Opening Bell: 10.25.11

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Hard line adopted on Greek debt loss (FT)
European negotiators have asked Greek debt holders to accept a 60 per cent cut in the face value of their bonds, a hardline stance that far exceeds losses agreed in a deal between private investors and eurozone authorities three months ago. The stance, delivered to a consortium of international banks at the weekend by Vittorio Grilli, Italian treasury chief and lead eurozone negotiator, is a victory for German-led northern creditor countries who have been pushing for Greek bondholders to accept far more of the burden for a second bail-out. According to officials briefed on the talks, France, the European Central Bank and the International Monetary Fund remain concerned the tough stance could trigger bondholder insurance policies known as credit default swaps, sparking investor panic because of uncertainty over which financial institutions face CDS losses.

In Cautious Times, Banks Flooded With Cash (NYT)
Though financial institutions are not yet turning away customers at the door, they are trying to discourage some depositors from parking that cash with them. With fewer attractive lending and investment options for that money, it is harder for the banks to turn it around for a healthy profit. ... “We just don’t need it anymore,” said Don Sturm, the owner of American National Bank and Premier Bank, community lenders with 43 branches in Colorado and three other states. “If you had more money than you knew what to do with, would you want more?”

Go West, Investment Banker (WSJ)
The New York state comptroller's office predicted this month that Wall Street would cut 10,000 jobs by the end of 2012, bringing the total losses since January 2008 to 32,000. Bank of America last month announced global staff cuts of 30,000, or 10% of the firm's workforce. Meanwhile, regional banks like KeyCorp, Fifth Third Bancorp in Cincinnati, SunTrust Banks Inc. in Atlanta and U.S. Bancorp in Minneapolis, have been adding bankers for stock, bond and loan offerings, as well as mergers and acquisitions. KeyCorp, for example, has increased its investment banking unit by 36% since the beginning of 2010 and Fifth Third has 20 investment bankers, up from zero a year ago. Investment-banking generates hefty fees that could help the smaller banks offset declining interest income from their core business of lending. "It's a great opportunity for the KeyCorps of the world to lift talent," says Michael Karp, a managing partner at executive search firm Options Group.

Regulator Flagged SAC Stock Trades (WSJ)
In the 18 referrals made by Finra and the NASD between 2002 and 2011 that were reviewed by the Journal, investigators said they were vexed by SAC's repeated appearance in routine screens of suspicious trading near mergers and acquisitions, earnings announcements and other market-moving news. SAC in a statement said, "Every day our firm transacts in thousands of securities," adding that "it is not surprising that we would be included in a small percentage of Finra referrals."

UBS Profit Falls After Trading Scandal (DealBook)
UBS said on Tuesday that profit fell 39 percent in the third quarter from the period a year earlier after a rogue-trading scandal had cost it $2.3 billion. Profit fell to 1.02 billion Swiss francs ($1.2 billion) in the three months ended Sept. 30 from 1.66 billion francs in the period a year earlier. The trading loss and charges linked to a cost-cutting plan were partly offset by an accounting gain on the bank’s own credit of 1.8 billion francs and the sale of some investments.

Mayo Concedes He Dialed Wrong Number (Fox)
Glad that's cleared up.

Deutsche Bank Earnings Beat Expectations (DealBook)
Deutsche Bank, the largest German lender, on Tuesday reported third-quarter profit that was above expectations, as improvement in its consumer banking business helped offset a plunge in trading revenue that the bank blamed on the European sovereign debt crisis. The bank said profit in the three months ended Sept. 30 was 777 million euros ($1.1 billion), after a loss of 1.2 billion euros in the period a year earlier. Analysts surveyed by Reuters had expected a net profit of 400 million euros. But pretax profit in the corporate banking and securities division, which includes the investment bank, plunged to 70 million euros in the quarter from 1.1 billion euros a year earlier, the bank said.

Perry calls for major spending and tax cuts (WaPo)
In almost every way, Perry, who is looking to woo tea party conservatives who have been reluctant to back Romney, presents policies to the right of the former Massachusetts governor. Romney has called for capping federal government spending at 20 percent of GDP, the Texas governor proposes 18. (This year, under President Obama, spending is at 24 percent of GDP). Romney has proposed raising the retirement age to reform Social Security, Perry adopts an idea even more beloved by conservatives and hated by liberals: allowing young people to put their money into private savings accounts outside the traditional retirement system. Romney would cut corporate taxes to 25 percent, Perry 20. While Romney has said one of his goals is a “flatter” American tax code, under Perry’s plan, Americans could either choose to pay taxes under the current system, or pay a 20 percent national flat tax. Conservative activists have long called for the adoption of a flat tax.

'Dark Pool' Settlement Shines Light on Potential Abuses (WSJ)
Pipeline Trading Systems LLC and two executives agreed to pay $1.2 million in fines to settle charges that the firm withheld the fact that nearly all of its clients' trades on the company's private electronic markets were facilitated by a Pipeline-owned entity, according to Securities and Exchange Commission officials. In a statement, a Pipeline spokesman said the firm was "pleased" to resolve the matter, in which it didn't admit or deny wrongdoing. The case is the SEC's first enforcement action involving dark pools—private markets for institutional traders where large blocks of stock are bought and sold anonymously—and stems from a deeper SEC probe into potential abuses in private share dealing, according to regulators.

Raining on Brazil's Banking Carnival (II)
Virtually all the major international firms, including Bank of America Merrill Lynch, Barclays Capital, Deutsche Bank, Goldman Sachs Group and JPMorgan Chase & Co., have been building up their Brazilian operations in recent years, hiring bankers, traders and back-office staff. ... The growing army of bankers is chasing fewer and fewer deals, though. The pace of equity offerings this year has slowed to the lowest level since 2005 as stock prices have tumbled. São Paulo’s Bovespa Index was down 23.1 percent for the year as of late last month. With prospective valuations reduced, a number of companies have postponed plans for initial public offerings of stock. Merger activity has suffered an even bigger decline, running at barely half of last year’s pace. The sudden evaporation of fees is squeezing banks and arousing tensions among domestic banks and some of the newer arrivals.

Italy keeps EU waiting on eve of crucial summit (Reuters)
Just 24 hours before European Union leaders are due to adopt a plan to reduce Greece's debt burden, fortify European banks to withstand bond losses, and scale up the euro zone rescue fund to prevent market contagion, all eyes were on Rome. Prime Minister Silvio Berlusconi's faction-ridden cabinet failed to agree at an emergency session late Monday on raising the retirement age, one of the key economic reforms demanded by Italy's EU partners as a condition for supporting its bonds. Berlusconi responded defiantly to public pressure from French President Nicolas Sarkozy and German Chancellor Angela Merkel at an EU meeting on Sunday, saying in a statement that no one could teach Italy lessons.

Berlusconi claims Bunga Bunga parties are 'invention of porn obsessed judges' (Daily Mail via The Awl)
Berlusconi also insisted the words 'bunga bunga' which have entered global phraseology, refer to dancing that took place at his parties. He said: 'When one of my guests said "Are we going to have some bunga bunga after dinner?" they were just talking about dancing. I never took part because I have vowed never to dance.'

Related

Opening Bell: 07.27.12

Barclays Faces New Scrutiny (WSJ) n what could turn out to be a new black eye for the bank, Barclays said the U.K. financial regulator has started an investigation into four current and former senior employees, including Chris Lucas, Barclays's finance director. The issue centers on the "sufficiency of disclosure" in relation to fees paid when Barclays conducted an emergency £7.3 billion ($11.45 billion) capital increase with Middle Eastern investors in 2008. The cash injection likely saved Barclays from being bailed out by the government and part-nationalized. The Financial Services Authority and Barclays declined to elaborate further the issue. Barclays said in a statement that it was confident it had satisfied disclosure obligations. In a separate debacle, Barclays said it put aside £450 million to cover the misselling of derivatives products to small businesses. Merkel, Hollande Vow to Do Everything to Defend Euro (Reuters) FYI: "Germany and France are deeply committed to the integrity of the euro zone. They are determined to do everything to protect the euro zone," they said in a joint statement. Treasury Eyes Funds Hidden Overseas (WSJ) he Treasury Department released new details Thursday of a plan to ferret out Americans' global tax dodging, though some lawmakers and banks remain concerned about the initiative's scope and regulatory costs. Treasury officials said they hope to finalize the system's basic rules by the fall and expressed confidence it would be on track for implementation by 2014 as scheduled. Congressional experts said the new system would recover $8.7 billion in tax revenues over 10 years. Facebook Growth Slows Again (WSJ) The company swung to a second-quarter loss largely weighed down by expenses from compensating employees with stock upon its initial public offering in May. Revenue in the second quarter was $1.18 billion, up 32% from $895 million a year ago. That revenue growth was the lowest percentage since at least the first quarter of 2011, when Facebook was more than doubling the amount of money it brought in from advertising, and to a lesser extent, the cut of fees it takes from payments on its platform. Facebook Falls After Report Fails To Quell Growth Concerns (Bloomberg) “It took a long time for the TV market and advertising to be truly understood, it took a long time for search, and I think we’re still in that learning curve with a lot of our clients,” COO Sheryl Sandberg said. The Guy In The Clown Nose? He's An Olympian (WSJ) Terry Bartlett is a world-class gymnast who leapt, tumbled and swung for the glory of Great Britain in three Olympic Games. Today, he is also a world-class clown. Ten times a week, he dons a red nose and floppy shoes to elicit chuckles at "O," a Las Vegas water-themed circus run by Cirque du Soleil. "It's better than having a real job," says the 48-year-old Bartlett...A few months after Bartlett's audition, Cirque hired him as an acrobat for a new show in Las Vegas. At first, he says, he had to confront some stigma about joining a circus. "Some people were like, whoa, that's not much of a move from what you've done," he says. But today, he says Cirque is so well-known that he gets few smirks. Spanish Banks Hit By Real Estate Woes (WSJ) Caixabank SA, Spain's third-largest lender by market value, number five bank Banco Popular Español SA, and smaller Banco Español de Credito SA, all said they had set aside most of their profit to bolster their buffers against property sector losses, after the government twice this year raised the minimum required provisioning level for banks. Caixabank said quarterly net profit tumbled 78% to €118 million ($145.1 million) and Popular's profit fell 37% to €75.4 million. Smaller Banesto, which is owned by banking giant Banco Santander SA, said quarterly profit sank 97% to €14.4 million. Goldman PR Guru's Charm School (NYP) Under Siewert, the bank has scheduled weekly roundtable meetings between the media and executives including Goldman President Gary Cohn and CFO David Viniar. In one of those meetings yesterday, rising-star Treasurer Elizabeth “Liz” Beshel Robinson met the press for the first time. Not everyone’s keen on the changes. Goldman’s financial rock star Viniar, sources said, has sworn off appearing on TV. JPMorgan Revamps Business Units (WSJ) The bank said Frank Bisignano, who was tapped in early 2011 to lead J.P. Morgan's transformation of its mortgage banking group, will become co-chief operating officer for the entire company, in addition to continuing as chief administrative officer of the firm. He will transition the mortgage business to Gordon Smith in early 2013. Matt Zames will serve as co-COO, and will remain head of the chief investment office and mortgage capital markets...J.P. Morgan said its investment banks, treasury and securities services and global corporate banks businesses are being combined into the corporate and investment bank unit, to be chaired by Jes Staley, CEO of the investment bank business. Mike Cavanagh, head of treasury and securities, will become co-CEO of the new unit, along with Daniel Pinto, who currently heads EMEA and global fixed income. Romney Riles Londoners With Comments On Olympics Games (Bloomberg) It was supposed to be Mitt Romney’s flawless world stage debut. Instead, the Republican presidential candidate spent the start of his overseas trip fending off a furor over his London Olympics comments and scrutiny of a fundraiser with bankers linked to the Libor rate-fixing scandal. “There’s a guy called Mitt Romney who wants to know whether we’re ready,” London Mayor Boris Johnson told 80,000 cheering people gathered at Hyde Park for the arrival of the Olympic torch last night. “Are we ready? Are we ready? Yes, we are!” Romney worked to put the controversy behind him today, scheduling an interview at Olympic Park to quell the storm of criticism over his comment that the city was unprepared to host the games. “After being here a couple of days, it looks to me like London’s ready,” he told NBC’s “Today” program. “What they’ve done that I find so impressive is they took the venues and put them right in the city.” In the July 25 NBC interview, Romney described reports of difficulties recruiting enough security staff for the games, which begin today, as “disconcerting” and said, “It’s hard to know just how well it will turn out.”