Today's Top Stories Also Noted: Spotlight On... AIG board meets on lawsuit News From the Fierce Network:
Today's Top News1. All eyes on fourth quarter bank earnings
The fourth quarter earnings season has been generating lots of anxiety on Wall Street. As CNBC notes, the "slowdown in earnings" was "a major theme for bears last year. Earnings had strengthened beginning in 2009, and were spectacular for 2010 and 2011, then growth began slowing, clocking in at a measly 2.4 percent for the third quarter. Fourth-quarter estimates, according to Capital IQ, are now at a mere 3.3 percent, as well…The key to earnings season are banks. Analysts are expecting a better than 10 percent increase in earnings." Wells Fargo will get the party started on Friday with its fourth quarter report. JPMorgan, Goldman Sachs and U.S. Bancorp will report January 16, followed by Bank of America and Citigroup on January 17. One huge issue of course is the effect of the bank settlement this week on fourth quarter results. Bank of America will see its earnings almost wiped out after reaching two settlements, but that may be seen as a net positive, as it might clear the way for the bank to finally put the mortgage mess behind it and reassert itself in critical markets. "A mortgage repurchase settlement is a real positive for banks ... mortgage bank revenues in 2013 should be even higher than the healthy levels in 2012 once all the litigation and settlement costs are factored in," says CNBC. For more:
Read more about: bank earnings
2. Iran orchestrates online attacks
The cyber attacks on U.S. banks late last year started out as a headline-grabbing news event. Bas the attack wore on, the intensity of the coverage dropped off. You might be forgiven for eventually concluding that the attack was a hum-drum denial of service attempt, perhaps the work of Wall Street protestors. But U.S. officials are convinced that Iran is responsible for the prolonged attack. The New York Times reports that, "there was something disturbingly different about the wave of online attacks on American banks in recent weeks. Security researchers say that instead of exploiting individual computers, the attackers engineered networks of computers in data centers, transforming the online equivalent of a few yapping Chihuahuas into a pack of fire-breathing Godzillas. The skill required to carry out attacks on this scale has convinced United States government officials and security researchers" that they were the work of a government entity, most likely Iran. The technical term for such an attack is advanced persistent threat, which I discuss often over on FierceFinanceIT. The evidence right now is more anecdotal than technical, but the skill level suggests something other than a bunch of amateurs. What this signifies is that the cyber wars are heating up dramatically. It's a testament to the banks that no accounts were compromised. For more: Related articles:
Read more about: Advanced Persistent Threat, Cyber Attacks 3. Ex-SAC Capital manager cooperates with feds
To build a strong insider trading case against SAC Capital found Steven Cohen, prosecutors will need help from people on the inside. So far, their best hope, Mathew Martoma, has refused to turn state's evidence. He has pleaded not guilty to insider trading charges and will risk jail time rather than cooperate against Cohen. But as it turns, federal prosecutors do have a former SAC Capital insider on their side. DealBook reports that Wesley Wang, "a journeyman hedge fund analyst who spent just a couple of years at SAC Capital nearly a decade ago," has been cooperating and has made significant contributions. He provided about 20 names of people who might be guilty of insider trading and "contributed to the criminal conviction of more than 10 people." The cooperation of Wang had been under wraps and was made public recently via court documents by prosecutors who are advocating for a lenient sentence for Wang, who is scheduled to be sentenced today. Wang quitely pleaded guilty to insider trading charges last summer, admitting to illegally leaking confidential information about technology stocks. The full implications of Wang's cooperation have yet to be realized, as there are active investigations on-going about the affairs of people he named. But it would not appear likely that he had the goods on Cohen. For more: Related articles: Read more about: insider trading, Prosecutor 4. Citigroup aims for strong regulator relationships
Citigroup's new CEO Michael Corbat has a lot of agenda items to address. One is to convince the world that he's serious about expenses. Another is to steer the bank through the Fed's stress tests in a way that allows for a meaningful dividend increase and/or stock buyback. Another is to field a team of savvy executives that will help make the Corbet era a success. And yet another item is to pave the way for strong relationships with regulators, an agenda item that has received relatively little notice. Reuters reports that Corbat "has been to Washington at least three times to meet with regulators since taking over. He met twice with Daniel Tarullo, the Federal Reserve's top regulatory official, on November 6 and December 17, a Fed spokesman confirmed, while declining to give additional details. Corbat also met with Fed Chairman Ben Bernanke on November 6. At the Fed, Corbat's team is following a drive Pandit started in March to talk more with regulators and make certain the company's next plan will be approved....Corbat has also met with officials at the Federal Deposit Insurance Corp, the Office of the Comptroller of the Currency, and the Consumer Financial Protection Bureau, as well as the Treasury Department." You can't argue with the logic of this. You need relationships, and regulatory relationships may have been an area where his predecessor was lacking. The head of FDIC was all but openly calling for ex-CEO Vikram Pandit's head at one point. For more: Related articles: Read more about: CEO, regulation 5. Morgan Stanley to cut 1,600 jobs
Few Wall Street CEOs have been as blunt about excessive banker compensation than Morgan Stanley CEO James Gorman. His rhetoric has been noteworthy, and he recently told Bloomberg that "if you put your compensation in a one-year context to define your overall level of happiness, you have a problem which is much bigger than the job" and "if you're really unhappy, just leave." Gorman is on a crusade to bring down banker pay, and he has struck another telling blow. The bank has announced it will cut 1,600 jobs in its profitable institutional securities group, which houses the main trading and investment banking units. That's about 6 percent of the group's total. The focus of the cuts will be well-compensated senior-level executives as well as others. About half the cuts will be in the United States. The bank cut 4,000 jobs last year as well. The additional cuts are necessary from Gorman's point of view if the bank is to remain serious about expenses. Morgan Stanley will report its fourth quarter results next week, and it may be trying to lay a certain groundwork. It would like to get it ROE higher, as do all banks. But with the prospects for explosive revenue growth small, expense reductions continue to play a leading role. Other banks have likewise returned to job cutting mode. Barclays reportedly will lay off 2,000 in its investment banking unit. Citigroup of course recently detailed plans to lay off 11,000, which drew applause from Mr. Market. More are expected soon. This will likely be an issue as earnings season gets underway on Friday. For more: Related articles: Read more about: Layoffs, jobs Also NotedSPOTLIGHT ON... AIG board meets on lawsuit Does want to sue the U.S. government for bailing it out, arguing that the bailout harmed shareholders? The AIG board met this week to discuss the issue, according to Reuters. AIG "is weighing whether to join a lawsuit filed by its former chief executive, Hank Greenberg, and his company Starr International, which owned 12 percent of the insurer before its rescue." The suit charges that the bailout hurt shareholders, and that the Fed charged an excessive interest rate on its initial loan. Article Company News:
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Thursday, January 10, 2013
| 01.10.13 | All eyes on fourth quarter bank earnings
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