SELECTED BLOGS: FT ALPHAVILLE // CAPITAL MARKETS, Siemens in knots Posted by Joseph Cotterill on Sep 20 09:57.

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Siemens in knots

Posted by Joseph Cotterill on Sep 20 09:57.

Oh no no, of course we didn’t take cash out of a French bank!

RTRS-SIEMENS BANK SAYS FT REPORT THAT IT TOOK MONEY OUT OF FRENCH BANK AND DEPOSITED IT WITH ECB IS FACTUALLY NOT CORRECT

Oh, er, maybe we did or maybe we didn’t!

RTRS-SIEMENS GROUP SPOKESMAN DECLINES TO COMMENT ON FT REPORT THAT COMPANY SHIFTED FUNDS FROM FRENCH BANK TO ECB

Oh, er…

RTRS-SIEMENS WITHDREW UNKNOWN DEPOSIT AMOUNT FROM SOCIETE GENERALE IN JULY, BEFORE STRESS TEST RESULTS – PARIS-BASED SOURCE

RTRS-SIEMENS WITHDRAWAL FROM SOCIETE GENERALE RELATED TO PERFORMANCE AND NOT TO OVERALL HEALTH OF BANK – PARIS-BASED SOURCE

We remain mystified as to what Siemens actually thinks about this at pixel time – and what does ‘performance’ mean in this context.

Anyway, this might be controversial but we don’t think that Siemens taking money out of SocGen is in itself such a huge thing. Sure, SocGen might have to had to fund assets from another source to replace that €500m (as the FT reports the figure) of Siemens deposits, but that’s fairly normal. Certainly though it’s come at a bad time. Whether or not Siemens took it out for performance reasons or out of fear is neither here nor there — the cash is leaving SocGen all the same.

At the same time, it’s not clear what, if anything, this means for Siemens’ relationships with SocGen on other issues or with other French banks. (Trade finance must still be a key relationship, for example?)

More interesting is news that Siemens has parked much more cash at the ECB, between €4bn and €6bn. For context, we note that Siemens Group had around €13bn in cash or cash equivalents on balance sheet in June, according to its latest financial results.

And Siemens has placed it all in a very topical place at the ECB — the central bank’s sterilisation operations related to its sovereign bond purchases. The size of the operations is now €143bn owing to recent Italian and Spanish bond purchases, so Siemens Bank is helping to sterilise between 2.8 and 4.2 per cent of the total. This is maybe not a massive number in itself, but it is interesting we think given the thousands of credit institutions who operate in the Eurosystem and who’re eligible to bid for the sterilisation deposits. Some ECB board members happen to be anxious that the central bank can continue to sterilise its interventions in the massive Italian bond market (which perforce have to be persistent and large in size). This is an intriguing datapoint.

Of course what Siemens does with its cash is it’s business, and certainly if “performance” is the issue it’s getting a better rate at the ECB. It’s purely a coincidence that it’s also a massive safe haven!

We are of course just dying to know what Juergen Stark thinks of a German engineering conglomerate helping prevent the ECB’s bond-buying from becoming full-blown QE. Presumably he would not be impressed.

Related link:
Banco Santander versus Bank of BMW – FT Alphaville

This entry was posted by Joseph Cotterill on Tuesday, September 20th, 2011 at 9:57 and is filed under Capital markets.