Tag Archives: Austria

Credit Ratings Are Now Officially A Joke

With the downgrade of EU’s emergency funding fund, the US credit rating agency Standard & Poor have made the whole rating business a fucking joke. If you think this will make waves in tomorrow’s markets, forget it! Nobody takes this shit serious anymore…

“Triple-A or no triple-A, I couldn’t care less.”

Shakeb Syed

“On Jan. 13, 2012, we lowered to ‘AA+’ the long-term sovereign credit ratings on two of the European Financial Stability Facility‘s (EFSF’s) previously ‘AAA‘ rated guarantor member states, France and Austria,” S&P writes in a press release.  Adding: “The EFSF’s obligations are no longer fully supported either by guarantees from EFSF members rated ‘AAA’ by Standard & Poor’s, or by ‘AAA’ rated securities.”  Well, we already know that, morons!

And you can’t say A without saying B, also, in this business. So, in light of last weeks mass downgrade of European core nations, this is just a natural consequence.

But it becomes rather ridiculous when we’re talking about an international emergency fund that the EU leaders are able to do whatever they want with. Perhaps they choose to “print” enough euros to ten-fold the size of the fund?

Nobody knows anything for sure, these days.

And that’s why most financial pros just don’t give a damn about the rating actions anymore; it’s no longer  possible to take the rating business serious.

And, as Norwegian chief economist Shakeb Syed, rightfully points out – there are far more important things to worry about when it comes to the EU economy than its stupid stability facility.

“Triple-A or no triple-A, I couldn’t care less,” Shakeb Syed at Sparebank 1 Markets says in an interview with Norwegian website www.dn.no.

Syed recon there will be some reactions in the financial markets on Tuesday, but not much,

“In the market, the fund have implied interest costs that is not consistent with a triple-A. So,  in practice, the difference is not that great,” Syed points out.

The Norwegian analyst also says what many financial pros are thinking these days;

“The EFST is a dead-end.”

“Triple-A or not, the fund will never be big enough th cover both Spain and Italy,” he notes.

And Shakeb Syed seems too keeping the right focus, stating that investors should be more worried about  the ECB than the EFSF.

Anyway – here’s a little more from today’s “shocker” by Standard & Poor’s:

“The developing outlook on the long-term rating reflects the likelihood we currently see that we may either raise or lower the ratings over the next two years.”

“We understand that EFSF member states may currently be exploring credit-enhancement options. If the EFSF adopts credit enhancements that in our view are sufficient to offset its now-reduced creditworthiness, in particular if we see that once again the EFSF’s long-term obligations are fully supported by guarantees from EFSF member-guarantors rated ‘AAA’ or by securities rated ‘AAA’, we would likely raise the EFSF’s long-term ratings to ‘AAA’.”

“Conversely, if we were to conclude that sufficient offsetting credit enhancements are, in our opinion, not likely to be forthcoming, we would likely change the outlook to negative to mirror the negative outlooks of France and Austria. Under those circumstances we would expect to lower the ratings on the EFSF if we lowered the long-term sovereign credit ratings on the EFSF’s ‘AAA’ or ‘AA+’ rated members to below ‘AA+’.”

So, anyway the wind blows……

Related by econoTwist’s:

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Credits: Remember Me?

Most eyes were on Ireland soverigns in the European credit market, Tuesday. However, that’s not were the biggest action was… Another familiar nation saw their CDS spread blow out almost 100 basis points and took the investors completly by surprise.

“It is ironic that Austria is blocking the aid considering it was one of the most vocal in criticising Slovakia’s refusal.”

Gavan Nolan


It was already in the cards; yesterday the IMF revised its estimate for the Greek debt-to-GDP ratio, and not in a positive direction. But the real kicker came when Austria‘s finance minister Josef Proll indicated that his government is considering withholding its EUR190 million December tranche of assistance, citing Greece’s failure to meet its tax revenue targets.

Greece’s spreads, already underperforming before the news, widened out over 100bps after the announcement. Without the disbursement of funds from the EU, Greece would struggle to fund itself, according to Markit Intraday Alert.

The IMF could possibly step in if Austria stood fast in its refusal to participate, Markit analyst Gavan Nolan notes.

Adding: “It is ironic that Austria is blocking the aid considering it was one of the most vocal in criticising Slovakia’s refusal to bail out Greece.”

Nolan also says the Greece’s volatility had a “knock-on effect” on the other peripheral names, which were only slightly wider prior to the Austria news.

Ireland was expected to get the undivided attention of the markets today ahead of the crucial meeting of euro zone finance ministers later this afternoon.

But they didn’t count on Greece widening dramatically as its solvency again came into question.

The Irish government by Prime Minister Brian Gowen made a statement in the Irish Parliament Tuesday afternoon, underlining the need to restore confidence in the country’s economy and repeating the fact that no bailout agreement have been signed – yet.

Here’s the statement.

“It seems that the onus is now firmly on the Irish banking sector and the need for recapitalisation,” Nolan comments.

EU commissioner Olli Rehn says that Ireland’s problem is its banks, and the sovereign had no immediate funding needs.

This, of course, is not news to the markets.

“The bigger questions are whether bank senior debt holders should be made whole, the conditions of the bailout and what consequences this would have politically for the current coalition government,” Gavan Nolan points out.

The widening in the peripherals caused the Markit SovX Western Europe to blow out 9bp to 171bp.

  • Markit iTraxx Europe 104.5bp (+3), Markit iTraxx Crossover 469.5bp (+13.5)
  • Markit iTraxx SovX Western Europe 171bp (+9)
  • Markit iTraxx Senior Financials 138.5bp (+5)
  • Markit CDX IG 95.5bp (+2)
  • Sovereigns – Greece 950bp (+97), Spain 265bp (+15), Portugal 430bp (+17), Italy 191bp (+8), Ireland 530bp (+33), Belgium 140bp (+3)

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An Estonian Mystery

Although critics have for years predicted the collapse of Bigbank, Estonian-owned bank that started as a provider of small unsecured consumer financing, the bank reported much better 2009 results than any other bank in Estonia. In addition to making a nice profit, Bigbank doubled its volume of deposits and redeemed about 600 million kroons worth of international bonds before due date.

“At current projections we are not seeing a need to raise additional financing and plan to redeem our bonds by due date.”

Targo Raus


Moreover, while at the beginning of 2009, Bigbank was burdened by 1.5 billion kroons in issued bonds, the figure fell by half by the end of the year, the Estonian newspaper Äripäev writes.

“At current projections we are not seeing a need to raise additional financing and plan to redeem our bonds by due date,” said Targo Raus, CEO of Bigbank.

When Äripäev two years ago asked Raus about what would be the worst case scenario for Estonia, Raus said:

“It is if the economy would collapse and about 20% of people would be unemployed.”

Now Raus says that he believes the unemployment situation to have hit rock bottom; “I think most of the layoffs have been made and the initial impact of unemployment has been seen.

The bank’s consolidated net profit in 2009 amounted to 117.1 million Estonian kroons compared with 144.7 million kroons in 2008.

During the year the bank opened a branch in the Finnish market and launched offering of cross-border deposit services in the German and Austrian markets.

At the end of 2009, the bank’s loan portfolio was on the level of 2.053 billion kroons, a 10.3% decrease year-over-year. The loan portfolio showed a 17.0% growth in the Lithuanian market.

Looking by countries, loans issued in Estonia constituted to 47.1%, in Latvia to 40.6% and in Lithuania to 12.3% of the total loan portfolio.

The amount of term deposits reached 1.173 billion kroons at the end of 2009 compared with 630.6 million kroons at the end of 2008.

Targo Raus

Chairman Targo Raus said that on the background of the tough macroeconomic developments the bank was implementing a conservative management policy and at the same time managed to maintain proper profitability and enter into new markets.

“Our goal in 2010 is to continue the bank’s geographic and service range expansion in foreign markets,“ Raus says.

Bigbank is a specialised credit institution based on Estonian capital, which has branches in Finland, Latvia and Lithuania and provides its services on cross-border basis also in Austria and Germany.

As of the end of 2009 the bank employed 394 people and had in total 28 offices.

The bank’s bonds are listed on Stockholm Stock Exchange.

Source: balticbusinessnews.com

Financial Statement.

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The Latvian Solution: Go Blonde!

Standard and Poor’s: The Baltic Are Stabilizing

Swedbank Buy Greek Bonds With Estonian Money

Estonia Put Pressure On Journalists

Baltic Countries Remain In Recession

Estonian Company Claims $130mill from SEB

How To Make A Rat Look Like A Puppy

Swedbank In Estonia: “Daylight Robbery”

Swedbank Reports Record Loss of SEK 10,5bn

“SEB Robbed Customers,” Whistleblower Says

Bankrupt Baltic Baker Charged With Million-Dollar Fraud in U.S.

Nordic Central Banks Agree On Baltic Bank Bailout

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