Weekly Financial Biz Recap: Consumers Get Short End of Credit Card Settlement Stick, Deutsche Bank Makes Big Job Cuts
HSBC Holdings P.L.C. (NYSE:HBC) is stepping up its discussions with the Justice Department and is said to be close to a resolution on a criminal inquiry into money laundering. According to sources, a settlement could come within weeks.
Investing Insights: Citigroup Earnings: Investors IGNORE Declines and APPLAUD Profitable Beat.
Citigroup, Inc. (NYSE:C) might request permission to raise its dividend by the end of 2012, according to CEO Vikram Pandit, which if granted would mark its first dividend hike since the financial crisis. Currently, the firm pays a token one cent per share every quarter.
J.P. Morgan Chase (NYSE:JPM), Morgan Stanley (NYSE:MS), and Goldman Sachs Group, Inc. (NYSE:GS) are among Wall Street banks that are moving farther into the oil business. Recent financial reforms allow banks to use physical oil cargoes to offset their quota of derivative positions. The move by these firms might also be a result of high oil prices on independent refiners.
Investigators in the United States Senate allege that HSBC Holdings P.L.C. (NYSE:HBC) did business with firms linked to terrorism, failed to guard against money-laundering violations in Mexico and bypassed U.S. sanctions against Iran, in a 335-page report released on Monday. The firm’s executives are testifying Tuesday at a hearing, and David Bagley, who is the head of group compliance, has said that he plans to step down.
Goldman Sachs Group, Inc. (NYSE:GS) is establishing an in-house bank that will loan money to wealthy clients and companies, which marks an important move for the company as it attempts to deal with financial reforms and a weak worldwide economy. The firm’s executives have set a goal of $100 billion in loans, up substantially from $12 billion at the end of March.
American International Group, Inc. (NYSE:AIG) has received $5 billion from The New York Federal Reserve which was contributed by the insurer to a fund in 2008 as part of its rescue. This repayment is subsequent to the sale of collateralized debt obligations held in Maiden Lane III. AIG will receive one third of the proceeds from additional divestitures, and the NY Fed will get the rest. It’s expected that the firm will use the cash to repurchase stock.
J.P. Morgan Chase (NYSE:JPM) has told authorities investigating The Loss that three traders in London might have tried to hide losses that led to the restating of first quarter earnings. The inquiry will now move from investigating the personal trades of those involved, to one of fraud.
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The Charles Schwab Corporation’s (NYSE:SCHW) Chief Executive Walt Bettinger says that “trading activity weakened” during the quarter, but the company sees other signs of “sustained client engagement”. Active brokerage accounts increased by 7 percent, year-over-year; client assets rose 9 percent; and net interest margin declined by an additional 24 basis points from the same quarter in 2011 to 1.72 percent.
U.S. Bancorp (NYSE:USB) is facing a lawsuit by the City of Los Angeles, as one of its divisions is accused of being one of the city’s biggest slumlords and contributors to blight. Allegations are that the company has taken title to more than 1,500 properties, but “disregarded” its legal duties as owner. For its part, the lender insists that it’s the servicers and not the trustee, who have responsibility over the homes.
The Blackstone Group (NYSE:BX) and KKR & Company, L.P. (NYSE:KKR) are now among other private equity firms starting talks with Chinese authorities to initiate a large amount of renminbi funds, which the firms expect to assist them in winning deals in the country. In an experiment, certain private equity companies are being allowed to raise yuan from investors in Hong Kong, and to eventually finalize deals without first obtaining approval from the authorities.
American Capital Agency (NASDAQ:AGNC) prices its 32 million secondary offer, estimating gross proceeds of $1.09 billion, which implies a price of around $34, which would represent 16 percent above book value.
Capital One Financial Corporation (NYSE:COF) is ordered by regulators to pay as much as $210 million to settle allegations that it used deceptive marketing tactics to mislead customers into paying for add-on products such as credit monitoring. Parties who were affected by the actions will be reimbursed by the Corporation, and it also is required to cease the sale of debt suspension/cancellation products.
Don’t Miss: BancorpSouth Second Quarter Earnings Sneak Peek.
Berkshire Hathaway (BRK.B) is easily beating the S&P so far in 2012, plus doing it with much lower volatility. More than 20 percent of Warren Buffett’s portfolio is invested in Wells Fargo & Co., (NYSE:WFC), who is by far the current dominant player in the mortgage market, and then there is a long list of Berkshire subsidiaries that are linked to homebuilding or remodeling.
Goldman Sachs (NYSE:GS) reaches a settlement in a class-action lawsuit in which investors claim losses on $698 million worth of securities, backed with mortgages issued by New Century Financial. Terms of the agreement have not been divulged.
Credit Suisse (NYSE:CS) reports that it will increase capital by 8.7 billion Swiss francs, or $8.9 billion, with a possible future increase of an additional 6.6 billion francs. Further, the firm will raise its cost savings target to 3 billion francs from 2 billion francs. Finally, CS is releasing its earnings figures a week early: second quarter net income increased from 768 million francs in 2011 to 788 million francs in 2012. The Swiss National Bank had recently warned about the firm’s capital position, and commented that, “In an environment that remains particularly challenging for the international banking system, these measures substantially increase the resilience of Credit Suisse Group.”
HSBC Holdings (NYSE:HBC) wants to divest its Vietnam insurance division. according to sources. Such a sale could amass approximately $400 million for the company as it proceeds to leave non-core markets.
J.P. Morgan Chase’s (NYSE:JPM) plans for an exchange-traded fund backed by physical copper might be blocked by regulators, if Senator Carl Levin (D-MI) has his way. He is asking that the move be disallowed, as he believes that it could cause a supply shock and inflate prices, as a significant amount of copper would disappear from the markets.
Bank of America (NYSE:BAC) will pay $375 million to resolve a suit with Syncora Guarantee, the bond insurer division of Syncora Holdings, concerning toxic mortgage-backed securities, according to Reuters. The former was sued in 2009 by Syncora in order to recover losses on securities transactions which were based upon home loans made by Countrywide. Separately, in the bank’s conference call on Wednesday, Chief Financial Officer Bruce Thompson blames the bank’s decline in both consumer and business loans to the runoff in real estate. The total number of loan division employees is down 4 percent year over year, but down 8 percent if new hires in delinquent mortgage servicing are excluded. In addition, BofA confirms it is being questioned by regulators regarding the Libor matter.
KKR & Company, L.P. (NYSE:KKR) is filing to launch two funds to individual investors: one a high yield bond fund, and the other allows investing in “special situations”. Acquisitions and takeovers are still KKR’s core business, but the company is branching out into asset management, real estate, as well as other lines.
Cypress Sharpridge Investments, Inc. (NYSE:CYS) Chief Executive Kevin Grant commented that “Our biggest competitor for assets is the Fed.” The remark was made during the firm’s earnings conference call, pertaining to what could become a volatile mREIT sector, as yield-obsessed investors crowd each other out, with the central bank winning the race.
Bank of America’s (NYSE:BAC) 30 basis point decline net interest margin comes to a lost quarterly earnings power of $1.27 billion, calculates John Steiner, who calls it a “hit (that) is recurring, not one time.” This loss to the company’s underlying business could have to do with the shares’ falling off so far this week, in the face of an impressive beat on earnings due to a large reserve release.
The Co-operative Group provisionally agrees to acquire 632 of Lloyds Banking Group’s (NYSE:LYG) branches for £750 million, which amount is less than the already-reduced rumor number as the firm needs to divest the branches to fulfill the European Commission’s state aid rules. The Co-op will pay £350 million initially, and added “earn-out” sums from completion through the year 2027, subject to performance.
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Deutsche Bank (NYSE:DB) will cut 1,000 investment-banking positions, according to a Reuters report, as a slump in capital markets activity results from the eurozone crisis. The terminations must come as a surprise, since the bank said in April that it did not foresee a need to reduce employees in the department.
Morgan Stanley (NYSE:MS) intends to eliminate an added 700 jobs by the end of 2012, in an attempt to “rightsize” the bank, says its Chief Financial Officer Ruth Porat. Already since the first of 2012, more than 3,000 positions have been cut at the company.
During a day of industry-wide job slashing, Citigroup Inc. (NYSE:C) announces that 350 positions will be eliminated from its investment banking and trading unit this year, says a source. The reductions comprise approximately 2 percent of the division’s staff and come in addition to 1,200 cuts already announced.
Bank of America Corporation (NYSE:BAC) is leading in something in which it would rather not: Investors are pressuring banks to buy back soured mortgages during the past few months, due to recent earnings reports, and the firm is said to be facing outstanding claims jumping more than 40 percent to $22 billion in the second quarter, which is the highest of all banks. Other big names in the group include include Wells Fargo & Co. (NYSE:WFC), PNC Financial Services Group (NYSE:PNC) and Fifth Third Bancorp (NASDAQ:FITB).
Morgan Stanley (NYSE:MS) is in advanced discussions with Qatar’s sovereign wealth fund, concerning a possible stake in the bank’s commodities division and it’s said that an agreement might be imminent, according to CNBC. An investment such as that could provide the wealth fund a beachhead in the worldwide business of trading paper and physical stocks of commodities such as crude oil, natural gas and metals, while at the same time bringing an influx of capital for MS.
The Blackstone Group (NYSE:BX) is among those interested in what’s on offer, as the U.S. government steps up its plans to divest the billions of dollars in assets it purchased during the bailout of the financial system in 2008. The assets include the preferred shares of over 300 small and midsize banks held by the United States Treasury, and mortgage bonds held by the New York Federal Reserve Bank, according to the Wall Street Journal.
Top crop insurers, such as Wells Fargo & Co. (NYSE:WFC), ACE Limited (NYSE:ACE), and Q B E Insurance Group (QBEIF.PK), might experience their first underwriting losses in a decade due to the ongoing drought. However, taxpayers might have to provide some 50 to 80 percent of government subsidies and reinsurance, along with having to pay more at the grocery store. Meanwhile, cynics sat that farmers might be tempted by the severity of the drought at abandon their crops and claim the insurance instead.
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