Weekly Financial Biz Recap: BofA Losing Jobs and Revenue, JPMorgan Under Fire Again
Barclays (NYSE:BCS) is searching for way to divest its investment-banking division in reaction to the Libor scandal, according to The Sunday Times. A source to Marketwatch says that the report is not accurate, but if it is, the Barclays unit could float in New York as the United Kingdom-based retail and commercial bank keeps its London listing.
Lloyds (NYSE:LYG) is said to be closing in on a deal to be rid of approximately £1 billion in toxic loans and equity stakes that it inherited through its 2008 HBOS acquisition, and that various private equity and vulture firms are competing as buyers.
Visa (NYSE:V) and Mastercard (NYSE:MA) are in for an “unavoidable” slowing during the next 3-6 months, opines John Williams at UBS, as he downgrading both to Sell, worrying out loud that while both stocks stand near all-time highs, they are exposed to a decided weakening in worldwide consumer spending.
Mitsubishi UFJ Financial Group (NYSE:MTU) has suspended two of its traders who are based in London, in connection with the Libor-fixing inquiry. The traders previously were employed by Dutch lender Rabobank, which is one of at least 12 banks that are being investigated by regulators.
Barclays (NYSE:BCS) Chairman Marcus Agius, in his testimony before Parliament, said that the former CEO Bob Diamond will voluntarily forgo any deferred bonuses, worth a maximum of approximately £20 million ($31 million). In his comments, Agius also acknowledged to the PMs that his bank has “strained relationship” with the regulator Financial Services Authority. Meanwhile, the Bank of England’s Paul Tucker said that it’s more and more obvious that the Libor-manipulation was really an open secret in the ranks of central bank officials for years. Further, the Federal Reserve Bank of New York said that it was aware of problems concerning Barclays and the lending rate as far back as late 2007.
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Bank of America Merrill Lynch reduces its second quarter profit expectations for asset managers by an additional 4 percent, due to their equity funds losing money and inflows slowing down. AllianceBernstein (NYSE:AB), BlackRock (NYSE:BLK), and Legg Mason (NYSE:LM) are among those in the group.
JPMorgan Chase’s (NYSE:JPM) now infamous multibillion-dollar trading loss brought an industry practice to light: Banks keep investors uninformed regarding how they calculate trading risks, says a Bloomberg report. Regulators will likely take a dim view towards this revelation.
HSBC (NYSE:HBC) officials are expected to apologize to a Senate hearing on July 12th for anti-money laundering controls which were insufficiently effective, according to an internal memo. CEO Stuart Gulliver, in a note to employees, wrote that, “we failed to spot and deal with unacceptable behavior… It is right that we be held accountable and that we take responsibility for fixing what went wrong.”
Three out of Barclays’ (NYSE:BCS) top 10 investors indicate that they want an outsider appointed as chairman, which could spell trouble for the current plans for deputy chairman Sir Michael Rake to take over from Marcus Agius.
JPMorgan (NYSE:JPM) is said to be planning to retrieve millions of dollars in stock from individuals linked with The CIO Loss. Individuals include the former CIO chief Ina Drew and the “London whale” Bruno Iksil. The clawback might be announced as soon as Friday, at which time earnings will be released.
Bank of America (NYSE:BAC) has been eliminating jobs in its commercial banking division, according to sources, as part of the bank’s endeavors to reduce costs while at the same time grow in a lackluster economy. Separately, the Bank stands to lose a $480 million revenue stream, which comprises 3 percent of 2011 earnings, reports Matthew O’Connor, due to anticipated new rules that require banks to process debit card transactions in the order they occur, as opposed to largest to smallest. Several big banks have already made the switch, but others including BofA, have not.
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Big banks who are anticipating losses from the expected new debit-card processing rule include Regions Financial (NYSE:RF), which faces the biggest hit as a percentage of earnings, possibly 4 percent; JPMorgan (NYSE:JPM), and Wells Fargo (NYSE:WFC). The new requirements include the processing of debit card transactions in the order they occur, as opposed to largest to smallest.
Don’t Miss: SNEAK PEEK: JPMorgan Chase Quarterly Earnings.
Germany gets trendy, as it now might also have its own financial scandal: German prosecutors open an inquiry of the head of Morgan Stanley’s (NYSE:MS) German division, Dirk Notheis, who is currently on leave, and his interactions with the former premier of a German state. The target of the investigation is that state’s purchase of shares in a German utility, and emails implying improper insider ties between the banker and the politician(NYSE:S).
Citigroup (NYSE:C) introduces its Client Segregation Transparency Initiative, in reaction to a pattern among brokerages that seem to treat the idea of segregated client accounts as little more than a might-do-sometime thing. Bank officials comment that, “No other clearing member provides this level of disclosure to its clients.”
Credit Suisse (NYSE:CS) clients suspected of tax evasion have had their homes raided by tax inspectors in Germany, say government and bank officials. Approximately 5,000 clients are said to have purchased certain insurance policies between 2005 and 2009. The current action is part of a larger crackdown on Swiss banks linked to possible tax evasion.
JPMorgan (NYSE:JPM) faces yet more inquiries, as several regulatory agencies are said to be investigating the firm’s sales tactics after complaints from current and former JPM financial advisers, who said they felt that they were pressured to sell the bank’s products even though less expensive and/or better performing options existed.
Earnings Report: Goldman Sachs Group’s Second Quarter Earnings Sneak Peek.
Blackstone (NYSE:BX) is thought to be allying up with the former AIA Group chief Mark Wilson and also Swiss Re to bid for ING’s (NYSE:ING) Asian insurance division. The new consortium could make an offer amounting to between €5 billion and €6 billion ($6.1 billion and $7.3 bilion), which, at the top of the range, would match the $7 billion that ING hopes for.
Wells Fargo (NYSE:WFC) will shell out $125 million to resolve federal claims that it violated fair-lending laws, says a source, in a case that involves the mortgage loan officers’ practice of leading minority homeowners into high-cost subprime mortgages.
The Co-operative Group is near agreement on the purchase of 630 branches from Lloyds (NYSE:LYG), says the Financial Times. However, the weak environment probably requires that the price will have a maximum of £1 billion, which is well under the previously suggested figure of £1.5 billion. Further, the amount will likely be split into upfront and performance-based payments.
Earnings Report: Bank of New York Mellon Second Quarter Earnings Sneak Peek.
HSBC’s (NYSE:HBC) part in the laundering of funds for or in Iran, Cuba, and Mexico, will be on display Tuesday, as a U.S. Senate panel will hear testimony from the firm’s executives, which will include legal chief Stuart Levey, who was once a major Treasury official on terrorism and finance.
J. P. Morgan’s (NYSE:JPM) pretax loss from the CIO trades has now been set at $4.4 billion, which is obviously quite lower than estimates which went as high as $9 billion. The CIO synthetic group is being shut down. The firm’s earnings report, along with a restatement of The Loss, and a conference call are all slated for Friday. Net revenue fell by 6.8 percent year-to-year, and trading revenue dropped 10 percent, and by 15 percent without the debt valuation adjustment. The second quarter’s pretax profit from reduced loan loss reserves was 2.1 billion, adding 33 cents per share to profits, compared to 28 cents in the first quarter. The deterioration in the bank’s credit spreads enabled the booking of an $800 million DVA profit. JPM’s Basel III Tier 1 capital ratio is 7.9 percent. Net interest income was $11.3 billion, which was down 5 percent year-to-year.
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