Opening Bell: 01.17.12

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Citi Earnings Miss on Profit and Revenue; Shares Lower (CNBC)
Citigroup quarterly earnings fell well short of analysts' expectations on both profit and revenue, sending shares lower in pre-market trading on Tuesday. The global financial services company delivered fourth-quarter earnings excluding items of 38 cents per share, down from 40 cents in the year-earlier period. Revenue was $17.2 billion, a 6 percent decrease from $18.37 billion a year ago. Analysts had expected Citigroup to report earnings excluding items of 49 cents per share on revenue of $18.54 billion, according to Thomson Reuters.

Wells Fargo Profit Rose 20% in Fourth Quarter (DealBook)
The bank, based in San Francisco, turned a $4.1 billion profit in the fourth quarter, or 73 cents a share, as its loan portfolio showed signs of improving and its deposit division continued to grow. That compared with a profit of $3.4 billion, or 61 cents a share, in the period a year earlier. The figures, which were aided by Wells Fargo’s lack of exposure to the volatile investment banking business, exceeded analysts’ consensus estimate of 72 cents a share.

Bonuses Are Sinking at Morgan Stanley (WSJ)
Responding to a difficult environment for Wall Street, Morgan Stanley plans to tell employees this week that bonuses will drop sharply, with cash payouts capped at $125,000, according to people familiar with the matter. Some top executives will receive nothing now, deferring their 2011 payouts until the end of this year. The New York-based bank, run by Chief Executive James Gorman, will defer the portion of any bonus past $125,000 until December 2012 and December 2013, according to one of the people familiar with the matter.

Goldman Sachs forced to reveal pay of top London staff (Guardian)
For the first time it has been forced to disclose, under EU rules, how it pays so-called "code staff" – those who are judged to be responsible for taking or managing risks – in its UK-based operations. Regulatory filings for Goldman Sachs Group Holdings (UK) show that it had 95 code staff in 2010 who shared $269.5m (£175m) in cash (including salaries) and were handed 2m restricted stock units (RSUs), worth $320m at the $160-ish share price in 2010. At these prices ... this suggests an average pay deal of $6.2m for each of the 95, none of whom is identified by name.

Monti warns of political backlash (FT)
Italy’s prime minister has pleaded for Germany and other creditor countries to do more to help lower his country’s borrowing costs, warning there would be a “powerful backlash” among voters in the eurozone’s struggling periphery if they did not. ... “The more these [high debt] countries show to have concretely understood the imperatives of discipline … the more Germany should feel relaxed,” Mr Monti said in the 90-minute interview in his opulent office in central Rome.

Spain Borrowing Costs Fall at Auction After S&P Downgrade (Bloomberg)
Spain sold 4.88 billion ($6.23 billion) of 12-month and 18-month bills, just below the maximum target, and its borrowing costs fell in its first auction since its credit rating was cut by Standard & Poor’s. The Madrid-based Treasury said it sold 12-month debt at an average yield of 2.049 percent, compared with 4.05 percent at an auction on Dec. 13. It sold 18-month paper at 2.399 percent, down from 4.226 percent last month.

Wikipedia to Go Dark on Wednesday to Protest Bills on Web Piracy (NYT)
Jimmy Wales, co-founder of Wikipedia, confirmed the site’s decision on Monday on Twitter, writing: “Student warning! Do your homework early. Wikipedia protesting bad law on Wednesday!”

Oops! I sent it again: Cuban’s e-mail taunter wants job back, cites ADHD (NYP)
The disgraced former Securities and Exchange Commission lawyer who got the ax after he called billionaire investor Mark Cuban “unpatriotic” in one of several inappropriate e-mails sent from his work computer, wants his job back, The Post has learned. Jeff Norris, who sent the e-mails while the SEC was investigating Cuban for insider-trading, said he suffered from undiagnosed Attention Deficit-Hyperactivity Disorder, or ADHD, at the time which resulted in “uncharacteristically impulsive behavior,” like sending the e-mails in question. ... The SEC, in firing the legal eagle, “failed to take into account that [Norris] suffers from ADHD and that because he was under severe stress, he could not control his impulse to engage in inappropriate e-mail traffic,” it is alleged in a court filing.

Demise of Fund of Funds Continues Apace (II)
While the amount of money flowing into single manager hedge funds has been on the rise since the 2008 market implosion, fund of funds have been in decline. According to Hedge Fund Research (HFR), there has been a steady shrinking in the number of fund of hedge funds since the peak in 2007; there were 2,018 fund of funds at the end of the third quarter of 2011, down 18 percent from 2,462 in 2007. The number of single manager funds is down from 2007 as well, but the total number has been steadily rising since 2008. What’s more, inflows to single manager funds have risen for the past nine months. ... Part of the problem has been performance. Fund of funds, which charge fees on top of the fees charged by the hedge funds in which they invest, have seen their performance lag in this lower-return environment for four straight years and seven of the past eight, according to HFR.

Star dims for Goldman's youngest partner (Fortune)
After a year of losses, the exodus of investors from hedge funds hasn't been as great as many expected. In the case of Eric Mindich's $12 billion Eton Park Capital Management -- which fell about 11% last year -- that's because try as they might, investors still have a hard time taking their money out. ... Mindich's claim to fame is being the youngest person, at age 27, to make partner at Goldman Sachs (GS) in 1994. When he left to launch a hedge fund in 2004, the fever to invest with the wunderkind was so great that Mindich raised a record $3.5 billion despite insisting on one of the most stringent lockups on record. Investors in a certain share class had to agree to keep the money in Eton Park for a minimum of 27 months, and it would take them another two years to get out, as they could only redeem one-third in any given year -- what's called a rolling three-year lockup. If the investor missed the window of opportunity after the initial 27 months, he couldn't try again for another 27.

Lazard Gets Five Weeks to Find RBS Buyers Before Bankers Depart (Bloomberg)
Lazard Ltd., the largest non-bank merger adviser, has been given five weeks to find a buyer for all or parts of Royal Bank of Scotland Group Plc’s equities and advisory operations before managers start firing employees, according to three executives at the bank. RBS, the U.K.’s largest state-owned lender, last week said it will sell or close its unprofitable cash equities, mergers advisory and equity capital markets units. The 3,500 affected employees won’t be put on redundancy notice until RBS concludes it can’t find a home for them elsewhere.

Market Shrinks First Time Since ‘09 on U.S. Buybacks, Sales (Bloomberg)
Stocks are getting scarcer in the U.S. for the first time since the bull market began as companies cut share sales to the lowest level since 2006 and buy back equity at the fastest pace in four years.

Chinese GDP growth rate falls (FT)
China’s economy expanded 8.9 per cent in the fourth quarter of last year, extending a slowdown that began at the start of 2011 and is expected to continue into 2012. ... The fourth quarter figure represents a slight drop from the 9.1 per cent growth rate in the third quarter, but came in higher than median analyst forecasts of 8.7 per cent.

Romney rules out future bank bail-outs (FT)
Mitt Romney said as president he would allow banks to go into bankruptcy in the event of another financial crisis, rather than keep them afloat with a government bail-out.

Protesters ready igloos to Occupy Davos (CNBC)
"Don't let them decide for you! Occupy WEF!" read a banner draped across the first igloo, which took five hours to build. Speaking at a podium made of snow blocks, Roth said they planned to build several more igloos, each sleeping two people, and pitch two heated teepees and a field kitchen.

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Opening Bell: 01.16.13

Goldman Profit Soars (WSJ) "While economic conditions remained challenging for much of last year, the strengths of our business model and client franchise, coupled with our focus on disciplined management, delivered solid performance for our shareholders," Chief Executive Lloyd C. Blankfein said. Overall, the investment-banking arm recorded revenue of $1.41 billion for the quarter, up from $857 million a year ago and $1.16 billion in the third quarter. Financial advisory revenue rose 8.1% from year ago. Debt underwriting revenue surged to $593 million from $196 million in the year ago and the $466 million reported in the third quarter. Equity underwriting revenue popped 59% from the year ago and 61% from the prior quarter to $304 million. Revenue from fixed income, currency and commodity trading totaled $2.04 billion, versus $1.36 billion a year earlier and $2.22 billion in the third quarter. Revenue from equities execution rose 45% from a year ago to $764 million but fell 10% from the third quarter. Overall profit for the fourth quarter totaled $2.89 billion, compared with a year-earlier profit of $1.01 billion. Earnings per share, reflecting the payment of preferred dividends, jumped to $5.60 from $1.84. Net revenue, including net interest income, surged 53% to $9.24 billion. JPMorgan Profit Tops Estimates (WSJ) JPMorgan's fourth-quarter earnings surged 53% on strong revenue and better credit, as the bank further detailed the fallout from more than $6 billion in trading losses last year. The outsized, complex trades on credit default swaps tied to corporate bonds became known as the "London Whale." On Wednesday, the bank made public an internal report outlining mistakes and oversights by executives who played a role in the matter, including Chief Investment Officer Ina Drew, who has since left the bank, and Douglas Braunstein, who was chief financial officer during the episode and has since become a vice chairman. It also said its Treasury and Chief Investment Office, where the "Whale" trades were made, recorded a loss of $157 million on the fourth quarter, compared to net income of $417 million in the year ago. J.P. Morgan also said it halved the 2012 compensation of Chief Executive James Dimon to $11.5 million. Additionally, he will have to wait up to another 18 months before he can start exercising two million options that were awarded to him five years ago. Overall, J.P. Morgan reported a profit of $5.69 billion, or $1.39 a share, for the fourth quarter, up from $3.73 billion, or 90 cents a share, a year ago. Bankers Get IOUs Instead Of Bonus Cash (WSJ) Several thousand Morgan Stanley traders, investment bankers and other employees will get IOUs instead of cash when bonus day arrives Thursday, a fundamental change in Wall Street pay triggered by the financial crisis. The New York company will pay its bonuses in four equal installments, according to people briefed on the plan, with the first chunk coming in May and the last in January 2016. Employees who quit or are laid off before the payments stand to lose their deferred compensation unless they negotiate a separate deal with the company. "I don't think there will be a lot of cheers on the trading floors of Morgan Stanley," said Mark Williams, a former Federal Reserve bank examiner who now teaches at Boston University. "Bonuses were used to buy houses and cars. They were savings vehicles." AIG Seeks Approval To File More Bank Suits (NYT) Since the summer of 2011, the insurance giant American International Group has been battling Bank of America over claims that the bank packaged and sold it defective mortgages that dealt A.I.G. billions of dollars in losses. Now A.I.G. wants to be able to sue other banks that sold it mortgage-backed securities that plunged in value during the financial crisis. It has not said which banks, but possibilities include Deutsche Bank, Goldman Sachs and JPMorgan Chase. But to sue, A.I.G. first must win a court fight with an entity controlled by the Federal Reserve Bank of New York, which the insurer says is blocking its efforts to pursue the banks that caused it financial harm. Hungary Attacks Roubini Over Currency 'Advice' (CNBC) Hungary's Ministry for National Economy said in a statement that the forint began to depreciate after economist Nouriel Roubini – dubbed Dr Doom for his pessimistic forecasts – said in a newsletter that failure to secure a deal with the International Monetary Fund was bad news for the currency. The forint has been in decline since last week hitting seven-month lows earlier this week but has since gained some ground. Hungarian officials rounded on Roubini saying; "On Thursday speculators seem to have taken Roubini's advice and attacked the forint." BofA Takes A Mortgage Mulligan (WSJ) Less than two years after embarking on a painful retreat from home lending, Bank of America Corp. is girding for a new run at the U.S. mortgage business. Whether that gamble pays off will depend in large measure on how long the mortgage market's run of record profits continues. The Charlotte, N.C., company aims to sell more mortgages through its 5,000-plus branches, executives said. The fourth-biggest U.S. mortgage lender, after Wells Fargo & Co., J.P. Morgan Chase & Co. and U.S. Bancorp, is intent on "growing that business," Chief Executive Brian Moynihan said at a December investor conference. Eurozone Plan May Be Watered Down (WSJ) One of the euro zone's most significant commitments last year aimed at containing its financial crisis—a plan to allow the bloc's bailout fund to directly boost the capital of banks in countries facing debt troubles—could be undermined by technical complications and second thoughts by some governments. Germany Repatriates Gold Reserves (WSJ) Germany's central bank said it would remove nearly a fifth of its total gold reserves from deposits at the New York Federal Reserve Bank and the Bank of France and bring them back to Germany, amid a debate in the country over the transparency of its global gold holdings. Inside Trader Sent To Kinnu-can (NYP) John Kinnucan, the former head of Portland, Ore.-based firm Broadband Research, was sentenced to four years and three months in prison after admitting to feeding illegal stock tips to his well-heeled hedge fund clients. Reporter fired for secret stripping job gets new journalism gig with same (NYDN) Tressler, 30, is now a reporter for the San Antonio Express-News, covering “cops, crime and general mayhem,” according to her Twitter account. In April, the gorgeous Tressler was fired from her job as a society reporter for the Houston Chronicle for failing to tell the newspaper about her after-hours gig as a stripper, which she chronicled in her blog, “Diary of an Angry Stripper.” Tressler then sued her former employer's parent company, the Hearst Corp., which also owns the Express-News, alleging that the firing was unfair. She hired celebrity lawyer Gloria Allred and filed a complaint with the U.S. Equal Employment Opportunity Commission, saying the paper’s reason for firing her -- failing to write on her application that she had been working part-time as a stripper -- was ridiculous. "I've worked at KB Toys. I've worked at a surf shop. I've worked at multiple coffee shops. I've worked at Taco Bell. I've worked as a line cook at a restaurant," Tressler told the Las Vegas Review-Journal in June. “Do you really want me to put every single one of those on my job application?" Over the summer, Tressler embarked on a national stripping tour and pushed a book, which shared the same title as her blog. She also picked up some freelance assignments for “Good Morning America.” After the suit and the tour, it seemed unlikely Tressler would re-enter Texas journalism, let alone for a newspaper owned by the same parent company that fired her. Some have suspected that her new job was part of a settlement she reached with the company.