Weekly Financial Biz Recap: JPMorgan SCANDAL Details, Wells Fargo CEO Speaks
Certain ‘logistical issues, including trade reporting problems, have caused Goldman Sachs (NYSE:GS) to postpone the introduction of GSessions, its new corporate-bond trading platform, according to sources. The new innovation required a year for development, and should substantially change the manner in which Goldman’s fixed-income team trades bonds. Meanwhile, Bank of America analyst Guy Moszkowski shrinks his profit projections, not only for Goldman, but also Morgan Stanley (NYSE:MS) and Citigroup (NYSE:C), pointing to weaker trading and investment banking results, and “macro fears”. Further, The Loss at JPM’s CIO is said to have “extinguished investor complacency regarding new regulation”.
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Two new stories have emerged regarding JPMorgan (NYSE:JPM). In the first, the company is said by Reuters to have sold some $25 billion of profitable securities, for the purpose of raising its second quarter earnings following its now famous CIO loss. The news agency used Jamie Dimon’s claim of a $1 billion profit for JPM on sales of assets, and also the bank’s historical return of below 4 percent from such instruments as the basis of its calculation. Separately, JPMorgan finds itself enmeshed in an insider-trading investigation in Japan, also reported by Reuters. Regulators have named the bank as the source of leaked confidential information about a $505 million secondary offering by Nippon Sheet Glass in 2010. That investigation is part of a wider probe into insider trading related to secondary offerings, a situation described as “endemic”.
President Marcial Portela of Banco Santander SA’s (NYSE:STD) Brazilian division rejects reports that the bank is planning to divest an equity stake to one of its competitors, saying that [his company] “does not need capital”. The Brazilian banks which are rumored to be potential buyers are also dismissing reports of talks.
The new president of SunTrust’s (NYSE:STI) mortgage division is said by sources to be David Stevens, who will step down following one year as the CEO of the Mortgage Banker’s Association. Stevens led the FHA for the Obama administration for two years, prior to his time at the MBA.
Federated Investors (NYSE:FII) and Affiliated Managers (NYSE:AMG) are said by Reuters to be potential buyers of the $1 billion asset management unit of bailed-out Franco-Belgian bank Dexia (DXBGF.PK). New York Life Insurance and European private equity firm Permira might also have Dexia on their acquisitions shopping list.
Late Wednesday it was announced that JPMorgan (NYSE:JPM) is moving the “special investments group” from the chief investment office to the corporate division, which group made private equity investments but was not implicated in any of the losses, which now total more than $2 billion. The CIO’s new chief Matt Zames, wants his division to strictly concentrate on basic asset-liability management.
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Morgan Stanley (NYSE:MS) advises Citigroup (NYSE:C) that it will exercise its option to buy another 14 percent of Smith Barney, of which it already owns 51 percent. The company received Fed approval two months ago for the purchase.
Wells Fargo (NYSE:WFC) CEO Stumpf, speaking at the Sanford Bernstein Conference, said that “Today, we’re getting paid fairly (for mortgage business)”, but as for overseas expansion, “I don’t even think about it.”. WFC is the undisputed king of mortgage lending in the U.S., thanks to the pullback of its competitors, which allow it to not have to pass on to its lower funding costs to its customers.
Bank of America’s (NYSE:BAC) equities division in Japan has lost Chief Equity Strategist Masatoshi Kikuchi, plus four other analysts through resignation, according to sources. The upheaval in the company’s top ranks saw the stepping down of the chief of BofA’s Middle East and North Africa I-bank less than a month ago.
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New powers obtained from the Dodd-Frank Act are enabling the Commodities Futures Trading Commission to expand its investigation into JPMorgan’s (NYSE:JPM) now famous trading loss, according to the Wall Street Journal. The inquiry centers on whether CIO managers were deceived by traders as matters began to get serious, and thus committed fraud.
Shares of Berkshire Hathaway (NYSE:BRKB) (NYSE:BRKA) are bucking the downward trend Friday, bouncing back from early losses. It’s likely that Warren Buffett’s purchase of shares is responsible for the turnaround; Conor Sen tweets that, “(The) moral of the story continues to be that if companies are public about supporting stocks with buybacks, they won’t fall.”.
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