October 18, 2018

Fed Closer to Easing Back Stimulus, but Still No Consensus on Timing

The minutes of the central bank’s Federal Open Market Committee meeting late last month, released Wednesday, showed hints that some committee members were more comfortable with easing back sooner rather than later on the Fed’s program of purchasing $85 billion a month in government bonds and mortgage-backed securities.

In June, the Fed’s chairman, Ben S. Bernanke, indicated the stimulus program could be scaled back later this year if economic data continued to be positive, but he left investors guessing as to whether that might begin as soon as September or be delayed until December or even later.

While “a few members emphasized the importance of being patient and evaluating additional information before deciding on any changes to the pace of asset purchases,” a few others “suggested that it might soon be time to slow somewhat the pace of purchases,” the summary of the July 30-31 meeting said.

Still, it was clear from the minutes that big doubts remained about the economy’s underlying strength, and any change in policy remained contingent on the economic data that will come out before their next meeting on Sept. 17-18.

Despite continued strength in housing and auto sales, a number of participants indicated “that they were somewhat less confident about a near-term pickup in economic growth than they had been in June.”

“Tapering is certainly on their minds, but they don’t want to lock themselves in,” said Dean Maki, chief United States economist at Barclays, in an interview prior to the release of the minutes.

He noted that to achieve the Fed’s annual forecast of growth for 2013, the economy would have to expand at 3.25 percent to 3.5 percent in the second half of 2013. Few observers expect that to happen, although the growth is expected to be better than the 1.4 percent rate of the first half of 2013.

Since Mr. Bernanke and the Federal Reserve first indicated that stimulus efforts might be eased, trading in both developed countries and in emerging markets has been volatile.

The asset purchases and ultralow interest rates made it to cheap to borrow in many countries, while also propping up stock markets around the world. That era is coming to an end but the minutes reveal that members are concerned about that the pace is properly telegraphed to investors.

In particular, the policy-makers emphasized that while the bond purchase would soon be scaled back, any uptick in interest rates was years away.

Another focus was how the economy and the housing sector, in particular, would handle rising interest rates, which moved up sharply in the wake of Mr. Bernanke’s comments following the June meeting.

“While recent mortgage rate increases might serve to restrain housing activity, several participants expressed confidence that the housing recovery would be resilient in the face of the higher rates,” the minutes said.

They cited factors such as pent-up housing demand, banks’ increased willingness to make mortgage loans, healthy consumer confidence and the fact that rates remain low by historical standards, even after the recent run-up.

Another topic of discussion was the impact of the sharp reductions in government spending mandated by Congress earlier this year, with committee members noting the cuts had caused slower growth in sales and equipment orders.

Overall, the concerns about the U.S. economy in the second-half were spurred by the increase in mortgage rates, higher oil prices, slower growth in key export markets abroad and the possibility the federal budget cuts will continue to crimp growth.

Article source: http://www.nytimes.com/2013/08/22/business/economy/fed-closer-to-easing-back-stimulus-but-still-no-consensus-on-timing.html?partner=rss&emc=rss

Jobless Applications Fall to Lowest Since 2008

The Labor Department said on Thursday that the less volatile four-week average of new jobless claims dropped 6,250, to 336,750. That is the fewest since November 2007, a month before the recession began.

Weekly jobless claims applications have fallen about 9 percent since November and are now at a level consistent with a healthy economy. The last time jobless claims were lower was in January 2008, when they were 321,000.

Economists were largely encouraged by the decline.

“This is a very positive trend and we should embrace it,” Jennifer Lee, an economist at BMO Capital Markets, said in an e-mail to clients.

The job market has also improved over the last six months. Net job gains have averaged of 208,000 a month from November through April. That is up from only 138,000 a month in the previous six months.

New jobless claims are in effect a proxy for layoffs, and much of the job growth has come from fewer layoffs — not increased hiring. Layoffs fell in January to the lowest level on records dating back 12 years, though they have risen moderately since then. Overall hiring remains far below prerecession levels and unemployment remained high at 7.5 percent in April.

For hiring to increase enough to rapidly lower the unemployment rate, companies must gain more confidence in the economy. But some employers have held off adding new workers in recent months, possibly because of concerns about the impact of federal spending cuts and tax increases.

Dean Maki, an economist at Barclays Capital, said the decline in new jobless claims suggested that companies were not too worried about the fiscal drag of spending cuts and tax increases. He noted that employers were responding to the government’s actions by reducing hiring and cutting back on their employees’ hours — not laying off workers. That means they anticipate the weakness will be temporary.

About 4.9 million people collected unemployment aid in the week that ended April 20, the most recent period for which figures are available. That is about 90,000 fewer than the previous week.

Separately, the Commerce Department said Thursday that wholesale inventories rose 0.4 percent in March compared with February, when they had fallen 0.3 percent.

Sales in March dropped 1.6 percent, the biggest setback since March 2009, when the country was in recession. Sales had risen 1.5 percent in February.

Inventory rebuilding can be a positive for economic growth because it means stronger production at the nation’s factories. The March increase left inventories at $503.1 billion, up 4.7 percent from a year ago and 30.7 percent above the recession low.

But increased restocking at a time of falling sales can signal trouble for the economy. The falling demand could lead businesses to reverse course and cut their stockpiles. Those cutbacks would damp factory production and economic growth.

The buildup of inventories in March was largely a result of a 0.5 percent increase in restocking of durable goods. These are items that are expected to last at least three years.

Article source: http://www.nytimes.com/2013/05/10/business/economy/jobless-applications-fall-to-lowest-since-2008.html?partner=rss&emc=rss

DealBook: Rich Ricci, the Investment Chief at Barclays, to Step Down

Rich Ricci is head of Barclays' investment banking unit.Punit Paranjpe/Agence France-Presse — Getty ImagesRich Ricci is head of Barclays’ investment banking unit.

LONDON – Rich Ricci, the head of corporate and investment banking at Barclays, is stepping down.

Mr. Ricci was a top lieutenant to Robert E. Diamond Jr., the former chief executive who left the bank in the aftermath of a rate-rigging scandal. Mr. Ricci had long been expected to depart after his name surfaced in the inquiry into the bank’s role in the manipulation of the London interbank offered rate, or Libor.

The move comes as part of major shake-up in the top management of Barclays, which reached a $450 million settlement last year with American and British regulators over the manipulation of key benchmark interest rates.

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Regulatory filings this year showed that Mr. Ricci had cashed in $26 million of deferred shares. He was awarded the shares — some 5.7 million — as part of his bonus from 2009 to 2011.

Mr. Ricci, who is leaving on June 30, will receive up to one year’s salary as part of his retirement package, according to a statement from the bank. His salary for 2012 was not disclosed by Barclays, though analysts said he was probably one of the bank’s top earners last year.

The bank’s new chief executive, Antony P. Jenkins, announced major changes to the bank’s structure earlier this year, and gave faint praise to Mr. Ricci.

In February, Mr. Jenkins declined to comment specifically on the position of Mr. Ricci, but added: “No one can predict the future, but I am confident in the team around me. Who knows what could happen in a year’s time?”

Eric Bommensath, currently head of markets at Barclays, and Tom King, chief of the firm’s investment banking division, will become co-chief executives of the corporate and investment banking division on May 1, and they will join the bank’s executive committee.

Skip McGee, a former Lehman Brothers banker who was named head of Barclays’ corporate and investment banking in the Americas last year, has been appointed chief executive of Barclays Americas as of May 1.

Barclays also announced that Tom Kalaris, head of its wealth and investment management division and executive chairman of Barlcays in the Americas, would retire on June 30. Peter Horrell, the head of the bank’s intermediaries, international and direct businesses, will take over as interim chief executive of the wealth and investment management unit.

Article source: http://dealbook.nytimes.com/2013/04/18/barclays-investment-chief-rich-ricci-to-step-down/?partner=rss&emc=rss

DealBook: Morgan Stanley Shares Fall as Investors Appear Unimpressed With Profit Report

The headquarters of Morgan Stanley in New York.Stan Honda/Agence France-Presse — Getty ImagesThe headquarters of Morgan Stanley in Manhattan.

11:32 a.m. | Updated

Shares of Morgan Stanley were down more than 3 percent in late morning trading on Thursday as investors appeared to be unimpressed with the firm’s latest results.

The first-quarter adjusted earnings exceeded analyst estimates. And the financials had some bright spots, notably strong results in the bank’s wealth management division. But the institutional securities division, which includes trading, logged a fall in revenue over year-ago levels, rattling some investors.

Roger A. Freeman, an analyst with Barclays, called Morgan Stanley’s results “a mixed bag.”

Including charges, the firm posted a profit of $1 billion, or 50 cents a share. That compares with a loss of $79 million in the period a year earlier. The results, however, were affected by one-time accounting charges related to the firm’s credit spreads.

Excluding those charges, the firm had a profit of $1.2 billion, or 61 cents a share, a decline from the $1.4 billion reported in the first quarter of 2012. The results topped the estimate of 57 cents a share among analysts polled by Thomson Reuters.

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Morgan Stanley’s adjusted revenue for the three months ended March 31 fell to $8.5 billion from $8.9 billion in the period a year earlier. Analysts had been forecasting revenue of $8.35 billion.

“Morgan Stanley demonstrated solid momentum across the firm this quarter, consistent with the strategic objectives we laid out at the beginning of the year,” the bank’s chief executive, James P. Gorman, said in a statement.

It was a tricky quarter for banks across Wall Street, and most firms posted decent but not eye-popping results. This was clearly the case with Morgan Stanley. The firm posted strong results in wealth and asset management, but institutional securities – its third major division, which includes fixed income and banking – experienced a revenue drop.

The wealth management unit, which has been a big focus for the firm since the financial crisis, has pushed into less-risky lines of business. The division, led by Gregory J. Fleming, posted pretax income from continuing operations of $597 million, up 48 percent from the $403 million reported in the first quarter of last year.

One number investors had been watching – the division’s pretax profit margin – came in at 17 percent, higher than some analysts had projected. Net revenue in wealth management rose to $3.5 billion from $3.3 billion in the first quarter of 2012.

Asset management results were also strong. The unit posted revenue of $645 million in the first quarter, 21 percent higher than in the period a year earlier.

The bank has been working to cut back its fixed income operation, in part because that is where much of the firm’s risk is embedded. Since the financial crisis, some banks have been looking to downsize this business segment and shed risk.

Excluding charges related to the firm’s credit spreads, known as debt valuation adjustment, or DVA, net revenue in institutional securities was $4.4 billion, compared with $5.1 billion in the period a year earlier. Investment banking revenue, however, climbed 15 percent in the quarter, to $1.2 billion.

While the firm’s debt and equity underwriting desks posted yearly revenue gains, most other departments did not fare as well. For instance, revenue from trading commodities and rates fell in the quarter. This decline in revenue from rates trading came despite a decision to take more risk over the last year. In rates and credit spreads, the firm’s quarterly value at risk – a yardstick of how much could be lost in one trading day – was $61 million, up from $46 million in the year-ago period.

Morgan Stanley has been aggressively cutting costs over the last year, and its worldwide work force shrunk by 7 percent, to 55,289.

Return on equity, a measure of how efficiently shareholder money is being deployed, fell to 7.6 percent from 9.2 percent in the year-ago period.

Article source: http://dealbook.nytimes.com/2013/04/18/morgan-stanley-swings-to-a-profit-beating-estimates/?partner=rss&emc=rss

DealBook: Europe Votes to Curb Banker Bonuses

Jose Manuel Barroso, the president of the European Commission, said the rules would put an end to the culture of excessive bonuses.Frederick Florin/Agence France-Presse — Getty ImagesJose Manuel Barroso, the president of the European Commission, said the rules would “put an end to the culture of excessive bonuses.”

BRUSSELS – European politicians approved major new rules on Tuesday to cap the amount that bankers at the region’s largest institutions can receive in bonuses.

As part of a hard-fought deal, the compensation limits will restrict bonus payments to one year’s base salary, though that figure can be doubled if a majority of shareholders approve.

The legislation had faced major opposition from Britain, home to Europe’s largest financial center, which was eventually outvoted by other European Union countries that wanted to rein in the excesses and risky trading that contributed to the financial crisis.

“The rules will put an end to the culture of excessive bonuses, which encouraged risk-taking for short-term gains,” said José Manuel Barroso, president of the European Commission. “This is a question of fairness. If taxpayers are being asked to pick up the bill after the financial crisis, banks must also make a contribution.”

The legislation will apply to all banks active in Europe, as well as the international divisions of European firms like Barclays and UBS. The bonus limits come as many of the world’s largest financial institutions are slashing jobs and reducing their exposure to risky trading activity in an effort to increase profitability and cut costs.

As part of the deal approved by the European Parliament on Tuesday, at least one quarter of any bonus that exceeds 100 percent of salary must be deferred for at least five years.

“The new set of rules is the farthest-reaching banking regulation in the E.U. to date,” said Othmar Karas, an Austrian member of the Parliament who prepared the report on the law. “The rules on bankers’ bonuses will instill fairness and transparency and contribute to a change in banking culture,” he said.

The new crackdown on bonuses will take effect from the beginning of next year, and forms part of a major overhaul of European banking legislation that also includes new capital requirements for the Continent’s largest banks. Many firms, including HSBC and Deutsche Bank, have been shedding assets in a bid to increase their capital reserves to protect against future financial shocks.

The 27 member states must still give formal approval to the plan, though analysts say that is a mere formality after the European Parliament voted in favor of a previously approved compromise.

Article source: http://dealbook.nytimes.com/2013/04/16/europe-votes-to-curb-banker-bonuses/?partner=rss&emc=rss

DealBook: With Set-Aside, Deutsche Bank Cuts 2012 Profit

The headquarters of Deutsche Bank in Frankfurt, Germany.Michael Probst/Associated PressThe headquarters of Deutsche Bank in Frankfurt.

8:34 p.m. | Updated

FRANKFURT — Deutsche Bank on Wednesday revised its 2012 profit sharply downward as it set aside more money to cover the potential cost of legal proceedings.

Deutsche Bank, Germany’s largest lender, allocated an additional 600 million euros ($775 million) to cover its legal costs, a move that reduced its pretax profit for 2012 by the same amount. As a result, net profit for the year was 291 million euros ($376 million), about 400 million euros ($517 million) less than the bank reported on Jan. 31.

Like many big European institutions, Deutsche Bank faces a long list of legal woes.

It is dealing with numerous lawsuits related to its sales of mortgages and mortgage-related derivatives in the United States before the financial crisis. Ronald Weichert, a Deutsche Bank spokesman, cited those suits as the main reason for setting aside more money for legal expenses.

The bank, based in Frankfurt, has also been ensnared by the global investigation into rate manipulation. In November, Deutsche Bank said it had set aside money for potential penalties related to rate rigging. Now, it appears the bank is increasing the buffer, partially in response to a string of recent settlements involving other banks.

In February, Royal Bank of Scotland agreed to pay American and British regulators $612 million to settle claims that it manipulated the London interbank offered rate, or Libor. Last year, the Swiss bank UBS agreed to a $1.5 billion settlement and Barclays agreed to pay $450 million in that case. The banks are also expected to face civil suits from people who paid more interest than they should have because of Libor manipulation.

In total, Deutsche Bank has set aside 2.4 billion euros ($3.1 billion) to cover possible judgments and other litigation costs. The legal expenses, the bank said, would not affect the dividend of 75 euro cents (97 cents) a share, which was announced in January.

Deutsche Bank was one of the few large German banks to avoid taking a direct government bailout during the financial crisis and it is the only German bank able to compete with large American and British investment banks.

The bank’s co-chief executives, Anshu Jain and Jürgen Fitschen, have cut back on bonuses and taken other steps they say will discourage excessive risk-taking and unethical or illegal behavior in the future.

Article source: http://dealbook.nytimes.com/2013/03/20/deutsche-bank-cuts-2012-profit-and-sets-aside-more-cash-for-legal-woes/?partner=rss&emc=rss

DealBook: A Bad Year in Britain for Banks, Not Bankers

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

8:57 p.m. | Updated

LONDON — British banks have been suffering amid dismal earnings, scandals and regulatory investigations, but three of the country’s largest financial firms handed out seven-figure pay packages to hundreds of employees last year.

The disclosures this week add to the growing debate over compensation, as regulators look to rein in bankers’ pay. On Friday, one labor union official in Britain criticized Barclays, calling the bank’s payouts “obscene.”

Since the financial crisis, regulators and investors have been pushing banks to rethink their pay practices. While the banks have made some efforts in recent years, compensations levels remain persistently high, prompting regulators to take further action.

Last week, the European Union proposed to cap bonuses at no more than the annual salary for the region’s bankers. The British government has resisted such efforts, saying the move could prompt an exodus of talent and could have the “perverse” effect of raising fixed salaries.

But the region’s banks cannot easily defend their outsize pay in the current environment. British institutions, already struggling to bolster profits since the crisis, have been tarnished by a series of scandals. In the latest disclosures on Friday, Royal Bank of Scotland, which is 82 percent owned by the British government after receiving a bailout during the financial crisis, announced on Friday that 93 of its employees earned more than more than £1 million, or $1.5 million, last year. The payments came even as R.B.S. reported a multibillion-pound loss last year. The bank did not disclose the similar figures of staff compensation for 2011.

Barclays, which came under fire after agreeing to a $450 million fine with American and British authorities related to the rate-rigging scandal, said in an annual report on Friday that 428 of its staff members still earned more than $1.5 million in 2012.

The British bank said the number of people earning more than that amount fell 10 percent compared with 2011. Barclays also paid five bankers more than $7.5 million each last year, down from 17 in 2011.

Another British bank, HSBC, said on Monday that 204 members of its staff fell into the million-pound-or-more pay bracket, a 6 percent increase from the previous year. HSBC, Britain’s biggest bank, also said on Monday that its net profit fell 17 percent last year because of a record fine to settle money-laundering charges and charges related to the value of its debt. HSBC settled charges that it transferred billions of dollars for nations under United States sanctions, enabled Mexican drug cartels to launder tainted money through the American financial system, and worked closely with Saudi Arabian banks linked to terrorist organizations.

The continued large payouts for some bank employees contrast with weak earnings at banks and a series of scandals connected to the manipulation of the London interbank offered rate, or Libor, and money-laundering allegations.

Last year, Barclays reported a net loss of $1.5 billion, in contrast with a profit of $4.5 billion for 2011. The loss was driven by provisions to cover legal costs related to the rate-rigging scandal and other improper activities. The British bank has also announced a wide-ranging cost reduction program that includes cutting 3,700 jobs and closing some business units and branches.

Amid widespread criticism, financial institutions have been reining in pay, partly driven by a fall in earnings connected to the European debt crisis.

At Barclays, the bank’s staff members will be evaluated against a set of standards, including integrity, put together by the bank’s chief executive, Antony Jenkins.

“We have been justifiably criticized for failures to engage effectively with and explain our decisions to shareholders and the wider public,” John Sunderland, chairman of the board remuneration committee, wrote in Barclays’ annual report released Friday. “We must also ensure that we pay no more than necessary to achieve Barclays objectives, and that we eliminate undeserved remuneration.”

At a recent meeting with investors, Mr. Jenkins, who took over as chief executive in August, also hinted that more job cuts could be in store for Barclays.

Talking about his priority to reduce costs and use more computer programs and technology to do so, he said that the bank could be looking for a way to operate with as few as 100,000 staff members over the next decade or so, according to a person with direct knowledge of his comments, who declined to be identified because the comments were not made in public. Barclays currently employs about 140,000.

As part of the overhaul, Barclays clawed back $450 million of deferred bonuses because of the bank’s involvement in the scandals, which also led to the resignation of Robert E. Diamond Jr. as its chief executive.

Barclays said it paid executive directors in total in 2012 less than half of what they received a year earlier. Mr. Jenkins bowed to public pressure and announced earlier that he would not take an annual bonus for 2012. His total remuneration was $3.9 million for last year, including $1.25 million in salary and $2.3 million as part of a long-term incentive plan. Mr. Diamond earned $9.5 million in 2011, according to the firm’s annual report.

The fate of the Royal Bank of Scotland continues to be a heated topic for political leaders. Mervyn A. King, the departing governor of the Bank of England, said at a British parliamentary hearing this week that R.B.S. could be split up in an effort to return ownership of the firm to the private sector.

“The whole idea of a bank being 82 percent owned by the taxpayer, run at arm’s length from the government, is a nonsense,” Mr. King said on Wednesday.

Royal Bank of Scotland also said it had taken back $453 million in current and future bonuses, mostly from its investment banking division, after the bank reached a $612 million settlement with authorities over its Libor issues.

Stephen Hester, the chief of Royal Bank of Scotland, earned $2.4 million last year, though he declined a bonus for 2012.

Article source: http://dealbook.nytimes.com/2013/03/08/fewer-barclays-employees-made-more-than-1-million/?partner=rss&emc=rss

DealBook: 2 Top Officers at Barclays to Step Down

LONDON – Barclays said on Sunday that its chief financial officer and its general counsel would resign, the latest departures after the British bank’s involvement in a series of scandals, including an investigation into the manipulation of global interest rates.

The announcement comes less than two weeks before Barclays is to announce a far-reaching overhaul of its business. The finance chief, Christopher G. Lucas, and the group general counsel, Mark Harding, will remain in their jobs until the bank appoints their successors, Barclays said in a statement.

Mr. Lucas is one of four current and former Barclays executives who have been ensnared by a regulatory investigation into how the bank raised capital from a Qatari fund during the financial crisis.

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Antony P. Jenkins, the bank’s chief executive, said Mr. Lucas and Mr. Harding told him late last year that they were considering resigning.

“The rationale which each shared with me was consistent and, typically, grounded in wanting to do what is best for the bank,” Mr. Jenkins said. “Their decision to retire was theirs alone.”

Mr. Lucas said it was an “appropriate time, as we start the implementation of the transform program, to begin my retirement from my role on the board and executive committee, and to pass the mantle on to a successor.”

Since taking over the top job from Robert E. Diamond Jr. last year, Mr. Jenkins has been seeking to repair the bank’s reputation and regain trust among investors by improving profitability and reducing risks.

Mr. Diamond resigned amid an investigation into the bank’s role in the manipulation of the London interbank offered rate, or Libor, which Barclays settled for $450 million in June. Marcus Agius resigned as chairman, and the chief operating officer, Jerry del Missier, also left Barclays.

Mr. Jenkins said on Friday that he would give up his bonus for 2012, which could have totaled as much as $4.3 million, under some pressure from lawmakers. The bank also recently faced a $1 billion bill to compensate clients to whom it inappropriately sold payment insurance, and it might yet have to compensate some customers that had bought a certain interest rate-hedging product.

In the statement, Mr. Jenkins said he planned to turn Barclays into the “go to” bank for customers and said the planned changes were expected to take five to 10 years.

Mr. Lucas became finance chief in 2007. He previously worked for the accounting firm PricewaterhouseCoopers, where he was head of financial services in Britain.

Mr. Harding joined Barclays in 2003 from the law firm Clifford Chance. He is also chairman of the bank’s reputation council.

Article source: http://dealbook.nytimes.com/2013/02/03/barclays-c-f-o-to-step-down/?partner=rss&emc=rss

DealBook: Amid Fresh Legal Woes, Barclays Swings to a Loss

A branch of Barclays in London. On Wednesday, the British bank posted a net loss of £106 million ($170 million) in its latest earnings report.Facundo Arrizabalaga/European Pressphoto AgencyA branch of Barclays in London. On Wednesday, the British bank posted a net loss of £106 million ($170 million) in its latest earnings report.

LONDON – Barclays faces more legal trouble after the British bank disclosed two new investigations by American authorities, clouding the already weak third-quarter results.

The bank on Wednesday said the Justice Department and the Securities and Exchange Commission are investigating whether Barclays broke U.S. anti-corruption laws in its capital-raising efforts during the financial crisis. The inquiry follows similar efforts by British regulators.

The United States Federal Energy Regulatory Commission is also investigating the past energy trading activity in Barclays’ American operations. American authorities have until Oct. 31 to charge the British bank in the matter. Barclays said it would defend itself against any potential allegations stemming from the inquiry.

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The fresh legal woes, which follow the rate-rigging scandal that erupted this summer, complicate a difficult turnaround effort for Barclays.

On Wednesday, the British bank posted a net loss of £106 million ($170 million) in the three months ended Sept. 30, a steep drop from a £1.4 billion net profit it reported in the period a year earlier. The results were hit by a charge on its own debt and provisions connected to the inappropriate sale of insurance to clients.

Libor Explained

Antony Jenkins, chief of Barclays.Justin Thomas/VisualMedia, via Agence France-Presse — Getty ImagesAntony Jenkins, chief of Barclays.

“The last three months have been difficult for Barclays,” said Antony P. Jenkins said on a conference call with reporters on Wednesday.

Shares in the British bank fell 3.8 percent in morning trading in London.

Mr. Jenkins took over as chief executive from Robert E. Diamond Jr., who resigned in July after Barclays agreed to pay $450 million to settle charges that it attempted to manipulate a key benchmark, the London interbank offered rate, or Libor. In the aftermath, Mr. Jenkins promised to increase the focus on retail banking, shifting away from riskier activity in the firm’s investment banking unit.

The new joint investigation from the Justice Department and S.E.C. relates to Barclays’ capital raising efforts during the recent financial crisis.

Unlike its peers, the Royal Bank of Scotland Group and the Lloyds Banking Group, the British bank turned to sovereign wealth funds in Abu Dhabi and Qatar for new cash. Barclays raised a total of $7.1 billion from Qatar in July and October 2008.

Earlier this year, the bank disclosed that British authorities were investigating the legality of payments to Qatari investors in connection to Barclays’ capital raising. The firm’s disclosure on Wednesday said U.S. regulators are also pursuing similar enquiries. Barclays said it was cooperating with the investigations.

Despite its overall net loss, Barclays is making progress as its underlying businesses show signs of improvement. Excluding the adjustments, Barclays said pretax profit rose 29 percent, to £1.7 billion, in the third quarter.

Amid the continued volatility in global financial markets, Barclays said pretax profit in its investment and corporate banking division more than doubled in the quarter, to just over £1 billion, because of a strong performance in fixed income and equities. The European debt crisis, however, weighed on Barclays’ retail and business banking franchise. Pretax profit in the group fell 31 percent, to £794 million.

Ian Gordon, a banking analyst at Investec Securities in London, said a fall in revenues at Barclays’ investment banking division during the third quarter had raised some questions about the unit’s performance, though the British bank was in a position to win market share as competitors, such as UBS which announced 10,000 layoffs on Tuesday, move to reduce their trading activity.

“As other pull back, there’s a potential to win a greater share of the piece,” Mr. Gordon said.

Barclays, however, warned that continued difficulties in Europe and uncertainty in global markets could weigh on future profitability. “We continue to be cautious about the environment in which we operate,” the bank said in a statement.

Given the challenging environment, Barclays is moving to insulate its businesses. The bank, which operates throughout the European Union, said it had reduce its presence in heavily indebted countries like Spain and Greece. The bank said it had cut its exposure to the sovereign debt of Spain, Italy, Portugal, Greece and Cyprus by 15 percent, to £4.8 billion.

It’s also bolstering its capital to protect against potential losses. The bank’s core Tier 1 ratio, a measure of its ability to weather financial shocks, rose to 11.2 percent at the end of September from 10.9 percent at the end of the second quarter.


This post has been revised to reflect the following correction:

Correction: October 31, 2012

An earlier version of this article misstated the pretax profit Barclays attributed to its retail and business banking franchise. It was £794 million, not £794.

Article source: http://dealbook.nytimes.com/2012/10/31/barclays-reports-third-quarter-loss-on-credit-charges/?partner=rss&emc=rss

DealBook: Gensler Calls for Overhaul of Libor

Gary Gensler, since 2009 the chairman of the Commodity Futures Trading Commission, in his office in Washington.Peter W. Stevenson for The New York TimesGary Gensler, the chairman of the Commodity Futures Trading Commission, in his office in Washington.

A senior regulator called for an overhaul of a crucial interest rate on Monday, telling the European Parliament that the integrity of consumer borrowing is at stake.

Gary Gensler, chairman of the Commodity Futures Trading Commission, suggested that authorities should retool or replace the London interbank offered rate, or Libor, which affects the cost of borrowing for consumers and corporations. Libor, a measure of how much banks charge each other for loans, underpins the cost of trillions of dollars in mortgages and other loans.

“It is time for a new or revised benchmark – a healthy benchmark anchored in actual, observable market transactions – to restore the confidence of people around the globe that the rates at which they borrow and lend money and hedge interest rates are set honestly and transparently,” Mr. Gensler said in prepared remarks that he delivered via video from Washington. “People around the world saving for the future, using credit cards or borrowing money for tuition, cars and homes have a real stake in the integrity of Libor” and other rates like the Euro Interbank Offered Rate, or Euribor.

(Mr. Gensler cancelled his trip to Brussels after a recent “clumsy” fall caused him to break four ribs and puncture a lung.)

In June, Mr. Gensler’s agency leveled a $200 million fine against Barclays, accusing the British bank of trying to manipulate Libor. The settlement was the first of several cases the agency is building against big banks suspected of lowballing rates to protect their image during the financial crisis.

Libor Explained

“Naturally, people are wondering if the Barclays situation was isolated,” Mr. Gensler said.

Citing reams of data, Mr. Gensler argued that the problem persists today.

With banks no longer lending to one another, he noted, Libor is not rooted in actual transactions. The United States-dollar-denominated Libor is also significantly different from the comparable Euribor rate. The discrepancy, he said, underscores that the rate remains vulnerable to tampering.

“When market participants submit for a benchmark rate lacking observable underlying transactions, even if operating in good faith, they may stray from what real transactions would reflect,” he said.

Some regulators have called for alternative benchmarks, including the overnight index swaps rate, that are based on real transactions. Other options include using short-term bank financing, where banks pledge collateral with other financial institutions.

While Mr. Gensler did not insist on ending Libor, he argued that it might be the safest route.

“Despite a long and painful recovery, sometimes replacement is the better choice when a hip or a knee or even a benchmark rate has worn out,” he said, a nod to his recent medical mishap.

Article source: http://dealbook.nytimes.com/2012/09/24/gensler-calls-for-overhaul-of-libor/?partner=rss&emc=rss