Weekly Financial Biz Recap: Citigroup’s CEO in Davos, MS and GS Salivate Over Facebook IPO


European Banks (NYSEARCA:KBE) may be surging on reports of a Franco-German push to weaken bank capital rules. European Union financial Commissioner Michel Barnier says he will keep to the timetable already agreed for implementing stricter Basel III requirements. No country will be forced to accept a financial transaction tax, Michel Barnier added. The United Kingdom’s residents must be overjoyed.

Don’t Miss: Spain’s Rajoy Postpones Crucial Cuts, Risking Deficit Miss.

Allied World Assurance (NYSE:AWH) fell after saying late Friday it expects to record between $55 million to $64 million in catastrophe-related losses in the fourth quarter. Flooding in Thailand is responsible for between $40 million to $50 million and there are larger than anticipated set-asides for other global catastrophes that occurred earlier in the year.

Bank of America (NYSE:BAC) continues its surprising rally. It is outperforming the broader market and other big banks with its 31% year-to-date gain. Evercore tries to explain, even as several analysts have hacked their target prices since last week’s earnings report: “Seems like greater risk appetite to start new year, some better macro, and more comfort around Bank of America’s capital position.”

Sierra Bancorp (NASDAQ:BSRR) dropped after posting a weak fourth quarter earnings of $0.11 per diluted share, which is down from the prior year period. Its net interest margin declined to a 39 basis point drop which is what the company suggest is responsible for the dip seen.

Don’t Miss: Bank of America Announces More Cuts.


Zions Bancorp (NASDAQ:ZION) shares are lower after the bank holding company disappoints with its fourth quarter report. Lower net interest income and tepid loan volume were responsible for the upset. CEO Harris Simmons admits revenue growth was an obstacle but suggests improved results in 2012 due to stabilizing loan pricing and growth.

Citigroup’s (NYSE:C) Vikram Pandit is heading a delegation of bank executives at Davos, where a close comparison is being drawn between Citigroup and European Banks who have it worse, despite American firms retrenching. Observer, Mike Mayo is skeptical about Vikram Pandit’s opinion about the crisis in capitalism saying it is like “asking Alec Baldwin about airplane etiquette.”

Don’t Miss: Fed Expected to Set Inflation Target, Hold Interest Rates Near Zero Into 2014.

Fitch is being added to a list of those to be investigated. In Italy there are allegations that it may have been involved in market manipulation by ratings agencies following their negative reports about the country. Also included in the upheaval are The McGraw-Hill Companies, Inc. (NYSE:MHP) and Moody’s Corporation (NYSE:MCO) and it was extended to Fitch after it warned of a two-notch downgrade for Italy.

Bank of America’s (NYSE:BAC) investors should be expecting a 25% cut in compensation, reports Bloomberg. Cutting its investment banker pay 20-30%, Morgan Stanley (NYSE:MS) follows suit, as well as Goldman Sachs Group Inc. (NYSE:GS) which has seen a cut in its compensation costs by 21% year-over-year.

Berkshire Hathaway (NYSE:BRKA) is down as it says it will float new corporate bonds in order to refinance some of the debt it took on to acquire Burlington Northern Sante Fe (BNI) for $26.5 billion. The purchase was made in 2010. The firm plans to issue five-year and 10-year notes up to a total of $1.7 billion, sources say.

TCF Financial (NYSE:TCB) is beaten down after missing analyst’s consensus view for the fourth quarter revenue and earnings. Credit quality remains a challenge for the regional bank as well.

Earnings Report: Regions Financial Corp Earnings: Reversing to a Loss Following Two Consecutive Quarters of Profit.


Bank of America (NYSE:BAC) might be on the chopping block, at the very least it may be cut up into tiny pieces. A group of consumer advocates, academics and economists, led by consumer advocacy organization Public Citizen, plan to file a petition with the federal government and other regulators today. It will likely have minimal practical impact but is a dramatic criticism of regulators’ failure to act.

Investing Insights: Bank of America, CA, Corning, Abbott Labs, Toyota Lead Top Stock Movers Jan 25th.

Citigroup (NYSE:C) may cut more jobs this year at its securities and banking arm. This includes investment banking. The firm invested almost $1 billion in its investment bank last year, but last week reported a 29% drop in the parent unit. Citi has already announced cuts of 5,000 jobs across the entire company.

Flagstar Bancorp (NYSE:FBC) drops over 20% premarket. This after the bank holding company showed a wide loss in the fourth quarter, which was more than analysts expected.

Don’t Miss: Fed Extends Record-Low Interest Rates Through Late 2014.

Morgan Stanley (NYSE:MS) and Goldman Sachs (NYSE:GS) have been downgraded by JPMorgan Chase & Co (NYSE:JPM). Dropping it from Neutral to Overweight, analysts with JPM cite potential new calculations for capital risk from new methodologies emanating from the Dodd-Frank Act as an overhang on shares.

Piper Jaffray (NYSE:PJC) trades lower after a loss in the fourth quarter. A large impairment charge and continued weak demand for capital markets services could be to blame. Assets under management came in flat year-over-year and up 8.9% quarter-over-quarter largely due to equity market appreciation.

Morgan Stanley (NYSE:MS) CEO James Gorman tells CNBC in a video that his company is well equipped to meet Basel III capital requirements. Also, he states that there is no need to raise additional funds in the near-term, and reiterates Morgan Stanley’s commitment to buying a 14% stake in Morgan Stanley Smith Barney from Citigroup (NYSE:C). The purchase takes priority over dividends and buybacks.

Don’t Miss: Morgan Stanley CEO: I’m Optimistic About the Economy.


CEO Jamie Dimon of JP Morgan (NYSE:JPM) said yesyerday that the bank will stay in the GIIPS for “largely social, and partially economic” reasons, although pulling out had been considered. “I hope we will still be doing business there in 50 or 75 years,” Dimon said. The bank is in for the long haul, as it has $15B in exposure.

Don’t Miss: J.P. Morgan Considered Leaving the Euro Periphery.

When the IPO reportedly comes next week with a valuation of $70B-$100B, Morgan Stanley (NYSE:MS) looks eager to land the starring role as Facebook’s lead underwriter. Expected to have a “major role” but not the lead is Goldman Sachs (NYSE:GS). This is because Zuckerberg & Co. resented Goldman’s SEC rebuke for attempting to arrange a private placement for its clients.

Green Dot (NYSE:GDOT) announced recent multi-year extensions to exclusive distribution agreements with Rite-Aid (NYSE:RAD) and Kmart (NASDAQ:SHLD), two of its most important long-term retail partners. Shares trade lower after Green Dot missed on its Q4 revenue, despite a 77% Y/Y jump in earnings and raising its 2012 guidance.

Bank of America‘s (NYSE:BAC) mortgage modification practices are being targeted by Arizona, the latest state to do so, according to Bloomberg, which also says that BoA negotiated at least 12 secret settlements with borrowers that include non-dispargement clauses. The Arizona Attorney General’s office is asking a court to block those parts of the settlements and require the bank to hand over all the agreements to that office.

Investing Insights: Active Bank Stocks Jan 27th: BofA, JP Morgan, Morgan Stanley, TD, US Bancorp.

To contact the reporter on this story: Tanya Harding at staff.writers@wallstcheatsheet.com

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