an economic collapse in event of another 2008.

FT have been running the CEBS announcement on European bank stress test live since 16:45 BST.  Biggest surprise the the small number of failures.  One Spanish bank is all I picked out so far.  Portugal, Italy all passed.  I have seen nothing on Greece as yet.   More later.

Internet has resulted in more than a fair share of amateur experts on everything from technology to economics.  it was interesting to watch the antics of the armchair group when back in May Apple market cap overtook Microsoft.  The end of an era, as reported by their technology reporter.

Fast forward to this morning, and look at the market caps.

No-one doubts the shift to mobile and I still love my iPhone.  However care should be taken in isolating daily jumps in emotional stock markets which can generate attention grabbing headlines that may well prove to be proof of a long term trend, but that must be tempered with the next days reality too.  Trends are not made in daily shifts.  That May 26th headline looks a bit lame this morning, with real doubts about the reputation management at Apple being expressed in the 8.95% drop. 

Apple reputation is at stake

Who knows how much this will translate into product quality issues at Apple.  That would take a brave predictor of the future.  Will my next phone be an iPhone or an Android?  Already after 6 months iPhone use I have shifted entirely to non-native app usage including browser based gmail using the new html5 app which is superb and features google docs too.  Same with youtube. 

So now my decision point in phone choice is solely hardware quality and little to do with native app quality, or even App (as in app store) quality.  So long as I have a quality browser that deals with html 5 I am app agnostic and simply want the best hardware, something android devices have severely lacked, but are improving steadily.  Of course development is still required to make the app work on iphone or android but the user experience will be similar in a browser on both presumably because html 5 is the consistent standard.  Which brings me back to the best hardware.  iphone currently win that battle, but last weeks antennagate indicates a potential chink in the armour.

I suspect that is why we see the large market sentiment drop on Apple this morning.  That may change by afternoon, however how Apple restore reputation on hardware quality over the coming months will still be  critical in the long term.

An interesting chart from ft.com that reviews marketing shifts in the UK.  While there is a general downward shift in marketing in Q2, the mix continues to shift away from traditional and towards internet.

Q2 2010 Bellwether: marketing spend down

The latest IPA/BDO Bellwether survey published today (12th July 2010) reveals that marketing budgets were revised down in Q2 amid uncertainty regarding the economic outlook, with around 20% of companies reporting a downward revision against 15% that reported an increase.  Business confidence has also dipped with positive sentiment the lowest for a year. However the rate of budget trimming was much slower than at the height of the downturn

This is an off-topic rant on iOS 4.  if you are not using iPhone please disregard

<rant>

As cool as the iphone is, there are some things that just don’t change under the covers, whether its windows, or apple OS and thats memory management.  This is lazy code development.

The example here is the use of memory in the fake multitasking implemented in iOS 4.  Multitasking is not multitasking in iOS 4 – it is restricted to 3 areas (audio, VoIP, and location data).  Read here for the experts outline.  So if it is not real, then at least do not unnecessarily use up my memory with the apps that are not multitasking by retaining them in the multitask bar. Here is why it bugs me. 

1) here is the memory status on my phone after 2 or 3 weeks without rebooting.  Note free memory is 10 MB.

2.  After running memory clean, I got another 42MB free.

3. But the real kicker.  I closed all the apps in the multitask bar which included no music apps, and 3 geo-location apps.  Those should be the only multitask apps with live api access.  The other 13 apps are just sitting in the multitask bar taking up memory as far as I can see.  How much?  I closed everything and ran mem status again.

4. 70 MB!!!  This is ridiculous.  There is not even a function in a non-jailbroken iphone to restrict which apps head into the multitask bar.

Ho hum.  I love iphone, but iOS 4 is a loser so far in my view when the single largest promise is such a failure.

</rant>

I have been intrigued lately by this new site which is in support of a new book that I am sure is worth checking out (its available on a pre-order basis)

For now we can assess from the web site.  The arguments are well articulated and many have appeared on this and other blogs over the last few years and it makes sense to encapsulate into a book because banks do not get it apparently despite efforts of the likes of netbanker and others to offer guidance.

Bank2.0 | Banking4Tomorrow

Brett King’s new book, BANK 2.0 – How customer behaviour and technology will change the future of financial services (Marshall Cavendish; publication date: March 29, 2010), exposes the massive flaws in the retail banking system due to dramatic shifts that have taken place in customer behaviour and the complete failure of banks to recognize and respond to those shifts. The key message is that the banking system is broken, not because of regulation, but because banks just don’t understand or care about their customers anymore.

However, in my view, the picture is bigger and actually worse than indicated.  The premise noted above would apparently only require banks to ‘get it’ and all would be well.

It just ain’t that simple though.  There are other factors that I have summarised before that are at play and which hinder otherwise rational bankers from doing the right thing in my view.

I happen to be a CNN fan, but that is immaterial.  CNN has the interesting dichotomy of financial success and ratings failure.  That is interesting because maybe the problem lies in the measurement.  All companies whether news or banks are going through a shift, and the old way of thinking about it will not work in the new times. 

CNN bolsters profits even as ratings slump | ft.com

CNN has received a drubbing from rivals on both sides of the political spectrum –News Corp’s right-leaning Fox News Channel and NBC Universal’s liberal MSNBC network.

…

“CNN really has to come up with a formula that will resonate with viewers and attract advertising dollars. News is ubiquitous,” said Brad Adgate, senior vice-president of research at Horizon Media, an independent media agency.

As CNN disposes of Campbell Brown, and before that Paula Zahn I wonder if they are aiming for the right target. The business ecosystem is different now, and maybe, just maybe CNN have some secrets that are the right approach.  Certainly their global reach is different and better than their competitors.  When I travel CNN and BBC are ‘the’ news sources.  CNN’s online properties are lucrative beyond their competitors. 

Relevance to Bankwatch:

When Banks compare themselves to competition are you using old metrics (market share, share of deposits share of mortgages, etc) or new metrics (in CNN situation profit). 

It just strikes me that CNN could possibly me an early indicator of a new shift in industrial measurement success.

This latest Wal-Mart thing just won’t go away.  This story on Virgins annual comment from Branson about starting a bank in Canada notes that Wal-Mart has applied successfully to start a bank here.  That makes Wal-Mart a potential Mexico, US, Canada bank.  Interesting. 

Virgin Money hasn’t given up on Canada | Globe and Mail

That’s not to suggest that he’s not working on it. Wal-Mart just recently received the nod from Canada’s financial services regulator to start a bank in Canada, having been working on the concept since at least 2006.