Monday, July 30, 2012
TODAY'S TOP HEADLINES
Top Story
HSBC Sets Aside $2 Billion for Legal Woes as Profit Falls Profit at HSBC Holdings dropped nearly 9 percent in the first half of the year, as the big bank deals with the fallout from a money laundering investigation and a settlement over selling inappropriate financial products.
On Monday, HSBC said that it had set aside $700 million to cover the potential fines, settlements and other expenses related to a money-laundering inquiry in the United States. The bank made a further $1.3 billion provision toward a regulatory settlement related to payment protection plans for credit card loans, home mortgages and other consumer borrowings.
The legal woes weighed on the company's financial results. In the first half the year, HSBC announced net income of $8.4 billion, down from $9.2 billion in the previous year. HSBC's operating income rose slightly, to $43.6 billion, over the same period.
"I very much regret HSBC's past failures and I apologize for them. Our controls should have been stronger and more effective,'" Mr. Gulliver said Monday. '"We are committed to doing whatever it takes to make sure the organization is able to detect and prevent unacceptable behavior."
Even so, HSBC's final legal bills could rise. On Monday, the British bank's chief executive, Stuart Gulliver, indicated there was "tremendous uncertainty" around the money laundering case, and the "number could be significantly higher." He called the $700 million provision "a best estimate based on the facts that we currently know."
On Monday, HSBC said that it had set aside $700 million to cover the potential fines, settlements and other expenses related to a money-laundering inquiry in the United States. The bank made a further $1.3 billion provision toward a regulatory settlement related to payment protection plans for credit card loans, home mortgages and other consumer borrowings.
The legal woes weighed on the company's financial results. In the first half the year, HSBC announced net income of $8.4 billion, down from $9.2 billion in the previous year. HSBC's operating income rose slightly, to $43.6 billion, over the same period.
"I very much regret HSBC's past failures and I apologize for them. Our controls should have been stronger and more effective,'" Mr. Gulliver said Monday. '"We are committed to doing whatever it takes to make sure the organization is able to detect and prevent unacceptable behavior."
Even so, HSBC's final legal bills could rise. On Monday, the British bank's chief executive, Stuart Gulliver, indicated there was "tremendous uncertainty" around the money laundering case, and the "number could be significantly higher." He called the $700 million provision "a best estimate based on the facts that we currently know."
- DEALBOOK »
DEAL NOTES
A Tech Giant Defies Conventional Wisdom James B. Stewart, the Common Sense columnist for The New York Times, writes that if eBay can turn itself around, it would have "big implications for struggling companies like Yahoo and AOL, not to mention more recent sensations that have already lost some luster."
Adding Up Marissa Mayer's Pay at Yahoo Marissa Mayer can earn at least $117 million over five years at Yahoo - and much more if Yahoo's stock price rises, the Deal Professor writes.Real Estate Mogul Fears a Revolution Jeff Greene, a real estate billionaire who successfully shorted the housing market and then started buying up mortgage bonds, tells New York magazine that his "real, legitimate fear" is that the less-fortunate will "take over this country."U.S. Economic Recovery Loses Momentum Figures released on Friday showed the United States economy grew at an annual rate of 1.5 percent in the second quarter, making the recovery more vulnerable to shocks at home and in Europe.MERGERS & ACQUISITIONS »
Protesting Coup at Duke Energy, 2 Board Members Step Down In separate statements, two former directors of Progress Energy said the merged company needed a new chief to restore confidence among investors and regulators.Apple Officials Said to Consider Stake in Twitter Apple, which has stumbled in its efforts to get into social media, has talked with Twitter in recent months about making a strategic investment in it, Evelyn M. Rusli and Nick Bilton report in The New York Times.Apple to Acquire AuthenTec for $356 Million The acquisition of the company, which designs security products for mobile devices such as fingerprint sensors, could help Apple bolster the security of its products,Universal Said to Offer to Sell Prized Label The Universal Music Group, which is trying to get approval for a takeover of EMI Music, has offered to sell the bulk of EMI's Parlophone division, Reuters reports, citing three unidentified people familiar with the matter.Northern Iron of Australia Gets Rival Bid The Australian mining firm Northern Iron said it received a bid from the Swiss trading house Prominvest valuing it at about $550 million, Reuters reports. The bid competes with a lower offer from the Indian conglomerate Aditya Birla.Aviva Said to Receive Unsolicited Offers for Unit The British insurer Aviva, which is said to be preparing its United States business for a sale, received unsolicited approaches for the unit, which could be worth about $1.57 billion, The Sunday Telegraph reported, according to Reuters.Russian Co-Owners Oppose TNK-BP Dividends The vote put pressure on BP to resolve ownership issues at TNK-BP, its joint venture in Russia, Reuters reports.INVESTMENT BANKING »
The Bond Market's Crown Prince Mohamed A. El-Erian, the chief executive of the bond house Pimco, is in line to take the reins one day from his co-chief investment officer, William H. Gross, The New York Times reports. But some in the industry have doubts about whether Mr. El-Erian, whose trading background is thinner, can replicate Mr. Gross's success.
After Huge Loss, JPMorgan Rearranges Top Officials Matthew Zames and Frank Bisignano were promoted to co-chief operating officers of the bank, while Jes Staley moved from being chief executive of the corporate and investment bank to chairman.Jamie Who? A poll by "60 Minutes" and Vanity Fair found that only 14 percent of respondents could correctly identify Jamie Dimon, the chief executive of JPMorgan Chase.Bank of America Said to Have Mulled a Breakup The Wall Street Journal reports: "Long before Sanford Weill suggested last week that big banks should split up, Bank of America executives and directors considered the idea and then decided against it, said people close to the nation's second-biggest bank by assets."With Departure of Barclays Chief, End of an Era Fortune writes that the resignation of Robert E. Diamond Jr. over the Libor scandal "carries far broader significance than the demise of a single talented executive. It may, in fact, signal the death of his dream. That dream is the model of the universal bank."German Banks Stand Out in Survey Floyd Norris writes in The New York Times: "German banks are overwhelmed with deposits, and see continuing strong demand for loans to purchase homes. Other banks see deposits flowing out, and say they are tightening credit standards at the same time that fewer and fewer customers want to borrow."Deutsche Bank Trading Executive Departs Antoine Cornut, who ran flow-credit trading for Deutsche Bank in the Americas and Europe, has left the German lender for a hedge fund, Bloomberg News reports.Profit Falls at South Korean Banks Combined, lenders in South Korea reported a 59 percent decline in profit in the second quarter compared with a year earlier, Bloomberg News reports.- BLOOMBERG NEWS
PRIVATE EQUITY »
K.K.R.'s Quarterly Profit Surges The investment firm said on Friday that its profit more than doubled in the second quarter as the value of its holdings -- and one in particular, Alliance Boots -- rose significantly.Buyout Firms Get in the Olympics Spirit The British firm Phoenix Equity Partners recently held its own version of the Olympics, called the "Phoenix Olympics," while other firms, like K.K.R., are closely following the actual events, The Wall Street Journal reports.WL Ross Misses Target for Fund The firm run by Wilbur L. Ross Jr. raised about $640 million for a new private equity fund, falling short of a $2 billion goal, Bloomberg News reports.3 Private Equity Firms Consider Final Bids for Getty The Carlyle Group, CVC Capital Partners and TPG Capital remain in the auction for Getty Images and are considering final bids, Reuters reports, citing unidentified people familiar with the matter.HEDGE FUNDS »
Hedge Fund Industry Takes a Shine to Mutual Funds As the asset management industry changes, more hedge funds are offering products for individual investors, Barron's writes.SkyBridge Plans a Push Into Asia SkyBridge Capital, an American fund that invests in hedge funds, plans to open a Singapore office next year with a new fund focused on Asia, the trade publication AsianInvestor reports. It is also considering opening a Hong Kong office the following year.South Korea to Lower Barrier to Starting Hedge Funds The Yonhap news agency reports that South Korea has decided to lower the minimum amount of money that asset managers must have in order to start a hedge fund.Hedge Funds Extend a Bet on Commodities The moves came amid speculation that the Federal Reserve might increase its economic stimulus measures, Bloomberg News reports.I.P.O./OFFERINGS »
Twilight of the Tech Bubble of 2012? Shares of Facebook and Zynga were battered last week, and Netflix and Groupon were also under pressure, as investors and analysts lost some enthusiasm for the companies that were supposed to underpin a new Internet era. The New York Times writes: "There were instant echoes of the crash of 2000, when the money stopped flowing, the dot-coms crumbled and Silicon Valley devolved into recriminations and lawsuits."Facebook Stock Continues to Fall After Earnings Report Facebook probably wishes it could unfriend its stock ticker symbol right about now, Nick Bilton reports for The New York Times Bits blog.Horse Racing Deal Fails to Leave the Gates A plan to allow ordinary investors to back racehorses was scrapped due to market conditions, The Wall Street Journal reports.Markit Group Decides Against I.P.O. This Year The decision ended speculation that the financial information company might go public during the next 12 months, Financial News reports.VENTURE CAPITAL »
A Tech Hub Emerges in the West Bank With companies like ASAL Technologies, a tech firm with 120 employees, the West Bank city of Ramallah is aiming to become a Middle Eastern version of Silicon Valley, The New York Times reports. Unlike other industries, the technology sector is less affected by impediments like barriers, checkpoints and permit requirements.When Craigslist Snuffs Out Innovation Craigslist recently accused Padmapper, which places apartment listings on a map, of infringing on copyright and trademark. And it wasn't the first time the classifieds site has claimed such violations, writes Nick Bilton on the Bits blog.Learning Entrepreneurship in School A training program called the Founder Institute, which charges tuition of less than $1,000, requires students to create a fully operational company before they can graduate, The New York Times reports.At the Olympics, Twitter Users Told to Refrain The committee running the Olympics asked people attending the games in London to "kind of take it easy" with updates to Twitter, as an overloaded network was affecting the flow of information to television commentators, Reuters reports.LEGAL/REGULATORY »
Britain Launches Review of Libor The British government on Monday officially announced a review into the rate-setting process at the center of the recent financial scandal.S.E.C. Alleges Insider Trading on $15 Billion Cnooc Deal The Securities and Exchange Commission moves to freeze the assets of traders accused of illegally trading in shares in advance of the announced $15 billion acquisition of Nexen, a Canadian oil producer by the state-owned Chinese oil company, Cnooc.British Court Sentences Six Men for Insider Trading A British court has sentenced six men for their role in a multiyear insider trading scheme.How Libor Became Libor Gretchen Morgenson writes in the Fair Game column in The New York Times: "You probably won't be shocked to learn that in mortgages, at least, Wall Street played a role in pushing Libor over another rate benchmark - one that some bankers say was better for borrowers."New York Lender Sues Banks Over Libor The Berkshire Bank, a lender with 11 branches, sued 21 banks over the alleged manipulation of Libor, Bloomberg News reports.Solyndra Files Reorganization Plan The beleaguered solar panel maker has filed a plan to reorganize its obligations in bankruptcy court, Reuters reports.Greece's Lenders Extend Their Stay The so-called troika of lenders - the European Commission, European Central Bank and the International Monetary Fund - now plan to stay "as long as necessary" in Athens to help the government make budget cuts, The New York Times reports.European Central Bank Council to Meet Thursday After the president of the European Central Bank promised to do "whatever it takes to preserve the euro," expectations are running high for a meeting of the central bank's governing council this week, The New York Times reports.Patent Fight Between Apple and Samsung Heads to Trial The New York Times reports: "The jury trial is the latest phase in a global campaign of smartphone patent litigation that began more than two years ago."
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