Citigroup Profit Beats Analysts’ Estimates on Investment Banking (Bloomberg)
Citigroup said profit rose 24 percent, beating analysts’ estimates on higher investment-banking fees and fewer losses tied to troubled assets. Second-quarter net income was $3.34 billion, or $1.09 a share, compared with $2.7 billion, or 90 cents, in the same period last year, New York-based Citigroup said today in a statement. The average estimate of 23 analysts surveyed by Bloomberg was for earnings per share of 96 cents.
S&P warns that chance of downgrading U.S. credit rating is 50 percent (WaPo)
Standard & Poor’s said late Thursday that it could downgrade the U.S. credit rating as soon as this month, and there is a 50 percent chance it will do so within three months, if Washington fails to come to an agreement over the nation’s debt…S&P managing director John Chambers said in an interview that the downgrade could come by the end of the month if Congress has not voted to raise the $14.3 trillion debt ceiling…Chambers said the country must implement a plan to reduce the annual budget deficit by roughly $4 trillion over 10 years, which makes the debt manageable over the long term.
Debt limit: U.S. outreach to banks, investors over possible default comes up empty (WaPo)
Obama administration officials have been privately exploring with major banks and foreign investors whether the government could devise a way to avoid a severe disruption in financial markets if the federal debt ceiling is not raised, according to several people familiar with the matter…But the message back from the market has been discouraging: The failure to pay any significant obligations would scare away investors and undermine the financial system.
High-yield bond issuance to hit record this year, says Moody’s (FT)
Mounting concern that the European debt crisis is spreading to larger southern economies such as Italy and Spain has rattled corporate debt markets this month and brought issuance of fresh high-yield bonds to a juddering halt…However, while the market remains “susceptible to shocks”, companies in Europe, the Middle East and Africa sold $58bn of high-yielding bonds in the first six months of the year, and should still surpass last year’s record $65bn, Moody’s said in a report.
The AAA bubble (FT Alphaville)
It comes from a new report, issued by the BIS and Basel Committee’s joint forum, on the subject of securitisation incentives…The financial crisis had a lot to do with triple-A ratings being slapped on to subprime securities which didn’t warrant them, we know that…The turmoil of 2008 shunted some investors from ABS into safer sovereign debt, it’s true. But you also had a plethora of incoming bank regulation to purposefully herd investors towards holding more government bonds, plus a glut of central bank liquidity facilities accepting government IOUs as collateral. Where ABS dissipated, sovereign debt stood in to fill the gap. And more.
Muni Default Plunge Belies Whitney Prediction as Borrowers Shun Insolvency (Bloomberg)
Time is running out for Meredith Whitney’s municipal-market default prediction to come true...Defaults fell 60 percent in the first half of 2011 compared with the same period last year, including a $12.5 million Austin, Texas, apartment project that made a late payment in June, according to Distressed Debt Securities Newsletter. Whitney, a bank analyst, predicted “hundreds of billions of dollars” of municipal defaults within 12 months in a Dec. 19 “60 Minutes” broadcast, fueling a wave of selling in the $2.9 trillion market.
US state tax revenues rise (FT)
US state tax revenues grew by 12.5 per cent in April and May versus the same months in 2010, preliminary data for 45 states compiled by the Rockefeller Institute of Government shows. The recent pace of growth has raised hopes that state revenues, which were decimated by the US recession, are heading toward pre-recession levels, the research group said.
Lenders Praise Irish Austerity Program (WSJ)
In a quarterly progress report issued Thursday, inspectors from the European Union, the European Central Bank and the International Monetary Fund said Ireland was successfully closing a huge budget deficit and cleaning up the remains of a shattered banking system.
France loses out in ‘flight to quality’ (FT)
This week the difference between French and German borrowing costs rose to its highest since 1997, raising concerns over whether France could become the next victim of the current crisis of confidence in European debt markets. The so-called spread to German Bunds hit 77 basis points on Wednesday, marking a sharp break with the past close correlation between continental Europe’s two biggest economies of 30-40 basis points.
Bain Capital Lowers Its Fees (WSJ)
For more than a decade, Bain charged higher fees than almost all competitors…Now, as Bain markets a new $2 billion fund focused on investments in Asia, the firm is offering two lower-priced choices, according to people familiar with the matter…Bain's investors say the lower fees reflect the fact that the firm's most recent funds have produced returns in line with competitors, making it harder to charge higher fees.
U.S. probes Credit Suisse for aiding tax evasion (Reuters)
Credit Suisse said in a brief statement it had received a letter on Thursday notifying the bank that it was a target of a DoJ investigation concerning "historical private banking services provided on a cross-border basis to U.S. persons".
Key Credit Gauge Loses Clout (WSJ)
A crucial barometer of global banking health is losing its clout as a macroeconomic indicator, but the move is benefiting some consumers and others whose low interest-rate loans still are pegged to it. Known as the London interbank offered rate, or Libor, the barometer helps price trillions of dollars of derivatives and home and corporate loans. Calculated daily, Libor is supposed to measure borrowing costs for a panel of banks globally. The rate "floats," or ebbs and flows depending on how much banks charge one another.
More Wall Street Banks Grab Groupon I.P.O. (DealBook)
When Groupon first filed for its offering in early June, only three banks — Morgan Stanley, Goldman Sachs and Credit Suisse — were among the anointed underwriters. Now, the Internet company has filled out the roster with JPMorgan Chase, Allen & Company, Bank of America Merrill Lynch, Barclays Capital, Citigroup, Deutsche Bank Securities, William Blair, Citadel Securities, Loop Capital Markets, RBC Capital Markets and the Williams Capital Group.
Elin dating billionaire's son (NYP)
Heartbroken Elin Nordegren has found love again with wealthy American investor Jamie Dingman. Elin, who divorced cheating golf great Tiger Woods following a series of scandals with multiple women, has been dating Dingman, the son of billionaire Michael Dingman, for months. Friends say Jamie is an accomplished emerging-markets veteran who has represented his father's interests in China for the past six years. In the mid-1990s, he specialized in Russian private equity funds.