Weekly Financial Biz Recap: Citigroup’s Rogue Trading Losses, Banks Settle on Mortgage Scam
Some states and five banks — Bank of America (NYSE:BAC), JPMorgan Chase (NYSE:JPM), Wells Fargo (NYSE:WFC), Citigroup (NYSE:C) and Ally Financial — are on the brink of finalizing a $25 billion deal over problematic foreclosure practices. California and New York returned to negotiations following a four-month absence, which signaled they could support an agreement. State attorney generals must indicate today whether they will sign on to the deal.
Citigroup’s (NYSE:C) Chinese unit claims it has received approval to issue credit cards in China. It is the first non-Asian bank to receive such permission. Other foreign banks have tried, as have many other industries, but to little or no avail, to gain market share in China. Citigroup’s approval may be a significant step in gaining approval for other entities.
Don’t Miss: Citibank To Issue Credit Cards In China.
JPMorgan Chase & Co. (NYSE:JPM) reportedly agreed to settle a lawsuit over overdraft fees in the amount of $110 million. It would be $300 million lower than what Bank of America (NYSE:BAC) signed off on over its own legal headache on similar accusations of excessive overdraft fees charged to customers.
CNA Financial (NYSE:CNA) beat fourth quarter estimates. It trades lower after posting a 37% year-over-year decline in profit on wider operating losses in its non-core life and group business lines.
Fidelity National Financial (NYSE:FNF) could purchase even more restaurant companies. Even purchasing O’Charley’s (NASDAQ:CHUX) it still has capital stored away from the sales of insurance assets, according to CEO George Scanlon. “The restaurant business can scale pretty quickly, and there are clearly cost benefits to being bigger, particularly on the purchasing side.”
Bank of America’s (NYSE:BAC) United Kingdom and Ireland credit card business (MBNA Europe) reportedly has been abandoned. The reasons are unclear, although new capital requirements by European regulators may have rendered the credit card business less attractive to potential acquirers.
Investing Insights: 2 Financial Stocks Slightly Lower After Earnings.
Barclays (NYSE:BCS), Credit Suisse (NYSE:CS), Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS) and the Royal Bank of Scotland (NYSE:RBS) have been invited to participate in an auction to sell off another $6 billion of ex-Amerian International Group (NYSE:AIG) mortgage bonds this week by the Federal Reserve Bank of New York. Last month, CS bought debt with a principal value of $7 billion and quickly resold it.
Don’t Miss: Big Banks Play Let’s Make a Deal.
Itau Unibanco (NYSE:ITUB) will buy the almost 50% of card payment processor Redecard it doesn’t already own. ITUB is a Brazilian bank, which intends to pay up to 11.77 billion Brazilian reals ($6.81 billion) in the deal.
Lloyds (NYSE:LYG) has announced the cutting of nearly 1,000 positions and the closing of several offices, which will bring total layoffs to about 4,000 in less than a year. The United Kingdom government remains a 41% owner of the lender.
Santander (NYSE:STD) will set aside 2.3 billion euros in loss provisions. STD is Spain’s largest bank, and new government standards are forcing lenders to more realistically value the real estate assets on their books. Banco Bilbao Vizcaya Argentaria SA (NYSE:BBVA) which is the second largest lender in Spain will set aside 2.8 billion euros, but unlike Santander, expects the provisions to result in a large (1.3 billion euros) hit to 2012 earnings.
Goldman Sachs (NYSE:GS) announced it purchased Dwight Asset Management from Old Mutual Asset Management. The amount for which was undisclosed as it makes a stronger push into the defined contribution investment-only business. The firm expects Dwight to become a part of Goldman Sachs Asset Management sometime in the second quarter.
Don’t Miss: Homeowners Make Money by Not Foreclosing.
RBS’s (NYSE:RBS) restructuring has cost 38 billion euros ($60.5 billion), CEO Stephen Hester tells employees in an email. It almost collapsed in 2009, and the restructuring since that time includes monies from loan losses, disposal costs and restructuring charges. Still, Hester says, “We are ahead of schedule in (our) clean-up.”
Bank of America (NYSE:BAC) has the biggest bill for problematic mortgages and foreclosure abuse with its amount totaling $41.8 billion. Other banks included in the excess of $72 billion loss, according to a Bloomberg analysis are Wells Fargo (NYSE:WFC), Citigroup (NYSE:C), JPMorgan (NYSE:JPM) and Ally. “It’s a colossal failure of basic banking,” says analyst David Knutson.
Blackrock (NYSE:BLK) discloses (13D) to the Securities Exchange Commission that it increased its stake in Pep Boys (NYSE:PBY) to 8.4%. The increased stake came after a flurry of trading (buys and sells) on both the New York Stock Exchange and private exchanges over the last two months.
Hartford Financial (NYSE:HIG) soars after CEO Liam McGee says the insurer had considered the possibility of a breakup. Its largest shareholder also pushed for a breakup. “Hartford needs to do something drastic because the stock is the lowest valuation relative to book value of any major insurance company,” says John Paulson, whose hedge fund owns an 8.7% stake.
Investing Insights: Broadridge Financial Solutions and Gartner in Investing Spotlight Post Earnings.
Intercontinental Exchange (NYSE:ICE) moves higher after its fourth quarter earnings per share beat expectations earlier today. Revenue grew 15% year-over-year, and the company expects it to grow by at least 10% in 2012. The growth is expected thanks to rising commodity derivatives demand.
Capital One’s (NYSE:COF) controversial bid to buy ING Direct USA (NYSE:ING) was rescheduled to Monday without explanation by the Federal Reserve Board. COF’s deal caught community groups’ attention. Concerns are about banks getting too big, given its ING bid is the biggest bank deal since the financial crisis.
Credit Suisse (NYSE:CS) experienced a fourth quarter loss of 637 million Swiss francs ($698 million). This was after taking a 981 million franc charge to speed cost cutting and offload risky assets. Consensus had been for a 430 million franc profit, but the performance or lack thereof reflects gloomy market conditions and the impact of responding to “evolving market and regulatory requirements.”
California Attorney General Kamala Harris says that California will receive $18 billion in the national mortgage settlement. Her tactic of leaving the talks for a few months and then coming back in at last moment appears to have paid off. As reported by the official Web site, the settlement total will be $1 billion less than expected; $25 billion.
Bank of America (NYSE:BAC), Wells Fargo & Company (NYSE:WFC), JPMorgan Chase & Co. (NYSE:JPM) and Citigroup, Inc. (NYSE:C) are the four big banks listed in the national mortgage settlement. The deal does not put a cap on the banks’ legal liabilities.
Assured Guaranty (NYSE:AGO) doubles its dividend payout to $0.09 per share. It is citing the success of the firm’s strategic initiatives as a reason for the hike. Shares now trade with a 2.05% yield.
Barclays (NYSE:BCS) fiscal year 2011 net attributable profit of 3 billion pounds ($4.75 billion) is down from 3.56 billion ($5.63 billion) in 2010 on “challenging” market conditions. Net interest income is down to 12.2 billion pounds ($19.31 billion) from 12.52 billion pounds ($19.81 billion). The company is raising its cost-reduction target to 2 billion pounds ($3.17 billion) and cutting its bonus pool by 26%.
Don’t Miss: Are Big Banks Laughing at Job Applicants?
Citigroup (NYSE:C) took a loss of at least $50 million over alleged attempts by traders to manipulate inter-bank lending rates. The bank reported the activity to regulators, the FT reports. Numerous banks are being investigated. Traders at RBS (NYSE:RBS), Deutsche Bank (NYSE:DB), UBS and JPMorgan Chase & Co (NYSE:JPM) are being fired, suspended or placed on leave.
Bank of America (NYSE:BAC) delays the launch of its mobile deposit product until H2 in a move that will likely disappoint a portion of its 5 million mobile banking customers expecting the time-saving service in second quarter. The question remains, is this a tech issue or is the bank waiting for a better climate to launch a service that could include fees after suffering a harsh public backlash over debit card fees?
State Street (NYSE:STT) secured a Buy rating from Nomura and a price target of $40. Analyst Glenn Schorr says that the firm is well positioned and expects above-average growth, but warns of cyclical headwinds that include net interest income and FX.