Weekly Financial Biz Recap: Barclays’ U.S. Debut, JPMorgan’s Big Loss
Warren Buffet, CEO of Berkshire Hathaway (NYSE:BRKB), now says that holding large reserves of cash for a long time is not sensible. He also told CNBC that a “logical dividend policy” will be discussed in next year’s annual report.
UBS (NYSE:UBS) wants to sell its collateralized debt obligations assembled in 2007, during the current week. The instruments carry a face value of $1.5 billion, and are connected to loans involving hotels, malls and skyscrapers.
Barclays (NYSE:BCS) enters the United States market with the introduction of an online savings bank, in which customers will be able to earn around 1 percent on their deposits.
Wells Fargo’s (NYSE:WFC) entry into the prime brokerage business displeases Moody’s (NYSE:MCO), which says that the company’s purchase of Merlin Securities is “credit negative” and that “We do not believe (investment banking) is a traditional area of expertise for WFC management.”. Well Fargo, for its part, remarked that the acquisition was “a natural extension” of its capital markets business.
Investing Insights: Are These Big Shareholders Scaling Back Their JPMorgan Holdings?
ING (NYSE:ING) posts a first quarter net profit of €680 million, which is down 51 percent year-to-year. On the upside, its underlying pretax figure if up 65 percent quarter-to-quarter, to €1.126 billion, due to lower impairments. Core Tier 1 ratio improved to 10.9 percent.
Shares of Hilltop Holdings (NYSE:HTH) were up in early trading at the news of its intention to acquire Texas bank holding company PlainsCapital for $318 million in cash plus 27.5 million common shares, which are valued at $219 million, when based on Tuesday’s closing price of $7.96 per share.
Annaly (NYSE:NLY) shares rally from their Tuesday after hours slump, when it was revealed that there would be an offering of convertible bonds and preferred stock. Problem is that the bonds yield is only 5 percent, which is considerably less (unless they are converted) than the present dividend of 13.3 percent. Dividend Master commented, “Incredible execution”.
Santander (NYSE:STD) is one of the Spanish banks that likely will be able to bypass at least some of the reforms that will be imposed on Friday. Sources say that the bank’s heavy lobbying campaign helped it in this case, and that it is one of the companies who “feel they have already heavily provisioned are near to reaching their (capital) targets.”.
The first ever Chinese acquisition of an American bank is approved by the Fed, as it okays ICBC’s (IDCBF.PK) purchase of 80 percent of Bank of East Asia. In addition, applications by the Bank of China (BACHY.PK) to open a branch in Chicago and Ag Bank of China a branch in New York City were also approved.
SunTrust (NYSE:STI) is reportedly in discussions to divest RidgeWorth Investments, which is not core to its business. This comes only two years following the failure of an auction of the asset management business, and now cash is needed as well. SunTrust’s capital plan was rejeceted by the Fed earlier in 2012.
Headaches for Goldman Sachs (NYSE:GS) are revealed Thursday, as an SEC filing says that the company might need to raise $2.21 billion in extra collateral for counter-parties if its credit rating is cut by two notches. (Moody’s currently has major U.S. banks under evaluation for possible downgrade.) In addition, Goldman increases its expectations of “reasonably possible” legal costs to $2.7 billion from $2.4 billion, as an ongoing investigation of its role in allowing Greece to hide its debts now includes “trading and research activities”.
Shares of Dutch insurer and pensions firm Aegon (NYSE:AEG) soar after reporting a surprise increase in first quarter net profit, aided by investment gains and lower impairments. Aegon says it will continue its concentration upon reinforcing its capital buffer so as to shield itself from economic uncertainties
Friday’s financial news revolves around JPMorgan’s (NYSE:JPM) $2 billion trading losses and comments regarding the matter. The company is said to be in talks with regulators in the United Kingdom, concentrating upon exactly how the losses happened, and ways that might be put into place so as to avoid a repeat performance. Kid Dynamite remarked that the bank has “trillions in exposure” and that the issue is too complicated for the best experts to fathom. He also posed the question: “If this could happen to the best-in-class, what might we think about the rest of the banks? 2008 is not that long ago and the loss in trustis of far more import than the $2 billion.”. Also, the U.S. Senator who co-authored the Volcker Rule, Carl Levin, commented that “…the losses are just the latest evidence that what banks call “hedges” are often risky bets that so-called Too Big To Fail banks have no business making … a stark reminder of the need for regulators to establish tough, effective standards.”. At midday the Securities and Exchange Commission formally initiated an inquiry into the accounting practices of JPM and also public disclosures in the wake of the Chief Investment Office’s activities, reported the New York Times, but it seems that the agency was actually looking into the matter but only revealed it after the big loss was announced.
Shares of Banco Santander S.A. (NYSE:STD) fall then shrugged at new details of Spain’s banking reform. An independent audit of the real estate portfolios of banks has been ordered, and the government will demand 47 percent provisions on loans made to property developers. Additionally, bailouts are very much included in the reforms, through which government money will be given to banks whose books are insufficient by the new standards. Not helping matters was the extraordinary prediction by economics minister De Guindos, that the maximum public cost of bailing out Spanish banks would be (only) about €15 billion.
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