April 23, 2024

DealBook: Earnings Rise at Bank of America but Fall Short of Forecasts

A Bank of America branch in Manhattan.Andrew Gombert/European Pressphoto AgencyA Bank of America branch in Manhattan.

Bank of America reported first-quarter earnings on Wednesday that fell well short of Wall Street’s expectations but were substantially higher than in the period a year earlier.

The bank made 20 cents a share in the first quarter, compared with 3 cents in the year-ago period. Analysts were expecting a profit of 23 cents a share. Bank of America, the nation’s second-largest bank when measured by assets, had revenue of $23.5 billion in the first quarter.

Since the financial crisis, Bank of America’s performance has been hurt by large mortgage-related losses, but in recent months investors have been betting the bank would regain its footing. Its shares have risen nearly 40 percent in the last 12 months. And earlier this year, regulators approved the bank’s plan to buy back stock, a clear sign they felt the lender was on firmer ground.

In a statement, Brian T. Moynihan, Bank of America’s chief executive, said, “Our strategy of connecting our customers to all we can do for them is working.”

The question is whether the latest earnings will add to the recent optimism surrounding the bank, which lends to individuals and companies and has a large Wall Street presence through its Merrill Lynch unit.

Other large banks have reported earnings that exceeded analysts’ estimates this quarter, so Bank of America’s failure to do so may unnerve some investors. That said, some of the weakness in the quarter resulted from the types of losses that could cause less pain in the future, like litigation expenses relating to bad mortgages.

The bank said it had made headway in cutting expenses, something investors are watching closely. As banks struggle to increase revenue, they can improve earnings by reducing costs.

“There were many examples of progress this quarter,” said its chief financial officer, Bruce R. Thompson. “We reduced noninterest expense by nearly $1 billion year-over-year, and credit costs continued to decline.”

Notably, the bank’s earnings were lower in this year’s first quarter, after excluding accounting charges related to the bank’s own debt, a measure investors often ignore. Absent those charges in the first quarter of 2012, the bank made 31 cents a share.

This year’s first quarter contained very little effect from such charges, so the 20 cents a share the bank reported Wednesday should be compared with the 31 cents a share from the period a year earlier.

Article source: http://dealbook.nytimes.com/2013/04/17/bank-of-america-earnings-rise-but-fall-short-of-forecasts/?partner=rss&emc=rss

Detroit Seeks More Time to Avoid State Takeover

The case was presented at a state hearing in Lansing, with representatives for Detroit’s City Council appealing a decision this month by Gov. Rick Snyder to appoint an outside manager. That person would have sweeping authority to balance Detroit’s books, making it one of the largest cities in the nation ever to face such a level of oversight.

Speaking before a Michigan treasury official on Tuesday morning, City Council leaders, while admitting that headway was not as swift as they had hoped, said the state was expecting too much, too fast.

“Arguably, it would take up to a full two years for such an ambitious plan to be implemented,” said Irvin Corley Jr., a fiscal analyst for the Council, citing a legal agreement city leaders made with the state to cut costs last year. He insisted that Detroit had a “satisfactory plan” to address the fiscal challenges ahead, which include more than $14 billion in long-term liabilities, and begged for more time.

“We have a deal on the table,” added David Whitaker, director of research and analysis for the City Council. “It is not over. And we say keep the current deal we have in place.”

State officials do not believe that is enough.

Frederick Headen, a member of a state financial review team that examined Detroit, said changes that had been made by the city were too heavily weighted toward short-term savings. He also said that city leaders had “exhibited notable lack of enthusiasm” about working with the state, a factor that contributed to the need for an emergency manager to step in.

“The review team did not take issue with the stability agreement,” Mr. Headen said. “We took issue with the unwillingness by city officials to abide by its terms.”

While Mayor Dave Bing has opposed an emergency manager for Detroit, he did not support the City Council’s effort to appeal the decision to appoint one, saying he did not think it would change the governor’s mind. Still, he released a report on Tuesday to show progress the city had made.

Detroit would become Michigan’s sixth city currently under the supervision of an outside manager who has the power to alter labor contracts, sell off city assets and slash spending without the normal checks and balances that elected officials face.

For decades, a variety of methods — from oversight boards to appointed receivers — have been used in cases where cities have fallen into financial disarray, but the arrangements are often controversial, stirring up political struggles.

In Detroit, a mostly black city led mainly by Democrats, the intervention by the state, mostly white and led by Republicans, has been viewed by some as a needless and undemocratic seizure of control.

Mr. Snyder, a Republican, was expected to make a decision in a matter of days on whether to reconsider the city’s need for an emergency manager.

Monica Davey contributed reporting.

Article source: http://www.nytimes.com/2013/03/13/us/detroit-seeks-more-time-to-avoid-state-takeover.html?partner=rss&emc=rss

Bernard Sanders, a Gruff Voice for Shielding Entitlements

He had a cup of coffee and a bowl of oatmeal in a Senate cafeteria, marched into the chamber and began talking. He talked for so long — railing for 8 hours 37 minutes about economic justice, the decline of the middle class and “reckless, uncontrollable” corporate greed — that his legs cramped. So many people watched online that the Senate video server crashed.

Today the issue of tax cuts for the wealthy is once again front and center in Washington, as part of the debate over how to reduce the federal deficit. And Mr. Sanders is once again talking, carving out a place for himself as the antithesis of the Tea Party and becoming a thorn in the side to some Democrats and Mr. Obama, who he fears will cut Social Security, Medicare and Medicaid benefits as part of a deficit reduction deal.

A number of Congressional Democrats agree with Mr. Sanders that “no deal is better than a bad deal,” but he may be the most vocal.

He is emboldened by his recent re-election with more than 70 percent of the vote — “Seventy-one percent, but who’s counting?” Mr. Sanders said — and he appears to be making a little headway. Mr. Sanders has been pressing Mr. Obama to take Social Security off the negotiating table, and the White House now says changes to the retirement program should be considered on a “separate track” from a deficit deal.

“I think maybe he has learned something,” Mr. Sanders, 71, said of the president, who is 20 years his junior. “After four years he has gotten the clue that you can’t negotiate with yourself, you can’t come up with a modest agreement and hope the Republicans say, ‘That’s fair, you’re O.K., we’ll accept that.’ He’s reached out his hand, and they’ve cut him off at the wrist.”

The Senate is a polite place, so Republicans have little to say about their colleague from Vermont with the thick Brooklyn accent. (He acquired it growing up in Flatbush.) After four years of accusing Mr. Obama of practicing “European-style socialism,” they are hardly enamored of a man who actually embraces European-style socialism, and who carries a brass key chain from the presidential campaign of Eugene V. Debs, who ran in the early 1900s as the Socialist Party candidate.

“Bernie?” Senator John Cornyn, the Texas Republican, said with a raised eyebrow and a sly smile. “He’s one of a kind.”

Vermont Republicans are a bit more pointed. Richard Tarrant, a businessman who ran against Mr. Sanders in 2006 and was trounced, agrees with him that taxes should rise for the rich. But he sees his former opponent as a populist “advocating class warfare” and raising “false hope” about programs that are unsustainable.

Mr. Sanders, who has a habit of answering questions with questions, says it is Republicans who are engaging in class warfare.

“Do we really say we’re going to balance the budget on making major cuts in disability benefits for veterans who have lost their arms and legs defending America, while we continue to give tax breaks to billionaires?” he thundered, without pausing for breath. “Is that what the American people want? They surely do not, and only within a Beltway surrounded by Wall Street and big-money interests could anyone think that is vaguely sensible.”

Mr. Sanders, who on Wednesday was appointed chairman of the Veterans Affairs Committee, has 28 of the Senate’s 51 Democrats with him on keeping Social Security out of the deficit talks; all signed a letter that he and the Senate Democratic leader, Harry Reid, sent to the president. In the House, 104 Democrats — more than half of the caucus — signed a similar appeal. And 13 Senate Democrats, plus Mr. Sanders, signed a second letter demanding that entitlement programs be spared “harmful cuts.”

To Mr. Sanders, “harmful cuts” means any cuts in benefits. He says that entitlement spending should be trimmed only by wringing out inefficiencies. Many budget experts say that is unlikely to produce as much savings as the president and Republicans want. But Senator Tom Harkin, the Iowa Democrat, believes that Mr. Sanders has some silent support.

Article source: http://www.nytimes.com/2012/12/14/us/politics/bernard-sanders-a-voice-for-shielding-entitlements.html?partner=rss&emc=rss

DealBook: Women Break Down Barriers in Mideast Finance

Hoda Abou-Jamra is the founding partner of a $40 million private equity health care fund that is based in Dubai.Heinz S. Tesarek for The New York TimesHoda Abou-Jamra is the founding partner of a $40 million private equity health care fund that is based in Dubai.

Hoda Abou-Jamra still remembers the meeting when potential investors for her private equity fund thought she was the secretary.

“I would ask a question, and they would answer to the man next to me. I would answer their question, and they would look at him,” she said, laughing. “I didn’t let it bother me. I just stood up straighter and talked louder.”

Women deal makers, financiers and entrepreneurs are a rare breed in the Middle East. As a founding partner of a $40 million health care fund in Dubai, Ms. Abou-Jamra operates in a male-dominated industry globally and a male-dominated work force locally.

In private equity, women account for roughly 9 percent of the senior management positions worldwide, with the share varying from 9.1 percent in Europe to 8.7 percent in the United States, according to a study this year by the industry research firm Preqin. The gender imbalance is even more extreme in the Middle East, market participants say. While few statistics are available on the region’s nascent industry, only 25 percent of women enter the job market at all, compared with nearly 60 percent in the United States.

Ms. Abou-Jamra and other women financial professionals in the Middle East are trying improve the mix. It is a slow process, but they are making headway by creating their own investment vehicles, forging ties with influential players, and generally raising awareness.

“For the gulf states, in the last decade, women have become a lot more entrepreneurial,” said Dina Kawar, the ambassador to France from Jordan, where women account for about 13 percent of all private-sector workers.

Like Ms. Abou-Jamra, Maha Al-Ghunaim found a place at the top by creating a new financial firm, rather than working inside an existing one. At the investment arm of Kuwait’s sovereign wealth fund, Mrs. Al-Ghunaim steadily rose through the ranks, reaching the position an assistant general manager. But competition was intense, and she felt her best opportunity for advancement was elsewhere.

“When you are climbing the ladder, you have to balance between speed and safety,” Mrs. Al-Ghunaim said.

So 13 years ago she founded Global Investment House, a Kuwait-based financial firm that began as a brokerage firm and investment bank. She has since expanded into private equity, with four funds overseeing about $1.5 billion.

The barriers for women are both cultural and structural.

“The guys have so much testosterone, I’ve had to learn to be more aggressive to be heard,” Ms. Abou-Jamra said. “I’ve found that unless I participate in boys’ club activities, I’m put aside. You have to be one of the boys to really fit.”

But some Mideast countries ban women from driving or mixing in public spaces with the opposite sex. Strict dress codes are also enforced in places like Saudi Arabia and Iran.

“There are buildings where I walk in, and I’m the only woman there,” said Ms. Abou-Jamra. “Even the secretaries are male.”

Such restrictions made it difficult for Muna AbuSulayman, an entrepreneur and former television personality, to develop her latest ventures, a fashion line and a Facebook application for new parents. Simply registering the businesses with the government took a year, instead of the usual three days, she said.

“Each time, they would ask for something else, another piece of information, but they wouldn’t ask for all of it at the same time,” she said.

One item that held up the process: an address. The country’s law forbids people from using their home for commercial purposes. Ms. AbuSulayman could not use her father’s office either, since it was not licensed to have women employees under Saudi Arabia’s gender segregation rules. She obtained a business address through a brother.

It can be difficult to find capital, too.

Despite the region’s wealth and deep-pocketed investors, women are often reliant on conservative lenders, which are reluctant to give loans to small, women-led firms. When Ms. AbuSulayman and a male counterpart submitted similar applications to the same Saudi Arabian bank, she received a loan roughly a third of the size of the man.

“Applying for a loan, a woman will not get as much as a man,” she said. “My sister decided to sell her catering business when she could not raise the money she needed to expand it.”

Ms. Abou-Jamra went outside of the Mideast to find money for her firm. After meeting with four international private equity firms, she won the backing of the TVM Capital, a German private equity firm focused on the life sciences, to start a health care fund. She has since raised capital from investors like the World Bank’s private-sector arm, the International Finance Corporation, and the health care unit of General Electric.

Fund-raising in the Middle East was a central topic at a conference in Paris this month. The one-day event, attended by dozens of business people, diplomats and policy analysts, covered how mentorships and social media could play a transformative role in helping women financiers succeed in the region.

“As a woman in the Middle East, as an Arab woman, I found some men were very supportive,” Ms. Abou-Jamra said. “They helped me to not give up.”

Anu Bhardwaj, organizer of the conference, said “like-minded people invest in one another.”

Ms. Bhardwaj’s efforts are tied to a wider campaign by the Women’s Business Forum. Backed by the Organization for Economic Cooperation and Development, Jordan and the United States, the group is trying to educate women entrepreneurs and executives across the globe.

The group wants to tap into the vast resources of the region’s wealthy women. In the Middle East, women are thought to control billions.

“Widows and divorcées have that kind of money,” Ms. Bhardwaj said, “and they don’t spend it all on eye shadow.”

Article source: http://feeds.nytimes.com/click.phdo?i=dff0511063cba6c47b03b82cd5012b38