Macquarie Bank

Here's a nice piece on Mac Bank by Michael West with some financial policy analysis (level of debt), accounting analysis (write-down of assets) and management communication (disclosure about the level of write-downs, and questions about debt levels).

Dividends and franking credits

Here's a good overview of dividends, and Australia's franking credits system (dividend imputation).

That's thanks to our system of "franked dividends" (or "dividend imputation") introduced by the Labor government in 1987 and improved by the Coalition government in 1996.

The system is logical -- and simple. When a company pays tax on its profits to the Australian government, and then pays a dividend to its shareholders, the shareholders receive credits ("franking credits") for the income tax already paid by the company. These credits, which apply whether the Australian resident owns shares directly or through a managed fund, are included in the shareholder's tax return both as income and as tax already paid.

The extent of the benefit depends on the shareholder's marginal rate of tax. If the company pays tax on its profits at the full company tax rate of 30 per cent and distributes a dividend, a taxpayer on the 30 per cent tax rate (which this year applies on taxable incomes of $30,000 to $75,000) effectively receives the dividends tax-free.

Have a look at the whole article. Note also the impact of continuing economic uncertainty could result in decreases in dividends, or at least a stop to increases in them. Probably more so in the U.S than here.

"Re-equitisation"

Jeebus. Apparently that's what they're calling the process of getting more equity onto the balance sheet. That's what happens when debt falls out of favour. Which is currently is. See Michael Sainsbury's analysis here. In the case of Wesfarmers, getting shareholders to stump up more money to pay back the loans taken out for the Coles takeover.

Branding

We here a lot about the importance of branding in generating (abnormal) returns. In a recently released survey, Google tops the global brands.

Closer to home, here's how branding is reported for some of the local retailers:
David Jones & Myer and changing demographics, and Just Group focuses on the so-called Generation Y.

Insider trading

The 7.30 Report on ABC1 did a nice show on insider trading by directors of Australian companies, and the regulators' response, last night.

Transcript and video available at this link.

This one's got the lot

General Electic has announced its first quarter profits, and disappointed the market. The Wall Street Journal (as featured in The Australian) has the story. Some business analysis:

GE's results also shake another common Wall Street belief, that large multinational conglomerates have become safe stock market havens.
GE, which recorded more than half of its $US173 billion in 2007 sales outside the US, did post strong international results, but not enough to fully counter its problems at home.
"It's evidence that you can't offset declining US earnings by having operations in the rest of the world," said Sherry Cooper, global economic strategist at BMO Financial Group.

Some accounting analysis:

On the consumer-lending side, Mr Sherin said GE would likely increase loss provisions beyond the planned $US600 million for the year because of increased delinquencies.

Some discussion of the role of analysts:

One reason for Wall Street's surprise: GE usually works closely with analysts in giving guidance on where its earnings are likely to land. The company generally meets the consensus estimates of Wall Street analysts.
This time, the analysts were way off. Their consensus suggested GE would record earnings per share from continuing operations of US51c. Instead, the number was US44c, down 8 per cent from a year ago. Overall, GE earned $US4.3 billion ($4.6 billion), or US43c per share, in the first quarter, down from $US4.57 billion, or US44c per share, in the same quarter a year earlier.

And another example of the impact of missing analysts' forecasts:

The disappointing results put new pressure on Mr Immelt to shake up the company he took over six years ago. GE's closing share price of $US32.05 on Friday is 19 per cent below its level when Mr Immelt became chairman and CEO just before the September 11, 2001 terror attacks, although the share price is well above its 2002-03 lows.

ANZ and disclosure

ANZ's involvement in the Opes Prime "collapse" is, according to Adele Ferguson, raising eyebrows.

As usual, allegations of not informing the market when they knew of trouble are being thrown about.

ACA Capital's (A US insurance firm) monoline business had its credit rating slashed to junk bond status in December. It took Canadian bank CIBC until January 14 to reveal that it would have to write down its exposure to ACA by $US2 billion, and others, including Merrill Lynch and Citigroup, made similar announcements around the same time.

It took ANZ until February 18, or more than eight weeks after ACA's original announcement and four weeks after every other bank revealed its exposure.

This delay sent shivers up the spines of investors, who started to wonder what else was lurking in ANZ's balance sheet as well as what was going on off balance sheet, which has more than doubled to $1.73 trillion during the past three years.

Opes, short sales and market transparency

John Durie in The Oz highlights the issues that ASIC faces in dealing with matters like the Opes collapse. As Duries suggests, avoiding regulatory buck-passing is the key.

Several firms engaged in stock lending offered last year to provide information about their practices to the ASX. The ASX, in its infinite wisdom, said it did not know what it could do with the information. One interpretation: we can't make money out of knowing this, so don't tell us.