Today's Top Stories Also Noted: Spotlight On... Citigroup CEO names new exec team News From the Fierce Network:
Today's Top News1. SAC Capital: First in profitability and controversy
SAC Capital wasn't the number one hedge fund in 2012 as ranked by performance. That honor, according to a Bloomberg Markets magazine analysis, went to Metacapital Management, which racked up a 38 percent gain in the first 10 months of the year. But SAC Capital did finish the year ranked first in profitability, while it tied for 86 in terms of performance. The fund earned the most money because SAC Capital founder Steven Cohen "charges some of the highest fees on Wall Street. While most funds impose a 1 to 2 percent management fee and then take 15 to 20 percent of the profits, Cohen levies 3 percent and as much as 50 percent, according to investors." Of course, he's earned that right over time. "The fund manager, who's largely an equities investor, has produced an average annual return of 30 percent since starting his firm two decades ago. He's had just one money-losing year, 2008, when the flagship fund tumbled 19 percent. For calendar 2011, he and his managers shared $907 million. SAC Capital International has been closed to new investors since August 2011." His incredible success has not been without controversy, a category in which SAC Capital is the de facto number one fund. One of the big stories of 2013 will be the approach that prosecutors take with the firm. In their mind, such returns over so long may be too good to be true. But now that Mathew Martoma has decided to go to trial, are hopes of a criminal indictment fading? For more: Related articles: Read more about: SAC Capital, Hedge Fund Performance 2. Bank of America inks settlement with Fannie Mae
Is this the definitive settlement that will allow Bank of America to convince the world that its nasty putback controversy with Fannie Mae has been dealt with? It's fair to say that the bank's cantankerous relationship with the big GSE had been viewed as a negative by many, the major unresolved dispute and a big legal risk. So it will be seen as good news by many analysts that the bank has resolved the legal issues between the two. The bank has agreed to pay Fannie Mae $3.6 billion and to pay another $6.75 billion to buyback various toxic mortgages. The bank expects the settlement will be paid for by existing reserves and an additional $2.5 billion (pretax) in representations and warranties provision to be recorded in the fourth quarter. The bank will also make a cash payment to settle issues related to foreclosure delays that will results in a $260 million hit for the fourth quarter. The agreements with Fannie Mae cover loans with and an aggregate outstanding principal balance of approximately $300 billion. Unresolved claims by Fannie Mae for alleged breaches of selling representations and warranties totaled $11.2 billion of unpaid principal balance at September 30, 2012. In addition, Bank of America announced it will sell the servicing rights on 2.0 million residential mortgage loans totaling approximately $306 billion. A settlement with Freddie Mac was signed in 2011. For more: Related articles: Read more about: Bank of America, Fannie Mae 3. Jamie Dimon doubtful for Treasury Secretary opening
With new cabinet selections yet to be made, the Washington rumor mill is as active as ever. The notion that JPMorgan CEO Jamie Dimon might be in the running for Treasury Secretary has yet to be put to bed. Policymic has published a profile of Dimon, pegged to the idea that he is a indeed a candidate to take over the department. This idea has been floated before, and the reaction was somewhat less than enthusiastic. Dimon would likely make a fine Treasury Secretary. He would have no problem goading fellow CEOs into some sort of action if he had too, just as Hank Paulson, formerly CEO of Goldman Sachs, was able to do in the financial crisis. It remains unclear if Dimon really wants the job. Even if he did, his candidacy would present some real optics issues for the current administration, which has cast itself as a Wall Street reform proponent. It might be that the London Whale fiasco, which tarnished Dimon's reputation, albeit temporarily, might have shut the door on the idea. It would take a lot of explaining on the part of the President. But what about Lloyd Blankfein? He might be interested in moving into public service and has certainly been acting the part as of late. But he suffers from the same optics issues, though most would agree he has seen his bank through some dark days. The truth is that any Wall Street executive would be a controversial nomination in today's political climate. For more: Related articles: Read more about: Jamie Dimon, CEO 4. OCC investigating JPMorgan over Madoff scandal
It's amazing how the Bernard Madoff scandal took on a life of its own--one that apparently is going strong. It's not surprising, however, that the trustees are taking years to wind down affairs. That's fairly common. But it is rather odd that Bernard Madoff continues to make news even from prison, from the many jailhouse interviews to his just recently publicized letter excoriating the evils of dark pools among other things. To write yet another chapter in this saga, the Office of the Comptroller of the Currency apparently has an investigation underway, one that had previously kept under wraps. It was publicized last week when the Treasury Department's Inspector General ordered JPMorgan to turn over documents. He gave the bank a January 11 deadline to cooperate with the probe or risk sanctions for impeding the agency's oversight, according to Bloomberg. JPMorgan had argued that the information is protected by attorney-client privilege. Trustee Irving Picard, tasked with recovering money for victims, has argued in the past that JPMorgan holds documents that shed light on the fraud. JPMorgan was one of Madoff's primary banks. Picard sued the bank in 2010, but the suit was later dismissed. For more: Related articles: Read more about: Bernard Madoff, JPMorgan 5. Goldman Sachs: Buy calls on Citigroup now
Add Goldman Sachs to the list of research outfits that are bullish on Citigroup. The firm's analysts have placed Citigroup on its "Conviction" buy list, as they boosted their 12-month price target to $49, suggesting a roughly 15 percent price increase is in the offing. What's more, the analysts think the appreciation could get started very soon. In fact, they recommend buying call options right now. According to Bloomberg, the bank has told clients that they should buy calls on the stock before the bank announces fourth quarter results on January 17. The analysts have turned bullish on banks in general and Citigroup in particular, as Corbat's aggressive restructuring moves have hit the right now. "Under new CEO Michael Corbat, we believe Citi is poised to improve returns and increase efficiency," according to the analysts' note. "Citi shares are mispriced given the company's core earnings power, especially considering further restructuring could generate additional upside for shares." In addition, the economy and consumer banking market seems to be on the mend. Banks have been generally bullish for some time, and the stock has rallied already from a local low of about $24 in early June. For more: Related articles: Read more about: banks, Stock Analysts Also NotedSPOTLIGHT ON... Citigroup CEO names new exec team One big question so far in the early tenure of Citigroup CEO Michael Corbet was whom he would rely on as his top dogs. He recently appointed two company industry veterans to run the institutional and consumer sides. Jamie Forese will run the bank's institutional business, and Manuel Medina-Mora will run the consumer side. The new organizational chart names a total of 12 executives and a chief of staff who will report to Corbat, notes Reuters. Article Company News:
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Tuesday, January 8, 2013
| 01.08.13 | SAC Capital: First in profitability and controversy
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