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Today's Top News1. Some analysts bullish on Bank of America
We've become accustomed to dour assessments of Bank of America, which continues to trade well below book value. But at these levels, some analysts think the stock is compelling. A Forbes columnist puts it this way: Bank of America "may be one of the best buys among the financials as its stock regains its footing in spite of general investor wariness towards the major banks." To be sure, the bank seems to be executing on key initiatives, such as the initiative to exit non-core businesses and slash costs via Project New BAC. We'll likely see more in these areas soon. The next possible step may indeed be sales of Merrill Lynch overseas units, continuing in the vein of the much reported sale of its international wealth management unit. But the main factor motivating the bulls continues to be valuation. It's just so cheap. I've touched on this theme often. My sense is that if the bank can get the consumer side past the eight ball on the foreclosure front and if it can make headway toward resolving key legal disputes, the relative bullish case will be even stronger. As of right now, the bulls-bears war for this stock continues with no real winner. For more: Related articles: Read more about: Bank of America, analysts 2. Facebook may drop Nasdaq, join NYSE
Will the NYSE win the Facebook listing sweepstakes after all? While some media reports hold that Facebook has decided to remain on the Nasdaq, DealBook reports that tension is extreme between the Nasdaq and Facebook that the big social media giant may end up switching its listing. That would amount to a very public humiliation that would likely prompt some shake-up at Nasdaq OMX. To be sure, the NYSE has made a concerted effort to win more small-ish technology companies, and that effort has borne fruit, as the likes of LinkedIn and Yelp listed on the Big Board. But Facebook would be the ultimate coup. Nasdaq OMX, while expressing contrition for the botched effort, really needs to take this more seriously. The board would be foolish to discount the seriousness of this. The exchange needs to undertake an all-out effort to fix this relationship. It would be naïve of the board and top management to see the article in DealBook as anything other than a direct message. The article notes that, "Perhaps most disconcerting was Nasdaq's conference call with reporters on Sunday, just days after the I.P.O. On the call, Mr. Greifeld, Nasdaq's chief, assured the press that Nasdaq's errors had not affected the stock's performance. 'It would lead a reasonable person to conclude that it didn't have an impact on the stock price,' he said. The statement was tantamount to an act of betrayal, according to those close to Facebook. Once again, the Facebook team was baffled. Why didn't the exchange warn them about Mr. Greifeld's comments? Incensed, a Facebook executive told Mr. Greifeld, 'You don't understand the hole you're in.' " That hole is getting deeper. Part of the issue of course is perception. The Nasdaq never seemed to understand the gravity of the situation, the magnitude of their errors. The anecdote about Griefeld being incommunicado on an airplane as the crisis unfolded certainly set the tone. If Facebook defects, the Nasdaq OMX board has to weigh what consequences would be appropriate. Some executive changes would have to be pondered at that point. For more: Related articles: Read more about: Nasdaq, IPOs 3. Trickle-down economics, Goldman Sachs style
"When Goldman Sachs, the potent financial services firm, opened its new 43-story, $2.1 billion steel-and-glass headquarters on a former parking lot at 200 West Street in October 2009, it was an area sorely in need of more shops and restaurants. So Goldman, helped along by $1.65 billion worth of tax-exempt Liberty Bonds and an additional $115 million in tax sweeteners, simply created its own." So says the New York Times in a wonderful feature about the effect of the big bank on its own neighborhood. The newly dubbed Goldman Alley is the anchor of this little village---and what an alley it is. The larger effect on Battery Park City remains to be seen, but it's fair to say the neighborhood has gone upscale. It's not exactly raining dollar bills, to be sure. But as one business development leaders told the paper: "Certainly it's good for local baby sitters, because more people are going out at night." Goldman Sachs has "calculated that since 2008 it has showered $76.1 million on community activities in Lower Manhattan. In discussions with Community Board 1, which represents the area but holds no power over Goldman, it agreed to contribute $3.5 million of the $6.7 million cost to build a Battery Park library branch, which opened two years ago, and to chip in $1 million toward the cost of a community center in TriBeCa. Goldman gave donations like $25,000 last year to the Downtown Little League and the Downtown Soccer League, which play just across Murray Street from the new headquarters." If you work for Goldman Sachs, you could exist quite comfortably in this world, which seems to be the point. Whether employees eventually become untethered may be a point worth debating. We've seen this before to be sure. People used to speak of the effect of Microsoft on Seattle in the same way. Ditto the effect of Google on Silicon Valley. For more: Read more about: Goldman Sachs, New York City 4. Calls for CEO of Barclays to resign
In one view, Bob Diamond never really quite fit as the CEO of venerable British bank Barclays. He was an American after all. Beyond that, his hard-charging aggressive strategy struck some as exactly what the once-staid bank did not need. His massive pay certainly did not help his cause. The Libor manipulation scandal may be the last straw. The bank has agreed to pay a whopping $450 million to settle charges that it helped manipulate the key interest rate to benefit traders. Now, one Breakingviews columnist states bluntly that, "Barclays' chief executive has become a liability," adding that, "Though Diamond has been an asset to Barclays for most of his 16-year career at the lender, the bank will find it hard to move on while he is in charge. It is less than seven months since Diamond argued that banks should 'serve a social purpose and meet a real client need.' Subsequent events have exposed the gap between his words and Barclays' actions. In February, the bank's use of aggressive tax avoidance schemes prompted the UK government to take the highly unusual step of retrospectively changing the law. In April, Barclays' decision to award Diamond a hefty bonus for 2011 – even though he admitted the bank's performance was 'unacceptable' – prompted a shareholder protest." With that said, some have rushed to his side. The board is in a tricky spot. For more: Related articles: Read more about: Barclays, LIBOR 5. Outsourcing within U.S. picks up
The financial services industry has experimented a lot with offshore outsourcing, with mixed results. So it shouldn't be a surprise that top banks are now shifting to outsourcing domestically instead. The New York Times reports that big banks are now moving various support operations, such as accounting, legal support, human resources and even some trading functions outside of the costly New York City metropolitan area to places like Florida and Utah. This trend has been going on at law firms and other professional services firms for some time now. Such moves can be rather jarring for employees, however. It's hard not to make these employees feel like second class citizens. One anecdote in the article featured an employee making $100,000 in trading support at RBS in Stamford, Conn. that was offered the same job for $60,000 in Salt lake City. Yikes! A few of his colleagues took the offer, but most chose to remain in the New York City area. The economics of such moves are compelling, however. And "since the end of 2009, Deutsche Bank's work force in the New York area has fallen to 6,900 from 7,400 even as its staff in Jacksonville rose to 1,000 from 600. Credit Suisse's staff in the New York region has dropped by 500 in the past four years, but the firm has added 450 positions in North Carolina's Research Triangle, in the area of Raleigh, Cary, Durham and Chapel Hill. And last year, Bank of New York Mellon cut 350 jobs in New York City while hiring 150 people in Lake Mary, Fla." At some point, banks have to figure out where to draw the line. For example, would it make sense in an interconnected global economy to move entire firms (or even 80 percent of it) to a low cost-locale? Certainly, there will be states willing to make some awesome incentives. For more: Related articles:
Read more about: banks, Outsourcing Also Noted
SPOTLIGHT ON... JPMorgan's bond dominance grows According to Bloomberg, JPMorgan underwrote 6.8 percent of corporate debt underwritings in the first half of 2012, up from 6.4 percent in all of 2011.Meanwhile, Bank of America's share of the market sand to 5.2 percent from 6.1 percent. The high rated corporate bond market has been one of the few bright spots recently, as issuers take advantage of record low rates. All the top banks are benefitting, but few as much as JPMorgan, which can take advantage of its fortress balance sheet, which would not appear to be in danger despite the big trading losses expected in the second quarter. Article Company News: And finally … Amazon outage takes down Netflix. Article
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Tuesday, July 3, 2012
| 07.03.12 | Some analysts bullish on Bank of America
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