April 27, 2024

You are here: Home / 2012 / Archives for July 2012

Archives for July 2012

DealBook: UBS Profit Falls on Facebook Loss

July 31, 2012 by Leave a Comment

Sergio P. Ermotti, right, chief of UBS, and Thomas C. Naratil, the Swiss bank's chief financial officer.Arnd Wiegmann/ReutersSergio P. Ermotti, right, chief of UBS, and Thomas C. Naratil, the Swiss bank’s chief financial officer.

LONDON — UBS reported on Tuesday a 58 percent decline in its net profit in the second quarter as a fall in investment banking income weighed on the Swiss bank.

The drop in profit comes as the chief executive of UBS, Sergio P. Ermotti, is paring back the firm’s investment banking unit and expanding its wealth-management division.

Market volatility connected to the European debt crisis has hit trading activity across the financial services sector.

Like many of its rival, UBS’s investment banking unit continued to face difficult market conditions, and was also hit by a 349 million Swiss franc, or $356 million, loss connected to the botched Facebook initial public offering.

The bank said the lack of a solution to the European debt crisis and the Continent’s banking problems could harm the firm’s future profits.

“Failure to make progress on these key issues, accentuated by the reduction in market activity levels typically seen in the third quarter, would make further improvements in prevailing market conditions unlikely,” UBS said in a statement.

Net income at the Swiss bank, which was below analysts’ estimates, fell to 425 million Swiss francs during the three months through June 30, compared with 1.02 billion Swiss francs in the same period a year earlier. Operating income fell 10.6 percent, to 6.4 billion Swiss francs.

In early morning trading in Zurich, UBS shares fell 4.9 percent. Stock in the bank has dropped around 8 percent over the last 12 months.

Lower trading revenue and the loss incurred from the Facebook I.P.O. hurt UBS’s investment banking unit. In total, the division reported a pretax loss of 130 million Swiss francs in the second quarter. UBS does not provide net income figures for its separate business units.

Technical errors at Nasdaq exchange caused a delay in the start of trading of Facebook shares and later flooded the market with the social networking company’s stock. The problems caused UBS to receive more shares than its clients had ordered, according to a company statement.

“We will take appropriate legal action against Nasdaq to address its gross mishandling of the offering and its substantial failures to perform its duties,” the bank said.

Despite the declining activity in its investment banking unit, UBS said its wealth-management businesses had received 13.2 billion Swiss francs of new money during the second quarter of the year.

UBS continues to reduce its exposure to risky assets after a string of recent scandals, including a $2.3 billion trading loss prosecutors say was caused by Kweku M. Adoboli, a former trader at the bank.

The Swiss financial giant said it had cut its risk-weighted assets by 45 billion Swiss francs in the second quarter. The bank now plans to reduce the total figure to 270 billion Swiss francs by 2013, more than the previous target of 290 billion Swiss francs.

UBS said its core Tier 1 capital ratio, a measure of a firm’s ability to weather financial shocks, had risen to 8.8 percent, and would reach 9 percent by the end of the year.

The firm also cut more than 700 jobs during the three months through June 30, as part of the bank’s plan to achieve annual savings worth 2 billion Swiss francs by 2013. Last year, the Swiss firm said it would cut 3,500 jobs, with about half of the layoffs to come from its investment banking division.

UBS is also subject to several investigations into the manipulation of the London interbank offered rate, or Libor. Mr. Ermotti of UBS said the bank was in the process of conducting an internal review related to Libor and other benchmark rates. The British bank Barclays agreed a $450 million settlement last month with American and British authorities after some of its traders and senior executives were found to have altered the rate for financial gain.

In a conference call with reporters, Tom Naratil, the bank’s chief financial officer, declined to comment on whether UBS had made specific provisions to cover potential fines connected to the manipulation of the rate. The Swiss bank, however, set aside a further 130 million Swiss francs during the second quarter to cover litigation and regulatory issues, but did not say if the extra money was related to Libor.

“We have provisioned accordingly for all matters,” Mr. Naratil said.

Article source: http://dealbook.nytimes.com/2012/07/31/ubs-profit-hit-after-loss-on-facebook-ipo/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Media Decoder Blog: Twitter Backpedals on Reporter’s Post

July 31, 2012 by Leave a Comment

Twitter has become the default for people when they have a complaint. Even when that complaint is about Twitter.

The company found itself at the center of a Twitter firestorm when it suspended on Sunday the account of Guy Adams, a British newspaper reporter for The Independent, after he had posted complaints about NBC’s tape-delayed Olympics coverage. The posts included the e-mail address of Gary Zenkel, the head of NBC Sports.

On Tuesday, both Twitter and NBC backpedaled. While Twitter officials stress that the company generally does not monitor content, Alex Macgillivray, Twitter’s general counsel, admitted in a statement on Tuesday that Twitter “did proactively identify a Tweet that was in violation of the Twitter rules and encouraged them” — NBC — “to file a support ticket with our Trust and Safety team to report the violation.”

Chloe Sladden, vice president for media at Twitter, personally apologized on her Twitter feed for the mistake. NBC also issued a statement apologizing for having the reporter’s account suspended. Twitter then reactivated the reporter’s account.

“Our interest was in protecting our executive, not suspending the user from Twitter,” an NBC spokesman said in a statement. “We didn’t initially understand the repercussions of our complaint, but now that we do, we have rescinded it.”

But the initial suspension already put both companies out of favor with many Twitter faithful. Out of solidarity for Mr. Adams, supporters also started posting the e-mail address of Mr. Zenkel, the NBC executive. They paired the hashtags #guyadams with #NBCfail. They called the incident a “watershed moment” for social media and accused Twitter executives of censoring Mr. Adams’s account “to cater to corporate whim.”

They also went for the jugular by threatening not to tune in to NBC’s Olympics coverage. Mr. Adams gained several thousand new followers after Twitter reinstated his account.

“Thanks to @NBCOlympics behavior wrt @GuyAdams I won’t be watching any more Olympics. Sorry, London.” wrote one follower.

Twitter has always enjoyed an extraordinary amount of good will from its users in part because it does not require them to sign in under their own names (unlike Facebook) and it allows almost unlimited free speech. The suspension of Mr. Adams’s account seemed like an exception to Twitter rules based on a corporate relationship.

Last month, Twitter and NBC announced a partnership to share their Olympics coverage across both of their platforms. NBC would promote Twitter’s Olympic event page through on-air graphics and Twitter would include NBC commentators on its Olympic events page.

The problems started on Friday evening when Mr. Adams, who is based in Los Angeles, started posting on Twitter how frustrated he was that NBC was delaying television coverage until prime time. He wrote, “Am I alone in wondering why NBColympics think its acceptable to pretend this road race is being broadcast live?” As his frustration grew, he filed a post to Twitter that was heard throughout social media.

“The man responsible for NBC pretending the Olympics haven’t started yet is Gary Zenkel. Tell him what u think!” He ended his post with the work e-mail address of Mr. Zenkel. Soon he was retweeted and some angry followers added the hashtag #NBCFAIL.

That’s when Twitter officials abandoned their usual stance and contacted NBC employees they knew through their Olympics partnership. They told them about the post and advised them on how to suspend Mr. Adams’s account. Writing in The Independent, Mr. Adams said he discovered that his account had been suspended “for posting an individual’s private information such as private e-mail address.” But he stressed, “I do not wish Mr. Zenkel any harm.”

Jillian C. York, director for international freedom of expression at the Electronic Frontier Foundation, a civil liberties group, said that the incident was a departure from Twitter’s generally strong reputation as a supporter of free speech.

“Twitter has a pretty strong history in defending free speech. They’ve stood up for users in court. They’ve publicly written about their dedication to free expression,” said Ms. York. “Twitter needs to do more work this time around to make people trust them again.”

Article source: http://mediadecoder.blogs.nytimes.com/2012/07/31/twitter-gets-a-backlash-of-its-own-over-adams-suspension/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

DealBook: Ex-Citigroup Manager Cleared in Suit

July 31, 2012 by Leave a Comment

Robert Khuzami, director of the S.E.C.'s Division of Enforcement, said, We respect the jury's verdict and will continue to aggressively pursue misconduct arising out of the financial crisis.Cliff Owen/Associated PressRobert Khuzami, director of the S.E.C.’s Division of Enforcement, said, “We respect the jury’s verdict and will continue to aggressively pursue misconduct arising out of the financial crisis.”

A jury on Tuesday cleared a former Citigroup executive of wrongdoing connected to the bank’s sale of risky mortgage-related investments at the peak of the housing boom, dealing a blow to the government’s effort to hold Wall Street executives accountable for their conduct during the financial crisis.

In addition to handing up its verdict, the federal jury also issued an unusual statement addressed to the Securities and Exchange Commission, the government agency that brought the civil case.

“This verdict should not deter the S.E.C. from investigating the financial industry and current regulations and modify existing regulations as necessary,” said the statement, which was read aloud in the courtroom by Judge Jed S. Rakoff, who presided over the trial.

Related Links

The trial of Brian Stoker, a former mid-level Citigroup executive, served as a referendum on a questionable practice that became common in the years leading up to the financial crisis: Selling clients complex securities tied to the housing market while simultaneously betting against those same securities.

The S.E.C. did not accuse Mr. Stoker of committing securities fraud. Instead, it accused him of negligence in preparing sales materials for a complex mortgage-related investment called a collateralized debt obligation, or C.D.O.s. The government claimed that Mr. Stoker knew or should have known that he was misleading investors by not disclosing that Citigroup helped select the underlying mortgage securities in the C.D.O. and then placed a large bet against it.

Judge Jed S. Rakoff, who presided over the federal jury trial.Justin Maxon/The New York TimesJudge Jed S. Rakoff, who presided over the federal jury trial.

The S.E.C separately sued Citigroup, but Mr. Stoker was the only bank executive charged in the case. None of Citigroup’s senior management was named by the commission.

As Mr. Stoker prepared for trial, his former employer, Citigroup, agreed to pay $285 million to settle a civil complaint brought by the S.E.C. related to the same deal. But Judge Rakoff, who presided over the trial of Mr. Stoker, rejected that settlement. Both the commission and Citigroup have appealed the rejection of the settlement.

Mr. Stoker’s lawyer, John Keker, had depicted his client as a scapegoat for the industry’s sins. While decrying the “high-stakes, high level gambling” that banks engaged had in during the housing boom, Mr. Keker urged the jury to set aside any distaste that it had for Wall Street’s questionable behavior and the mind numbingly complex mortgage securities that it concocted.

“It’s not the bank or the transaction that’s on trial here,” said Mr. Keker in his closing argument. “It’s Brian Stoker.”

Mr. Stoker’s lawyers argued that Credit Suisse, the bank that Citigroup brought in to serve as a manager of the C.D.O., did its own homework on the underlying securities.

“We’re grateful that justice was done and Brian Stoker can get back to his life,” Mr. Keker said outside the courtroom shortly after the verdict came down.

Robert Khuzami, director of the S.E.C.’s Division of Enforcement, said, “We respect the jury’s verdict and will continue to aggressively pursue misconduct arising out of the financial crisis.”

The allegations against Citigroup and Mr. Stoker parallel those brought by the S.E.C. in a more high-profile case against Goldman Sachs and Fabrice Tourre, a relatively junior Goldman executive.

In April 2010, the S.E.C. claimed that Goldman and Mr. Tourre deceived investors in a C.D.O. that the bank had created called Abacus. Mr. Tourre, the government said, failed to disclose that the hedge fund manager John Paulson helped select the underlying assets. Mr. Paulson profited by betting against the C.D.O.

Goldman quickly settled the case in July 2010 for $550 million, but Mr. Tourre, who has left the bank, is fighting the civil charges. Unlike the case against Mr. Stoker, which proceeded to trial quickly, Mr. Tourre’s case has moved at glacial speed and no trial date has been set.

Article source: http://dealbook.nytimes.com/2012/07/31/former-citigroup-manager-cleared-in-mortgage-securities-case/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

DealBook Column: Suggestions for an Apple Shopping List

July 31, 2012 by Leave a Comment

Timothy D. Cook, right, chief of Apple, with Julius Genachowski, the Federal Communications Commission chairman.Jim Urquhart/ReutersTimothy D. Cook, right, chief of Apple, with Julius Genachowski, the Federal Communications Commission chairman.

Question: What would you do if you had $117 billion?

That’s the challenge facing Tim Cook, Apple’s chief, whose company’s cash hoard keeps growing — by about $1 billion a week.

He could hold onto it. He could increase Apple’s dividend, which he instituted this year for the first time.

Or he could spend it.

Just last week, Mr. Cook acquired AuthenTec, a mobile security company, for $356 million in cash — a price equal to pocket lint for a company with the war chest the size of Apple’s.

The real question is whether Mr. Cook would ever spend Apple’s money on an “elephant” — Wall Street parlance for a huge deal.

Apple denizens often say that the company is not interested in deal making. It has, after all, invented some of today’s most successful consumer products. But that view misunderstands Apple’s history: some of its most important innovations were not invented within Apple; they were purchased from other companies.

DealBook Column
View all posts

For example, the touch-sensitive gesture technology that made the iPhone and iPad possible was invented and patented by FingerWorks, which Apple acquired in 2005. Siri? Apple bought it in 2010. Even Apple’s current Macintosh operating system was an acquisition of sorts. It is built on the back of NeXT, acquired from Steve Jobs (they got him to return as part of the deal, too) in 1996. (Pixar, Mr. Jobs’s other big success, was an acquisition as well. He bought the company from George Lucas as part of a spinoff from Lucasfilm in 1986.)

A year before Mr. Jobs died, he strongly hinted that Apple would consider a big deal. “We strongly believe that one or more very strategic opportunities may come along, that we are in a unique position to take advantage of because of our strong cash position,” Mr. Jobs said in a call with analysts in 2010.

Having all that money can be daunting, so to help Mr. Cook, here is a potential shopping list — some must-buys and some pie-in-the-sky targets — that he may want to consider:

NUANCE This is the one no-brainer on the list. Nuance, based in Burlington, Mass., provides much of the speech recognition technology behind Apple’s Siri and dictation functions. Right now, Apple has merely licensed it and integrated it into both its mobile devices like iPhones and iPads as well as its new Macintosh operating system. Most users think it is Apple technology, but those services wouldn’t work without Nuance.

It should go without saying, but the importance of speech recognition is only going to increase in the future. Nuance has more patents for it and has developed the technology further than just about any firm in the world. At some point, Nuance will be able to hold Apple for ransom. Google and Microsoft are steadily building their own speech recognition technologies and they are catching up quickly. Nuance’s market value is $6.3 billion. Even if Apple paid twice as much, it would be a worthwhile investment.

TWITTER AND PATH Consider this a one-two punch. Apple should buy the social media companies Twitter and Path. Twitter is well known. The 140-character Twitterverse now has more than 140 million active monthly users. It is one of the few, if only, independent social media properties that could allow Apple to build its own social media platform to truly compete against the likes of Facebook and Google.

Twitter’s price tag is just north of $10 billion, and as my colleagues Evelyn M. Rusli and Nick Bilton reported in The New York Times last week, the idea has certainly crossed the minds of Apple executives.

Path is less familiar, but it would be an integral ingredient for Apple’s push into social media. Path is a fast-growing social media company that works on mobile devices only. It has cracked the code on making the mobile experience of sharing with friends enjoyable. Path would probably cost $250 million to $1 billion. If Apple were to stir together Twitter, Path and its own Photo Stream service — and leveraged all the data it has collected about its users over the years (while mindful of privacy issues) — the company would have quite a product that would keep consumers hooked.

RESEARCH IN MOTION Yes, this one may be a head-scratcher, considering that the iPhone seems to have eaten RIM’s BlackBerry for breakfast — and lunch. But with a marke value of $3.7 billion it is a relative bargain and could be had for four weeks’ worth of Apple’s spare cash).

Such a deal would instantly put Apple into the enterprise market, giving it access to corporate and government customers that require RIM’s highly secure servers. Apple could build access into RIM’s network directly into future iPhones and maybe even create an iPhone with BlackBerry’s famous keyboard, which for many of us would create the ultimate smartphone.

RIM’s relationships with corporate and government customers could be leveraged to sell other products like computers and iPads. RIM also owns QNX, a software that is being used in its next-generation BlackBerry devices. More important for Apple, QNX is used as an in-dashboard operating system, and it is already in 20 million cars, like Chryslers and Porsches.

Finally, there are RIM’s patents, said to be worth $1 billion to $4 billion alone, a virtual treasure trove for a company that is locked in brutal patent wars with rivals. Google paid $12.5 billion for Motorola Mobility last year, in part, to secure the company’s patent portfolio.

SQUARE Everyone is talking about the mobile wallet. Square, started by the Twitter co-founder Jack Dorsey, has created a unique new electronic payment system though iPhones and iPads. The next time you go to a coffee shop, there is a chance you can pay with your iPhone simply by saying your name when you get to the cash register.

Square’s value has crept up to more than $3 billion, which is high for a company that is still losing money. But if Apple could integrate Square into iTunes — which has over 400 million active credit cards on file from around the world — it could become a sensation overnight, pushing out rivals like VeriFone and PayPal.

SPRINT Yes, the phone company. This might seem the most out-there idea. But it solves many of Apple’s biggest problems.

Such a deal would give Apple its own wireless network, which it could upgrade to become the ultimate high-speed wireless carrier in the country. It could eventually use the network to bypass the cable operators to deliver content directly to the home on multiple devices, including the product that everyone speculates is on its way: a TV device.

With a stock market value of $13.5 billion, Sprint can be purchased for a song. Apple could easily spend four times more than that — say, $50 billion — to build out the Sprint network and turn it into a showcase for the next generation mobile technology. Apple could still offer its devices on other carriers, but its premium product would exist on its own network.

Think about it: Apple service, Apple Stores and simple Apple pricing. That would revolutionize the business. And such an investment would force the other carriers to step up their game, which would only help Apple. Most compelling is the possibility of Apple owning the last mile into everyone’s home (wirelessly) and be able to offer televised content. (I had considered Netflix as a suitable acquisition target, but if Apple had its own telephone company, it could negotiate directly with content providers on a level playing field with cable and satellite operators.)

The total cost for this grocery list, takeover premiums and additional investments included, is about $97 billion, give or take a couple billion. (Let’s put aside the thorny issue of how Apple can use its cash, much of which is abroad, without being taxed). That would leave Mr. Cook with $20 billion in the bank for walking-around money.

Article source: http://dealbook.nytimes.com/2012/07/30/suggestions-for-an-apple-shopping-list/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

DealBook: Britain Begins Review of Libor

July 30, 2012 by Leave a Comment

Martin Wheatley, managing director of the Financial Services Authority, the British regulator that will conduct the review into the rate-setting process.Jerome Favre/Bloomberg NewsMartin Wheatley, managing director of the Financial Services Authority, the British regulator that will conduct the review into the rate-setting process.

LONDON – The British government on Monday officially announced a review into the rate-setting process at the center of the recent financial scandal.

The review comes as British and American regulators face mounting scrutiny for their passive approach in policing benchmark rates, including the London interbank offered rate, or Libor. Since Barclays struck a $450 million settlement last month over rate manipulation, lawmakers have blasted authorities for failing to stop the illegal activities at the British bank, despite evidence of problems.

The two-month, government-mandated inquiry will focus on whether British officials should regulate Libor and how governance of the rate can be improved.

Currently, the British Bankers’ Association, a London-based trade association, oversees the Libor process, but American and British government officials have raised concerns that there is not enough oversight into how the rate is set.

“It is clear that urgent reform of the Libor compilation process is required,” said Martin Wheatley, managing director of the Financial Services Authority, the British regulator that will conduct the review. “Such reform may include amendments to the technical definitions used for Libor, the associated governance framework and the role of official regulation.”

Libor Explained

The results of the review will be published by the end of September, and may prompt new legislation that criminalizes rate manipulation, according to a statement from the British government. The inquiry will not focus on specific actions by banks implicated in the Libor investigations.

Last week, the European Commission also announced plans to make Libor manipulation a criminal offense. American and British authorities are considering potential criminal prosecutions against traders involved in the rate-rigging scandal.

The British review follows a broad public outcry against the manipulation of Libor. Many of Barclays’ senior executives, including the firm’s chief executive, Robert E. Diamond Jr., and its chairman, Marcus Agius, have resigned in the wake of the scandal.

The British bank revealed last week that it is a defendant in a number of class action lawsuits connected to the manipulation of Libor and the European interbank offered rate, or Euribor.

The rate-rigging investigations could prove costly for many of the world’s largest financial institutions. Global banks may have to pay more than a combined $20 billion in fines and penalties in connection to Libor manipulation, according to estimates from analysts at Morgan Stanley.

Article source: http://dealbook.nytimes.com/2012/07/30/britain-launches-review-of-libor/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

DealBook: HSBC Sets Aside $2 Billion for Legal Woes as Profit Falls

July 30, 2012 by Leave a Comment

I very much regret HSBC's past failures and I apologize for them, the British bank's chief, Stuart Gulliver, said.Jerome Favre/Bloomberg News“I very much regret HSBC’s past failures and I apologize for them,” the British bank’s chief, Stuart Gulliver, said.

HONG KONG — 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.

HSBC announced net income of $8.4 billion in the first half the year, 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,” the British bank’s chief executive, Stuart 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, Mr. 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.”

Earlier this year, the United States Senate Permanent Subcommittee on Investigations issued a report accusing HSBC of serving as a conduit for money flowing illegally into the United States from Mexican drug traffickers and Middle Eastern banks with ties to terrorists. An outside audit identified nearly 25,000 transactions related to Iran involving more than $19 billion, which were handled by HSBC’s American unit but were not properly disclosed to American regulators

HSBC has also been ensnared by the rate-manipulation inquiry, along with other big global bank. The multiyear investigation centers on benchmark rates, including the London interbank offered rate, Libor, and the Euro interbank offered rate, Euribor.

Last month, Barclays paid $450 million to authorities for submitting false rates. Global banks may have to pay more than a combined $20 billion in fines and penalties related the investigation, according to estimates from analysts at Morgan Stanley.

HSBC said that it had made no provision for potential fines or regulatory settlements related to the global investigation.

“It’s far too soon to make any estimate on Libor or Euribor,’’ Mr. Gulliver said. ‘‘We are providing information to various regulators simply because we are a panel bank, and therefore we don’t have any information that gives us any ability to make a provision for future costs that may result from anything do with Euribor or Libor.’”

Despite the continued legal problems, HSBC’s underlying businesses are showing signs of strength. During the first three months through June 30, the bank reported that pretax profit rose 28.1 percent to $8.42 billion compared with same period a year earlier.

According to HSBC, Asia continued to be an ‘‘absolute powerhouse’’ for the bank’s growth, accounting for half of pretax profit in the second quarter. Pretax earnings from Hong Kong and the rest of Asia rose 16 percent in the second quarter to $4.2 billion.

Since taking over as the bank’s chief executive in January 2011, Mr. Gulliver has focused on cutting costs, selling less-profitable businesses and focusing new investment on faster-growing economies of Asia.

Over that time, HSBC announced more than 36 deals to reduce or dispose of its stakes in a wide range of businesses around the world. Last week, the bank struck an agreement to sell its 44 percent share in Global Payments Asia-Pacific, a card processing joint venture, for $242 million.

In August 2011, the bank announced a plan to slash 30,000 jobs by 2013, part of an effort to cut costs globally by $2.5 billion to $3.5 billion. On Monday, HSBC said the number of full time staff globally had fallen to 272,000 people in the second quarter, down 8 percent from 296,000 people a year earlier.

Article source: http://dealbook.nytimes.com/2012/07/30/hsbc-sets-aside-2-billion-for-legal-woes-as-profit-falls/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Disruptions: When Craigslist Blocks Innovations

July 30, 2012 by Leave a Comment

Craig Newmark, founder and chairman of Craigslist, shown in 2004 at his company's office in San Francisco.Thor Swift for The New York TimesCraig Newmark, founder and chairman of Craigslist, shown in 2004 at his company’s office in San Francisco.

In 1995, a good-hearted programmer named Craig Newmark thought of a way to make newspaper classified ad listings simple, and in turn, people’s lives easier. His free Web site, called Craigslist, quickly gained millions of users. Eye-popping offers to buy the company outright came in, all of which Mr. Newmark turned down, saying Craigslist was a “public good.”

Craigslist makes hundreds of millions of dollars a year, but it has become stagnant. Today, it feels stuck in the 1990s, where links are electric blue and everything is underlined. As a result, the site is now crammed with listings and is extremely difficult to use.

One might think Craigslist is as ready for disruption as sleepy newspaper classified ad sections once were. Why hasn’t a site this vulnerable been displaced?

There may be part of the answer in this tale. Eric DeMenthon, a 27-year-old programmer, was one of the users overwhelmed by the site. In 2008 he was searching for an apartment on Craigslist and he couldn’t navigate the endless listings. So he quickly built an application that placed Craigslist apartment ads on an online map. After finding an apartment with the tool he had cobbled together, he realized the product had saved him so much time that he should make it available to others, also as a “public good.”

He said, “I did the math and I figure if I save people three hours of their time on my site when they need to look for a new apartment, that’s over 350 years of time that I can save people each month.”

Last week, Craigslist served Mr. DeMenthon with a lawsuit accusing his site, Padmapper, of infringing on copyright and trademark, and it threw in a long list of other piracy-related claims for good measure.

But, according to Mr. DeMenthon, he isn’t stealing anything.

“I was kind of disappointed. I was always a great admirer of what Craigslist was doing,” he said by phone from his two-bedroom apartment in Mountain View, Calif., where he works on the site from noon until 3 a.m. daily as the only full-time employee. “I’m just trying to help people save time.”

This isn’t the first time Craigslist has claimed such violations. The Internet is littered with digital carcasses that once built on top of the listings site. Their pixelated tombstones are inscribed with one-liners that Craigslist killed access without any notice, or they were sent a cease-and-desist letter by Perkins Coie, a top corporate law firm that frequently represents Craigslist.

One, a site called Craigs Little Buddy, could search multiple Craigslist cities at once — a simple feature that Craigslist doesn’t offer. Another site, Craigsly, helped people set up e-mail alerts when a certain type of listing, like a specific car or apartment for sale, was posted in their area. Another, Ziink Craigslist Helper, which offered a free browser plug-in that made navigating listings easier, was also shut down by Craigslist lawyers.

Most of the sites that Craigslist killed began as hobby projects, making little to no money — just programmers trying to improve a product they loved.

Craigslist and its chief executive, Jim Buckmaster, did not return repeated requests for comment.

Yet something doesn’t add up in all this. In July 2010, on the question-and-answer site Quora, Mr. Newmark defended the company’s actions in a similar situation to Padmapper’s, saying he did not take issue with sites that do not affect Craigslist’s servers. “Actually, we take issue with only services which consume a lot of bandwidth, it’s that simple,” Mr. Newmark wrote.

But Padmapper does not siphon off a bit of bandwidth from Craigslist. Instead, it uses a company called 3Taps, which collects listings from Craigslist by looking for them on search engines, including Google and Bing, then organizing them and wrapping them up in an application programming interface so developers can build sites that point to Craigslist’s listings.

“The listings are already out there. We’re finding them already on the Web and organizing them so other people don’t have to do the same thing twice,” said Greg Kidd, the chief executive of 3Taps. “And we’re not breaking any laws because we are pulling in the facts from the listing; everyone knows you can’t copyright facts.” Craigslist also named 3Taps in the lawsuit filed last week.

As intellectual property lawyers will tell you, Mr. Kidd is not off base: facts, like those in classified listings, cannot be copyrighted.

So why hasn’t anyone managed to unseat Craigslist, a site that has barely changed in close to two decades?

It has dug an effective moat by cultivating an exaggerated image of “doing good” that keeps its customers loyal, while behind the scenes, it bullies any rivals that come near and it stifles innovation.

Mr. Kidd explained: “Where there is dominance in an exchange place, like a classified platform such as Craigslist, the importance is not in the listings posted on the site — those are just facts — but rather the critical mass of connecting people.”

As for Mr. DeMenthon of Padmapper, even in the face of legal action, he feels he has a moral obligation to keep the site running. “I don’t have a lawyer,” he said. “I don’t know what I’m going to do, but I definitely know I have a chance to do more good with this site.”

E-mail: bilton@nytimes.com

Article source: http://bits.blogs.nytimes.com/2012/07/29/when-craigslist-blocks-innovations-disruptions/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

DealBook: After Huge Loss, JPMorgan Rearranges Top Officials

July 28, 2012 by Leave a Comment

Matthew Zames was promoted to co-chief operating officer of JPMorgan Chase.Matthew Zames was promoted to co-chief operating officer of JPMorgan Chase.

Adjusting to a shifting banking landscape, JPMorgan Chase broadly reshuffled its management ranks on Friday and united some of its business operations.

The moves, coming months after the bank announced a multibillion-dollar loss on a soured trade, are intended to strengthen JPMorgan’s focus on its clients, especially as profits in other areas are threatened by regulatory changes and the gloom in Europe.

Much of the change centers on combining the bank’s central businesses. Under the new organization, JPMorgan’s consumer businesses will be under one awning, and its investment banking and treasury operations will be under another. “It’s a natural progression,” said Jamie Dimon, the bank’s chief executive.

Revolving Door
View all posts

Related Links

By making such a clear delineation, some bank analysts said, JPMorgan is also implicitly mounting a defense against calls for the big banks to be broken up. Those cries gathered steam earlier this week, when Sanford I. Weill, who forced Mr. Dimon, his former lieutenant, out of Citigroup in 1998, said that behemoth financial institutions should split their investment banking businesses from their deposit-taking operations. As the executive who built Citigroup, Mr. Weill had earlier led a charge to lift the Depression-era ban on commercial banks doing investment banking.

Mike Mayo, an analyst with Crédit Agricole Securities, said JPMorgan’s moves were aimed at showing that plain-vanilla banking operations are entirely cordoned off from the bank’s potentially risky investments.

As part of the realignment, JPMorgan promoted a number of younger executives, including Matthew E. Zames and Michael J. Cavanagh, generating new speculation about who may succeed Mr. Dimon. Still, people close to the bank say Mr. Dimon, who is 56, does not have plans to hand over the reins for at least five years.

Frank Bisignano was promoted to co-chief operating officer of JPMorgan Chase.Frank Bisignano was promoted to co-chief operating officer of JPMorgan Chase.James Staley will become chairman of JPMorgan Chase's corporate and investment bank.Scott Eells/Bloomberg NewsJames Staley will become chairman of JPMorgan Chase’s corporate and investment bank.Michael Cavanagh will become co-chief executive of JPMorgan Chase's corporate and investment bank.Michael Cavanagh will become co-chief executive of JPMorgan Chase’s corporate and investment bank.

Both Mr. Cavanagh and Mr. Zames have been in the spotlight over the last three months as JPMorgan works to contain the damages from the trading debacle — a rare black eye for Mr. Dimon, once considered among the most deft risk managers on Wall Street.

In May, Mr. Zames, 41, took over the bank’s chief investment office, the powerful unit at the center of the losing trade. He succeeded Ina Drew, who was one of the more notable casualties of the trade, which has grown to $5.8 billion in losses. Mr. Zames will become JPMorgan’s chief operating officer, a role he will share with Frank Bisignano. Under the realignment announced on Friday, Mr. Zames will still oversee the chief investment office and mortgage capital markets.

Like Mr. Zames, Mr. Bisignano, 52, was tapped last year to be a kind of fix-it man. In his case, it was JPMorgan’s struggling mortgage business.

One little noticed element of the reorganization is its impact on Douglas L. Braunstein, the bank’s chief financial officer. Although Mr. Braunstein, 51, will keep his position, he will no longer report to Mr. Dimon, but instead to Mr. Zames.

Bank executives are split on how to interpret the moves. Some see the change as simply a long-planned promotion for Mr. Zames. But others, who did not want to be named because of the sensitivity of the issues, wondered whether the move was a demotion for Mr. Braunstein.

Just weeks before the trading error, Mr. Braunstein dismissed concerns about the trading that would later blow up in the bank’s chief investment office. In an interview, Mr. Braunstein said he was “very comfortable with the positions we have.”

Under the management changes, Mr. Cavanagh, 46, who used to be the bank’s chief financial officer and now leads the treasury and securities services, will become co-chief executive of the corporate and investment bank. Daniel E. Pinto, 49, who heads the bank’s business in Europe, the Middle East and Africa as well as its global fixed-income business, will oversee all trading businesses and become co-chief executive with Mr. Cavanagh.

Signs of the latest shifts appeared when JPMorgan announced second-quarter earnings this month. On a conference call with analysts, Mr. Cavanagh, who was deputized by Mr. Dimon to lead a kind of financial autopsy of the chief investment unit, described what went wrong at the unit, pointing to fundamental flaws in risk management.

Mr. Cavanagh has long been a valuable lieutenant for Mr. Dimon, senior executives said. As head of strategy and planning at Bank One, he worked closely with Mr. Dimon, a camaraderie he maintained as JPMorgan’s chief financial officer in 2004.

As a result of the shake-up, however, James Staley, 55, who currently is chief executive of JPMorgan’s investment bank, is partly sidelined, some senior executives said Friday. Although Mr. Staley will take on a new role as head of the newly formed corporate and investment bank, some viewed the position as more symbolic than substantial.

“In this role, he will head a group of senior executives who will work together to develop a view of what global banking will look like in the years ahead,” the bank said in a statement. He will continue to serve on the bank’s operating committee.

During Mr. Dimon’s nearly six-year reign, the bank has undergone a number of management revamps. Few of the executives who made up Mr. Dimon’s inner circle during the financial crisis — including Bill Winters, Steve Black and Heidi Miller — remain.

Driving the latest organizational changes, Mr. Cavanagh said, is an overarching desire to improve services for clients and recruit more business. “We can do things that few of our competitors can,” he said in an interview on Friday. He added that the moves allowed JPMorgan to leverage “our size for our clients.”

Although JPMorgan, unlike its rivals, safely navigated the storm of the financial crisis, it is now grappling with the same problems affecting the entire industry. Across the banking sector, revenue from securities and banking are still lackluster as deal volume stays around record lows. As a result, a focus on client services is paramount, banking analysts said. Banks like JPMorgan, they say, cannot depend on profits from trading.

“These companies will live and die on their ability to serve the clients,” said Jason Goldberg, an analyst with Barclays.

JPMorgan is trying to reassure investors that its risk management practices are strong and that the losses are contained. Since disclosing the trading losses in May, the bank has been under close scrutiny. The Justice Department and the Securities and Exchange Commission are investigating the loss. In Washington, some lawmakers have seized upon the losses as further evidence that banks need to scale back their riskiest activities.

In a memo circulated to employees on Friday, Mr. Dimon said: “Periodically, all businesses need to reorganize to set themselves up for continued success.”

Article source: http://dealbook.nytimes.com/2012/07/27/jpmorgan-shakes-up-management/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

DealBook: Barclays’s Profit Falls as New Regulatory Problems Emerge

July 28, 2012 by Leave a Comment

The letter B is hoisted up the side of Barclays' headquarters in London.Simon Newman/ReutersThe letter “B” is hoisted up the side of Barclays‘ headquarters in London.

LONDON — The problems continue to mount for Barclays, as the British bank disclosed that it was facing lawsuits related to a rate-rigging scandal and that regulators were investigating the company’s financial director on a different matter.

The bank’s legal and regulatory burdens have been a continued source of financial pain for Barclays.

On Friday, Barclays reported that net profit dropped 76 percent to $752 million during the first six months of the year after taking an accounting charge on its debt and a charge for inappropriately selling complex financial products to small businesses. Last month, Barclays and other banks settled with British regulators over those sales, of interest rate swaps.

On Friday, Barclays said that the Financial Services Authority, the British regulator, was looking into the actions of some current and former employees, including the finance director, Chris Lucas, over the disclosure of fees related to the bank’s capital-raising efforts in 2008. The issues revolve around agreements with the Qatar Investment Authority and the Sumitomo Mitsui Banking Corporation of Japan, according to regulatory filings.

After the collapse of Lehman Brothers in 2008, the British bank tapped Middle Eastern investors for a combined £11.8 billion, or $18.6 billion, in two rounds of capital raising. Existing shareholders have voiced concerns that their rights were overlooked when Barclays turned to outside investors for a fresh injection of capital.

“Barclays considers that it satisfied its disclosure obligations and confirms that it will cooperate fully with the F.S.A.’s investigation,” the bank said in a statement.

Last month, Barclays announced a $450 million settlement with American and British authorities over the manipulation of benchmark rates, including the London interbank offered rate, or Libor. On Friday, Barclays disclosed that it was facing class-action lawsuits in the United States related to such issues. One of the lawsuits also cites unnamed current and former members of the bank’s board as defendants, according to a statement from the bank.

Barclays said it was “not practical” to estimate the costs related to the legal proceedings. Morgan Stanley analysts have said global banks may have to pay more than a combined $20 billion in penalties and fines related to the manipulation of Libor.

“We are sorry for the issues that have emerged over recent weeks and recognize that we have disappointed our customers and shareholders,” Barclays’ chairman, Marcus Agius, who will step down, said in a statement.

As it deals with the fallout, Barclays must also remake its management team. As the rate manipulation scandal unfolded, Robert E. Diamond Jr., the company’s former chief executive, and Jerry del Missier, the former chief operating officer, both resigned. Mr. Agius said in a conference call that the firm would appoint a new chairman before selecting its next chief executive.

The bank is also taking a close look at its actions. Barclays has appointed Anthony Salz, vice chairman of the advisory firm Rothschild, to conduct a review into the British bank’s business practices. Some current and former Barclays employees may still face criminal charges related to the rate-rigging scandal.

Despite the bad news, investors found a reason to be upbeat. By the close of trading in London, the bank’s shares had jumped nearly 9 percent.

Without the accounting charge and other one-time costs, Barclays’ net profit in the first half of the year rose 9 percent, to £3.07 billion, compared with £2.8 billion a year earlier. The earnings, which beat analysts’ estimates, were driven by an improved performance in the bank’s retail and corporate banking divisions.

Barclays’ investment banking unit, however, continued to get hit by the European debt crisis. Other global rivals, like Morgan Stanley and Goldman Sachs, have faced weakness in their investment banking activity, but analysts said that Barclays had done better than most to maintain its trading income.

The bank reported a £1 billion pretax profit in its investment banking unit in the three months through June 30, a 2.5 percent increase over the previous year. Barclays does not report net income for its separate business units.

“Despite the more recent regulatory assault, this underpins the belief that, in challenging conditions, Barclays Capital should continue to consolidate market share,” Ian Gordon, a banking analyst at Investec in London, said in a note to investors.

The British bank said it had reduced its exposure to the debt of Southern European countries by 22 percent, to £5.6 billion, during the first six months of the year. The bank’s core Tier 1 ratio, a measure of ability to weather financial shocks, fell slightly to 10.9 percent.

“We continue to be cautious about the environment in which we operate and will maintain the group’s strong capital, leverage and liquidity positions,” Mr. Lucas of Barclays said in a statement.

Article source: http://dealbook.nytimes.com/2012/07/27/barclays-profit-falls-amid-rate-rigging-scandal/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

DealBook: JPMorgan Shakes Up Management

July 27, 2012 by Leave a Comment

Matthew Zames was promoted to co-chief operating officer of JPMorgan Chase.Matthew Zames was promoted to co-chief operating officer of JPMorgan Chase.

As JPMorgan Chase works to move beyond its multibillion-dollar trading blunder, it reshuffled some of its highest ranks Friday.

JPMorgan Chase, the nation’s largest bank by assets, promoted Matthew Zames and Frank Bisignano to co-chief operating officers in a broad management reshuffling. In May, Mr. Zames was tapped to take over the reins of the bank’s chief investment office, which was at center of the botched trade. At the time, Mr. Zames was seen by many industry observers as a kind of fix-it man, who could come into the unit that had been taking on outsize risks and straighten things out. He succeeded Ina Drew, who was one of the closest lieutenants of Jamie Dimon, the bank’s chief executive. Ms. Drew left the bank in the wake of the trading blowup, which has now totaled $5.8 billion in losses.

One little noticed element of the reorganization is its impact on Doug Braunstein, the bank’s chief financial officer. Although Mr. Braunstein will keep his position, he will no longer report to Mr. Dimon, but instead to Mr. Zames.

Revolving Door
View all posts


Related Links



Executives in the bank are split on how they interpret the moves. Some see the change as simply a promotion for Mr. Zames. But other senior executives at the bank, who didn’t want to be named because of the sensitivity of the issues, said that Mr. Braunstein lost some favor with Mr. Dimon after the trading losses.

“He lost some credibility with Jamie,” a senior executive said.

Frank Bisignano was promoted to co-chief operating officer of JPMorgan Chase.Frank Bisignano was promoted to co-chief operating officer of JPMorgan Chase.
Jes Staley will become chairman of JPMorgan Chase's corporate and investment bank.Scott Eells/Bloomberg NewsJes Staley will become chairman of JPMorgan Chase’s corporate and investment bank.
Michael Cavanagh will become co-chief executive of JPMorgan Chase's corporate and investment bank.Michael Cavanagh will become co-chief executive of JPMorgan Chase’s corporate and investment bank.

Just weeks before the trading mishap, Mr. Braunstein dismissed concerns about the trading that would later blow up in the bank’s chief investment office. In an interview, Mr. Braunstein said he was “very comfortable with the positions we have.”

Under the realignment announced on Friday, Mr. Zames will still oversee the chief investment office and mortgage capital markets. Mr. Bisignano was part of an earlier transformation at the bank when he was picked to lead JPMorgan’s mortgage banking group in 2011.

Jes Staley, the chief executive of the investment banking business, will become chairman of the corporate and investment bank, a new position. “In this role, he will head a group of senior executives who will work together to develop a view of what global banking will look like in the years ahead,” the bank said in a statement. He will continue to serve on the bank’s operating committee.

Michael Cavanagh, the head of treasury and securities services, and Daniel Pinto, head of the European, Middle East and Africa business and global fixed income, will become co-chief executives of the corporate and investment bank

In an interview on Friday, Mr. Dimon, the bank’s chief executive, said that the reshuffling within JPMorgan had “no relationship to the trading losses at all,” adding that “this was already under way and is a natural progression.”

Mr. Cavanagh has been discussed as a possible successor to Mr. Dimon, although there are no rumblings that Mr. Dimon will leave the firm anytime soon.

The moves come as the bank tries to reassure investors that its risk management practices are strong and that the losses are contained. Since disclosing the trading losses in May, the bank has been under close scrutiny. The Justice Department and the Securities and Exchange Commission are investigating the trading loss. In Washington, some lawmakers have seized upon the losses as further evidence that banks need to scale back their riskiest activities.

In a memo circulated to staff on Friday, Mr. Dimon said: “Periodically, all businesses need to reorganize to set themselves up for continued success.”

Shares of JPMorgan were up 0.8 percent in late morning trading on Friday, at $36.08.

Article source: http://dealbook.nytimes.com/2012/07/27/jpmorgan-shakes-up-management/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,
Next Page »