Bloomberg News prides itself on market-moving scoops. Today its reporters excelled themselves, getting Citigroup’s Q3 earnings out a full 29 minutes before they were due.
The Italian government has not collapsed in a flurry of post-bunga bunga recrimination, at least not yet.
With the ECB standing ready, the debt markets are calm, and investors in the banks are feeling good about improvements in asset quality and the direction of earnings. Read more
A new word to you? Yes, well, we were searching for a suitable adjective to describe this:
20 June 2013
Tullett Prebon plc
Statement in relation to court proceedings
No respite for gold producers in the southern hemisphere on Tuesday morning…
And no dead cat
bounce splat for the gold price.
And to spell out why this is such an issue for the gold miners, we present the following thoughts from Citigroup. Read more
“These are the times that will define us all,” Vikram Pandit told fearful Citi staff on March 10, 2009. They’re certainly going to define him.
Is Citi’s CEO going out on top? (‘Top’ in relative Citi terms)
Getting out now that banking is boring? Or just possibly — board pressure. Compared to Jamie Dimon and Lloyd Blankfein, the only crisis-era survivors left after Pandit (who himself already took over from Chuck Prince, who led Citi into the crisis), the Citi chief never had the chairman’s role. Richard Parsons, who had served with Pandit since February 2009, made plans to step down in March.
As we went to pixel the WSJ was reporting a board clash but what actually happened is still unclear. The Journal says it was “strategy and operating performance at businesses including its institutional clients group, according to people with knowledge of the bank.”
Update – From the FT:
People close to the situation said Mr Pandit opted to leave immediately after a tense board meeting where succession planning was discussed. One said the underlying issues were Citi’s failure to pass stress tests earlier this year, a defeat on a “say on pay” vote and the handling of the sale of the bank’s stake in Smith Barney to Morgan Stanley.
(Felix says in response that on governance, “Citi can credibly claim to be leagues ahead of Goldman.”)
Well, we are going to miss the Pandit years… Read more
Citi and Morgan Stanley vs the S&P at pixel time, unlocking value by finally parting ways (seemingly):
The full Citigroup blast against Nasdaq’s handling of the Facebook IPO is well worth a read. (Big hat-tip to NYT Dealbook, click to enlarge)
Matt King, Citi credit strategist, strikes again in a new presentation — this time on capital preservation and making ‘risky’ assets ‘safe’. Full note in the usual place. Click to enlarge…
Said Wall Street legend’s barfage took place on CNBC:
“What we should probably do is go and split up investment banking from banking, have banks be deposit takers, have banks make commercial loans and real estate loans, have banks do something that’s not going to risk the taxpayer dollars, that’s not too big to fail,” Read more
Net income down 12 per cent to $2.9bn, a sombre investment banking performance – equities revenue down 29 per cent on the year – while in releasing loan loss reserves…
Just in case the real trophies never get cast, here are the advisers to the
$90 $80 $70 $60 $55(?)bn putative merger between Glencore and Xstrata. Click to enlarge.
First there was the foul-up over competition issues. Unbelievably, Glenstrata had not factored in the likelihood of a referral to the European authorities. Read more
The river was deep but we swam it, Pandit.
The future is ours so let’s plan it, Pandit.
So please don’t tell me to can it, Pandit.
I’ve one thing to say and that’s
Dammit, Pandit, we wanna talk to you… (about levels of executive compensation).
We gave you a ring to prove that we’re no jokers
There’s three ways that love can grow
That’s good, bad or mediocre
Oh P-A-N-D-I-T we wanna talk to you… (about executive compensation). Read more
An advisory vote, but still – Pandit’s pay pack only got 45 per cent shareholder approval in Dallas. US corporate governance on a roll lately (or is that diminished expectations?).
Three’s a trend — Citi’s joined JP Morgan and Wells Fargo in reclassifying home equity (junior lien mortgage) loans as bad assets this quarter.
From a footnote in its Q1 results: Read more
Yes, we said they failed the Fed stress tests. But maybe it’s not quite so dire as it sounds.
First, remember that Citi’s tier one capital ratios only fell short by 0.1 per cent — they came in at 4.9 per cent rather than the 5 per cent minimum. Read more
(BN) Citigroup, SunTrust Banks Capital Plans Fail Fed Stress Tests
Also Ally Financial and MetLife [update: and SunTrust]. Full – Jamie Dimon-bumrushed – Fed release here. Remember the minimum pass was a five per cent tier one common equity ratio. Citi came in with 4.9 per cent. Read more
John Paulson, the billionaire investor, has taken public his efforts to get The Hartford Financial Services Group to split into two companies, says the FT. The Hartford, like other insurers, has been under pressure in its life insurance business as interest rates hover near zero, making it difficult to generate the income to cover pay-outs on products like annuities. At the same time, it has participated in an industry-wide increase in pricing in its separate property and casualty business to make up for disaster-related losses last year. Mr Paulson, the largest shareholder in The Hartford with an 8.4 per cent stake, published a letter to the company on Tuesdayblaming its underperformance on the combination of its two businesses. He said it is too complex for analysts to properly value and that most other insurers have chosen to focus on one or the other business. Meanwhile Bloomberg reports Mr Paulson sold his entire stakes in Citigroup and Bank of America in the fourth quarter before the shares rallied. Paulson & Co, which owned $643m worth of Citigroup at the end of the third quarter, had sold its entire 25.1m shares as of December 31, the firm said on Tuesday in a filing with the SEC. He also sold $394m worth of Bank of America, or 64.3m shares. It also sold its 998,900 shares of BlackRock valued at $146m.
Citigroup was forced to write off $50m after two traders accused of attempting to influence global lending rates left the bank, says the FT, citing people familiar with a worldwide investigation that is gathering pace. Nine separate enforcement agencies in the US, Europe and Japan have been probing whether US and European banks manipulated the London Interbank Offered Rate or Libor, the benchmark reference rate for $350tn worth of financial products, and other interbank lending rates. So far, only Japan’s Financial Services Agency has formally sanctioned banks in connection with the probe.
Citigroup was forced to write off $50m after two traders accused of attempting to influence global lending rates left the bank, according to people familiar with a worldwide investigation that is gathering pace. Nine separate enforcement agencies in the US, Europe and Japan have been probing whether US and European banks manipulated the London Interbank Offered Rate or Libor, the benchmark reference rate for $350tn worth of financial products, and other interbank lending rates, the FT reports. The investigation into possible manipulation of global interbank lending rates has accelerated in recent weeks, with more than a dozen traders at banks including Royal Bank of Scotland, Deutsche Bank, UBS and JPMorgan Chase fired, suspended or placed on administrative leave.
The FT reports that Citigroup will become the first western bank to issue credit cards in mainland China under its own brand after it won approval to launch the business from the China Banking Regulatory Commission. The move is another foot in the door for Citi on the mainland after it also won preliminary approval in January to set up a joint-venture securities firm with Orient Securities, which will be based in Shanghai and licensed for investment banking business. China’s credit card market has begun to grow more rapidly in recent years after a slow start due to a lack of payments infrastructure. The number of cards in issue recorded by the Chinese central bank reached 268m by September, more than five times the level at the end of 2006, according to Citi.
Hey, we said the top line might be ugly.
Here’s a quick roundup of the major items hurting revenues and earnings from Citi’s release on Tuesday, including the relevant excerpts: Read more
For those following the US bank earnings play by play (and you’re about to have a busy week), here’s an interesting take from Nomura on something specific to look for in Citi’s upcoming release at 8am EST:
A key differentiator for Citi is its emerging market exposure and its ability to show growth outside the US. Unlike the tepid US loan growth that is impeding US banks’ top lines, Citi continued to show positive international growth trends in 3Q11. Read more
JPMorgan’s fourth-quarter revenue miss has dampened the outlook for the banks reporting this week, who include Goldman Sachs, Bank of America, Citigroup and Morgan Stanley, the FT reports. Nevertheless, financial stocks have the highest predicted earnings growth rate – 24.3 per cent – in the S&P 500 index, according to FactSet, and the Federal Reserve is also expected to allow Citigroup to increase its dividend beyond one per cent. However, a round of cost-cutting is likely to come at Goldman and Morgan Stanley, following further tough trading and sparse business from clients in the last months of 2011.
Kodak is in advanced discussions with Citigroup to provide bankruptcy financing, Bloomberg says, citing three people familiar with the matter. Kodak may seek protection from creditors within weeks and then hold an auction to sell its patent portfolio, said the people. Two of the sources said Kodak may seek about $1bn in debtor-in-possession financing, though terms may change, and one said advisers to Kodak are lining up a bidder that will be the frontrunner or so-called stalking horse bidder for the patent portfolio should the company file.
FT Alphaville has intercepted a recent phone call between banks and their regulators!!!
Regulators: “We’re going to revise the capital adequacy framework and increase transparency in the reporting of risk on bank balance sheets.” Read more
New York State’s Department of Financial Services is investigating several large banks to see whether they fraudulently steered homeowners into overpriced insurance policies, reports the NYT, citing a person briefed on the investigation. JPMorgan Chase, Bank of America, Citigroup and Wells Fargo are among the banks under scrutiny, the newspaper says, in an investigation into “force-placed” insurance. These insurance policies have been increasingly required by lenders to protect the value of the house if it is damaged after the borrower defaults. The source said the investigators are looking for the potential conflict at Bank of America involving a unit called Balboa Insurance that it owned until last year. That unit’s interaction with the bank’s mortgage servicing is an important focus for Benjamin Lawsky, superintendent of the state’s financial services department. JPMorgan is a focus of the inquiry because in recent years the bank held a small financial stake in an insurance company called Assurant on behalf of its clients.
Investors in US home mortgage bonds may have to swallow losses as part of a wide-ranging settlement being discussed between leading banks and the Obama administration to resolve allegations of foreclosure misdeeds, the FT says, citing people familiar with the matter. Participants in the discussions cautioned that a final agreement remains weeks away and that the terms being discussed could change. However, they said it is likely banks would be able to reduce loan principal on mortgages owned by investors through mortgage-backed bonds. As a result, the five largest US mortgage servicers – Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial – would avoid some of the cost of the potential $25bn settlement. Distressed homeowners, who government officials claim were harmed by the banks’ allegedly deceptive practices, could see larger reductions in mortgage principal.
Citigroup on Tuesday sold $2.5bn of debt in its biggest bond offering since 2009. The bank lured strong interest by offering investors a hefty risk premium, or spread, of 360 basis points to US Treasuries on the five-year bonds, the FT reports, in the latest sign that US banks can still access the capital markets at a price while their European counterparts have struggled. The bonds were sold with a so-called new issuance concession of about 30bp more in yield than Citigroup’s existing five-year debt. The yield at the pricing was 4.48 per cent. Bloomberg reports that banks elsewhere geared up for covered bond issues, with UBS on Tuesday selling €1.5bn of five-year bonds for less than a third of the spread on its existing senior unsecured notes with a similar maturity. ING Bank is planning a €1.75bn issue, the agency said, citing a banker, and Credit Agricole, Caisse de Refinancement de l’Habitat, Lloyds, Norway’s Boligkreditt, and three large Australian banks were also planning covered bond sales.
Citigroup gained about $180m by selling its remaining 11 per cent stake in Primerica, the life assurance company that was a crucial building block in Sandy Weill’s attempt to create a financial supermarket in the 1990s, the FT reports. Vikram Pandit, Citi chief executive, spun off Primerica last year as part of efforts to bring in cash and shrink the troubled bank after its $45bn government bail-out during the financial crisis. The residual stake – 11 per cent before Tuesday’s sale – was kept in Citi Holdings, the bank’s portfolio of non-core assets that it is looking to wind down or sell.
Whatever is decided at the Save the Euro summit, it seems certain the eurozone is heading into recession.
But not just any recession, this will be a protracted one reckons Citigroup. Read more