PennantPark Divests with Big Banks, BofA Resolves Class Action Suit: Weekly Financial Biz Recap
Here’s your Cheat Sheet to this week’s financial industry business headlines:
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The Royal Bank of Scotland Group plc (NYSE:RBS) raises its target amount of job cuts by 300 to 3,800, while telling an investor conference that approximately 3,000 of those reductions will happen by the end of 2012 with the remainder by the end of next year.
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Discover Financial Services (NYSE:DFS) will pay back $200 million to 3.5 million cardholders in the resolution of a regulatory inquiry into deceptive telemarketing. The “scripts” which sold products such as payment and credit protection were designed to lure customers into signing on while thinking that they were not paying for anything, say the CFPB and FDIC.
MetLife, Inc. (NYSE:MET) modifies its divestiture of $7 billion in deposits to the General Electric Company (NYSE:GE). Under new terms, the OCC is in charge of approving the transaction instead of the FDIC, which is said to be delaying the process by asking too many questions.
On Friday, Bank of America Corporation (NYSE:BAC) incurred a loss of around $10 million from a “dividend trade” in which traders sell call options the day prior to an exchange-traded fund going ex-dividend, with the intention of repurchasing them at a lower price. The procedure is a favorite of big players, but is far from risk-free.
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Since the new Federal Reserve stimulus was announced, the spread between agency mortgage-backed securities and 10-year Treasuries has imploded from 60 basis points to only 6. With no spread remaining in practical terms, observers expect that non-agency real estate investment trusts such as Chimera Investment Corporation (NYSE:CIM), Invesco Mortgage Capital Inc. (NYSE:IVR), MFA Financial, Inc. (NYSE:MFA), and Western Asset Mortgage Capital Corporation (WMC) should continue to benefit from housing prices that are recovering, according to Chris Flanagan at BAML.
The complete transfer of ownership of Smith Barney from Citigroup Inc. (NYSE:C) to Morgan Stanley (NYSE:MS) is now set to be finalized by June 2015, when Morgan Stanley Smith Barney will be officially renamed Morgan Stanley Wealth Management.
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Nationstar Mortgage Holdings (NYSE:NSM) announces an offering of $100 million in Senior Notes which comes just after last week’s $300 million note offering. Observers wonder if the management is raising cash for an imminent acquisition. Meanwhile, shares gained modestly on the day.
The chief financial officer of Royal Dutch Shell (RDS.A)(RDS.B) worries that draft European Union financial trading rules might compel it to divert almost $1 billion of additional capital through clearing. New regulations would mandate that companies that reach set trading thresholds would have to clear their transactions. Shell says that such a thing would tie up significant capital that might otherwise be employed in investment.
PennantPark Investment Corporation (NASDAQ:PNNT) files a secondary offering to divest 9 million shares of common stock with JPMorgan Securities, Morgan Stanley, Goldman Sachs, and SunTrust all acting as joint bookrunners.
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It is said that managers at The Royal Bank of Scotland Group (NYSE:RBS) took part in the manipulation of world interest rates, while traders collaborated with their counterparts at other banks, according to Bloomberg. Money-market traders who submitted the bank’s Libor calculations were on the same desk as derivatives traders, the amount of whose profits were dependant upon the rate, while the latter made submissions themselves
Nasdaq (NASDAQ:NDAQ) and Amazon Web Services (NASDAQ:AMZN) are partnering to offer Wall Street companies s a service which will permit them to store crucial regulatory data on the latter’s cloud infrastructure. This arrangement, which should enable clients to reduce costs significantly, represents Amazon’s boldest move yet into the financial sector but worries about security might limit growth.
Shares of Life Partners Holdings Inc. (NASDAQ:LPHI) gain more than 150 percent on the day, following a Tuesday decision by a Texas judge that the interests it sells in life insurance policy settlements are not securities that are covered by state law. Previously, the attorney general of Texas had alleged that the firm was deceiving buyers in regards to the life expectancies of people insured under its policies.
General Electric Company (NYSE:GE) divests a 7.6 percent interest in Thailand’s Bank of Ayudhya to unidentified institutional buyers, and also reports that it is reviewing options for its remaining 25 percent. The company is said to have raised $462 million through the sale, which was at a price that was 5.4 percent below Ayudhya’s Tuesday close in Bangkok.
Zions Bancorporation (NASDAQ:ZION) reports that it has reimbursed the government its remaining $700 million in TARP funds. The Series D preferred shares were redeemed at their full face value, along with $233 million paid to the United States Treasury in dividends on its investment in Zions from November 2008 through this date.
Spain’s Banco Santander S.A. (NYSE:SAN) has been successful in $4 billion as its Mexican subsidiary Grupo Financiero Santander Mexico (BSMX) dually lists in both Mexico and in the United Sattes. Analysts believe that the Mexican division should enjoy solid demand in the U.S., because it is part of a strong banking franchise, and “indiscriminate demand” through index trackers since it will be represented by all of the respective exchange-traded funds.
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JPMorgan Chase & Co. (NYSE:JPM) is among several firms who have experienced cyber attacks on their electronic banking operations, such as those recently seen at Bank of America Corporation (NYSE:BAC), and Wells Fargo & Co.(NYSE:WFC, according to The Los Angeles Times. A group which claimed responsibility threatened that it would next target U.S. Bancorp (NYSE:USB) and The PNC Financial Services Group (NYSE:PNC).
In the third quarter, American Capital (NASDAQ:ACAS) bought back 11.4 million shares, which represents 3.6 percent of those outstanding as of June 30th. The firm repurchased the shares at an average price of $10.99, amounting to $125 million; shares closed Thursday at $11.31.
Shares of Penson Worldwide (NASDAQ:PNSN) lost more than 40 percent Thursday as the company notified Nasdaq that it wants to voluntarily delist from Nasdaq Global Select Market, and in addition will deregister with the Securities and Exchange Commission on or about October 8th. The firm was unable to keep a minimum of $10 million in stockholders’ equity which is required for continual listing pursuant to applicable NASDAQ rules.
The Royal Bank of Scotland (NYSE:RBS) will divest shares in its Direct Line insurance division for less than anticipated, so as to attract investors, according to The Financial Times. Direct Line will be valued at the mid-point of its target price-range, at £2.6 billion, which is under the consensus range of £2.7 billion to £2.9 billion; a few banks were pushing for £3.4 billion.
Lloyds Banking Group (NYSE:LYG) international division, BOS International, is said to have put up for sale a distressed Australian corporate loan portfolio having a face value of approximately $400 million. This move will in effect represent the end of the bank’s involvement in commercial real estate in Oz.
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Prudential Financial, Inc. (NYSE:PRU) might purchase Hartford Financial Services Group Inc.’s (NYSE:HIG) individual life-insurance division as soon as Thursday, according to The Wall Street Journal. The transaction should amount to approximately $1 billion, and would be another step in Hartford’s strategy of shrinking its concentration to property-casualty and group-benefits insurance.
Goldman Sachs Group (NYSE:GS) will shell out almost $12 million to resolve a pay-for-play scheme in which it was accused of making undisclosed campaign contributions to the Massachusetts state treasurer (at that time) when he ran for governor. The Securities and Exchange Commission says that a Goldman banker, Neil Morrison, used his office to pretty much run a campaign operation for Tim Cahill.
Bank of America Corporation (NYSE:BAC) reports that it, along with certain of its current and former officers and directors, agrees to resolve a class action lawsuit that was brought in 2009 on behalf of investors who bought or held Bank of America securities at the time at which the firm announced plans to purchase Merrill Lynch. Through its terms, Bank of America would pay an amount of $2.43 billion and also set in place certain corporate governance policies. However, the payment is covered by the bank’s current litigation reserves and third quarter litigation expenses of $1.6 billion.
Western Asset Mortgage Capital Corporation (WMC) has priced a 12 million share secondary at $22.20 per share compared to Thursday’s close at $23. Underwriters have an option to buy up to an additional 1.8 million shares.
The Spanish banks Banco Santander (NYSE:SAN) and Banco Bilbao Vizcaya Argentaria (NYSE:BBVA) are among 7 in that country that do not require capital to pass the stress test which indicated that Spain’s lenders overall need €59.3 billion in capital. Marketwatch reports that “Results show banks mostly solvent, viable.”