Monday, November 26, 2007

HSBC Will Take on $45 Billion of Assets From Two SIVs

Finally .......If you take this event one step further you might ask why Citi & Co are not able to do the same and Paulson & Co is tring desperately to help and create the "Superfund"...... Maybe it has something to do with the strenth of their balance sheets...... UPDATE: Fire Sale At Citigroup...Citigroup to Get $7.5 Billion Infusion From Abu Dhabi

Endlich...... Im Umkehrschluß sollte man sich sehr wohl fragen warum Citi & Co es der HSBC nicht gleichtun und warum Paulson & Co so verzweifelt versucht den "Superfund" ins leben zu rufen....... Das liegt sicher nicht an den "starken" Bilanzstrukturen....... UPDATE: Fire Sale At Citigroup...Citigroup to Get $7.5 Billion Infusion From Abu Dhabi

Nov. 26 (Bloomberg) -- HSBC Holdings Plc, Europe's largest bank, will add $45 billion of assets to its balance sheet by consolidating two structured investment vehicles it manages.

The bank doesn't expect any ``material impact'' on its earnings or capital strength, it said today in a Regulatory News Service statement.

HSBC's decision comes as U.S. lenders led by Bank of America Corp. seek to persuade competitors to help finance an $80 billion bailout of other SIVs, companies that borrow short-term to invest in higher-yielding assets. HSBC will give investors in Cullinan Finance Ltd. and Asscher Finance Ltd. the chance to swap their holdings for securities issued by a new company, backed by loans from the London-based bank.

``HSBC's actions will set a benchmark and restore a degree of confidence to the SIV sector, while providing a specific solution to address the challenges faced by investors in Cullinan and Asscher,'' Stuart Gulliver, HSBC's chief executive officer of corporate and investment banking in London, said in the statement.

SIVs borrow in the $836 billion asset-backed commercial paper market to buy longer-dated debt including bank bonds, mortgage-backed securities and collateralized debt obligations. Investors are shunning SIVs because the holdings are difficult to value now that trading has collapsed in some mortgage debt markets. That's stoking concern SIVs will sell assets at distressed prices, adding to turmoil in credit markets.

FT Alphaville The other problem is that declines in asset values have left these vehicles facing NAV or market value triggers that would put them into a restricted state of operation.

The latter seems to be the more immediate problem for HSBC. The bank says that both its SIVs are funded beyond the end of the year, with Asscher funded to April 2008.

In terms of their asset value, Asscher, back at launch in January, was intended to have about about 10 percent of its portfolio invested in triple-A cash CDOs, with about 40 percent in residential mortgage-backed securities. Not a great place to be.

Other SIVs have been hamstrung by declining NAVs. But, as we noted earlier this month, HSBC has kept its portfolio tests under wraps

Bank of America Takes Lead in Backing `SuperSIV' Fund The ``SuperSIV'' fund, backed by U.S. Treasury Secretary Henry Paulson, would buy assets from so-called structured investment vehicles, whose $300 billion of holdings include corporate and mortgage debt in danger of default.

Bank of America, Citigroup and JPMorgan, the three largest U.S. banks, want SuperSIV in place by year-end because some SIVs haven't been able to trade, people familiar with the fund said. BlackRock Inc., the biggest publicly traded U.S. money manager, probably will manage the fund, said a person with knowledge of the plan.

Loomis Sayles & Co. declined to invest after receiving one of 16 invitations for a personal meeting last week with current Fed Chairman Ben Bernanke, said Daniel Fuss, who oversees $22 billion as chief investment officer at the Boston-based firm.

``It's so nice to get a personal invitation to go to Washington and have a one-hour visit with Ben Bernanke,'' said Fuss, who decided participating wasn't worth the risk to his firm. ``Oh, boy, did I feel important for about 27 seconds, and then you smell a rat.''


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Anonymous traderboy said...

it really is criminal.

if HSBC didn't have risk to the underlying assets, then it shouldn't take them onto its balance sheet. since i am guessing they are not doing it out of charity, i am guessing that they are/were at risk to those assets.

but if THAT is the case, then they should have been on balance sheet in the first place.

seems pretty clear that there has been fraud going on on a massive scale here. can you say "Enron"?

5:20 AM  
Blogger jmf said...

Moin Traderboy,

"they should have been on balance sheet in the first place"


I totally agree. It´s this kind of financial alchemy and lax oversight that creates lots of danger and trouble.

Citi & Co are obviously way too weak to shoulder this and can´t survive without these "enron-esque chracteristics".....

But nice to hear that CNBC & Co still focuses on their dividend yield... What a farce.....

5:30 AM  
Anonymous Anonymous said...

HSBC is a nice friendly neighborhood bank, you can trust them. They make money the old fashioned way, from thin air. Bonus anyone?

1:27 PM  
Anonymous teomax said...

I dont get it, why they take it onto balance sheet, when every other bank try to avoid taking SIV assets onto balance sheets. Are they sure, they arent going to post losses?
How they can be so sure, when:

"Moody's [on Nov 8th] said that the average NAV across the SIV sector has fallen from 101% at the beginning of July to 71% at the beginning of November, and the shut-down of the CP market has led to realised losses in some cases.
However, the rating agency pointed out that there was significant variation between the NAVs of different SIVs, with some declining only to 90% and others falling below 50%."


2:08 PM  
Blogger jmf said...

Moin Teomax,

they will post big losses and their ability to lend will also be reduced.

But at least their balance sheet is strong enough to take it like a man...

Watch the whining from Citi & Co....

12:40 AM  
Blogger jmf said...

Moin Edgar,

before this mess i really thought that UBS and HSBC were the leading and most conservative banks out there.

UBS with their large wealth management division and a stable business...

HSBC with their broad footprint and a small investment banking division....

Boy was i wrong!

12:44 AM  

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