Weekly Financial Biz Recap: Lloyds’ Unexpected Loss, J.P. Morgan Management Changes
UBS A.G. (NYSE:UBS) is among several companies facing a probe for alleged roles in the Libor scandal. In a past faux pas, UBS had to pay $22.7 billion to reimburse clients that it was said to have defrauded when they bought auction-rate securities. James Stewart at the New York Times says that “UBS is in a league of its own given its track record for scandals. The bank’s recidivism seems rivaled only by its ability to escape prosecution.”
American International Group, Inc. (NYSE:AIG) is said to be approaching the acquisition of the Woodbury independent broker-dealer division from Hartford Financial Services group, Inc. (NYSE:HIG), which is an insurance competitor that’s selling off several units. The latter has been under pressure from its principal shareholder John Paulson to cause its stock price to rise; this move might well be the result.
Bank of America (NYSE:BAC) shares are rebounding modestly from early losses, likely due to positive remarks from J.P. Morgan. The comments coincided with the company’s report that it reduced its ATM presence by 9 percent, or 1,536 units, in the first half, realized mostly by removing most of the systems installed at domestic gas stations and malls. The ATM removals are due to BofA’s attempts to raise $8 billion in expense cuts, and also to concentrate on its most profitable clients.
Citigroup, Inc. (NYSE:C) and Morgan Stanley (NYSE:MS) recruit Perella Weinberg to evaluate the Morgan Stanley Smith Barney brokerage, in which the former holds a 49 percent investment, and intends to sell more. Citi values the brokerage at approximately $22 billion, but Morgan Stanley sees it as only about $9 billion.
Alison Carnwath steps down from her position as the head of Barclays PLC (NYSE:BCS) remuneration committee. A large number of shareholders had voted against her renomination to the board earlier in 2012, due to their objections concerning executive pay.
BlackRock, Inc. (NYSE:BLK) is bereft of a profit center as the European Securities and Markets Authority rules that European fund managers must give back any money made from securities lending transactions to investors. The firm’s iShares division is a major player in that area, and BlackRock contends that the new rule will put it at a disadvantage to synthetic exchange-traded fund providers. The new regulation will become effective in February of next year.
J.P. Morgan Chase Co. (NYSE:JPM) is set to act, should an exit from the Euro monetary union occur. The firm has established a plan to trade the bonds of any country that leaves. Carl Norrey comments that, “The probability of a country exiting the euro is no longer zero. It’s a massive task, (but) we would be ready to trade with clients in as short a period of time as possible.”
The Carlyle Group (NYSE:CG) and Australia’s Seven Group Holdings are mulling an initial public offering of the equipment rental company Coates Hire, say sources, in a move that could bring up to $722 million. Such an IPO is not likely before next year, but it would be the largest private equity-backed sale in Oz in the past 3 years.
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Newcastle Investment Corp. (NYSE:NCT) stocks fall subsequent to a secondary offering of 22 million shares. The company is not a traditional mortgage real estate investment trust, but is more in the mortgage servicing business, and will likely use the proceeds to acquire additional rights.
Berkshire Hathaway, Inc. (NYSE:BRK.A) is about to receive additional cash from a legal dispute with Kuwait, which Dow Chemical Co. (NYSE:DOW) Chief Executive Liveris believes will be used to redeem preferred stock, of which Berkshire owns $3 billion worth. Liveris adds that such a transaction could be immediately “very accretive”.
The government of China wants to own assets that are less volatile than stocks, and so The Blackstone Group’s (NYSE:BX) Real Estate Partners VII fund gets a rare commitment from that body of approximately $500 million, reports a source. Blackstone has raised $12 billion for the fund so far, and expects to close it at $13.3 billion in the near term.
Lloyds Banking Group (NYSE:LYG) posts an unanticipated first half net loss of £641 million, which is down from a loss of £2.28 billion year-over-year from 2011. Analysts had instead expected a £314 million profit, but the firm had to set aside an additional £700 million during the period in order to pay back customers for mis-sold PPI policies. Separately, Lloyds has received subpoenas from authorities who are looking into the Libor scandal, and is also a defendant in several lawsuits linked to the matter. However, the company has yet to set aside reserves to cover any penalties, even as Liberum Capital calculates that it might be liable for as much as £1.5 billion.
Banco Santander S.A. (NYSE:SAN) has now reached some 70 percent of the provisioning mandates set by Spanish government against real estate loans in its domestic market, which caused the bank to see its first half net profit drop by 51.3 percent to €1.7 billion, having had to set aside €1.3 billion in provisions. Santander’s non-performing loans rose by 1.17 percent year-over-year to 5.98 percent.
Nomura Holdings, Inc. (NYSE:NMR) Chief Executive Kenichi Watanabe and Chief Operations Officer Takumi Shibata have stepped down, after the third insider-trading scandal at the firm in the four years in which Watanabe has been leading it. Koji Nagai, the chief of the securities division, will be the new chief executive. At the same time, Nomura posts a fiscal first quarter net profit that dropped from ¥17.7 billion to ¥1.89 billion ($24.2 million).
BlackRock, Inc. (NYSE:BLK), Fidelity Investments and Vanguard Group report that they are attempting to assess in what manner Libor manipulation might have damaged their clients, and whether any legal action should be taken over the rate-rigging. The three companies collectively manage more than $7 trillion.
J.P. Morgan Chase & Co. (NYSE:JPM) has announced several changes in its management team: Jes Stanley is named chairman of its corporate and investment bank, Mike Cavanagh and Daniel Pinto will be co-chief executives of the unit, and Matt Zames is chosen as co-operating chief of the entire company. The firm explains that it is “further unifying businesses around customer needs.”
Shares of Legg Mason, Inc. (NYSE:LM) move down following the firm’s fiscal first quarter missed estimates Friday. The asset manager reported double-digit revenue slides amid a smaller pool of assets under management as well as ongoing outflows of investor cash. The firm is faced with a shrinking asset base because of poor performance, and has not experienced any net inflows of investor funds since 2007.
It’s two days of share pain for pawn and payday lender Cash America International, Inc. (NYSE:CSH), after posting disappointing second quarter earnings and also canceling a $500 million initial public offering of its online Enova International lending unit. The volatility of the markets was blamed for pulling the IPO, but the firm said that it is “reserved” regarding expectations for the rest of this year.
Douglas Keenan, who was employed by Morgan Stanley (NYSE:MS) in London in 1991, has told the Financial Times that senior staffers explained to him that, “banks misreported the Libor rates in a way that would generally bring them profits.” It just so happens that Bob Diamond was head of interest-rate trading in London at that time, but Parliament is apparently not interested in hearing Keenan’s testimony on the matter.
Four former and current senior Barclays PLC (NYSE:BCS) employees, including Finance Director Chris Lucas, are being investigated by the United Kingdom’s financial regulator, regarding “sufficiency of disclosure” fees paid when the firm raised an emergency £7.3 billion with Middle Eastern investors in 2008. In addition, the company is reporting its first half earnings, along with the disclosure it’s facing lawsuits over Libor.
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