Today's Top Stories Also Noted: Spotlight On... Moody's warns on U.S. debt News From the Fierce Network:
Today's Top News1. Bank of America putback woes remain heavy
If Bank of America has made so much progress cleaning up its balance sheet, what's holding back big institutional investors? According to a poll after a recent presentation by CFO Bruce Thompson, more than half of the audience said the biggest obstacle to buying the stock was that they are "still stuck on mortgage repurchase," according to Deal Journal. The big fear is that "Fannie and Freddie might succeed in forcing banks to buy back soured mortgages, and the agencies have been getting more aggressive recently, leading to a breakdown between Fannie and BofA." At this point, a meaningful settlement seems unlikely. In fact, Fannie Mae and Freddie Mac are stepping up their efforts to secure putbacks from Bank of America, Wells Fargo and many others, including regional banks. The two GSEs are incented to recover as much as possible of the $190 billion bailout that was financed with taxpayer funds. Bloomberg reports that Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial have set aside almost $3 billion to buy back bad home loans in the first half of 2012, but that may not be enough. It's really a matter of how much the banks can cut their losses going forward. For the sake of comparison, Bank of America has added $677 million to reserves for putbacks in the first half of 2012, compared with $1.1 billion for Wells Fargo. For more:
Read more about: Bank of America, Fannie Mae 2. Lawsuit revives lawsuit club deal controversy
The era of big deals featuring top private equity firms as teammates, jointly bidding on a company has passed, along with the heyday of the industry. The practice has however taken on a longer life in the courts. Now, new court documents have emerged, courtesy of the New York Times, which sheds new light on the practice that thrived in the mid-2000s. For example, in the documents in the buyout of HCA, which Bain Capital, K.K.R. and Merrill Lynch bought in 2006 for $32.1 billion, "showed e-mails and meetings indicating that other equity firms had agreed to 'stand down' and avoid bidding with the understanding that they would be brought into future deals. E-mails cited in the lawsuit indicate that another private equity firm, TPG, said it had discussed the HCA acquisition with executives for Bain and K.K.R. and had decided not to bid on the company because 'our relationship' with them, K.K.R. and Bain, was more important. In another deal, according to the plaintiffs, K.K.R. and Silver Lake Partners brought Bain into its $9.4 billion acquisition of Philips's semiconductor unit, despite Philips's insistence that Bain bid separately for the business." The suit charges that a secret deal was cemented "whereby Bain would permit K.K.R. and Silver Lake to submit the winning bid and then invite Bain into its deal on equal terms." The issue might become more fodder for the presidential election, though Romney had left the firm before the club deal era. He did, however, continue to receive income from the firm. For more: Read more about: club deals 3. Zuckerberg finally addresses IPO issues
I've suggested that the best thing Mark Zuckerberg could do to repair Facebook's relationship with Wall Street is to make himself more available to institutions and analysts. That's classic IR thinking, and it makes sense. It's a good first step that the boyish CEO of Facebook has acknowledged the disappointing IPO in public. As reported by Bloomberg, he appeared at a tech conference in San Francisco, and "said the stock price—a gut-wrenching 50 percent drop since the IPO—'doesn't help' with employee morale. He noted, though, that 'Facebook has not been uncontroversial in the past. It's not like this is the first up and down we've had.' And he implied that the company would likely be furnishing employees with additional equity to compensate for the decreased value of their shares. 'I think it's a great time for people to join and a great time for people to stay and double down,' he said." Are big institutions more likely to double down, based on his comments, which included a pronouncement that the firm is now a mobile company? CNBC noted different opinions. One analyst said that there was nothing Zukerberg said that would prompt him to buy the stock. Another said he was slightly more bullish because of the public talk. All in all, winning over institutions would appear to be a long-term goal at this point. It will be a while before Facebook gets back to its IPO offer price. For more: Related articles: Read more about: sell-side, Facebook IPO 4. UBS whistleblower goes from jail to $104 million award
The saga of Bradley Birkenfeld, the former UBS banker who blew the whistle on the bank's efforts to help Americans evade taxes, has taken another twist. He has just been awarded $104 million from the IRS for his role in the investigations that has left an indelible mark on UBS and helped change Swiss banking forever. That's quite a turn of events for a man was in prison until August 1. Around 2007, he was blowing the whistle against on his bank, but "prosecutors decided to charge him with a crime because he initially refused to describe his own role in the fraud...In early 2008, prosecutors won an indictment of Birkenfeld from a federal grand jury in Fort Lauderdale, Florida. He was arrested in April 2008 at Boston's Logan International Airport as he flew in from Geneva for a high school reunion and meetings with Senate investigators and the SEC." The IRS said in a statement that, "The whistle-blower statute provides a valuable tool to combat tax non-compliance, and this award reflects our commitment to the law." The largest award recently in the financial services industry was to Sherry Hunt, who was awarded $31 million for successfully blowing the whistle on Citigroup, which remains her employer. Birkenfeld's cooperation was obviously instrumental in a very successful ITS investigation, despite the controversy over his role. "At least 11 banks are under criminal investigation in the U.S. Two dozen offshore bankers, lawyers and advisers, as well as 50 American taxpayers, have been charged with crimes." Banks are already worked up about the new Dodd Frank whistleblower provisions, but there are many ways for whistleblowers to go. For more: Related articles:
Read more about: UBS 5. Deutsche Bank faces its future
Deutsche Bank has promised its shareholders a new era, one that will likely be less profitable but perhaps more ethical, though I hope the two are not mutually exclusive. ''Tremendous mistakes have been made,'' said Anshu Jain, co-CEO along with Jürgen Fitschen, who joined him at a watershed press conference, adding that "We can see times have changed and we need to change and change rapidly.'' Jain and Fitschen "avoided criticizing their predecessor, Josef Ackermann, who ran the bank for a decade before his retirement in May. But much of their presentation amounted to a repudiation of Mr. Ackermann's legacy. They presented an unusually frank assessment of Deutsche Bank's shortcomings and promised to redress them. The flaws include relatively weak capital reserves, excessive dependence on investment banking and a tarnished reputation. They also backed away from the profit standard that Mr. Ackermann had long advocated: a 25 percent return before taxes. Deutsche Bank will now aim for an aftertax return of 12 percent on equity, a standard measure of bank performance," according to DealBook. Jain also said that the Libor scandal participation by the bank was the handiwork of a small group of employees. All in all, this is the sort of come-to-the-Lord moment that we never quite saw from U.S. banks, which as a group were much more defiant. For more:
Read more about: Deutsche Bank, CEO Also NotedSPOTLIGHT ON... Moody's warns on U.S. debt For now, Moody's is sticking with its current Aaa rating on U.S. sovereign debt, albeit with a negative outlook. The big issue remains the extent to which Congress can come up with a budget deal. If it becomes apparent that no deal is in the works, the credit rating company may well reduce its Aaa rating one notch. S&P of course has already backed down from any sort of triple-a rating. Is an additional downgrade inevitable? Article Company News: And Finally…Manufacturing scandal at Apple. Article
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Thursday, September 13, 2012
| 09.13.12 | Bank of America putback woes remain heavy
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