Thank God There is No Stress Test On Goodwill Assets Propping Up Bank Balance Sheets.........

Almost every M&A activity during the past few years across all sectors ( miners, tech, industrial, chemicals etc ) has lead to substantial and often spectacular write downs ( Rio Tinto / Alcan, Google/Youtube + AOL , FOX/Wall Street Journal etc )..... The following must read report from Disclosure Insights ( Hat tip Zero Hedge ) is asking the obvious..... Why on earth have there been almost no impairments in te US banking industry ( Europe has taken the hit with ABN Ambro, Royal Bank Of Scotland, Fortis, Hypo Real Estate / Depfa etc, probably no coincidence that they are now "nationalized"..... ) even after the biggest bubble in history has popped and every other indirectly effected sector has taken the necessary step...... I think readers of this blog know the answer.....

Nahezu jede getätigte Übernahme binnen der letzten 3 Jahre in allen Sektoren ( Minen, Tech, Industrie, Maschinenbau, Chemie usw ) hat in den vergangenen Quartalsberichten zu massiven und teilweise dramatischen Abschreibungen auf den sogenannten Goodwill geführt ( spontan fällt mir hier das Beispiel Rio Tinto/Alcan, Google/Youtube+AOL, Continental/Siemens VDO, EON/Erwerb von Kraftwerken in Russland+Italien usw ) ... Der nachfolgende Report von Disclosure Insights ( Dank an Zero Hedge ) ist Pflichtlektüre und geht der Frage nach warum gerade für die Bankenbranche der USA ( Europa hat mit den 50 Mrd € Abschreibungen der Royal Bank of Scotland, Fortis für den ABN Kauf , Hypo Real Estat / Depfa den Anfang gemacht, sicher kein Zufall das diese Institute de facto verstaatlicht sind..... ) anscheinend andere Gesetze gelten..... Muß wohl an den "starken" Bilanzen liegen.....

Thanks to Randy Glasbergen. This must see Cartoon from Jesse´s Cafe Americain is (unfortunately ) looking better on a daily basis.....

It appears banks are not adequately impairing their goodwill. While market value isn’t necessarily the sole trigger for a bank to impair its goodwill, it is a powerful one. Fully 72% (36 of 50) of the banks we analyzed trade below book with 58% (29 of 50) trading below tangible book. Based on the rules governing goodwill, we expected to find widespread goodwill impairments by banks. That didn’t happen.

Rather, our analysis shows that 70% (35 of 50) of the banks we analyzed did not impair goodwill in 2008. Despite a pop in the easy credit bubble, a period during which many acquisitions that generated the goodwill were made, only $21.5 billion (less than 10%) in total goodwill was written down by 15 of the banks in our study.

Bank of America – The poster child for goodwill desperately in need of impairment. Our analysis of Bank of America’s acquisitions of FleetBoston, MBNA, and LaSalle illustrate well why banks need to impair their goodwill more – far more – than they’ve done to date.

BAC paid a total of $102.8 billion for these three acquisitions. Using market comparables, one of the methods prescribed under FASB 142, we derived a current value for these acquisitions of $37.4 billion. BAC currently carries $64.7 billion in goodwill on its book for these three acquisitions, or twice our estimated value for what these acquisitions are now worth. As such, it strains credibility that Bank of America did not impair any goodwill.

Nice to hear that Ken Lewis is in the Press on a daily basis with the request to pay back TARP.....If you keep in mind that the goodwill is part of the Tier 1 Capital calculation the bragging from Lewis with a "strong" 10.1 ratio is one reason more to feel confident. No wonder this "measure" of health has come under some scrutiny ( UPDATE via Option Armageddon : Stress Test: Tangible Common Equity Will Be Critical Metric & Tutorial Tangible Common Equity… ).... His balance sheet is looking stronger day by day...... Go read the full report for much more! It will be interesting to see how long the auditors are ordered, i mean allowed to ignore the obvious.....

Besonders witzig in diesem Zusammenhang das der CEO der Bank of America so schnell wie möglich die TARP Mrd zurückzahlen möchte... Wenn man jetzt noch berücksichtigt das der Goodwill in die Berechnung des immer wieder zitierten Tier 1 Capital eingeht erscheinen Aussagen wie die vom CEO der BAC das deren Quote starke 10,1 beträgt noch vertrauenserweckender. Kein Wunder das diese Kennzahl die in nahezu jeder Veröffentlichung herausgestellt wird in letzter Zeit mehrmals ins Gerede gekommen ist.( UPDATE via Option Armageddon Stress Test : Tangible Common Equity Will Be Critical Metric sowie das dazugehörige Tutorial Tangible Common Equity… ) ...Bin gespannt wie lange die Wirtschaftsprüfer noch zugucken ( müssen) bis hier mal die Axt rausgeholt wird.....Zieht Euch den kompletten Report rein und die tagtäglichen Kommentare der Verantwortlichen ( Geithner usw ) wirken noch ein wenig verzweifelter und unglaubwürdiger als ohnehin schon.......

Banks - Disclosure Insight

Publish at Scribd or explore others: School Work Finance investment indonesia

Ken Lewis / CEO Bank Of America "Banker Of The Year 2008"

Almost as good as the Satyam Award ( see Satyam Computer Services Ltd has won the coveted Golden Peacock Global Award for Excellence in Corporate Governance for 2008 ).......This guy makes the CEO of Deutsche Bank Jo Ackermann quite a likable & competent person.... Compare the quotes with todays news $ 138 Billion Bailout Needed To Save Bank Of America / Merrill Lynch............

Dieser Preis ist fast so aberwitzig wie der von Satyam für erstklassige Corporate Governance ( siehe Satyam Computer Services Ltd has won the coveted Golden Peacock Global Award for Excellence in Corporate Governance for 2008 ).....Verglichen mit diesem Typ wirkt sogar Ackermann von der Deutschen Bank sympatisch & kompetent....... Knapp 3 Monate später benötigt dieser Clown einen $ 138 Billion Bailout .........

FT Alphaville ( Thanks / Danke )!
"We’re good at this".…losing money, that is. Not due diligence or canny dealmaking.

Selected excepts from Ken Lewis (Banker of the Year) on the Bank of America/Merrill Lynch conference call, September 15th, 2008.

Enjoy!

…we could have rolled the dice and possibly could have got it at a cheaper price. We thought the long-term benefits were so overwhelming, it was such a strategic opportunity that we elected not to roll the dice and to go ahead and do it at this time.

Question: can you provide a little more colour on some of the due diligence that was done?

Well, Joe, you want to go over it again in terms of- and the JC Flowers piece is key because they were renewing something- an effort that had already gone on and been very, very extensive.

Errr…

Clearly we had a tremendous amount of historical knowledge both as a competitor with Merrill Lynch and reviewed and analyze the company over the years.

Mr Lewis, have you ever visited the planet earth?

…it’s not as if we don’t have a very significant knowledge of the markets around the asset classes that are most problematic. In addition, as you would expect, we deployed the team that we would ordinarily deploy in these types of situations, which had well over 45 people from our team on site as well as others offsite outside counsel and the like.

Well over45 people!

We’re good at this.

> That they can get away with such generous bailout terms tells you all you need to know..... The comparable Commerzbank/Dresdner Bailout ( see Biggest German Bailout Stands Now At € 18.3 Billion & Counting..... ) terms for honoring such misjudgement looks almost "draconian".....

> Das so ein massives Fehlversagen auch noch mit absolut geschenkten Bailoutkondidionen "belohnt" wird sagt eigentlich alles..... Dagegen sehen die Konditionen bei dem vergleichbaren Commerzbank / Dresner Bailout drakonisch aus