Weekly Biz Recap: JPMorgan CIO Retires, BofA Selling Overseas, Facebook Fury

Monday’s JPMorgan (NYSE:JPM) news includes worries concerning its European mortgage bonds, Dimon’s conference comments, and a new agency investigation. Investors are concerned about European home-loan bonds, of which JPM is the largest purchaser, and the possibility that the bank will pull back from that market due to its CIO faux pas. As it is, the mortgage bond market in Europe might experience considerable volatility, since JPM’s stake is almost 9 percent of the size of the Dutch and United Kingdom markets upon which it has been focusing. Meanwhile, Jamie Dimon commented at a conference that “Hopefully by the end of the year we will make this [the CIO loss] something we don’t need to talk about”, while also saying that his company has no intentions of making regular progress reports on that subject. Additionally, Dimon said that JPM is suspending its share buybacks, but intends to continue the dividend; this in the face of a March 2012 announcement of a $15 billion repurchase program, and previous remarks about ‘buying low’. Also on Monday, getting into the act is the Commodity Futures Trading Commission, whose chair confirms that JPM’s CIO losses will be investigated by that agency (as well as several others).

Morgan Stanley (NYSE:MS) shares fall Monday, perhaps in connection with its taking the lead in underwriting Facebook’s IPO (NASDAQ:FB), in which it might have spent more cash keeping the new stock above $38, than it earned in fees. The bank is often a proxy for conditions in Europe, which doesn’t really help right now.

Big banks Bank of America (NYSE:BAC), Citigroup (NYSE:C), Deutsche Bank AG (NYSE:DB), and JPMorgan (NYSE:JPM) and being sued by the FDIC in New York, which is acting as receiver for Strategic Capital Bank, as it claims $11 million in mortgage backed securities losses.

Wells Fargo (NYSE:WFC) decides to assertively push the expansion of its $444 billion mutual funds business internationally. In doing so, the bank faces an upside and a downside: there is currently space for its unit overseas as European companies pull back, but Morningstar says that the crux will be ‘overcoming the perception that bank and insurance-run mutual funds are among the most expensive’.

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MetLife’s (NYSE:MET) domestic retail life insurance and annuities divisions will likely be the next areas for cost reduction, says Sean Dargan of Macquarie’s, as the firm seems to be concentrating upon growth opportunities in emerging markets. The analyst agrees, remarking that “The company can achieve higher returns elsewhere.”.

American Express (NYSE:AXP) reinforces its position in the Social Network by launching a line of co-branded prepaid plastic with Zynga (NASDAQ:ZNGA). Users will be required to sign up for a Serve account, which can be loaded from existing bank accounts or debit/credit cards, but no credit checks will be necessary.

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Oaktree (OAK) gets some analyst comments, both bullish and bearish. Morgan Stanley opines that OAK’s “countercyclical” strategies make it a “natural complement” to Blackstone, while KBW thinks the shares inexpensive, but isn’t happy with the firm’s opportunity to profit from distressed strategies, which it says “has moderated.”.

Shares of JPMorgan (NYSE:JPM) are moving up Tuesday, despite the news that the firm, along with Jamie Dimon and Ina Drew as individuals, are being sued on behalf of employees. The suit alleges that the company violated its duties to 401k and other retirement plan participants, when it included JPM as an investment choice and hid the stock’s risk.

Wednesday

Bank of America (NYSE:BAC) will repurchase some $330 million of home loans from Freddie Mac (FMCC.OB), subsequent to the discovery of flaws in the loans’ creation process. Although this is a small buyback relative to the usual transactions of the company, BofA’s total costs linked to defective home loans have amounted to more than $42 billion thus far.

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Barclays’ (NYSE:BCS) sale of its 19.6 percent investment in BlackRock (NYSE:BLK) has brought a net amount of $5.5 billion, selling 26.2 million shares to money managers at $160, and 6.38 million shares to BlackRock at $156.80. In addition, there is an over allotment option of 2.6 million shares. The divestiture will raise the company’s Tier 1 capital ratio by about five basis points, as it moves to meet Basel III requirements.

Aflac (NYSE:AFL) is among DividendChannel’s top ranked dividend stocks, of which insider buying has occurred during the past six months. Reasons for the purchases vary, but in this case it’s probably because the stock currently yields 3.4 percent.

If investors in Facebook (NASDAQ:FB) feel that they overpaid, Morgan Stanley (NYSE:MS) now has a price adjustment for them, according to Dow Jones. This word comes amid lawsuits, politicians chiming in, and rumors in the Wall Street Journal that underwriters (including MS) made a profit of $100 million through over allotment option short positions on the shares.

Investing Insights: Did These Banks Profit From Facebook’s IPO?

Thursday

Banco Bilbao Vizcaya Argentaria SA (NYSE:BBVA) is mulling a divestiture of its pension unit in Latin America, which it says is ‘attractive, but non-core’. No rush, however, as the bank indicates that the strategic review will take more than one quarter, with a decision not likely in the current year.

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Thursday brings more on the underwriter/client background notes leading up to Facebook’s (NASDAQ:FB) IPO. The Wall Street Journal reports that institutional investor Capital Research & Management was warned off taking a position in FB as an underwriter informed it of cuts to the shares’ estimates. However it’s also noted that such ‘selective disclosures’ are not illegal in the case of IPOs. In another aspect of the now famous Facebook Big Day, Stephen Gandel of Fortune writes that the $100 million trading profit that underwriters are said to have obtained with “greenshoe” short positions might seem “…like a giant conflict of interest, but no rules were broken and the potential trades were even disclosed in Facebook’s prospectus.”.

Toronto Dominion Bank (NYSE:TD) enjoyed record profits from its U.S. business, but the Royal Bank of Canada (NYSE:RY), having exited the U.S. consumer market, saw its earnings (+ 5 percent) miss consensus. Even so, shares of both banks are down Thursday, but those of RY are far lower.

Friday

As a part of Citigroup’s (NYSE:C) program to raise capital to meet Tier I requirements, the company divests a 10.1 percent investment in Turkey’s Akbank (AKBTY.PK) for $1.15 billion. However, Citi will retain a 9.9 percent stake for three years, and will take a $243 million loss, post-tax, on the deal, since it acquired the 20 percent for $3.1 billion in 2007.

There seems to be no substitute for experience, as it’s now revealed that the three board members who oversaw risk at JPMorgan (NYSE:JPM) had little of it, so far as managing financial institutions goes. Further, it seems that JPM is the only one of the Too Big To Fail Club whose risk committee had no one with closer industry ties.

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S&P has cut the ratings on five banks in Spain, but Banco Santander SA (NYSE:STD) wasn’t among them. Spain might mimic Greece, in that the banks there are facing possible large scale deposit withdrawals, as they have some €85 billion of maturing debt in the second and third quarters. More long term refinancing operations borrowing might be problematic, as they have little collateral left for such purposes. By the way, Santander does remain on “CreditWatch with negative implications”.

If acquired, Hudson City Bancorp (NASDAQ:HCBK) might bring a 31 percent windfall over its current price, says Matt Kelley of Stern Agee, although a buyer “could take substantial liability marks”. New York Community Bancorp (NYSE:NYB) is said (more than once) to be a possible suitor.

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