Category: Profitability

Economy, Profitability, Social Theory, UKLeave a comment

Revealed: Scottish state pays staff £27m for jobs that don’t exist

Colin Henderson

An SNP ban on compulsory redundancy means 800 public-sector ‘ghost workers’ are on full pay even though their roles are gone Saturday October 24 2026, 5.00pm BST, Hundreds of public sector workers in Scotland are costing the taxpayer at least £27m a year because their jobs no longer exist and the SNP refuses to make them redundant. A Sunday Times investigation has uncovered about 800 cases of NHS, central government, council and quango workers who no longer have a fixed role and who might ordinarily have been made redundant but remain on the public payroll.  The cost to the taxpayer is … Continue reading Revealed: Scottish state pays staff £27m for jobs that don’t exist

productivity, Profitability, regulation

StableCoin needs clear definition similar to Bretton Woods

Colin Henderson

The debate between USDC exemplified by Circle and USDT associated with Tether brings many of the realities of crypto into focus. The perennial debate has been whether Bitcoin is an asset class lke Gold or Silver or is it a useful alternative currency to fiat. Bankwatch Research Research and background on USDC and USDT. The recent Compass Point report made two points, and thus fails as an analytical support document: 1. Market Penetration – USDT has that 2. Additional cost structure for USDC (Circle ) associated with regulatry requirements similar to banking, will hinder profitability If we explore the second … Continue reading StableCoin needs clear definition similar to Bretton Woods

Profitability1 Comment

Expedia takes a hard line with American Airlines (AA) | why this is critical for the next phase of ecommerce – UPDATED

Colin Henderson

This is a good thing.  The problem with much of ecommerce is that it places a nice usable front end on to existing infrastructure.  It does not necessarily remove intermediate steps and costs and usually adds a layer of cost.  Online banking is the perfect example.  That is the root of consumer frustration that online should be cheaper but is not. Expedia stops selling American Airlines tickets | ft.com American Airlines and its online partners have struggled for months to agree terms as their contracts expire. American wants to pay the sites less and has pushed them to connect directly … Continue reading Expedia takes a hard line with American Airlines (AA) | why this is critical for the next phase of ecommerce – UPDATED

Economy, Profitability, regulation1 Comment

The fragility of the banking system – the final 2 days in the life of Wachovia in 2008

Colin Henderson

There is a statement today … Statement of John Corston, Acting Deputy Director, Complex Financial Institution Branch, Division of Supervision and Consumer Protection, Federal Deposit Insurance Corporation on Systemically Important Institutions and the Issue of "Too Big To Fail" that contains some very interesting facts, and side from he bureaucratic commentary there is a real sense of incredulity that this is how big banks are managed. The overall message is excruciating detail is one of rationalising insufficient regulatory oversight existed to permit the FDIC to adequately monitor the situation.  It describes the nature of onsite examiners at FI’s with greater … Continue reading The fragility of the banking system – the final 2 days in the life of Wachovia in 2008

Profitability1 Comment

FDIC report on US Banks’ financial profitability confirm dire circumstances

Colin Henderson

These graphs extracted from the latest US FDIC quarterly report display the long term impact of the crisis on the US Banks. Their predicament has a much earlier lead time, and a suggests a far longer expected period for improvement to anything close to pre 2008 results. People are in retrenching mode, and the consumer confidence and asset values that drove banking business volumes until 2007 are not returning in the near future, depsite the stock market growth which has occurred in 2009. Loan losses remain 400% higher than the 2001/ 2007 period. when related to Operating Revenue. Relevance to … Continue reading FDIC report on US Banks’ financial profitability confirm dire circumstances

Business Models, Profitability

Mullenweg’s Safe Bank Could not just Survive but it could Prosper

Colin Henderson

When Matt wrote his post the other day about starting a bank it got me thinking about the effect of what he is saying relative to profitability when we introduce a policy to be safe and carry capital reserves of 2 – 3 times more than todays banks. Assumptions: – demand deposits = demand loans – GIC (CD) = Mortgages – incremental investment in higher returning mortgages is funded from cash Relevance to Bankwatch: A $4 increase in gross profit results in a 15% higher Return on Equity when a lower capital ratio of 10% is accepted.  Note the stock … Continue reading Mullenweg’s Safe Bank Could not just Survive but it could Prosper

Innovation, Profitability

The Productivity Gap is closing in on Banks’ | Branches will be next

Colin Henderson

FT reports on a new Bain report concerning RoE at Banks, and the unliklihood that Banks’ can regain previous RoE levels. This fits with the theme here of no more business as usual, post crisis. The spreads in this low interest enviroment are simply not high enough to accomodate spreads like we saw over the late 90’s and early 2000’s. Furthermore and separate from the spread issue, the growth in credit will not be there either because consumers are unwinding unwieldly debt levels that are now disproportionate to asset levels. The course banks must follow is rejuvenated product suites, and … Continue reading The Productivity Gap is closing in on Banks’ | Branches will be next

Profitability4 Comments

The Dangers of Thin Value

Colin Henderson

Umaiar defines thin value as a mirage that will eventually evaporate. it is value that has no point nor reason, other than generate revenue for the corporation. The landmark example he offers is ARPU, or Average Rrevenue per Customer in the telco business. The 15 second instructional wait time in front of every voice mail is worth $620 million to one telco is one example he offers. The sole purpose of the 15 seconds is to generate revenue, notwithstanding claims that it is for the benefit of the user. The Value Every Business Needs to Create Now| Harvard: Umair Haque … Continue reading The Dangers of Thin Value

Profitability

“We’ve already blown past the worst-case scenario on unemployment” | repeat stress tests

Colin Henderson

As banks rush to repay TARP money, driven by the desire to remove government control rather than any reflection of improved financial standing, here is a sobering statement from Elizabeth Warren.  Just as GM didn’t ‘get it’ in terms of the world will look like on the other side of this recession, many banks appear to have similar blinders.  Instead of arguing that they are not in bad shape and that they are secure, why not make changes now that display the recognition that the future is not going to be anything like the past.  I say again, and blame … Continue reading “We’ve already blown past the worst-case scenario on unemployment” | repeat stress tests

Profitability

Banks need more capital – its time to deal with that

Colin Henderson

Nice summary and suggestions here from Raghuram Rajan in a piece in the Financial Times.  I continue to believe that the issue of financial leverage (too high debt to equity ratio) is one of the systemic issues in banking. Desperate times need the right measures The real problem is the financial system has too little capital. Buying assets at the current depressed market price will not help. And overpaying substantially for these assets will reward the shareholders of the most incompetent or risk-seeking banks, who hold the largest amounts of this now-toxic waste, with the most taxpayer dollars. … I … Continue reading Banks need more capital – its time to deal with that