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Opening Bell: 07.30.13

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Barclays reveals £12.8bn balance sheet hole (FT)
Barclays has revealed a £12.8bn hole in its balance sheet as it announced a £5.8bn rights issue, buttressed by a plan to shrink its balance sheet and issue £2bn of contingent convertible debt. The bank’s shares, which fell 4 per cent on Monday after the Financial Times reported news of the rights issue, fell a further 5.5 per cent to 291.8p in early trading in London. The rights issue is the biggest since 2009, and the fourth biggest in British banking history. Barclays blamed a recalculation of the Prudential Regulation Authority’s leverage ratio, under new European definitions of capital for the expansion of the capital shortfall. It said it had a 2.2 per cent leverage ratio under that measure, when factoring in expected losses and other charges, as at the end of June. That compared with a 2.5 per cent number reported by the PRA last month on the basis of older figures. The rights issue will be priced at 185p a share, equivalent to a 35 per cent discount to the theoretical ex-rights price of 284p.

JPMorgan Accused of Gaming Energy Bids as FERC Deal Looms (Bloomberg)
JPMorgan Chase & Co. (JPM) manipulated power markets in California and the Midwest, the U.S. Federal Energy Regulatory Commission claimed in a proceeding that sets up a settlement to be announced as early as today. A JPMorgan trading unit gamed wholesale electricity markets from September 2010 to June 2011, leading to overpayment of “tens of millions of dollars at rates far above market prices” in California alone, FERC staff said in a Notice of Alleged Violations yesterday. The nation’s biggest bank and its chief energy-market regulator have agreed to settle the matter with sanctions that include a fine of about $400 million, according to a person familiar with the case who asked not to be identified because the terms aren’t yet public.

Deutsche Bank’s Earnings Tumble on Legal Costs (DealBook)
Deutsche Bank, Europe’s largest investment bank, said on Tuesday that net profit fell by half in the second quarter as it earned fewer fees from financial market trading and absorbed costs related to lawsuits. Responding to criticism that it is overly dependent on borrowed money, the bank also announced plans to shrink its total financial holdings to reduce risk and address demands by regulators that lenders increase their ability to absorb losses. ... Net profit fell to 335 million euros ($444 million) from 666 million in the second quarter of 2012, Deutsche Bank said. Revenue rose 2 percent in the quarter, but the gain was offset by additional expenses, including the cost of legal proceedings.

UBS Posts Higher Net, Plans to Buy Back Fund From SNB (Bloomberg)
UBS AG plans to buy back the fund set up by the Swiss central bank in 2008 to help it shed toxic assets, as Switzerland’s biggest bank seeks to boost capital. The purchase will lift the bank’s common equity ratio under Basel III rules, which stood at 11.2 percent at the end of June, by 70 basis points to 90 basis points in the fourth quarter, Zurich-based UBS said in a statement today. ... Buying back the fund, which was set up at the height of the financial crisis to help bail out UBS, would close a difficult chapter for the bank as it concentrates on managing money for wealthy clients. UBS’s capital ratio is “at the highest level among global peers,” JPMorgan Chase & Co. analysts Kian Abouhossein and Amit Ranjan, who rate UBS overweight, said in a note to clients today. The stock is “cheap considering its business mix.”

Camper's kiss sparks lawsuit (Greenwich Time)
The family of a 15-year-old Westport girl, caught necking behind the arts and crafts shed at summer camp earlier this month, claims in a lawsuit their daughter was given a big kiss-off by the camp director. "It was an innocent kiss between two young kids, condoned by the camp's counselors, but instead of treating it as a sensitive situation, the camp's director yelled at the girl for being promiscuous in front of everyone and had her escorted from the camp by an armed guard," said the family's lawyer, Rosemarie Arnold. ... She said the girl suffers from low self-esteem issues and her parents sent her to the camp hoping she would gain some self-confidence. "Instead, this quiet, withdrawn girl was hauled out in front of all her friends, in essence called a tramp and then run out of the camp," she said. Arnold said the girl's parents were made to wait outside the camp for their daughter and were told she was a security risk. She said the girl was not given back her belongings or the money her parents paid to send her to the camp. Arnold said the 15-year-old boy, who was high-fived after kissing the girl, was also kicked out of the camp.

Bank of Italy Inspecting Top Lenders' Books (WSJ)
The Bank of Italy is quietly inspecting the finances of some of the country's top lenders, which could push some Italian banks to sell assets or take other major steps, according to a central-bank document reviewed by The Wall Street Journal. The central bank's examinations, which were previously undisclosed, come against a backdrop of increasing worry among regulators, investors and bank executives about the health of some of the country's lenders amid a rise in souring loans. The current inspections are a follow-up to a previous round last fall that resulted in the Bank of Italy ordering banks to set aside a total of about €3.4 billion ($4.5 billion) more to guard against losses on bad loans.

Santander Profit Soars on Lower Charges (DealBook)
The Spanish lender Banco Santander posted a sharply higher second-quarter profit of 1.1 billion euros on Tuesday, as it benefited from a fall in charges tied to delinquent loans. Santander, one of Europe’s largest banks by market capitalization, wrote off billions of dollars’ worth of faulty real estate loans last year, primarily in its home market, where record levels of unemployment and weak domestic growth continue to plague the Spanish economy.

Groups That Are Often at Odds Join Forces to Oppose Spitzer’s Campaign (NYT)
Alarmed by Eliot Spitzer’s momentum in his unexpected bid to win citywide office, an unlikely coalition of business leaders, women’s groups and labor unions is vowing to finance an ambitious effort to thwart the former governor’s ambition. The interest groups, which often spar with one another over competing agendas and priorities, have found rare common cause in their antipathy toward Mr. Spitzer, who infuriated the business community with his aggressive posture toward Wall Street, who offended feminists by paying for sex with prostitutes and who alienated unions by taking on a labor-backed candidate. Now, they are pledging to raise and spend at least $1.5 million on advertising, direct mail and field work in an effort to persuade voters that Mr. Spitzer would be a poor choice for comptroller, New York City’s chief financial officer.

Bitcoin banned in Thailand (CNBC)
Virtual currency bitcoin has been banned in Thailand, according to a prominent bitcoin exchange that operates in the Southeast Asian country. According to Bitcoin Co. Ltd, a Bangkok-based website that trades the digital currency, the firm had been in the process of registering with governmental agencies but the application was turned down and the currency has now been made illegal.

Long Island tradition changes to save the sharks (CBS)
Sixty-four sharks were reeled in this weekend during a tournament about 20 miles off the coast of Montauk. For the first time ever in the long, bloody history of shark tournaments in this area, all of the sharks were released. Jason Behan, a third-generation fishing captain, has been catching and killing sharks in the area since he was a young boy. He says there's a whole different mood in a tournament where you're not killing sharks. "In a tournament like this ... it's going to change a lot of people's minds and it's going to open a lot of people up to 'Hey, there is another way to do this,'" said Behan.

Florida Police Sergeant Played Nude Online Sex Game While On Duty (Gawker)
A veteran police officer was forced to resign last week after an internal affairs investigation revealed she had used police department equipment to post nude photos of herself online as part of a virtual sex game. Daytona Beach Police Sergeant Penny Dane reportedly confessed to investigators that she regularly spent hours playing Red Light Center — described as "a porn-themed version of Second Life" — while she was supposed to be on duty supervising officers.

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Opening Bell

Opening/Hurricane Bell: 10.29.12

Bracing for Storm, U.S. Stock Markets to Close (Dealbook) All United States stock and options markets will close on Monday as Hurricane Sandy approaches, reversing course as Wall Street braces for the storm to barrel through the heart of the country’s financial center. The decision, made late Sunday night, leaves the American stock markets closed for weather conditions for the first time in nearly three decades. The New York Stock Exchange had previously planned on closing only its physical trading floor, while allowing for trading on its Arca electronic exchange. It has now decided to halt all trading. The Nasdaq and BATS stock markets, which are built on electronic trading, also decided to close. The CME Group, which operates the Nymex commodities exchange, said earlier on Sunday that it would close its physical trading floor on Monday, though trading would continue on its electronic trading platforms. The Securities Industry and Financial Markets Association, or Sifma, said in an e-mailed statement that it was calling for bond trading, which is all done electronically, to close at noon Monday, though it left the final decision to member firms. The N.Y.S.E. last closed trading for weather reasons in 1985, when Hurricane Gloria lashed the metropolitan area. Markets Go Dark Ahead Of Storm (WSJ) Customers had complained to the exchanges and to the Securities and Exchange Commission that partial closures of the market would be too complicated, according to people with knowledge of the matter. US Stock Markets To Possibly Stay Closed Through Tuesday (Reuters) In a statement, the company said that "the dangerous conditions developing as a result of Hurricane Sandy will make it extremely difficult to ensure the safety of our people and communities, and safety must be our first priority." Citigroup, Goldman Sachs Shut Some NYC Offices for Storm (Bloomberg) Citigroup and and Goldman Sachs are among Wall Street firms planning to shift operations to other cities and have staff work from home as Hurricane Sandy’s arrival in New York forces evacuations. Employees at Citigroup, the third-biggest U.S. bank by assets, won’t be able to enter Lower Manhattan offices on Greenwich Street and Wall Street, which include the main trading floor, according to a memo sent to workers and confirmed by Shannon Bell, a spokeswoman. Goldman Sachs, whose corporate headquarters at 200 West St. is also located in an evacuation zone, told the staff in an internal memo that most of them will work from home...European-based firms including Deutsche Bank AG, Credit Suisse Group AG and UBS AG, which have offices outside of the mandatory evacuation zone, are making arrangements to provide transportation and hotels for workers. Christie: "Don't Be Stupid" (AP) A year after telling New Jersey residents to "Get the hell off the beach" as Hurricane Irene approached, Gov. Chris Christie has a new message for people on the coastline: "Don't be stupid — get out," Christie said Sunday afternoon at a news conference, where he updated residents on the status of the huge storm bearing down on the state. Stock Pickers Game The Fiscal Cliff (WSJ) A number of companies are seeking to get ahead of the tax increases by paying out big special dividends before Dec. 31. In the past two weeks, at least four Standard & Poor's 500 companies have announced special payouts, including a $750 million payout by casino operator Wynn Resorts Ltd., a $1.1 billion dividend from hospital operator HCA Holdings Inc. and a $1.6 billion dividend from LyondellBasell Industries NV, a New York-listed chemicals group. The game for investors is to figure out which companies could be next. Jay Wong, a Los Angeles-based portfolio manager for Payden & Rydel, a money manager with $75 billion under management, is on high alert for potential payouts. He increased his stake in Wynn earlier this month in anticipation of a special dividend and is looking for others. He declined to be specific, citing a desire to not give his trades away. Occupy Wall Street's Stacey Hessler Splits From Husband (NYP, earlier) The filing lists Curtiss’ occupation as banker and says he earns $65,000 a year. Her job is listed in court papers as “protester” and her employer as “Occupy Wall Street.” Annual salary: $0. Divorce papers cite “irreconcilable differences” for the split, saying the 19-year marriage “is irretrievably broken.” One OWS protester who knows her says that Stacey’s devotion to the movement caused the divorce but that she was unfazed by the breakup. “She didn’t seem sad about any of it,” the source said. “It was just so matter-of-fact.” As recently as last month, Stacey, 39, was sleeping in front of a Wells Fargo bank branch in the Financial District near Zuccotti Park, but it appears she scrambled back home to suburban DeLand to finalize the divorce. Wearing her professional-protester uniform — a bandana and patchwork clothes — she refused to say what her plans were or when she’d be leaving the house. But she did respond when a Post reporter asked about a YouTube video showing her making out with another protester during an Occupy “Kiss In” on Valentine’s Day. “I actually made out with four guys,” she said, laughing wildly. Governments to debate 50 billion euro cut to EU budget (Reuters) The cut will be proposed in the latest EU negotiating text on the bloc's spending plan for 2014-2020, but is unlikely to be deep enough to satisfy Britain, Germany, France and other net budget contributors. They want strict limits on EU spending to reflect the austerity imposed by national governments to reduce debt, and called for cuts of 100-200 billion euros to the total proposed by the EU's executive, the European Commission. The proposal is also likely to anger Poland and other former communist EU countries who are the major beneficiaries of EU funds, and oppose any cuts to the Commission's blueprint which they argue is vital for their future economic growth. "As I see it now, the reduction from the Commission proposal will be 50 billion euros plus. That will be the basis for negotiations," said the source, who spoke on condition of anonymity. Greek Journalist Held Over List of Swiss-Account Holders (Bloomberg) Kostas Vaxevanis, editor of the Greek magazine Hot Doc, was arrested in Athens today, according to a message posted on his Twitter account at 11 a.m. local time. An arrest warrant was issued yesterday after the magazine published what’s been dubbed the “Lagarde list,” an electronic file given to Greece in 2010 by then-French Finance Minister Christine Lagarde of about 2,000 Greeks with Swiss accounts. Insurers Prepare For Impact Of Hurricane Sandy (Reuters) Had Sandy hit in 2011, it may have been more of a problem for the insurance industry, which dealt with record-breaking losses around the world last year, mostly from U.S. tornadoes and Asia-Pacific earthquakes. But in 2012, most insurers' disaster losses are down substantially, leaving them with more capacity to absorb the billions of dollars in costs some expect from Hurricane Sandy. "In terms of losses, I certainly don't think it's going to be the largest loss of the last 100 years," Tom Larsen, senior vice president of Eqecat, said in an interview late Friday. "It's not an end-of-days scenario." SEC Weighs Bringing Back Fractions in Stock Prices (WSJ) The move would at least partly undo an 11-year-old rule that replaced fractions of a dollar in stock prices, like 1/8 and 1/16, with pennies. The idea of that change was to trim investors' trading costs: One-cent increments can lead to narrower gaps between the prices at which brokers buy and sell shares—potentially reducing their opportunity to shave off profits. Those championing the fraction's return say it would spur securities firms to buy and sell more shares of some companies by making it more profitable for them to do so. Opponents say fractions would increase trading costs for investors with little or no benefit to companies. UBS, RBS Traders Suspended as Rates Probe Goes Beyond Libor (Bloomberg) UBS and Royal Bank of Scotland suspended more than three traders in Singapore as regulators investigating Libor-rigging turn their attention to the rates used to set prices on foreign exchange derivatives. At least two foreign-exchange traders at UBS, Switzerland’s largest bank, have been put on leave as part of an internal probe into the manipulation of non-deliverable forwards, a derivative traders use to speculate on the movement of currencies that are subject to domestic foreign exchange restrictions, according to a person with direct knowledge of the operation. Edinburgh-based RBS also put Ken Choy, a director in its emerging markets foreign exchange trading unit, on leave, a person briefed on the matter said on Oct. 26. Women who knew 'cannibal cop' worried they were on his 'cook list' (NYP) “Freaked-out” female acquaintances of would-be cannibal cop Gilberto “Gil” Valle yesterday wondered whether they were on his alleged list of 100 ladies to kidnap, rape, torture, cook — and eat. “I was so shaken when I found out it was him,” said Beverly Seiger, who knew Valle, 28, from the Forest Hills, Queens, park he visited nightly with his wife and baby daughter. “I used to walk his dog. I’ve been to his house many times. He’s been to my house,” she said of Valle, whom federal prosecutors accuse of plotting with three fiendish pals to kidnap, cook and consume scores of females. “I don’t want to be on his list!” Seiger said. “I’m so thin, he would use me as toothpicks. “The women in this neighborhood now are freaked out,” she said. Another female resident asked a reporter, “Are we on this list? “I fit in an oven,” she said, referring to Valle’s alleged boasting online of having an oven “big enough to fit one of these girls if I folded their legs.”

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Citigroup Profit Beats Analysts’ Estimates On Investment Bank (Bloomberg) Citi reported a 12 percent drop in second-quarter profit that beat analysts’ estimates on revenue from advising on mergers and underwriting stocks and bonds. Net income declined to $2.95 billion, or 95 cents a share, from $3.34 billion, or $1.09, a year earlier, the New York-based bank said today in a statement. Excluding accounting adjustments and a loss from the sale of a stake in a Turkish bank, earnings were $1 a share, compared with the average estimate of 89 cents in a Bloomberg survey of 18 analysts. HSBC Seeks To Evict Occupiers In Hong Kong (WSJ) HSBC said Monday it is seeking the right to evict an encampment of protesters that has been occupying the ground floor of the bank's Hong Kong headquarters since October, drawing inspiration from the Occupy Wall Street protests in New York last year. Libor Flaws Allowed Banks To Rig Rates Without Conspiracy (Bloomberg) FYI: “It is far easier to manipulate Libor than it may appear,” Andrew Verstein, a lecturer at Yale Law School, said in a paper to be published in the Winter 2013 issue of the Yale Journal on Regulation. “No conspiracy is required.” States Join Libor Probe (WSJ) Prosecutors in New York and Connecticut are investigating whether their states incurred losses as a result of interest-rate manipulation by banks, a probe that could lead to a wider multistate enforcement action, according to New York officials. The joint probe by New York Attorney General Eric Schneiderman and Connecticut Attorney General George Jepsen could lead to civil enforcement action, including possible breaches of antitrust and fraud laws, the officials said. Libor Probe May Yield Criminal Charges By September (Bloomberg) Barclays traders involved in allegedly manipulating Libor rates between 2005 and 2007 may be charged by U.S. prosecutors before the Labor Day holiday on Sept. 3, said a person familiar with the Justice Department investigation in Washington. Zuckerberg’s Loan Gives New Meaning To The 1% (Bloomberg) The Facebook founder refinanced a $5.95 million mortgage on his Palo Alto, California, home with a 30-year adjustable-rate loan starting at 1.05 percent, according to public records for the property. Missteps Doomed Barclays Leaders (WSJ) Mr. Diamond's downfall may have been hastened because the U.S.-born investment banker, who became chief executive at the start of 2011, had never won acceptance by Britain's political and financial establishment. When the rate-fixing scandal erupted, Mr. Diamond had few allies. It wasn't for lack of trying. Mr. Diamond enthusiastically embraced British culture and tried to overcome his reputation as a brash American. Mr. Diamond, a native of Concord, Mass., supported the Chelsea Football Club, handing out trophies himself when the team won England's premier soccer league in 2010. A month before the Libor settlement, Mr. Diamond hosted British aristocrats and Barclays' clients at the annual Chelsea Flower Show, providing Champagne and canapés as his guests inspected elaborate gardens and floral arrangements...But Mr. Diamond, age 60, was criticized for his lofty pay packages, as well as perceived risks in the investment-banking business he built. He sometimes appeared tone deaf in a country still angry about the role of banks in the financial crisis. "There was a period of remorse and apology," he told Parliament last year. "That period needs to be over." Activists Go After Big Game (WSJ) William Ackman's $2 billion bet that he can boost the value of consumer-products giant Procter & Gamble Co. reflects a new era of activist investing, in which no company is too big a target and restless institutional investors are more willing to rock the boat. Mr. Ackman's Pershing Square Capital Management LP owns a little more than 1% of P&G's shares. A few years ago, that would have been considered too small a stake in too big a company to exert much influence on management, the board or other investors. Tax Cuts Perpetuate Inequality, Should End: Summers (CNBC) The United States should not extend Bush-era tax cuts for the wealthiest Americans even as the so-called ‘fiscal cliff’ looms because it will perpetuate income inequality, says Larry Summers, former U.S. Treasury Secretary. Instead, these revenues should go towards strengthening public education and ensuring that low-income students are presented with equal opportunities as their wealthy counterparts so that they can participate in the economy. Tax breaks for the wealthy cannot continue to exist because it leads to a “perpetuation of privilege”, Summers said in the editorial in the Financial Times on Sunday. Unless steps were taken to “responsibly” increase the burden on those with high income and redistribute the proceeds, the trend toward inequality will continue, he said. Devils On The (B)rink (NYP) New Jersey Devils owner Jeff Vanderbeek is talking to private-equity firms and hedge funds about buying into his financially strapped team, according to sources close to the situation Vanderbeek is looking to sell a majority stake, but keep operating control, sources said. The talks, coming three weeks after the 55-year old former Wall Street executive seemed close to inking a deal with an investor to save the team, are leading some in the financial world to believe the deal has fallen apart. If that’s so, it would be a terrible break for Vanderbeek, who is facing an Aug. 14 deadline to get the Devils’ financing in order...Creditors are owed $80 million. Downgrade Anniversary Shows Investors Gained Buying U.S. (Bloomberg) When Standard & Poor’s downgraded the U.S. government’s credit rating in August, predictions of serious fallout soon followed. Republican presidential candidate Mitt Romney described it as a “meltdown” reminiscent of the economic crises of Jimmy Carter’s presidency. He warned of higher long-term interest rates and damage to foreign investors’ confidence in the U.S. U.S. House Budget Committee Chairman Paul Ryan said the government’s loss of its AAA rating would raise the cost of mortgages and car loans. Mohamed El-Erian, chief executive officer of Pacific Investment Management Co., said over time the standing of the dollar and U.S. financial markets would erode and credit costs rise “for virtually all American borrowers.” They were wrong. Almost a year later, mortgage rates have dropped to record lows, the government’s borrowing costs have eased, the dollar and the benchmark S&P stock index are up, and global investors’ enthusiasm for Treasury debt has strengthened. Woman tells police man sucked her toe at Grovetown Walmart (AC) The 18-year-old said she was shopping when a man, who looked to be in his late 30s or early 40s, walked up and asked if her toenails were painted, according to a Columbia County Sheriff’s Office incident report. After replying yes and questioning why he wanted to know, the woman was asked if she’d watched America’s Funniest Home Videos. The man told her he was with the TV show and if she complied with his requests, everything she purchased that day would be free. She said she reluctantly agreed to let him take a photo of her foot. He asked if he could kiss her foot as part of the prank and she agreed. The man guided her to an area behind a clothing rack, dropped to the floor, grabbed her ankle and told her, “Don’t worry. I don’t bite.” He then started sucking on her big toe. The woman said she screamed at him to stop. Before the man ran from the store, he told her, “It tasted so good, though.”

Opening Bell

Opening Bell: 2.23.16

Bruno Iksil "objects to London whale nickname"; Yahoo attempts to fend off activist investor; Zenefits tells employees "Do not use the stairwells to smoke, drink, eat, or have sex"; and more.