Today's Top Stories Also Noted: Quest Software News From the Fierce Network:
Today's Top News1. Calls to break up big banks intensify
What will it take to break up the mega-banks? Well, lots of critics of "too big to fail" have failed in their efforts to prompt such action. The government has toyed with the idea but not seriously. Bank executives certainly are committed to their integrated business models. My sense is that the only thing that could lead to a true break up of big banks would be concerted action by disgruntled shareholders, who could pressure boards and executives like no one other entity. Could this happen? Over the years, some shareholders have called for break ups. Bloomberg notes a new advocate: Michael Price, who now runs MFP Investors. "Within the banks are wonderful assets," Price was quoted. "How long are the boards of directors going to stand by and take no action and let them be pounded? So far there's no indication that any of these banks or boards of banks is willing to do anything about it." He thinks five of the top six banks are prime candidates for break up activity that would unlock the value of assets. Most of these banks have traded below their book value for years. An analyst at JMP Securities recently said that at least two banks JPMorgan and Citigroup would be worth more if they were broken up than they are worth now. Even Philip Purcell, former CEO of Morgan Stanley, has put forward his view that breaking up the banks would be better for shareholders. At some point, bank boards will have to discuss this. They can only get by with the argument about regulatory uncertainty for so long before it wears thin. But what a bold move it would be for a CEO to make such a move now, a chance to really etch their names in the history books. For more: Related articles: Read more about: banks, break up 2. A return to normal for JPMorgan's CEO?
When JPMorgan found itself on the hot seat recently for its disastrous multi-billion dollar hedging fiasco, some speculated that CEO Jamie Dimon had lost credibility. No doubt his moral authority took a hit when it came to fighting back against Dodd-Frank took. His armor was dented, but overall the goodwill, strong industry relations and astute political connections he had built were strong enough to get him through the crisis. While people are calling for him to step down from the board of the New York Federal Reserve Bank, no one called for his job. He may want to go ahead and push for clawbacks of bonuses for key executives, including his own. That would certainly cement the idea that he's accountable. I expect the board to take action at some point, and I raise this in light of Goldman Sachs' recent analyst report that offered some bullish sentiment on the bank, upgrading the bank from buy to conviction buy. According to Deal Journal, "things are looking up for J.P. Morgan after Dimon testified before the Senate Banking Committee this month, Goldman says. From the initial announcement of the loss until the bank's upgrade this morning, shares had fallen about 13%, though have climbed back in recent weeks…. But Goldman says that the bank could re-initiate its share buyback plan as early as this year after halting it following the losses, a big reason for the share decline. And following Dimon's testimony, Goldman thinks the unexpected loss from the bank's Chief Investment Office won't have broad-ranging impact." For more: Related articles: Read more about: Jamie Dimon, CEO 3. Bernard Madoff's brother to plead guilty
One of the big remaining questions in the Bernard Madoff scandal is the extent to which his family members served as co-conspirators. Prosecutors have long had their suspicions, as some in his immediate family were considered suspects. Bernard Madoff himself has always said that he acted alone. But his brother has agreed to plead guilty to criminal charges, the first family member to admit to a role in the crimes, according to the New York Times. Peter Madoff "has agreed to a prison term of 10 years, prosecutors said in a letter filed with the court on Wednesday. As part of his plea deal, he has agreed to forfeit $143 billion, a staggering penalty that he is not likely to be able to pay. But it is a government calculation based on the amount of money that passed through the firm and a clear indication that prosecutors will seize all of his assets." Interestingly, "the guilty plea does not amount to an admission that Peter Madoff knew about or participated in his brother's Ponzi scheme. Rather, it confirms the government's allegations that Peter Madoff served as a sham compliance officer who exercised little if any legal oversight over the firm's operations, effectively enabling his brother's crimes." It's unclear what this mean for other family members. Bernard's sons, Mark and Andrew, both worked for the firm, each served as co-heads of trading. Mark committed suicide in December 2010. Peter's daughter, Shana Madoff Swanson, served as a compliance director at the firm. For more: Related articles: Read more about: Hedge Funds, Bernard Madoff 4. Analysts have mixed view on Facebook
The mandatory 40-day quiet period has expired on the Facebook IPO, and sell-side stock analysts--those who work for underwriters of the offering and others--have weighed in with largely bullish and neutral views. But even so, the reports were quite sober and there were no wild predictions of Google-like early stock gains. There was even a sell recommendation. Reuters report that "of 17 brokerages that issued research reports, only eight recommended that investors buy Facebook shares, eight brokerages gave neutral ratings and one had a 'sell rating.'" Among the most bullish: Morgan Stanley, which controversially served as the lead underwriter and exerted enormous influence over all decisions. The top banker said ahead of the offering that if anything went wrong it would be his neck on the line. The bank judges the stock a buy candidate, and thinks that the price will get back to the offer price fairly soon. Other banks that slapped an "overweight" call on the stock include other top underwriters, notably Goldman Sachs and JPMorgan Chase. So who was the lone wolf crying sell? BMO Capital Markets' Daniel Salmon initiated coverage with "underperform" recommendation and a $25 target, a nearly 25 percent discount from current levels. He told Reuters, "Slowing user growth is one of our primary concerns for Facebook's current valuation." He estimated Facebook's customer growth would be 22 percent next year and 16 percent the year after, much slower than expansion in the past. So who is right? We'll just have to see. This is one of those stock on which analysts can really make a name for themselves, if they're right. For more: Related articles: Read more about: Stock Analysts, sell-side analysts 5. JPMorgan losses could hit $9 billion
The big question over JPMorgan's botched "hedge" has been how much the bank would ultimately lose. When the bank announced the trade fiasco, it pegged the paper losses at $2 billion, though they made clear those losses could mount. Once the bank signaled its intentions to quickly wind down the doomed trades, credit hedge funds and others inflicted more losses, ballooning the ultimate costs. DealBook now says that internal estimates at the bank show that the losses might be as high as $9 billion. Whew! That's enough to more than wipe out second quarter earnings, which were projected to be in the $4 billion range before the blown-up hedge was announced. The massive loss also more than wipes out the legacy of the chief investment office, whose hedging activities raked in $4 billion in profit over the last three years. The extent of the losses looms as a great source of uncertainty ahead of the bank's second quarter earnings release date, scheduled for July 13, where we'll hear more. I had elsewhere speculated perhaps that the worst was over for CEO Jamie Dimon, whose credibility has been dented. But these much-larger-than-expected losses will keep the regulatory controversy that has fallen out of this mess alive for the foreseeable future. Some may second guess the bank's decision to so quickly try to exit these trades. There was hope in some quarters that if he had held on long enough, the bond market might move in the bank's favor and actually reduce losses. Sadly, that didn't happen. For more: Related articles: Read more about: earnings, proprietary trading Also Noted
SPOTLIGHT ON... Barclay settlement raises worries Perhaps the least understood "scandal" recently is the one that involves alleged attempts by big broker dealers to manipulate the LIBOR and TIBOR, which allowed the banks to generate massive profits. Barclays has settled such charges for $451 million, a substantial fine, and immediately raised the issue of whether other banks will be forced to follow suit. Other banks under investigation include Citigroup, Royal Bank of Scotland Group, UBS, Lloyds and Deutsche Bank. Article Company News: And Finally… Do rich kids hate their parents? Article
©2012 FierceMarkets This email was sent to kumaresan.selva.blogger@gmail.com as part of the FierceFinance email list which is administered by FierceMarkets, 1900 L Street NW, Suite 400, Washington, DC 20036, (202) 628-8778. Contact Us Editor: Jim Kim Advertise Advertising: Jack Fordi or call 202.824.5040 Email Management Unsubscribe from FierceFinance Explore our network of publications: | |||||||||||||||||||||||||||||||||
Friday, June 29, 2012
| 06.29.12 | Calls to break up big banks intensify
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment