Good morning, New York…
Lloyds offloads 632 branches to the Co-operative Group, as directed by the European Union when it approved government aid to the bank. The EU had given until 2013 to make the disposal. The Co-op had been named in the spring as Lloyds’ preferred bidder for the branches but a period of negotiating exclusivity was allowed to lapse after a succession of problems emerged with the bid. The FSA had been insisting on a particular treatment of the deal from a capital ratios standpoint that the Co-op felt could prove prohibitively expensive. But people close to the Co-op said recently enough that the bulk of the regulatory issues had been resolved. David’s post has further details of the deal.
European retail lending as a dying bank business model walking, if charts in a new report by McKinsey are anything to go by. Returns on equity for mortgages, credit cards and other basic business lines across the region, are plummeting due to the new generation of bank capital and liquidity regulations. As Rahul points out, it’s a little eyebrow-raising that McKinsey suggests tinkering with risk-weightings as one of the most effective methods of reviving return on equity.
The return of auto subprime lending. Moody’s Auto Navigator report goes over some similarities in this segment of the loan market between the early to mid 1990s and today. Back then increased competition led to decreased underwriting standards. More recently, private equity firms have been investing in subprime auto lenders, raising the question of overcrowding in the market that could lead to a similar deterioration in controls on the access to credit. Cardiff has the story.
Rate probe turns to four major banks: Regulators are focusing on at least four of Europe’s biggest banks as they investigate the attempted manipulation of the region’s benchmark interest rate, suspecting that Barclays’ traders were the ringleaders of a circle that included Crédit Agricole, HSBC, Deutsche Bank, and Société Générale, according to the FT. Evidence of links between traders at all four banks and Barclays’ former euroswaps trader Philippe Moryoussef is under scrutiny.
China to buy US assets via GM pension: The Chinese government has agreed to buy investment stakes currently held by General Motors’ pension plan. The State Administration of Foreign Exchange, which manages China’s more than $3tn in foreign exchange reserves, will pay $1.5bn-$2bn for GM’s positions in blue chip private equity funds managed by firms including Carlyle Group, Blackstone and CVC Capital Partners, according to the FT.
China offers $20bn in loans to Africa: China extended further economic commitments to African leaders during a regional summit on Thursday, as the fast-growing nation seeks to smooth relations with the resource-rich continent. China will offer $20bn in loans to African countries to support the development of their infrastructure, agriculture, manufacturing and small and medium-sized enterprises, Chinese President Hu Jintao said Thursday during the gathering in Beijing. The figure is double what China committed to in 2009, says the WSJ.
Alliance agrees deal for Suddenlink: BC Partners and CPP Investment Board have agreed a $6.6bn bid for Suddenlink, America’s seventh largest cable operator by subscriber numbers, to buy out a group of equity holders led by Goldman Sachs Capital Partners. The buyout will allow Goldman Sachs Capital Partners, which led an investor group including Quadrangle and Oaktree Capital Management, to record a return more than three times its original investment, made in 2004, writes the FT.
Cost-cutting helps BofA swing to profit: Bank of America delivered improved second-quarter net income after cost cuts that included the loss of 20,000 jobs, but suffered a spike in claims for faulty mortgages. The second-biggest US bank by assets announced it would achieve $8bn in annualised cost savings by mid-2015 after a strategic review known as “New BAC”, which is leading to heavy job losses, reports the FT. While other big banks follow suit according to the WSJ.
United Tech in talks to sell Rocketdyne to GenCorp: United Technologies is in final discussions to sell its Rocketdyne business to GenCorp, a maker of aerospace propulsion systems, two people familiar with the matter said on Wednesday to Reuters. The deal, which may come late this week or early next week according to one of the sources, represents part of the diversified U.S. conglomerate’s efforts to divest non-core units and focus on closing its $16.5bn acquisition of aircraft component maker Goodrich.
Universal moves to save EMI deal: Universal Music has made a sweeping offer to sell parts of EMI to independent record labels, in a last-ditch attempt to secure clearance for the £1.2bn deal from regulators on both sides of the Atlantic, reports the FT.
Consumer agency fines Capital One for card marketing: Capital One Financial agreed to pay $210 million to resolve charges by banking regulators that its call-center representatives misled consumers into paying for extra credit card products, says Reuters.
Mizuho to pay $127m to settle CDO charges: Japan’s Mizuho Securities and an investment manager have agreed to pay a combined $132m to resolve US regulatory allegations they misled investors in a mortgage-related product by stuffing it with phoney securities to secure a higher credit rating, reports the FT.
Manchester United targets $300m in IPO: Manchester United plans to raise $300m through an initial public offering in the US as the English football club looks to to pay down the company’s net debt of £425m, according to the FT. Since announcing its intention to go public last year, United has been forced to abandon plans to list in Hong Kong and then in Singapore after demand for its shares fell short. It had looked to raise as much as $1bn as part of its aborted Singapore float.
Muddy Waters Report Sinks New Oriental: New Oriental tumbled 35 percent to the lowest level since 2007 after losing 34 percent the previous day after short seller Muddy Waters LLC said financial statements at its units are fraudulet, says Bloomberg.
Lloyds sells Verde branches to Co-op: The Co-operative Group has provisionally agreed to pay Lloyds Banking Group about £750m for 632 branches in a long-awaited move that it described as the biggest shake-up in UK high street banking for a generation, reports the FT and Alphaville.
Japan property billionaire Mori bets $202m on China: Billionaire Akira Mori, the owner of Japan’s most profitable closely held developer, said he has formed a company to invest in China and advise Japanese companies on expanding there, says Bloomberg.
JSP pulls out of Bolivian mine deal: Jindal Steel and Power, India’s third-largest private steel company by revenue, has cancelled a $2.1bn Bolivian iron mine contract following a protracted dispute with the leftist government of President Evo Morales, says the FT.
Markets: European and US stocks are flirting with their highest levels in more than two months as the global mood improves on a combination of better-than-expected corporate earnings and reduced fears over the US economy. However, early gains have been pared slightly after yields jumped at an auction of Spanish debt, reminding traders that the sentiment-sapping eurozone fiscal crisis has not been resolved. The FTSE All-World equity index is up 0.4 per cent after the Asia-Pacific region bounced 1.5 per cent while the FTSE Eurofirst 300 is 0.3 per cent higher according to Jamie Chisholm the FT’s Global Market Overview maven.