Morgan Stanley and Citi may have been left with potentially risky exposures to Danish telecoms company TDC and UK gas supplier Centrica, respectively.
That after undertaking 'block trades' in shares of those two companies, the Financial Times (FT) reports, which may expose both banks to "painful losses."
Morgan Stanley has thus recently been left with 7.2% of TDCs capital, which is valued at $450m, on its hands.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Similarly, Citi is reported to have an indeterminate amount of unwanted shares in Centrica left on its books. This after having acquired a £587m stake from Malaysias state-owned oil company, Petronas, and later having failed to place all of it.
'Block trades' are transactions whereby banks buy large and sometimes not easy to place amounts of stock from a selling firms shareholders at a discount and then distribute them amongst a base of known investors, off of publicly traded markets.
However, if the market moves against them sufficiently or if the discount secured from the sellers is not enough they run the risk of incurring losses, as may finally occur in these two instances.
Lastly, the FT cites senior bankers who describe the level of competition between banks to participate in these 'block trades' as "frightening."
AB
-
What happens if you can’t pay your tax bill, and what is "Time to Pay"?Millions are due to file their tax return this Friday as the self-assessment deadline closes. Though the nightmare is not over until you pay the taxman what you owe - or face a penalty. But what happens if you can't afford to pay HMRC your tax bill, and what is "Time to Pay"?
-
What does Rachel Reeves’s plan for growth mean for UK investors?Rachel Reeves says she is going “further and faster” to kickstart the UK economy, but investors are unlikely to be persuaded
