March 26, 2023

DealBook: Barclays to Buy British Retail Unit From ING

A branch of Barclays in London.Andy Rain/European Pressphoto AgencyA branch of Barclays in London.

LONDON – Barclays agreed on Tuesday to buy the British savings and loan business of the Dutch firm ING Group.

The deal reflects Barclays shifting focus toward retail banking after a recent rate-manipulation scandal led to the resignation of its former chief executive, Robert E. Diamond Jr. The firm’s new chief, Antony P. Jenkins, previously ran the bank’s retail banking operations, and he has said that he will stop business activities that pose a “reputational risk” to the British bank.

Last week, Barclays announced a broad reorganization of its investment banking unit, the group at the center of the rate-rigging case. Hugh E. McGee III, one of the firm’s top deal makers, became its most senior corporate and investment banker in the Americas, while Eric Bommensath was tapped to run a combined fixed-income and equities sales and trading division.

Under the terms of the deal announced on Tuesday, the British bank will acquire deposits of £10.9 billion ($17.5 billion) and mortgages worth a combined £5.6 billion from ING Direct U.K. The acquisition also will add 1.5 million customers to its existing 15 million client base, according to a Barclays statement.

The British bank will acquire ING Direct U.K.’s mortgage book at a 3 percent discount, while the deposits will be acquired at par value, the firms said in separate statements.

“The acquisition of ING Direct U.K. is a good fit with Barclays’s existing U.K. retail banking business,” Ashok Vaswani, head of the British retail and business banking unit of Barclays, said in a statement.

The deal, which is expected to close in the second quarter of 2013, will result in a net loss of 260 million euros ($336 million) for ING. The Dutch bank added that the loss would be offset by 330 million euros of extra capital that would be freed up when the deal is completed.

ING has been required to dispose of assets around the world as part of a bailout from its local government during the financial crisis. Last month, ING sold its 9 percent stake in Capital One though a public offering worth around $3 billion.

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DealBook: Ackermann Hands Over Reins of Deutsche Bank

FRANKFURT — Josef Ackermann bowed out Thursday as the chief executive of Deutsche Bank after more than a decade in which he transformed the institution into a global contender but also became a symbol to many Germans of the excesses of capitalism.

At the bank’s annual meeting, Mr. Ackermann passed his responsibilities to two subordinates who will run the bank in tandem. Anshu Jain, a native of India who has been in charge of Deutsche Bank’s investment banking operations, will serve as co-chief executive with Jürgen Fitschen, a German whose title is head of Deutsche Bank regional management.

Mr. Ackermann’s talent for drawing both accolades and catcalls was on view during his last appearance before shareholders in an arena often used for rock concerts. Among a crowd of about 7,000 — a record for the company’s meetings — there were some boos and shouted insults as Mr. Ackermann reviewed the bank’s achievements in the last decade. But at the end of his speech shareholders gave him a standing ovation.

Under Mr. Ackermann, the stock has ridden a roller coaster, peaking above 100 euros, or $124, in 2007 but falling below 20 euros in 2009. On Thursday, the shares closed at 29.09 euros.

“I have done my duty and served the company with all my strength,” said Mr. Ackermann, who is retiring, at age 64, having stayed longer than initially planned.

Mr. Ackermann, a Swiss citizen who joined Deutsche Bank from Credit Suisse in 1996 and became chief executive in 2002, made Deutsche Bank a force in international banking while also becoming an influential figure in political circles. Since the financial crisis and subsequent sovereign debt debacle weakened other German banks, Deutsche Bank remains the country’s only institution able to compete with the likes of Goldman Sachs or JPMorgan Chase.

But there were hints Thursday of the succession struggle that marred Mr. Ackermann’s final years at the bank and helped derail plans for him to become chairman of the supervisory board, a part-time oversight role that many of his predecessors have held. During a speech to shareholders, Mr. Ackermann made only the briefest mention of his successors, Mr. Jain and Mr. Fitschen, saying they ‘‘can build on what we have achieved together.’’

The investment banking business run by Mr. Jain, 49, has often been responsible for most of Deutsche Bank’s profit, which last year was 4.3 billion euros. But some critics have questioned putting an investment banker at the head of the institution when risk-taking by traders is under fire, and when Deutsche Bank is trying to re-emphasize traditional businesses like retail banking.

Mr. Fitschen is seen as a transitional figure who will help compensate for Mr. Jain’s lack of fluency in German and maintain the bank’s close ties to political leaders in Europe. At 63, Mr. Fitschen is just a few months younger than Mr. Ackermann.

While Deutsche Bank earned most of its 32 billion euros of revenue last year outside Germany, many Germans regard the bank as de facto common property, although the government has no stake — ‘‘half a bank and half a part of Germany,’’ as the newspaper Handelsblatt wrote recently.

As usual, the annual meeting was a mass event with thousands of shareholders converging on a Frankfurt arena that in a few weeks will be used for a concert by the American rappers Jay-Z and Kanye West. The shareholders lined up for wurst and potato salad at buffet tables, and there was even a place where they could have souvenir photos taken.

Leaders including the German chancellor, Angela Merkel, or Jean-Claude Trichet, president of the European Central Bank until last year, sought Mr. Ackermann’s views, particularly after the financial crisis exploded in 2008. He was also an advocate for banking interests as president of the Institute of International Finance, an industry group whose membership also includes most large U.S. banks.

But Mr. Ackermann has drawn his share of controversy. His salary of 6.3 million euros in 2011 was not outlandish compared with those of the leaders of other big banks. But in some years he has been the highest-paid chief executive in Germany, becoming to some a symbol of corporate greed.

Deutsche Bank has also come under fire for what some critics regard as an unusually high number of lawsuits by aggrieved customers or official investigations. In early May, Deutsche Bank agreed to pay the U.S. government more than $200 million to settle accusations that it knowingly misled the Department of Housing and Urban Development about the quality of mortgages that later defaulted.

“We are concerned about the number of litigations and investigations which have mounted in the last few years,” said Hans-Christoph Hirt, global head of corporate engagement at Hermes Equity Ownership Services, a unit of Hermes Fund Managers that represents several large Deutsche Bank shareholders.

“This doesn’t look good and raises concerns about how new business opportunities and business activities are assessed before they are entered into,” Mr. Hirt said.

Mr. Ackermann acknowledged that the bank had made mistakes. “No business can be worth risking the bank’s reputation and credibility,” he said. “From today’s perspective, and I underline today’s perspective, we did not always completely live up to this principle during the years of excessive exuberance prior to the financial crisis.”

Mr. Hirt also criticized what he said was weak oversight by the bank’s supervisory board, which he blamed for an unseemly public battle over who would succeed Mr. Ackermann.

Clemens Börsig, who ceded his seat as chairman of the supervisory board Thursday, resigned amid criticism of the way he handled the selection of Mr. Ackermann’s successor. And he had warred openly with Mr. Ackermann.

But the two men shook hands warmly on stage at the annual meeting. ‘‘Contrary to press reports, we always worked together in a collegial spirit in the interests of the bank,’’ Mr. Ackermann said.

The relationship between Mr. Ackermann and Mr. Jain, his onetime protégé, also seemed to cool in recent years. During his speech to shareholders, Mr. Ackermann lavished praise on two top executives, Hugo Bänziger and Hermann-Josef Lamberti, who are leaving to make way for managers close to Mr. Jain.

Mr. Börsiis also leaving as chairman of the supervisory board and will be replaced by Paul Achleitner, former head of Goldman Sachs in Germany and until this week chief financial officer of Allianz, a Munich insurance company.

While there is a tradition among Deutsche Bank chief executives of taking over the supervisory board after they retire, some investors objected to Mr. Ackermann’s assuming that role, fearing he might impede his successor. So Mr. Ackermann chose not to seek the post, rather than face possible opposition in the annual meeting.

Mr. Achleitner, who at 55 is young to head the supervisory board of a large German company, is expected to be an activist chairman. That could create friction with Mr. Jain. But Mr. Hirt of Hermes said he welcomed Mr. Achleitner’s influence.

The supervisory board, Mr. Hirt said, should “think a little about the culture and think about the reasons for all the litigation and investigations. That’s really an area we would like them to focus on.”

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DealBook: European Banks Prepare More Job Cuts

LONDON — Less than a week into the new year, European banks are already planning new job cuts.

Société Générale, the second-largest French bank, announced an agreement on Wednesday with its trade unions for about 880 “voluntary departures” in its domestic investment banking business, starting in April. An additional 700 layoffs are expected in the bank’s international investment banking operations, including in New York and London, according to a company spokeswoman, Nathalie Boschat.

The Royal Bank of Scotland has hired the advisory investment bank Lazard to find a new owner for its struggling equities business, according to a person familiar with the matter.

That news comes as R.B.S., in which the British government holds an 83 percent stake after providing the bank a £20 billion ($31 billion) bailout in 2008, is attempting to reduce its investment banking unit, which currently employs about 19,000 people.

R.B.S. plans to eliminate 2,000 jobs from its global banking and markets unit in the next 12 to 18 months in response to the volatile financial markets and Europe’s debt crisis. The bank has already eliminated more than 30,000 jobs since 2008.

European banks have been cutting jobs aggressively.

In France, Crédit Agricole said late last year that it planned to eliminate 2,350 jobs as part of an effort to adapt to continued instability in world financial markets, and BNP Paribas has also announced plans for 1,400 layoffs.

The Swiss banks Credit Suisse and UBS each plan to eliminate 3,500 jobs as they shift their focus away from investment banking to their profitable wealth management operations.

The layoffs in Europe’s banking sector come as financial firms look to rein in costs and increase capital buffers to meet tough new regulatory requirements by June.

Banks have also been buffeted by the European sovereign debt crisis, which has wiped out billions of euros’ worth of shareholder value. The Euro STOXX banks index, made up of the largest banks in the euro zone region, has fallen 42 percent in the last year.

Shares in the Italian bank UniCredit, which fell on Wednesday after the bank offered newly issued stock to existing shareholders at a 43 percent discount in an effort to raise capital, continued to slide on Thursday. In afternoon trading in Milan, the share price had fallen 14 percent, to the lowest level since the 1990s.

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DealBook: Switzerland’s Credit Suisse Announces Job Cuts, Profit Rose 12% in Third Quarter

Credit Suisse's Zurich headquarters.Gianluca Colla/Bloomberg NewsCredit Suisse’s Zurich headquarters.

LONDON — Credit Suisse, the second-largest Swiss bank, said on Tuesday that its third-quarter net profit rose 12 percent, to 683 million Swiss francs, even as the bank announced a further 1,500 jobs cuts as a result of the weak global economy and continued volatility in the financial markets.

The announcement missed market expectations. Analysts surveyed by Reuters had predicted a net profit of 1.1 billion francs ($1.2 billion).

Earnings were bolstered by a 1.4 billion franc accounting gain on Credit Suisse’s own debt, which helped offset falling returns from its investment banking, asset management and private banking operations.

Credit Suisse had already announced 2,000 job reductions in July as part of a cost-cutting effort. The new layoffs are expected to contribute to a one-time overall cost savings of 2 billion francs by the end of 2013, the bank said.

“During the third quarter we experienced a challenging environment with a high degree of uncertainty, low levels of client activity across businesses and extreme market volatility,” Credit Suisse’s chief executive, Brady W. Dougan, said in a statement. “We believe subdued economic growth and the low-interest-rate environment and increased regulation that we are seeing may persist for an extended period.”

Mr. Dougan said the 1,500 additional job cuts were a result of a reorganization of the bank’s operations, including a reduction in its investment banking operations and an expansion of its wealth management business.

The markets reacted negatively to the company’s earnings announcement. In early morning trading in Europe on Tuesday, Credit Suisse’s share price had fallen more than 7 percent.

Credit Suisse is the latest European bank to report less-than-impressive earnings linked to the Continent’s sovereign debt crisis.

Last week, Banco Santander of Spain reported a 13 percent drop in nine-month net profit, and UBS said earnings fell 39 percent in the third quarter from the period a year earlier, weighed down by a trading scandal that cost the bank $2.3 billion.

Other banks have fared slightly better. On Monday, Barclays of Britain said its profit rose 5 percent in the third quarter, helped by lower provisions for bad loans.

And Deutsche Bank of Germany reported a quarterly profit last Tuesday that exceeded analysts’ expectations, though it warned of future job reductions in its investment banking unit after a drop in trading revenue.

Credit Suisse’s investment banking division is expected to shrink after the bank announced a 50 percent reduction in its risk-weighted fixed-income assets by 2014. The move comes as the division reported a 190 million franc loss in the third quarter. That compares with a 394 million franc gain in the period a year earlier.

“The results are disappointing, but almost all the disappointment comes from investment banking,” analysts at J.P. Morgan Cazenove said in a report issued Tuesday.

The bank also said it had set aside 478 million francs in its private banking operations to offset legal costs related to tax evasion charges in both the United States and Germany. Third-quarter net profit in Credit Suisse’s private banking division dropped 78 percent, to 183 million francs, from the period a year earlier.

Mr. Dougan said the bank was focusing on new markets, particularly in the Asia-Pacific region, to expand its private banking business. Credit Suisse plans to increase revenue from emerging markets to 25 percent of the bank’s total by 2014. That compares with just 15 percent from countries like China, India and Brazil this year.

Like the rest of the European banking sector, Credit Suisse has been hit by volatility in the Continent’s financial markets and ongoing uncertainty related to the sovereign debt crisis.

The bank’s core Tier 1 ratio, a measure of the bank’s ability to withstand financial shocks, was 10 percent at the end of September. Banks in the euro zone are being required to raise their ratio to 9 percent to protect against exposure to the debt of countries at risk.

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DealBook: Capital One to Buy HSBC’s U.S. Card Unit for $2.6 Billion

The London headquarters of HSBC.Olivia Harris/ReutersThe London headquarters of HSBC.

Capital One Financial agreed early Wednesday to buy the United States credit card business of HSBC Holdings for $2.6 billion in cash and stock, in what will be Capital One’s second major deal with a European firm in as many months.

The purchase will give Capital One more than $30 billion of credit card loans. It follows the firm’s agreement in June to buy the American online banking operations of ING Group of the Netherlands for $9 billion.

Capital One said it expected to realize cost savings of about $350 million and incur restructuring costs of about $420 million.

HSBC said that the sale represented a premium of 8.75 percent to the gross customer loan balances and that it would record a post-tax gain of $2.4 billion. The bank, based in London, also said that it would keep its $1.1 billion HSBC USA credit card program and that it would continue to offer credit cards to American customers.

However, the deal will allow HSBC to continue paring back its consumer businesses in the United States as it refocuses on emerging markets and international corporate lending.

HSBC had already announced that it was considering shedding noncore consumer operations and assets as part of a $3.5 billion cost-trimming effort. Last week, the British bank announced plans to lay off 30,000 employees.

It also said that it was selling 195 bank branches, mostly in upstate New York, to the First Niagara Financial Group for about $1 billion.

While the auction of the HSBC card business had attracted other potential suitors, like Wells Fargo, bankers considered Capital One the most likely buyer. Capital On, a 23-year-old firm, began life as a credit card lender, and it remains one of the biggest purveyors of such services to customers with less-than-ideal borrowing histories.

Capital One’s takeover of the ING banking operations was meant in part to bolster mainline banking operations. But the deal also furnished the firm with more deposits that it could use as a source of funds for lucrative acquisitions.

Analysts at Barclays Capital wrote in a research note published after the ING deal that if the firm were to buy the HSBC portfolio, it could raise its earnings per share by 10 percent or more.

Capital One has already benefited from an improving environment for credit card lenders, including fewer charge-offs and lower financing costs. Its card unit more than doubled its profit last year, to $2.3 billion.

HSBC was advised by JPMorgan Chase.

Morgan Stanley, Centerview Partners and the Kessler Group were advising Capital One. Wachtell, Lipton, Rosen and Katz, and Morrison Foerster acted as legal advisers.

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DealBook: HSBC Aiming to Cut $3.5 Billion in Costs

10:51 a.m. | Updated

HSBC said on Wednesday that it planned to cut jobs, scale back its retail banking operations and possibly sell its bank card business in the United States as part of a strategy to reduce costs by as much as $3.5 billion in the next two to three years.

The bank said it would focus on commercial banking and wealth management, while selling or shutting down some less profitable retail banking operations. HSBC, one of the biggest European banks, said the steps were expected to help it improve returns despite slower economic growth and a stricter regulatory environment.

“This is not about shrinking the business but about creating capacity to reinvest in growth markets and to provide a buffer against regulatory and inflationary headwinds,” said Stuart Gulliver, who took over as chief executive in January. He added that it was too early to say how many jobs would be cut.

Banks are seeking to streamline their business as new financial regulations require them to maintain higher capital reserves, putting pressure on profitability. The Barclays chief executive, Robert E. Diamond Jr., said in February that he would review businesses and close some that did not generate enough return.

Less than a month after taking over as chief executive, Mr. Gulliver held a two-day meeting with his management team at HSBC’s Hong Kong offices to discuss necessary changes. They agreed that HSBC’s branches failed to focus enough on the special demands of local markets and clients.

“We always tried to do everything, everywhere, always, and I’m not going to do that,” said Mr. Gulliver, who previously ran HSBC’s investment banking operation.

Having already decided to withdraw from Russia’s retail banking market, HSBC said it would test all of its operations and businesses for profitability. The bank also set a target of 48 percent to 52 percent for its cost efficiency ratio. Costs as a proportion of income were 55 percent last year, which the bank said was “unacceptable.”

Mr. Gulliver also said he planned to radically change HSBC’s business in the United States, which had been a drag on earnings ever since the subprime mortgage crisis dealt a blow to Household, the American lender HSBC acquired in 2003. HSBC is considering the sale of its American consumer bank card operation and plans to expand its private banking business to Latin America. It also hopes its commercial banking unit will benefit as America’s export industry rebuilds, Mr. Gulliver said.

“We need to get to a situation where the U.S. doesn’t lose us a colossal amount of money,” Mr. Gulliver said. The business was a “significant financial cost to HSBC and a management distraction.”

Despite large losses in the United States, HSBC weathered the financial crisis better than many of its rivals, mainly because it generated about half of its earnings from Asia and had strong deposit inflows on the commercial banking side. HSBC did not have to ask for financial help from the British government.

But this year the bank’s share price started to lag behind that of Deutsche Bank, JPMorgan Chase and Barclays as some investors expressed concerns about rising costs and the pace of growth. The strategy HSBC announced on Wednesday failed to spark enthusiasm among some analysts and the bank’s share price was down 1 percent in London.

“We would have loved to see a little bit more” change, said Pawel Uszko, an analyst at Keefe, Bruyette Woods. “The main thing they said was cost-cutting and that will take two to three years to get there.”10:51 a.m. | Updated

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DealBook: Barclays and Credit Suisse Show Weakness

LONDON — Barclays and Credit Suisse on Wednesday reported earnings declines for the first quarter, partly because of weaker revenue from their investment banking operations.

Barclays said its first-quarter profit fell 5 percent, to £1.01 billion ($1.67 billion), from £1.07 billion in the period a year earlier. Still, the bank’s chief executive, Robert E. Diamond Jr., said Barclays had “made a good start in 2011 in a challenging external environment.”

At the bank’s annual shareholder meeting in London on Wednesday, the earnings performance fueled criticism about executive pay packages at Barclays Capital, the bank’s investment banking unit, where pretax profit fell 33 percent in the quarter.

Richard Hunter, head of British equities at Hargreaves Lansdown Stockbrokers, said there was “disappointment that Barclays has failed to keep pace with some of its global peers.” Shares of Barclays fell 4.8 percent in London on Wednesday.

Credit Suisse, one of the largest Swiss banks, said its first-quarter net income fell 45 percent, to 1.14 billion Swiss francs ($1.3 billion), from 2.06 billion francs in the period a year earlier.

The bank attributed to decline in part to a write-down of 467 million francs on Credit Suisse’s own debt and the value of some derivatives. Earnings were also hurt by the appreciation of the Swiss currency against the dollar, it said.

Pretax profit at Credit Suisse’s investment banking operation fell 25 percent, to 1.34 billion francs, from 1.8 billion francs. Revenue from sales and trading at the unit fell 7.7 percent, less than at Wall Street rivals, and less than the 17 percent drop at Barclays Capital.

Credit Suisse shares showed little change on Wednesday in Zurich trading.

Earlier this year, both banks cut their targets for return on equity, a measure of profitability, on expectations that stricter capital rules and banking regulations would make banking less profitable.

Barclays is now aiming for at least a 13 percent return on equity and Credit Suisse at least 15 percent, compared with about 18 percent for both before.

Quarterly earnings at Barclays raised doubts among some analysts that the bank could meet this target by 2013.

“Although hard to achieve given the nature and influence of Barclays Capital, we believe that the group needs to deliver a few quarters of steady improvement in its return on equity to convince investors,” said Nic Clarke, an analyst at Charles Stanley in London.

The Independent Commission on Banking, which is backed by the British government, called this month for Barclays and other large banks to hold more capital to protect individual depositors in the event that their investment banking operations lost money.

But the commission stopped short of calling for a separation of the banks’ consumer deposit banking and investment banking businesses.

The prospect of such a separation had fueled speculation that Barclays would move its operations to New York from London. Barclays had warned that splitting consumer operations from investment banking, which had made up the bulk of its profit for some years, would seriously harm London’s standing as a global financial center.

A final recommendation by the commission on new rules is expected in September.

At the Barclays shareholder meeting in London, the bank’s executives were called upon to justify compensation for top managers, which had started to creep up again despite tighter regulation.

Mr. Diamond was awarded £6.75 million in salary and bonus for 2010 after not receiving a bonus in 2009. His bonus of £6.5 million for 2010 was “less than many of his peers in other similar banks,” according to Richard Broadbent, chairman of the compensation committee of the Barclays board.

Credit Suisse’s chief executive, Brady W. Dougan, received total compensation of 12.8 million Swiss francs in 2010.

Marcus Agius, the Barclays chairman, told shareholders on Wednesday that ‘‘if we are to remain competitive in a global marketplace, it is simply not possible — as some seem to suggest — for us unilaterally to reduce compensation levels without affecting future shareholder returns.”

Some Barclays shareholders were surprised by the bank’s decision to buy back a portfolio of troubled assets, including some backed by American subprime mortgages, that it had sold to a group of former employees in 2009.

The step represents a reversal just a year and a half after Barclays contended that the sale, which was also a highly complex accounting maneuver, would make its earnings less volatile.

Barclays is buying back the £6 billion portfolio after changes in capital rules for loans — including the $12.6 billion loan that the bank granted the asset holding vehicle, Protium Finance — made the entire structure less attractive.

To facilitate a sale of the troubled assets, Barclays said on Wednesday that it would pay $83 million to the manager of the portfolio and $270 million to buy out unidentified investors in the vehicle. The bank said the transaction would not result in a loss or a gain.

Julia Werdigier reported from London, and David Jolly from Paris. Chris V. Nicholson contributed reporting from Paris.

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