Today's Top Stories Editor's Corner: Volcker Rule deadline fast approaching Also Noted: Spotlight On... Goldman Sachs, Morgan Stanley stock to be volatile News From the Fierce Network:
Today's Top News1. Wells Fargo beats estimates
Wells Fargo & Company beat analysts' expectations for the second quarter, reporting Q2 net income of $4.6 billion (a record for the bank), or $0.82 per share. This is up from $3.9 billion, or $0.70 per share, a year ago and an increase of $4.2 billion, or $0.75 per share, over first quarter results. Analysts were expecting roughly $0.81 per share for the second quarter. Revenue was $21.3 billion in the second quarter, compared with $21.6 billion in first quarter 2012--one of the few banks most likely that will be able to show year-over-year revenue increases. The big driver was the bank's consumer operations, which was the biggest contributor to earnings year over year by far. Wholesale banking earnings declined, while wealth management earnings -- a very small part of the overall earnings pie -- rose a bit. Revenues from the community banking segment rose to $13.1 billion from $12.6 billion year over year; however, on a sequential basis revenues declined. Mortgage operations were strong in the second quarter, as expected. Originations hit $131 billion, up from $129 billion in prior quarter. Applications hit of $208 billion, compared with $188 billion in prior quarter. The application pipeline stood at $102 billion at quarter end, compared with $79 billion at the end of the first quarter. The bank remains relatively unencumbered by the sort of trading and investment banking weakness that will weigh heavier on other big banks. For more: Related articles:
Read more about: earnings, Wells Fargo
2. More energy market investigations likely
What does the investigation of possible manipulation by JPMorgan in the power market means for other banks and trading entities? It means that the Federal Energy Regulatory Commission (FERC) now feels newly empowered to police the massive market much more aggressively. In February, FERC created a division within its enforcement office--the Division of Analytics and Surveillance, run by Lee Ann Watson, a lawyer who previously worked in the agency's investigations group--to police the markets, where electricity is bought and sold by power generators and utilities. A 2005 overhaul of U.S. energy policy, passed after the collapse of energy trader Enron Corp., gave the agency the authority to fine companies as much as $1 million a day per violation, a vast increase in the agency's enforcement powers," according to Bloomberg. The new 45-person enforcement division aims to use deep analytics to spot signs of market manipulation. So far, the commission's investigations have helped lead to $302.4 million in civil penalties and repayment of $155.4 million in unjust profits. Their key ally in this endeavor may be grid operators, who were instrumental in providing information that led to the FERC's investigation of JPMorgan. Other bulge bracket firms have also become big energy market traders, and they would be wise to start internally probing such operations. Self-reporting may do wonders right about now. For more:
Read more about: fraud, Investigations 3. Charges stand against Ex-Citigroup MD
The trial of Brian Stoker must go on. And who is Brian Stoker? Recall that the SEC charged the former Citigroup mid-level executive, alleging that he had been the key bank manager for the Class V Funding III CDO transaction, and had been principally responsible for its marketing materials. Such marketing material, the SEC charged, failed to disclose Citigroup's role "in choosing the underlying debt, though a unit of Credit Suisse Group AG was acting as collateral manager, and concealed the $500 million short position," recounts Reuters. A federal judge, no less than Judge Jed Rakoff, has ruled that a jury should decide if Stoker's actions violated the law. So as it appears now, both Stoker and of course Fabrice Tourre--the only Goldman Sachs executive charged by the SEC in the massive CDO case that the bank settled in July 2010 for a record $550 million--will stand trial. There was a time when the trial of Tourre loomed as a fascinating, must-attend event. It promised to shed a light on the inner working of the big, controversial bank with the possibility that some high-level executives at the bank would be called to the stand. But as the CDO marketing scandal recedes into the past, the upcoming trials seem less compelling. Frankly, that may have been part of the bank's legal strategy--to stretch out the proceedings to the point that no one cares any longer. For more: Related articles: Read more about: Citigroup, fraud 4. LIBOR fines to hit big banks hard
After Barclays announced it had agreed to settle charges that it fraudulently manipulated the LIBOR process for $456 billion, a whopping sum, analysts have been trying to figure out how much other banks will be forced to pay. So far, 12 banks are implicated in on-going investigations regarding LIBOR and TIBOR around the globe, and according to a new analysis from Morgan Stanley, the combined tally could hit $22 billion. The Financial Times notes that, "Morgan Stanley's analysis is the most detailed effort so far to quantify the potential damage from the scandal.... The estimated fines would cut 4-13 percent off banks' earnings per share for 2012, or 0.5 percent off book value, Morgan Stanley said. The analysis also puts a value on the potential risk from class action lawsuits. Each of the banks named would pay an average $400m, with individual charges ranging from $60m to $1.1bn, depending on the size of their derivatives books. The analysis assumes most of the other 11 banks will admit to roughly similar behaviour and will not receive the same discount as Barclays for early co-operation." That raises the prospect that other banks will pay bigger fines, assuming they were not cooperating along with Barclays. That said, the evidence against other banks may not be as strong. There's still a lot of uncertainty around this, but banks will likely be forced to reserve against this fairly soon. For more: Related articles:
Read more about: LIBOR Scandal 5. Criminal charges possible in LIBOR scandal
Prosecutors are likely licking their chops as the LIBOR scandal continues to unfold. To be sure, multiple probes into LIBOR (and TIBOR) manipulation have been underway in various countries for some time. Some may be sensing that an opportunity to finally charge specific individuals at banks with criminal violations of law may be at hand. This may the last opportunity for federal prosecutors, who have been pilloried by some critics of the industry for their inability to bring federal charges against executives. The New York Times notes a letter sent to financial regulators and Attorney General Eric Holder by Democratic senators expressing "concern that some of the world's biggest banks were rigging a rate that affected how consumers and companies borrow money." The Justice Department has said little beyond disclosing that a criminal investigation into wrongdoing surrounding Libor is underway. But here's the tantalizing fact: Barclays was cooperating aggressively with the bank and was therefore entitled to lenient treatment. That suggests that the treatment of other banks will be that much more harsh. Criminal charges are indeed a possibility. For more: Related articles: Read more about: LIBOR Scandal, Criminal Chares Also NotedSPOTLIGHT ON... Goldman Sachs, Morgan Stanley stock to be volatile Sanford C. Bernstein & Co. analyst Brad Hintz, a former CFO at Lehman Brothers, has issued research noting that Goldman Sachs and Morgan Stanley both trade at compelling valuation, but could be whipped around by woes being suffered by European banks, with whom they are highly correlated. The "bumpy ride" may be worth it for some, given that both trade below book value. Both stocks are down for the year, and analysts have been busy paring expectations for the second quarter. Article Company News:
©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: | ||||||||||||||||||||||||||||||||||||
Monday, July 16, 2012
| 07.16.12 | Charges stand against Ex-Citigroup MD
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment