Weekly Financial Biz Recap: Big Cuts at BofA, Carlyle IPO
Chief functioning officer Kathryn Fagan of Annaly (NYSE:NLY) exercises her options to buy 37,500 shares of the company’s stock at $13.25 per share, increasing her investment by almost 15 percent to 290,500 shares. Annaly’s CEO and CIO made stock purchases last week.
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Approximately 2,000 positions in Bank of America’s (NYSE:BAC) investment banking, commercial banking and non-U.S. wealth-management divisions, will be eliminated, according to sources involved with the company’s cost cutting conference call. It appears that even the bank’s ‘moneymakers’ are not safe from the axe, during this period of relentless cuts.
A combined plan of Fannie Mae (FNMA.OB) and Citigroup (NYSE:C) was nixed in the making, although it might have saved Fannie up to $410 million, and assisted struggling homeowners as well. Congress is looking into why the so-called shared appreciation program, which would have allowed write-downs of principal in return for the lender receiving shares of future appreciation, was not approved. The program could have been set up at a very low cost and would have benefitted Fannie Mae immediately.
Lloyds (NYSE:LYG) posted a first quarter statutory pretax profit of £288 million, which is down quarter-to-quarter from £316M, and also a loss of £3.5 billion year-to-year. Total impairments dropped by 36 percent, and the company will place another £375 million in reserves to allow compensation for people who were ‘mis-sold’ insurance. Further, Lloyds reached its goal (two years early) of reducing its loan-to-deposit ratio to 130 percent, and intends to cut 120 percent inside a year. Reliance upon wholesale funding is reduced 24 percent year-to-year, and funding with maturity of less than a year is down 41 percent. Core Tier 1 capital ratio is now 11 percent, compared to 10 percent a year ago.
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MasterCard (NYSE:MA) shares fell but inched back up, as first quarter earnings per share of $5.36 exceeded consensus by 9 cents, and revenue of $1.75 billion by $300 million. An increase of 29 percent in processed transactions yielded $7.7 billion, which raised net income by 21 percent to $682 million and is said to be the “highest quarterly growth rate since” MasterCard’s initial public offering in 2006. Spending during foreign travel is apparently steady, as MC’s cross-border volumes rose by 18 percent. Finally, operating costs increased by 14 percent to $785 million.
Shares of Firsthand Technology Value Fund (SVVC) and GSV Capital (GSVC) jump following the news that Facebook (FB) will initiate its initial public offer campaign on Monday. The two firms are ‘usual suspects’ in speculation over the FB offering, and Firsthand also says that it has a new $1.8 million stake in Twitter.
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Although Carlyle (NYSE:CG) had to reduce its initial public offering price to $22 per share, which brought a somewhat disappointing amount of $671 million, it was still the largest such event in the U.S., so far in 2012.
Wells Fargo (NYSE:WFC) builds on its leading position in the home mortgage market, as it raises its loan origination figure from 30.1 to 33.9 percent in the first quarter, which beats the combined number of loans of the next seven lenders. However, Paul Miller doesn’t expect the company to add a lot more to its share from this point, remarking that “The government is concerned about (its) dominant position”.
Bank of America (NYSE:BAC) and attorneys representing more than 1,000 former Merrill Lynch brokers are in early stage discussions, in an attempt to resolve claims on behalf of the brokers that might eventually cost the bank hundreds of millions of dollars. The injured parties says that they are due deferred compensation from the 2009 BofA takeover.
Recent changes at BlackRock (NYSE:BLK) seem to be inducing Goldman Sachs (NYSE:GS) to quicken its preparations to launch a bond-trading platform, say inside sources. The platform, GSessions, which could appear later in May, will charge fees lower than on typical bond trades.
Major banks such as BNY Mellon (NYSE:BK) and JPMorgan (NYSE:JPM) are under pressure from the Fed to pull back their exposures to the $1.7 trillion triparty repossessions market. Though not well known, that market is a major source of funding for large firms’ trading businesses. Regulators have had informal discussions regarding the possibility of classifying it as Systemically Important, and increasing oversight on it as well.
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