Today's Top Stories Also Noted: OpenText News From the Fierce Network:
Today's Top News1. Bank compensation soars thanks to options, grants
At the height of the bank executive compensation furor, when compensation committees were being pilloried by regulators and others, bank boards really had no choice but to shift the compensation allocation, relying more on options and restricted stock grants than cash and cash bonuses. At the time, the rationale was that such awards would align the interests of bank managers and bank shareholders. It was hard to argue with that. Of course, at the time, stocks had plunged to shocking low levels, providing terrifically attractive strike prices. As of now, while banks stocks are still below tangible book value per share, bank stocks have recovered from their crisis lows, and bank executives have profited tremendously. The New York Times commissioned some research from Equilar "to compile the value of stock and options granted to the top five executives at each of the 18 largest American financial institutions — those that underwent stress tests in those years." It calls the compensation sums "stupendous." The "top executives at those 18 financial institutions received an aggregate of $142 million in stock and options from July 1, 2008, to June 30, 2009. It was a lot then, but these stock and options are now worth $457 million, an increase of $330 million, or 221 percent. On average, that is roughly $4 million per executive who received such compensation." America Express's CEO has made $50 million on the options granted in 2009. But "the biggest dollar winners are the executives of Capital One…The credit card company's top five executives received an incentive pay package granted in 2009 valued at $19.9 million. The package is now worth $114 million. The reason for the huge compensation package: Capital One's options were granted at a price of $18.28 during the financial crisis. Yet, Capital One's stock price is trading at almost $60 a share, below its pre-crisis price of around $80." This may trouble some critics, but in the end, the plans have worked as designs. The issue of compensation remains thorny. Even if executives had been paid in toxic assets and long-term debt, they still would have fared quite well. For more: Related articles: Read more about: ceo pay, executive compensation
2. Bank of America's last Merrill Lynch legal hurdle
Bank of America has (controversially) settled with the SEC and with shareholders over charges related to its acquisition of Merrill Lynch. So is the episode finally behind it? The bank is much closer to that point, with the only lawsuit remaining the one filed by then New York Attorney General Andrew Cuomo, alleging violations of the Martin Act. The suit accuses the bank, then CEO Ken Lewis, and the then CFO Joseph Price of misleading shareholders about Merrill's financial condition, as did the other suits. If the New York case goes to trial, it will likely turn into very distracting case about who knew what when, and the role of the federal government. In many ways, it would be like living through the financial crisis and early days of the bailout all over again. But we may not get to a trial. In one view, the settlement with private shareholders will undermine the case by New York State. "The case, which now falls to Eric T. Schneiderman, could lose much of its steam. Under a decision by New York's highest court, the attorney general can recover losses on behalf of shareholders. Once the shareholders settle, though, Mr. Schneiderman's office can expect to obtain little more than a penalty, according to people briefed on the matter. The attorney general's office declined to comment," notes DealBook. That said, it remains unclear of the New York AG will go ahead and accelerated the process to arrive at a settlement. Still, it's fair to say that Bank of America is much closer to putting the Merrill Lynch saga behind it. For more: Related articles: Read more about: Bank of America, Merrill Lynch 3. Task force slaps MBS-related charges against more banks
When the joint federal and state task force to investigate financial fraud--known as the Working Group--was announced in January, some thought that it was largely a political creation. Given that it was formed quite long after the financial crisis, expectations that charges would actually be handed down were low. So it was somewhat surprising when the task force--which includes representatives from the U.S. Justice Department, the SEC, the FBI and other federal and state officials--decided to pursue a civil case against Bear Stearns, now owned by JPMorgan Chase, which called the suit a recycled version of already filed private suits. Bloomberg now reports that the Eric Schneiderman, the New York AG and co-chair of the task force, intends to bring similar charges against other banks. "This is a workable template for future actions against issuers of residential mortgage-backed securities that defrauded investors and cost millions of Americans their homes," according to Schneiderman's statement. "We need real accountability for the illegal and deceptive conduct in the creation of the housing bubble in order to bring justice for New York's homeowners and investors." There are many other CDO and MBS-oriented deals ripe for the pickings, apart from ABACUS and others that were already the basis of federal SEC charges. One could argue that the top banks were all doing similar stuff. That raises the possibility of some sort of "global" settlement along the lines of the mortgage fraud settlement inked in February between top mortgage originators and servicers on one hand and federal and state officials on the other. For more: Related articles:
Read more about: mortgage backed securities, MBSs 4. Carlyle buys commodities hedge fund firm
Commodity funds have been hot, increasingly a must-own asset category for alternative investment providers. Carlyle Group has jumped into the industry in a big way. The second-largest private equity firm has just bought commodities hedge-fund manager Vermillion Asset Management, allowing it to add $2.2 billion in commodities assets as the firm diversifies in the wake of its public offering. The price wasn't disclosed. The Washington Post notes that Vermillion will be part of the firm's Global Market Strategies business, headed by Mitch Petrick. That unit manages about $29 billion across 53 funds, and is key to the firm's desire to offer a more diversified menu of investment options to investors. "As part of the deal, Carlyle agreed to give Vermillion principals 1,439,788 shares over 4 1/2 years if certain performance targets are met. Those shares would be valued at $36.9 million at yesterday's closing share price of $25.64." You certainly can't fault management for making the move, and shareholders will likely appreciate the need to diversify. You do have to wonder just a bit what the firm's long-time limited partners in private equity funds think. One concern all along was that public private equity companies inevitably will focus like a laser on the needs of shareholders, whereas the needs of limited partners used to come first. This is a newly familiar tension and one that the top companies have been able to manage. In the end, strong performance will reduce these sorts of conflicts significantly. For more: Related articles: Read more about: Hedge Funds, Private Equity 5. The most powerful women in finance
Is the buy-side more hospitable to women executive than the sell-side? One might be tempted to quip as much, in light of the American Banker's list of the 10 most powerful women in finance. The top two spots are haled by buy-siders. Number one is Ann Marie Petach, CFO of BlackRock. "Petach defies the stereotype of the CFO as corporate bean counter. She is a strategic adviser both internally and to key clients. In addition to chairing BlackRock's capital committee and co-chairing its corporate risk committee, she sits on the firm's global executive, global operating and government relations steering committees." Number two is Abigail Johnson, president of Fidelity Financial Services. "With her promotion in late August, Johnson now oversees all of Fidelity's major businesses, including asset management, retail and institutional brokers, and retirement and benefit services. The broadening of her responsibilities is widely seen as confirmation that she'll be the next CEO of the family business." The top sell-sider is the erstwhile Ruth Porat, CFO of Morgan Stanley at number three. Mary Callahan Erdoes, CEO of JPMorgan Asset Management, and Isabelle Ealet, co-head of securities at Goldman Sachs, round out the top five. All in all, these sorts of lists are great fun, and company PR employees should do what they can to ensure good placement. Some might see them as something of a curse, given what has befallen some of the highest ranking women on Wall Street in recent years. Soon, I'll bring you the most powerful women in banking. For more: Related articles: Read more about: finance, Wall Street Also Noted
SPOTLIGHT ON... JPMorgan Chase tops IB league table so far According to a new report from Thomson Reuters, fees for all investment banking activities, including capital markets and mergers & acquisitions, have totaled $51.9 billion through the first three quarters of 2012. That's down 14 percent from last year and "the worst start to a year since 2009." JPMorgan sits in the No. 1 spot in the league tables, earning $3.9 billion, followed by Bank of America-Merrill Lynch, Goldman Sachs, Morgan Stanley and Citigroup. 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: | |||||||||||||||||||||||||||||||||||||||
Thursday, October 4, 2012
| 10.04.12 | Bank of America's last Merrill Lynch legal hurdle
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment