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When cutting costs is not enough

Who pushed NatWest?

When cutting costs is not enough

Edited by Brian Caplen

From the mid-1990s enabling legislation and corporate issuance guaranteed a rapid take-off for Japan's securitization market. But economic recovery, recapitalization of the Japanese banks and their renewed enthusiasm for holding corporate assets may leave the market dependent on consumer finance and residential mortgage deals. This might not be enough to sustain the sector. Luciano Mondellini reports.

Edited by Rebecca Bream

Traditional active equity asset managers are alienating their institutional clients through underperfomance and high fees. Many pension funds and insurance companies in the US, UK and Europe are embracing passive index tracking, while others are devoting more attention to the rewards - and the risks - of hedge fund investing. The search is on for performance, or alpha, wherever it may be found. The whole asset management business may soon be transformed. Peter Lee reports.

Citigroup's latest acquisition

Last month's €2.3 billion issue of convertible bonds for Mannesmann promised to mark a revival of the convertible market, but within a week of its (successful) launch it was hit by Mannesmann's bid for Orange of the UK. At its launch on October 6, the deal was significantly oversubscribed, though it had been done on terms which raised plenty of eyebrows. The yield to maturity was 3.875%, towards the bottom of the indicated range and the premium conversion - the share price at which the bond could be exchanged for equity - was one of the highest seen this year at 38% above the prevailing share price. A high conversion premium usually points to a bullish equity market, but this deal came as the equity markets were looking rocky.

We live in a time when the necessity, desirability and inevitability of ever more bank mergers is simply taken for granted by bank executives, shareholders and regulators. The model of the ruthless cost-cutting merger, so firmly established in the US in the last seven years, has increasingly been adopted worldwide. As producing shareholder value becomes the prime motive of managers in national banking industries which for years have been overprotected by governments, overpopulated by too many unprofitable players, and inefficiently run, mergers - it is now taken for granted - are the only way to boost returns by cutting costs.

Edited by Rebecca Bream

Mannesmann has pitched into some speedy, expensive takeovers, but is still a takeover target. That's a symptom of the rush for change affecting nearly all German companies. For years investors complained that German managers were too slow and cautious; now many have become dangerously impulsive. By Laura Covill.