Weekly Financial Biz Recap: BofA Hides Info From Investors, HSBC Gets Out of Greece
Executives at Bank of America (NYSE:BAC) were informed just days before the bank’s shareholders approved the $50 billion Merrill Lynch acquisition, that losses at the latter would impact the combined firm’s earnings for years to come, but that piece of information was withheld from the investors who okayed the buyout. Court documents were filed on Sunday that amplified the omission, which might well induce Federal regulators to hold top brass in such firms more accountable for their actions during crises.
Here it comes. It now appears that key executives at JPMorgan (NYSE:JPM) were warned – more than one year ago – by CtW Investment Group, that it needed to upgrade its risk controls. Now being fast-tracked at JPM: two of CtW’s proposals, i.e., allowing the chief risk officer additional power to monitor CIO trades; and beefing up the board’s risk management committee.
Lloyd’s (NYSE:LYG) divests for $621 million, a portfolio of dustressed Australian property loans to a group led by Blackstone and Morgan Stanley, with a paper face value of $1.8 billion. The sale constitutes a portion of Lloyd’s ongoing process of strengthening its balance sheet.
In Tuesday’s JPMorgan (NYSE:JPM) news, it’s estimated the company might post a trading loss of $4.2 billion in its CIO, says International Strategy & Investment Group Inc. Such a loss could reduce the second quarter earnings per share to 65 cents, which is down 30 percent from the previous forecast of 93 cents.
Warren Buffett of Berkshire Hathaway (NYSE:BRKA) provided the best value as CEO, says a Bloomberg report detailing the 50 best-paid CEOs of financial firms, while KKR (NYSE:KKR) co-CEO Henry Kravis was the best paid, with $30 million. On average the salaries of the 50 increased by 20.4 percent in 2011, in the face of sharp decreases in earnings and share prices of most large banks and brokerages.
Blackstone (NYSE:BX) is in talks to acquire a $2 billion portfolio of 95 industrial properties from Chicago-based Walton Street, according to Bloomberg. The firm already owns $1 billion of junior debt on the assets, and they are now worth less than the $2.45 billion in loans which mature on Friday, that Walton took out to purchase them.
Ameris Bancorp (NASDAQ:ABCB), Farmers Capital (NASDAQ:FFKT), First Capital Bancorp (NASDAQ:FCVA), First Defiance Financial (NASDAQ:FDEF), LNB Bancorp (NASDAQ:LNBB), Taylor Capital (NASDAQ:TAYC) and United Bancorp (NASDAQ:UBCP) are seven banks whose Treasury investments will soon be auctioned, as the department continues its process of ending TARP.
And now Germany… Six German banks have been downgraded by Moody’s, including the country’s second largest, Commerzbank (CRZBY.BK). The largest, Deutsche Bank (NYSE:DB), remains under review. Some analysts view the action as a “bit harsh”, but it should be remembered that Germany is very much exposed to the ongoing debt crisis, especially in its often-called role as the ‘paymaster’ of Europe.
Yes they are – no, they are not. Morgan Stanley (NYSE:MS) is under pressure from Dodd-Frank rules that restrict trading, and now there is a question as to whether the firm wants to divest a minority investment in its commodities division, or perhaps the entire unit. One story on Wednesday attributed to sources has it that MS is in discussions for the purpose of selling the business, but MarketWatch reports that the company has no interest whatsoever in such a move, although it has been contacted by private equity entities. The division is said to bring a range of $2 billion to $3 billion per year in revenues, so its value would be considerably upwards from that.
Lloyds (NYSE:LYG) is in the midst of divesting non-core assets, and the latest such move involves the sale of £809 million ($1.25 billion) of non-performing Australian real-estate loans to a Morgan Stanley and Blackstone (NYSE:BX) joint venture for £388 million. Lloyds lost some £183 million on the loans last year, and will use the sale proceeds to repay its own debt.
Investing Insights: The Fed Whispers Sweet Nothings to Gold and Silver.
U.S. Bancorp (NYSE:USB), MetLife (NYSE:MET) and SunTrust (NYSE:STI) are among the mortgage lenders who have recently received subpoenas from Federal regulators, involving the now expanded inquiry into potential violations of FHA program rules. Banks found in violation could be penalized, with the proceeds going to help pay back FHA losses.
HSBC Holdings (NYSE:HBC) gets out of the Greek stock market, divesting its brokerage unit there, which holds $44.7 million in assets, to a group of investors which is led by HBC’s current managing director, Nikos Pantelakis.
Aflac (NYSE:AFL) announces a shakeup at the top, as it names Timothy Stevens (ex-Black Rock) to head its newly created position of worldwide head of trading. Stevens will report to chief investment officer Eric Kirsch, who was recruited in 2011 from Goldman Sachs. In addition, Brad Dyslin, who was a colleague of Kirsch at Deutsche Bank, will now be the worldwide chief of credit at Aflac’s newly opened investments office in New York.
Top German banks Deutsche Bank (NYSE:DB) and Commerzbank (CRZBY.PK) are reaping the Eurozone whirlwind: Deposits in Greece, Ireland and Spain are moving to Germany, leaving banks in that country ‘flush’ with cash (up 4.4 percent year-to-year to €2.17 trillion as of April 30, according to the ECB). At the same time, deposits in the three aforementioned countries have fallen by 6.5 percent to €1.2 trillion.
Nine regional sector banks have been downgraded by Citi: SVB Financial (NASDAQ:SIVB), First Horizon (NYSE:FHN), First Niagara (NASDAQ:FNFG), KeyCorp (NYSE:KEY), PNC, SunTrust (NYSE:STI), M&T (NYSE:MTB), Wells Fargo (NYSE:WFC), and ZION.
Ares Capital (NASDAQ:ARCC) reports that a revolving funding facility has been increased from $500 million to $580 million, with a further rise to $865 million possible. The firm currently holds three facilities, the total of which stands at $1.7 billion, and pay an average of Libor plus 2.3 percent.
Facebook (NASDAQ:FB) trading might have caused a loss to UBS (NYSE:UBS) of as much as $350 million, says a CNBC report. Facebook is reportedly prepping legal action against Nasdaq (NASDAQ:NDAQ), as well.
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