Weekly Financial Biz Recap: Shocking Goldman Op-Ed, Stress Test Fallout

Monday

Tax breaks for AIG (NYSE:AIG) should cease, according to four TARP watchdog panel members, who say that the insurer has been allowed to ‘escape billions of dollars in tax payments’, since its $128 billion bailout (which was taxpayer financed).

Stephen Bird, Citigroup’s (NYSE:C) Asia chief, reports that the bank’s recent development endeavors in China are now yielding rewards. In particular, Citigroup projects that its branches in that country will rise to 100 by 2015, doubling their number.

Though the final version of the $25 billion mortgage servicing settlement was expected in court on Friday, officials are filing it Monday. The delay was in part due to a dispute between the State of Nevada and Bank of America (NYSE:BAC), but that suit will now be settled separately from the main agreement.

In a nod towards its concentration on markets in emerging nations, Goldman Sachs (NYSE:GS) says it will hold its annual board meeting in India, which is often said to be the most important of the group.

The Fed’s stress test results on the banking industry has Keefe Bruyette optimistic and predicting. He sees dividend hikes and share repurchases on the late week horizon, and predicts that Fifth Third (NASDAQ:FITB), Huntington (NASDAQ:HBAN), JPMorgan Chase (NYSE:JPM) and M&T Bank (NYSE:MTB) are “likely to have dividend yields above 3 percent”. Additionally, Keefe says that Keycorp (NYSE:KEY) likely will see a below-expected 65 percent payout ratio approved.

Tuesday

JPMorgan (NYSE:JPM) shares pop with a new yield of 2.8 percent, after its announcement of a 20 percent increase in its dividend payout to $0.30 per share, with a new $15 billion share repurchase program as well. The program includes buybacks that can be earmarked for the current year, which total $12 billion.

An earlier report that HSBC (NYSE:HBC) is exiting as many as seven countries in its Asia-Pacific retail business, is now being denied by that company. Operations in Australia, China, Hong Kong, India, Indonesia, Malaysia and Singapore were included in the rumor, but HSBC says it has ‘no plans to exit any markets in Asia’.

BB&T (NYSE:BBT) resolves the issue that has blocked its $301 million acquisition of Florida’s BankAtlantic (NYSE:BBX), by assuming the debt of the latter bank’s $285 million in trust-preferred securities. BB&T comments that the growing Florida economy makes it takeover of BankAtlantic “even more compelling”.

In a sizable move towards improvement of its balance sheet, TCF Financial (NYSE:TCB) is prepaying $3.6 billion of its long-term debt and divesting itself of $1.9 billion of mortgage-backed securities. With its first quarter report in mind, the Minnesota bank projects that the prudent moves will increase its net interest margin along with a reduction of interest rate risk.

Wednesday

Keycorp (NYSE:KEY) is one of the banks that has passed the Fed’s stress test, and it now reports that the central bank approves its $344 million stock repurchase program. Additionally, Key’s board will take up a possible quarterly dividend payout rise from $0.03 per share to $0.05, when it convenes in May.

After nearly 12 years, Greg Smith is leaving Goldman Sachs (NYSE:GS) effective Wednesday, but he is not going quietly. In a open letter, he says that “I can honestly say the environment now is as toxic and destructive as I have ever seen it. The interests of the client continue to be sidelined … [I] see virtually no trace of the culture that made me love working for this firm.” Street watchers are wondering how much impact this story will have on Goldman, noting that the social media is keeping it alive longer than its natural life would ordinarily last.

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Regions Financial (NYSE:RF) says that it has begun a public offering of around $900 million of common stock as part of its repurchase plan regarding $3.5 billion of series A preferred stock issued to the U.S. Treasury Department under TARP. Shares jump accordingly on Wednesday.

Investors are apparently forgiving SunTrust’s (NYSE:STI) failure to pass the Fed’s stress test, as they heed a certain sentence from its press release “SunTrust’s improved earnings momentum has continued in the first quarter of 2012 and is expected to result in earnings per share that exceed the first quarter First Call mean estimate.”

The probability that Prudential (NYSE:PRU) may join MetLife (NYSE:MET) and other insurers on the list of “systemically important financial institutions” caused its shares to slide Wednesday, even though Prudential was not involved with the Fed’s stress test. The insurer is expected by experts to be named by the Financial Stability Oversight Council, to face some level of Fed scrutiny.

Thursday

Public auctions will be held by the Treasury to sell its preferred stock position in Banner Corp (NASDAQ:BANR), First Financial Holdings (NASDAQ:FFCH), MainSource Financial (NASDAQ:MSFG), Seacoast Banking (NASDAQ:SBCF), Wilshire Bancorp (NASDAQ:WIBC) and WSFS Financial (NASDAQ:WSFS). This is a part of Treasury’s plan to undo the effects of the bailout.

Another dividend hike for real estate sector firm Newcastle Investment (NYSE:NCT) in less than a year, this time up 33 percent to $0.20 a share. A 12.9 percent yield makes the shares quite attractive.

In an agreement in principle with an insurer believed to be MBIA (NYSE:MBI), UBS (NYSE:UBS) will accept a net cash payment for the commutation of certain credit default swap contracts. The monoline insurer’s name does not appear in the SEC filing, however.

California Insurance Commissioner Dave Jones gives insurers until April 1 to lower rates for clients who lapsed on their previous homeowner policies. Accordingly, shares of Assurant (NYSE:AIZ) — one of the 10 biggest California “lender-placed coverage” insurers — plummeted.

Friday

Details of the recent acquisition of El Paso (NYSE:EP) by Kinder Morgan (NYSE:KMI), in which Goldman Sachs (NYSE:GS) was heavily involved, has the company reevaluating its internal conflict-of-interest rules, according to the Wall Street Journal. Reform measures are said to include disclosing bankers’ financial holdings to clients. The Journal further notes that “all the banks are thinking about the very issue.”

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Specialty finance company Technology Investment Capital (NASDAQ:TICC) trades down after it announces that it’s offering 4.25 million shares of its common stock to the public at a discounted price of $9.96 per share.

Getty Realty (NYSE:GTY) says it will defer its next dividend due to cash flow concerns, and that has investors frustrated. Its fourth quarter earnings report didn’t assuage their doubts either, and shares are down sharply.

To contact the reporter on this story: Mark Lawson at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com