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Here’s your Cheat Sheet to this week’s financial industry business headlines:
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Rep. Barney Frank (D-MA) takes the side of JPMorgan Chase & Co. (NYSE:JPM), saying that the government should not pursue the company for infractions which were committed by Bear Stearns, remarking that, “To prosecute JPMorgan because of activities undertaken by Bear Stearns before the takeover unfortunately fits the description of allowing no good deed to go unpunished.”
BB&T Corporation (NYSE:BBT) Chief Financial Officer Daryl Bible commented on his firm’s earnings call last week that “Artificially low rates are not good for anybody.” The Federal Reserves’s rate policy is working out to be more trouble for banks than beneficial. New regulations are putting pressure on income from fees, making lenders more dependant than ever on lending, but they can’t make use of a spread when the Fed flattens the curve.
Regions Financial Corporation (NYSE:RF) executives are saying on their earnings conference call that “Customers seem a little hesitant,” to borrow and invest. The firm implies that it’s not only seasonality causing sluggish loan growth in the third quarter, but also the struggle against perverse Federal Reserve policies and countercyclical regulatory measures that are slowing things down.
Bank of America Corporation (NYSE:BAC) Chief Executive Moynihan has declared victory regarding the building of a “fortress balance sheet,” and will now turn his concentration upon returning capital to investors. However, Paul Miller at FBR thinks Moynihan might be speaking prematurely, as the costs from bad mortgages and litigation are still unknown.
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The Wall Street Journal might have reported otherwise, but Goldman Sachs (NYSE:GS) says it has never “seriously” thought of divesting its commodities operation to suit some new regulatory structure. On the other hand, Morgan Stanley (NYSE:MS), remains in ongoing discussions to sell off a majority interest in its commodity division to Qatar’s Sovereign Wealth Fund.
The board of Wells Fargo & Co. (NYSE:WFC) raises the firm’s stock repurchase authorization by 200 million shares which are worth around $7 billion worth at Tuesday’s price. The total float is approximately 5.3 billion shares.
UBS (NYSE:UBS) executives are locked in a board meeting to work out details regarding even more drastic reductions to the company’s investment bank as they look to step up the firm’s return to a concentration on the more lucrative wealth management business. The unit earns UBS a 26 percent return on allocated equity, which is far higher than the capital-consuming investment banking division.
He said, they said. The sudden exit of Vikram Pandit from Citigroup (NYSE:C) has gotten the Securities and Exchanges Commission’s curiosity up and that body will now explore the attendant circumstances surrounding the departure, according to Fox Business Network. Chairman Michael O’Neill has told analysts that Pandit resigned on his own, but other versions of the event now imply that the board demanded his resignation.
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A flow chart would be useful on this one. Shares of Nationstar Mortgage Holdings (NYSE:NSM) are tumbling Wednesday as the bidding war for the mortgage servicing assets of ResCap plays out. That company and Ocwen Financial Corporation (NYSE:OCN) wound up as the principal bidders after Berkshire Hathaway dropped out and Ocwen has apparently emerged victorious with its offer of $3 billion to Nationstar’s $2.3 billion (it had hoped to win with $2.5 billion). Meanwhile, shares of Walter Investment Management Corp. (AMEX:WAC), which might well be a partner of Ocwen in the matter, spiked then settled back in afternoon trading. Previously, a breakeven price had been assumed to be around $2.7 billion.
Warren Buffett, appearing on CNBC, said that in some of Berkshire Hathaway’s (NYSE:BRKA)(NYSE:BRKB) housing-related operations, activity is increasing by double digits. Although few would question that Europe remains problematic and that Asia is slumping, the domestic economy is still a bright spot. Also, Buffett added to his investment in Wells Fargo & Co. (NYSE:WFC) in the past week.
The Blackstone Group (NYSE:BX) is readying the intro of a multi-billion dollar fund to take investments in hedge fund managers. A source relates that stepping in as traditional buyers of hedge funds retreat from the private equity firm will target returns in excess of 20 percent.
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Shares of Altisource Portfolio Solutions (NASDAQ:ASPS) pop on the news of Ocwen’s apparent victory over Nationstar in the ResCap mortgage bidding war. The former supplies services to the mortgage servicing industry, of which Ocwen is likely a significant customer.
The United States government has brought a suit against Bank of America Corporation (NYSE:BAC), claiming that the firm misrepresened the quality of home loans it sold through its Countrywide unit to Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB). This move could herald a potential new legal front against banks as the government is seeking at least $1 billion in damages.
Bank of America Corporation’s (NYSE:BAC) latest lawsuit it faces comes as a non-surprise to Paul Miller at FBR, who believes that the amount being sought could have been far higher. However, he thinks the ongoing dispute BofA has with Fannie Mae (FNMA.OB) over the amount of loans the GSE is insisting that the bank repurchase is far more serious. Chris Whalen believes that BofA might be forced to place Countrywide into bankruptcy in order to avoid liability.
General Electric Company (NYSE:GE) is said to have made an offer for Hudson City Bancorp (NASDAQ:HCBK) before it made its own deal with M&T Bank Corporation (NYSE:MTB). Motivation for such a move might have been to secure long-term financing for its GE Capital division. GE’s reliance on short-term funding could have brought ruin on the enterprise in 2008.
Banco Santander (NYSE:SAN) reports that it has covered 90 percent of the government of Spain’s requirements, as it set aside reserves of €1.14 billion for bad loans.
The incoming Barclays (NYSE:BCS) Chairman, David Walker, intends to overhaul the company’s board and replace the majority of its non-executive directors while he endeavors to repair its damaged image subsequent to the Libor scandal, according to The Financial Times. Walker believes that the board should be more representative of the “real economy” and wants additional non-bankers, although a number of observers contend that it needs to reinforce its banking expertise.
CME Group (NASDAQ:CME) Chief Executive Terry Duffy comments on his earnings call that, “This year was setting up for a disaster in volumes from day one,” as he blames the trading volume decline on ZIRP and a slow economy instead of regulatory problems. Separately, CME will start the reimbursement of $2 million to the former clients such as ranchers, farmers, and co-ops of Peregrine Financial after that company was looted by its founder. The cash will be from a $100 million fund established following the collapse of MF Global.
Shares of Capstead Mortgage Corporation (NYSE:CMO) lose Wednesday’s post-earnings gain as its management debunks, via its earnings call, any notion of a buyback. Chief Executive Andrew Jacobs remarked that there exist more lucrative methods for the company to deploy its capital.
It is possible that Bank of America Corporation (NYSE:BAC) employees might be subject to civil fraud charges as part of a lawsuit brought by the government, which claims that the bank misrepresented the quality of the home loans its Countrywide division sold to Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB), resulting in losses of more than $1 billion to taxpayers. However, such would constitute an unusual move, given the few cases actually brought against individuals in regards to the financial crisis.
The Blackstone Group (NYSE:BX) Chairman Stephen Schwarzman said that “We believe in the basic prospects of this area,” as he described why the stalling of growth in Asia, along with lower asset prices, has his firm ready to deploy cash there. The company has recently closed a property fund and is sitting on a cool $13.3 billion.
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The S&P was busy overnight Thursday with several French banks as Societe Generale (SCGLY.PK) and Credit Agricole (CRARY.PK) were given negative outlooks and BNP Paribas (BNPQY.PK) was downgraded from AA- to A+, commenting that, “The economic risks under which French banks operate have increased in our view.”
The head securities regulator of Massachusetts has fined Citigroup (NYSE:C) $2 million. It was claimed that the company violated the law by an analyst emailing confidential information about Citi’s views on Facebook prior to the IPO. For its part, the bank is said to be relieved to have the matter settled for that amount. Meanwhile, the firm’s tech analyst Mark Mahaney has been sacked over the episode.
Some nine additional banks are now under the Libor magnifying glass as state subpoenas were issued in August and September to lenders Lloyds Banking Group (NYSE:LYG), Royal Bank of Canada (NYSE:RY), Credit Suisse Group (NYSE:CS), and Bank of America Corporation, among several other companies, according to the Wall Street Journal.
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KKR & Co. (NYSE:KKR) is having a hard time getting to its goal of raising $8 billion for its new North America fund. Bloomberg reports that the project has brought in a total amount of under $6.5 billion, and of that less than $1 billion since February. The firm’s difficulties in the current endeavor originate from the under-performance of the previous North American fund, which closed in 2006 with $17.6 billion.
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