After disappointing earnings with FICC revenues down 63% from last quarter, David Viniar announced on this morning’s call that GS expects to complete $1.2 billion in run-rate compensation and non-comp expense reductions by year end. Translation: 1,000 of you are out.
Archive for July 2011
We could learn a lot from the Greeks. I asked myself on the flight back [from Chalkidiki]: How is it that a people who lived more than 2,000 years ago, could grasp the world and its social laws as well as we can — or sometimes even better? Our brain has not evolved since the Sophists, who spent their lives trying to criticize outdated theories about the world? Maybe this is already the whole truth: Life and business have accelerated. The average citizen no longer has the time to devote himself consistently to considering a problem or theory. We’re too busy with our obligations to do something else, to be on the road, earn money, cultivate relationships, everything, as we rush through our live. And because we do so many different things, we believe, we believe we have more overall. But the opposite could be the case. [NetNet, earlier]
After announcing its largest loss ever, Bank of America said this morning that it plans to reduce Basel III risk-weighted assets by $200 to $250 billion by the end of 2012 (slide 27). On BofA’s call, Glenn Schorr of Nomura asked how that RWA reduction would affect revenues. Bruce Thompson didn’t give an exact answer, but admitted that many of the businesses that will be cut back are money losers – calling out structured credit in particular – and implied that the revenue effect would be small or even positive:
I think if you look at and you saw the individual books, one of the most significant contributors to that reduction of $200 billion to $250 billion is actually something, over the last several quarters, that we’ve taken losses on. I think if you think about the structured credit trading book, that’s not something where you see significant amounts of income on as well. So think — the net of it is, while there is some income, there are also certain elements of that, that have been expensive. So we really don’t see any material level of impact into the income statement from reducing that $200 billion to $250 billion.
Earnings Transcript [Seeking Alpha]
Today’s big day of bank earnings calls starts kind of small with Greenhill’s first-ever quarterly results call. The M&A boutique put out results early after some worries about managing director departures.
Turns out that was no problem. CEO Scott Bok explained that there are four reasons MDs leave Greenhill:
Continue reading »
Bank of America Has Record Loss on Bad Loans (Bloomberg)
The second-quarter loss of $8.83 billion, or 90 cents a share, compared with profit of $3.12 billion, or 27 cents, a year earlier, the Charlotte, North Carolina-based lender said today in a statement. Excluding the mortgage charges and gains on asset sales, the firm earned 33 cents a share, beating the 29-cent average estimate of 21 analysts surveyed by Bloomberg.
Goldman Sachs Profit Misses Estimates (Bloomberg)
Net income climbed 77 percent to $1.09 billion, or $1.85 per share, from $613 million, or 78 cents, in the same period a year earlier, the New York-based company said today in a statement. That compares with the $2.30 per share average estimate of 23 analysts surveyed by Bloomberg. Earnings fell 38 percent if one-time costs are excluded from the 2010 results.
Wells Fargo Profit Tops Estimates (MarketWatch)
Wells Fargo said Tuesday that its second-quarter profit rose to $3.9 billion, or 70 cents a share, from $3.1 billion, or 55 cents, a year earlier. Total revenue fell to $20.4 billion from $21.4 billion. Analysts surveyed by FactSet estimated profit of 69 cents a share. “While the economic recovery continues to be slower than expected, there are signs that businesses are investing for growth,” said Chief Executive John Stumpf.
Bill Clinton: I Would Use Constitutional Option To Raise Debt Ceiling And Force The Courts To Stop Me (National Memo via Morning Money)
Sharply criticizing Congressional Republicans in an exclusive Monday evening interview with The National Memo, Clinton said, “I think the Constitution is clear and I think this idea that the Congress gets to vote twice on whether to pay for [expenditures] it has appropriated is crazy.” Continue reading »
$$$ Fitch Says Treasurys With Missed Payments Would Get B+ Rating (WSJ)
$$$ Default Insurance on U.S. Burbling a Bit (MarketBeat)
$$$ With $1.5 Trillion of U.S. Debt, China Can Only Grumble (NYT)
$$$ US muni market braced for busiest week of year (FT)
$$$ Hermon Raju, commuter who verbally attacked train conductor, seeking PR expert to fix reputation (NYDN) Continue reading »
Brad Hintz Is Worried About Morgan Stanely’s Ability To Get Back To Number One On Clients’ Speed Dial
By Bess Levin
Morgan Stanley, which last year missed an internal trading-revenue target by more than 40 percent, is under pressure to show improvement after a two-year effort to turn around the firm’s fixed-income trading business…Chief Executive Officer James Gorman, 53, is looking to prove to investors this week when results are reported that the firm is advancing toward his goal of boosting market share in fixed-income trading by 2 percentage points. With the stock down 69 percent since 2006 to $21.09 last week, Colm Kelleher and Ken deRegt, both 20-year veterans of the company, aim to succeed at a task that has taken down three senior executives. “I’m absolutely surprised at how slow it has been,” said Brad Hintz, an analyst at Sanford C. Bernstein & Co. who has a “buy” rating on the firm’s shares and is a former Morgan Stanley treasurer. “I’d love to tell you what the trajectory is going to be, but I don’t know how rapidly one can come back…The problem is that clients have long memories. “If you’re no longer the first button on a phone, it takes a long time to become the first button.” [Bloomberg]
“I had no intent to injury or bodily harm anybody,” Vincent McCrudden told a judge today after pleading guilty to emailing a bunch of regulators describing them as “fucking corrupt piece[s] of shit!” letting them know that they were “not getting away with this,” encouraging them to “laugh mother fucker laugh,” and making it clear that “it wasn’t ever a question of ‘if’ I was going to kill you, it was just of when.” McCrudden, who also had an “execution” list on his website and encouraged people to help him cross the 47 names off the list, added that he “apologized” and was sorry for “any apprehension [the threats] may have caused” his targets and their families. Having said that, McC noted that he’d been “upset” about a suit against him by the CFTC and never actually “intended to injury or bodily harm anybody. [BW, earlier]
Walter Noel’s Daughter Apparently Failed To Get Bernie Madoff’s Advice On How To Run A Scam For Years Without Anyone Catching On
By Bess Levin
Remember Marisa Noel Brown? She’s the youngest daughter of Fairfield Greenwich Group founder Walter Noel, whose role in the Madoff scam resulted in the family being kicked out of their country club and being forced to sell their share of a private jet. As her husband was a FGG employee at the time the shit hit the fan back in December 2008, and would likely find it difficult to find a position at a new firm what with the taint of his father-in-law-/Madoff, it appeared lucky that Marisa had started a jewelry company with her friends several months prior, which meant she could not only provide for her children, but provide hope that the Noels could again one day be known as successful, hardworking businessmen and ladies. Which is why this lawsuit claiming MNB and her partners’s model was to buy jewelry from well-known designers and then sell it as their own is not helping things. Continue reading »
At this point, Nassim N. Taleb has explained many times (1) what caused the financial crisis and (2) what will cause the next one. This is actually pretty simple stuff and as he’s sick of repeating it, we’ll summarize:
(1) the Nobel Prize Committee, and
(2) knowing things.
We learned the second part when Taleb dropped by the U.S. Congress last week to warn them away from the dangerous trap of setting up an Office of Financial Research to collect statistical data from banks and try to analyze it to reduce risk. Taleb’s prepared testimony included some polite objections to this plan:
Continue reading »
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Don’t Try And Tell Ray Dalio There’s Anything Risky About Hunting An Animal Known To Impale People With Its Giant Horns
By Bess Levin
All that tells him is you know nothing about risk management. Continue reading »
