For some strange reason the media reports of ING’s latest commitment to return government equity is tracked as “Banking Strategy” no doubt a nonsensical use of our blog’s typonym
While JP Morgan is not allowed more buybacks at these prices by the government regulations, restricting the same for all banks, BofA is the one under a tough strain as a market facing bank is struggling to compete its comeback touch after having spent 3 years under very loose government controls for its 83% equity. While the strings aroung RBS’ neck seem much more tighter, there is hardly a difference unless the banks can commit to their payout / buyback operations to bring back equity demand to the shares or so they feel.
ING voluntarily decided to commit the same, no doubt under govermnment advisement stressing the use of “No dividend” policy as “Strategy” for the global bank that has already sold most of its profitable international assets and seemingly some of its loans to fill the hole in its large lending book which in Europe was leveraged by banks to as much as 50% times with a Tangible Common equity of 2%. BofA has to satisfy Basel 3 RWA targets of 6% TCE as also ING, lus limited surcharges for use of whole sale funding from overnight markets which has come down for both banks since the start of 2010 to 2011 when Basel 3 was published this year earlier and a later addition of a liquidity surcharge over the capital surcharge of 1-2.5% for global SIFI institutions
The bank says its currentTier I is 9.6% probably designed on Basel 2 assessment rules, i.e. closer to 7.2% and TCE below 5% at a rough guessstimate. The bank has paid back 7 out of 10 of its bailout dollars to the AAA rated Dutch government. Bailout conditions to separation of banking and insurance businesses would still apply after it returns the $4.5 bln it still has to pay. thebank’s Cost income ratio is a honest 55.8 which the bank targets to below 53 in the current four year block. The bank still has $2 bln of Southie exposure on its balance sheet which will reduce the current CAR ratios
It is selling its insurance and wealth management assets in Asia separately and may also find interest for some of its banking assets in the growth continent IT sold its Orange Direct in the US to CAPOne for $ 9 bln awaiting regulatory approval.
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- BofA Lagging Competitors In Complying With New Capital Rules (huffingtonpost.com)
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- J.P. Morgan’s Miss: Four Things We Learned (blogs.wsj.com)
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- ING Outlines Banking Strategy (dealbook.nytimes.com)