Also Noted: Spotlight On... Citigroup hit with $30 million fine News From the Fierce Network:
Today's Top News1. Limited partners defend dividend recaps
Dividend recaps have emerged as hot-button issue in the private equity industry, although industry practices in general seem less controversial now that the presidential election has passed. Dividend recaps perhaps did not rank as high as carried interest taxes on the political importance meter, but it certainly factored in a lot of discussions about the industry. Limited partners have been loath to discuss the issue, which makes some recent comments in Private Equity Beat noteworthy. "Dividend recapitalizations aren't evil," Pathway Capital Management Director Wayne Smith told attendees of a recent PE conference. "They are just not created equal." Indeed, there may be times when the strategy is entirely appropriate in terms of returning cash to limited partners. Especially this year, when the IPO market seemed to be flagging, dividend recaps re-emerged as prime tool. Limited partners seem less defensive about them now, though they can create some PR headaches. At the same time, there are some points of confusion. There is a cap on just how much limited partners "owe" general partners for such a move. Smith was quoted: "There probably are some misconceptions, particularly on the GP side," said Mr. Smith. You can't just return capital and have a value of one-times… There has to be a multiple on that…Selling assets may get you liquidity but it won't necessarily get you capital from us." For more: Read more about: Dividend Recaps 2. Barclays' casual Friday policy irks a few
CNBC notes that Barclays, like a few other banks, has put a casual Friday policy in place. Make that a "supercasual" Friday policy. "Jeans, T-shirts and even sneakers are acceptable on Fridays, according to people who work for the bank (and spoke on the condition of anonymity because banks keep everything top secret, even stuff like the rules of permissible footwear)." The idea has swept up many industries, though investment banking seems like one of the last holdouts. The goal is make work just a bit more fun, a laudable goal given what a lot of financial services employees have been through over the years. It's been an employment roller coaster for many. "Not everyone is thrilled. In particular, some of the holdovers from the Lehman Brothers days are dismayed. One former Lehmanite expressed distress at the idea of going to work in sneakers." A few choice quotes: "I didn't become an investment banker to dress like a perpetual teenager," And: "It's ridiculous. Please make them stop…. It's like working at a start-up but without the IPO." What we might eventually see is system that identifies people by job. The revenue producers will continue to dress up on Fridays, while the support staff will dress down. Obviously, there will be some exceptions. But on Fridays anyway, you will be defined in part by how you dress, which juts might work against the stated goals. Not that anyone really cares. Everyone knows who the rain makers are. For more:
Read more about: workplace, jobs 3. Bank of America cost cuts still effective
Lots of banks have seen their bottom lines pressured in the third quarter. Bank of America is not alone in that regard. But there are still plenty of bulls on the bank, including Raymond James analyst Anthony Polini. He has a "strong buy" on the stock going into third-quarter earnings, notes TheStreet.com. He estimates that the bank will earn 22 cents a share, compared with the consensus of 20 cents. The rationale relies on an old investment theme: expense management, something that Bank of America has excelled at under CEO Brian Moynihan. Soured loans and net charge offs seem to be declining relatively, and there will be a host of continuing benefits from Project New BAC. The bank says that Phase 1 of the project focused on the consumer side, including Deposits, Card Services and Consumer Real Estate Services, and related support, technology and operations functions. "Phase 2 focuses on Global Banking, Global Markets and Global Wealth & Investment Management, and related support, technology and operations functions not subject to evaluation in Phase 1. All aspects of Phase 1 of Project New BAC are currently expected to be implemented by the end of 2013, with the full cost savings impact expected to be realized in 2014, while Phase 2 is expected to be fully implemented by mid-2015." The big question of curse is how all this stacks up against a projected decline in revenue. So basically, the big issue about the top consumer banks remains: how long can they get by on expense management, without having to permanently grow the top line? In the view of one analyst anyway, the benefits of costs reductions will continue. But obviously they can't last indefinitely. At some point, the market will demand impressive revenue growth. For more:
Read more about: Bank of America, bank earnings 4. UBS investigates its Puerto Rico brokers
Puerto Rico has long beckoned to uber-wealthy investors around the world, who are drawn by the lack of federal taxes. UBS has been a leader in terms of setting up a local wealth management unit that caters to the needs of these well-heeled investors. Unfortunately, as reported by the New York Times, the bond market gyrations as of late has not been kind to clients, and that has thrown a harsh spotlight on the bank's operations. "The bank's clients had piled into highly leveraged bond funds run by UBS and were encouraged by its brokers to borrow even more money to invest in those funds. In some cases, money was lent improperly, exacerbating current losses," according to the paper. "Now, a number of UBS clients have been forced to liquidate hundreds of millions of dollars in holdings in these funds to meet margin calls. And the bank says it has begun an internal investigation into the lending practices of some of its top-producing brokers in the commonwealth." The bank has opened an internal investigation. One would guess that it has also notified the SEC, which oversees the brokerage industry in the commonwealth. If allegations that clients were improperly encouraged to leverage up to invest even more in bond funds, the bank can expect a lot of private litigation as well. Of course, it the bank self-reported, which it might have, it is in good position to win lenient treatment from regulators, especially if it can show that it had a strong ethics and compliance program in place. We can only hope that it did. For more: Read more about: UBS, bonds 5. Twitter IPO: Victim of politics?
The Twitter IPO looms as the most significant offering since, well, the Facebook IPO. But while the market remains abuzz with talk about an imminent offering, some are wondering if politics -- in the form of the fight over the government shutdown and debt ceiling -- will force a delay, which would be a shame. Fortune takes a look at the 2011 debt ceiling fight. "The government was scheduled to default on its debts on August 3. Beginning two weeks earlier, the stock markets began to tumble – with the DJIA losing nearly 600 points between July 21 and August 1. Then came the so-called Budget Control Act of 2011, which would later set the stage for sequestration. S&P reacted with a sovereign credit downgrade, sending the markets into a deeper spiral – by August 10, the DJIA down more than 2,000 points from that July 21mark (21% loss)." At that point, the IPO market weakened palpably. This time around, it's unclear how the market will react. No one has hit the panic button just yet, but the IPO machinery so far perhaps has underestimated the severity of all this political in-fighting. Before the shutdown, a source close to Twitter told the magazine: "Twitter is not worried at all. If the Senate passes the bill and it gets to the House, it's over. Republicans will have to pass." How utterly wrong that was. We're quickly heading into uncharted territory. Hopefully, the political folks realize just how much is at stake as they play their games and make their stands. For more: Read more about: IPO, Twitter Also NotedSPOTLIGHT ON... Citigroup hit with $30 million fine Massachusetts top securities regulator fined Citigroup $30 million for breaking disclosure rules by sending and unpublished, confidential research report about a technology company supplier to institutional clients, including SAC Capital, T. Rowe Price and others, according to Reuters. The complaint says that three Citigroup clients traded in Apple stock between the time it received the information and the day his report was official published. The report was about Hon Hai Precision Industry Co, a major supplier. Article Company News:
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Friday, October 4, 2013
| 10.04.13 | Bank of America cost cuts still effective
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