Basel III Builds Profit-Forecast Certainty

Global markets are up about 1 percent this morning, with many banks up 3 percent on the new Basel III capital requirements. Bottom line: longer time to implementation (8 years) and lower Tier 1 capital than expected (7 percent).

Still, there is plenty of concern that some banks will not even be able to make this level of implementation. To avoid cutting dividends and address any uncertainty, some banks may try to raise additional capital quickly.

Regardless: what we have now is more certainty on the ability to forecast profits.

Deutsche Bank is already moving to raise capital, 9.8 billion euros, though much of it is to attain control of Deutsche Postbank. DB did submit an offer to buy another 30.6 percent stake in Deutsche Postbank, which would boost its control to a little over 60 percent. Deutsche Postbank controls the remainder, which is likely to also be purchased by DB.


1) China's industrial production rose 13.9 percent in August from a year earlier, above economists’ expectations.

2) Dollar Thrifty is up 4 percent after accepting a new offer from competitor Hertz for $1.56 billion or $50 per share. The new deal raises the cash portion of the offer by $10.80 to $43.60, while keeping the stock portion at 0.6366 shares of Hertz stock. The revised offer once again trumps the $1.3 billion counteroffer made last week by rival Avis Budget .

3) Patriot Coal falls 3 percent after it reduced its Q3 shipment guidance. The coal producer said volumes are now seen between 7.5 million and 7.7 million tons - 10 percent lighter than its previous forecast. The reduction is blamed on "sporadic downtime" and "difficult geological conditions" at some of its mines.

3) ArcSight soars 25 percent after agreeing to be purchased by Hewlett-Packard for $1.5 billion in cash. Shareholders of the cybersecurity firm will receive $43.50 per share in the deal, which is expected to close by the end of the year.

It's the second significant cash acquisition in September for Hewlett-Packard, whose $2.4 billion offer ended the bidding war for data storage firm 3Par at the start of the month.

4) BE Aerospace continues the recent parade of corporate debt issuance. The maker of products for aircraft cabin interiors announced it will sell $500 million in senior notes. The reason…"to fund acquisitions," the company said.

Firms have been taking advantage of low interest rates to borrow money to fund cash deals (recall HP also sold $3 billion in debt last week) in the midst of its deal making.

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