>ASIAN BANK REFLECTIONS (NOMURA)

Shadow banking moves from private banks to central banks

■ Leverage dynamics in play

Global leverage is largely unchanged from the summer of 2008 to now. Assets went up US$6tn, but capital went up thanks to Chinese retained earnings and the US taxpayer. Asia’s low leverage puts it in a superior position to Europe. China’s releveraging is very healthy – so is Brazil’s. Most of Europe is unsustainable in our view

■ Asian banks in a global context

Asian banks have the lowest leverage and highest ROE. European banks have the lowest ROE and highest leverage. Our global ranking puts CCB, Stan Chart and BOC among the most attractive banks in our universe of 195 banks. Korean banks are a problem, in our view.

■ RBS sale of Asian businesses

Robert Law and Anand Pathmakanthan thrash out the details of the RBS sale of Asian assets. Questions on costs and asset quality are a problem and the franchise is wide rather than deep. But it is worth something to a newcomer – but not to existing giants such as HSBC and Standard Chartered, in our view.

■ IMF Study of Federal Reserve balance sheet

Central banks now account for almost one-third of the assets of the top-ten banks globally. Conflicts of interest arise when central banks are both the marginal buyer and seller of credit. Central banks’ policy is everything and will determine equity valuations – not earnings! Read on inside.

To see full report: BANK REFLECTIONS