Today's Top Stories Also Noted: Spotlight On... HSBC aims to fight criminal reputation News From the Fierce Network:
Today's Top News1. Citigroup might withdraw from more countries
Former Citigroup Vikram Pandit's strategy depended in large part on the bank's push to invest in other countries, making Citigroup a truly global bank seamlessly servicing the unique needs multinational corporations. When it comes to the consumer side of the bank, however, the bank was always less of a global player. Indeed, just three countries (Mexico, South Korea and Australia) account for half of the company's consumer debt. The bank's presence in many other countries is miniscule, according to Reuters. In an effort to cut expenses even more, new CEO Michael Corbat has announced plans to scale back on consumer operations in a host of other countries, including Pakistan, Paraguay, Romania, Turkey and Uruguay. More countries will soon be added to that list. Corbat recently suggested to analysts that over time, country managers tend to expand by veering into tangential businesses and end up saddling the company with extraneous and inefficient operations--a classic example of empire building perhaps. Unfortunately, "selling any of the foreign assets now would be tough. Other lenders around the world have also been closing foreign outposts and buyers can be hard to find. London-based HSBC Holdings Plc, for example, has sold more than 40 businesses and other assets, such as credit card portfolios, globally since 2011, but it has sometimes been a struggle to get the prices it wanted." For more:
Read more about: Citigroup, International Banking
2. Incriminating emails at heart of complaint against S&P
When the Justice Department sued Standard & Poor's for fraudulent ratings of CDOs, I felt obligated to note that email evidence in trials have so far not proven tremendously convincing. The best example of this may have been the trial of Ralph Cioffi and Matthew Tannin, the Bear Stearns hedge fund executives who took their chances in court and were acquitted of fraud charges "even though there were plenty of emails that the prosecution used as evidence of stark wrong-doing." DealBook notes the plentiful email evidence that the Department of Justice has amassed that on the surface seem more than damning. My favorite is when one employee IMed another noting, "We rate every deal. It could be structured by cows and we would rate it." There are plenty of other emails that suggest the rating analysts knew that the MBS universe was imploding, even as they continued handing out AAA ratings on what in hindsight were anything but safe securities. The more interesting emails deal with the competition between S&P and Moody's. "In May 2004, an analyst warned that S.&. P. had just lost to its competitor Moody's Investors Service the chance to rate a very large deal by being too hard-nosed about the amount of collateral that would be required to get a good rating. More collateral would mean less profit for Mizuho, the bank putting that deal together. 'We must address this now,' she said — otherwise the firm would lose more deals," according to Dealbook. All in all, the company says that there was a lot of internal debate about the rating model as applied to real estate-backed securities. While the firm was disastrously wrong on its ratings, it says it did not commit fraud and that the prosecutors have cherry-picked emails. My sense is that this is heading toward a settlement, but a trial would be vastly more interesting. For more: Related articles: Read more about: fraud, Standard & Poor's 3. Goldman Sachs launches career quiz online
For a lot of young people, the pinnacle of success in this day and age is landing a job at Goldman Sachs, but what would you do once you got there? To help people make that determination, Goldman Sachs has launched an interactive careers quiz. "Tell us a little bit about who you are and how you think. We'll use those answers to show you the best opportunities our firm offers to help solve problems for our clients — for businesses, communities, and institutions worldwide." Some of the questions, include:
Companies like Google have made asking questions in interviews an art form, seeking insights into the minds of applicants. The questions on this questionnaire are of a completely different genre. It certainly serves a marketing purpose. For more: Read more about: Goldman Sachs, careers
Will Michael Dell and Silver Lake have any problems raising up to $12 billion in debt? It will take one heck of an effort, but at this point there's no reason to conclude that the financing effort will be unsuccessful. While it is unclear what the bank syndication vs. junk bond split will be, the conditions seem to be in place for success on both fronts. The Deal Pipeline notes that, "January already bested last November's record in CLO 2.0 issuance (2.0 is the nomenclature applied to post-recession CLOs) with $8.3 billion for 15 of the structured securities, according to a JPMorgan Chase & Co. report. For 2012, total CLO issuance was $106 billion, up from $39.4 billion in 2011, the report said. And JPMorgan's high yield strategists said that CLO demand for U.S. loans could reach as much as $170 billion in 2013, setting up conditions that favor LBOs." The market is certainly strong enough to absorb a big deal. The big banks backing the deals are no doubt already in full-time marketing mode. The big losers in all this will be the holders of rated Dell debt, who will unfortunately be marched to the back of the line, subordinate to lots of new debt to be issued soon. For more:
Read more about: CLO, LBOs 5. Email evidence emerges in RBS rate case
It's become a staple of financial services prosecutions: Crazy, shocking emails that evidence criminal behavior. Like never before, prosecutors rely on email evidence to formally charge executives. Earlier, I noted some of the incriminating communications in the case against Standard & Poor's. Today, it's RBS's turn. The CFTC includes several emails as part of its complaint that the bank was conspiring to manipulate various interbank rates, such as the Euribor and Libor. Here are some examples culled from articles. Dealbook reports one trader of Swiss Francs emailed a colleague saying, "'i would lvoe [sic] u forever" if you were to set rates at a certain level. Later, the trader added 'if u did that i would come over there and make love to you.'" Dealbook quoted another trader, who pleaded "'Can we lower our fixings today please,'" The response was, "'make your mind up, haha, yes no probs.'" One trader wrote that, "It's just amazing how libor fixing can make you that much money," according to Dealbook. Taken in concert with similar emails that surfaced as part of the Barclays investigation into Libor abuse, it would appear that the prosecutors have strong cases against banks and dealers. Indeed, banks appear keen to settle, even for large sums. In this case, the evidence may indeed be powerful. But in general email evidence has proven to be less than persuasive in front of a jury. That said, I doubt a bank will want to test that theory by going to trial over Libor manipulation charges. Almost all will settle and the sooner, the better. For more: Related articles: Read more about: LIBOR, Enforcement Action Also NotedSPOTLIGHT ON... HSBC aims to fight criminal reputation HSBC was bludgeoned in December with a whopping $1.9 billion fine, the largest ever imposed on a bank over lax controls that allowed it to be used by organized crime units. The company was since forced to restructure to combat the problems. The CEO this week testified and said that, "Our structure was not fit for purpose for a modern world. Our geographic footprint became very attractive to trans-national criminal organizations, whether they are terrorist in origin or criminal in origin." That's quite an admission. Article Company News:
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Thursday, February 7, 2013
| 02.07.13 | Citigroup might withdraw from more countries
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