August 6, 2021

DealBook: Brazil Insurer Prices Biggest I.P.O. of the Year

BB Seguridade, the biggest insurance company in Latin America, raised $5.74 billion late Thursday in the largest initial public offering in the world so far this year.

The shares were priced at 17 reais each — within the range of 15 to 18 reais expected in the offering’s prospectus. The company is selling 675 million shares, or about a third of its total capital.

The share total includes a 175 million shares in additional and supplementary lots, whose sale will be finalized on May 28.

If all those shares were sold, it would be the second-largest I.P.O. in Brazil’s history, after Banco Santander Brasil’s $8 billion offering in 2009.

BB Seguridade’s shares will begin trading Monday on the Bovespa, the São Paulo stock exchange.

The deal occurred two days later than originally planned, as the CVM, Brazil’s securities regulator, required a delay because of irregularities in publicity documents earlier this month.

BB Seguridade has 16.5 percent of Brazil’s insurance market and operations in many other South American countries, mostly through its subsidiary Mapfre.

The money raised in the I.P.O. will go to BB Seguridade’s parent, the government-controlled Banco do Brasil, which still owns 70 percent of the company.

Banco do Brasil is already the largest financial institution in Latin America, and the capital raised in the offering should permit it to grow further through acquisitions.

Indeed, according to the I.P.O. prospectus, BB Seguridade is planning to accompany Banco do Brasil “in expanding its activities outside of Brazil, with a focus on Latin America… either through strategic partnerships or acquisitions.”

Banco do Brasil’s investment bank, BB Investimentos, was the lead underwriter for the offering, with JPMorgan Chase, Bradesco BBI, Itaú BBA, BTG Pactual, Citigroup, Brasil Plural, and Banco Votorantim also involved,

Brazil’s I.P.O. market was mostly dormant last year, with only three companies going public. The investment bank BTG Pactual raised $1.9 billion last April, but it did not pave the way for further big deals as local investment bankers had hoped.

This year is already proving to be a more robust market.

Besides BB Seguridade, the software companies Linx and Senior Solution, the sugar-cane processor Biosev, the electricity company Alupar and the airline Gol’s frequent-flyer program Smiles have held offerings this year, though these deals been well under $1 billion.

Another megadeal is waiting in the wings, however.

Votorantim Cimentos, Brazil’s largest cement producer, has filed documents for an I.P.O. that could raise as much as $5.4 billion through selling both shares in São Paulo and American depositary receipts in New York.

Article source: http://dealbook.nytimes.com/2013/04/25/brazil-insurer-prices-biggest-i-p-o-of-the-year/?partner=rss&emc=rss

DealBook: Report Faults ‘at All Costs’ Attitude at Barclays

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

7:43 p.m. | Updated LONDON — The push to change Barclays from a predominantly British retail bank to a global financial giant over the last two decades created a culture that put profit before customers, according to an independent report released on Wednesday.

That review, which was ordered by the bank’s top management after a rate-rigging scandal last year, highlighted an “at all costs” attitude, particularly in the company’s investment bank, that was reinforced by a bonus system that encouraged taking risks over serving clients.

“Barclays became complex to manage,” said the report, which was overseen by Anthony Salz, former head of the law firm Freshfields Bruckhaus Deringer. “The culture that emerged tended to favor transactions over relationships, the short term over sustainability and financial over other business purposes.”

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The conclusions represent a criticism of the strategy of a former chief executive of Barclays, Robert E. Diamond Jr., who helped transform the British company into one of the world’s largest investment banks.

Mr. Diamond, who stepped down last year after the scandal involving manipulation of the London interbank offered rate, or Libor, ran the bank’s investment banking operations until he became chief executive in 2011.

Libor Explained

Robert E. Diamond Jr., the former chief of Barclays.Lefteris Pitarakis/Associated PressRobert E. Diamond Jr., the former chief of Barclays.
Antony Jenkins, chief of Barclays.Justin Thomas/VisualMedia, via Agence France-Presse — Getty ImagesAntony P. Jenkins, chief of Barclays.

The report released on Wednesday said the push to increase profit across the bank’s operations led to potentially risky behavior that had a direct effect on the company’s reputation.

Last year, the British bank was the first global financial institution to admit wrongdoing in the rate-rigging scandal. Barclays agreed to a $450 million settlement with American and British authorities after some of its traders and senior managers were found to have manipulated the Libor.

The bank has also been implicated in the inappropriate sales of complex financial and insurance products to small businesses and retail customers that has led the British banking industry to pay billions of dollars in compensation.

The new chief executive, Antony P. Jenkins, announced a plan this year to improve the bank’s culture and profitability, including the closing of a tax planning division and the elimination of 3,700 jobs, mostly in the bank’s unprofitable European retail and business banking unit.

Mr. Jenkins also outlined efforts to end aggressive risk-taking at Barclays. In a memorandum to employees, he said staff members who were unwilling to buy into the bank’s push to rebuild its reputation should leave the bank.

Despite the move to improve how Barclays operates, it still has cultural problems, particularly related to banker bonuses, according to the independent review released on Wednesday.

“Many senior bankers seemed still to be arguing that they deserved their precrisis levels of pay,” the report said. “A few investment bankers seemed to lose a sense of proportion and humility.”

While total employee compensation at Barclays has fallen as a result of the financial crisis, pay for the bank’s top management has remained above the industry average, the report added.

In 2011, for example, compensation for the bank’s top 70 managers was 17 percent higher than that of peers at rival banks. The disparity was a result, in part, of executives moving from the investment banking unit to less well-paid jobs in other operations without an adjustment in pay to reflect their new positions, according to the independent review.

“The report makes for uncomfortable reading in parts,” the bank’s chairman, David Walker, said in a statement. “We must learn from the findings.”

Article source: http://dealbook.nytimes.com/2013/04/03/report-faults-at-all-costs-attitude-at-barclays/?partner=rss&emc=rss

DealBook: JPMorgan Executives Face Scrutiny in ‘London Whale’ Hearing

Ina Drew and Peter Weiland swear in before testifying at a Senate inquiry on JPMorgan's trading loss.Gary Cameron/ReutersIna Drew and Peter Weiland swear in before testifying at a Senate inquiry on JPMorgan’s trading loss.

WASHINGTON — A top JPMorgan Chase executive struggled to defend his actions on Friday as lawmakers scrutinized the bank’s multibillion-dollar trading loss.

For nearly an hour, the executive, Douglas L. Braunstein, was berated for playing down JPMorgan’s risky bets to investors and regulators on a conference call in April, just weeks before the bank disclosed the costly blowup.

“You give this very glowing call,” said Senator Carl Levin, Democrat of Michigan, “instead of telling them what you knew” — that the portfolio “had been losing money and violating risk limits.”

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Mr. Braunstein defended his statements in the conference call, saying they were the most “accurate” depiction based on the information at the time.

“You thought that was a balanced presentation?” Mr. Levin asked incredulously, peering over his glasses.

The long, and often tense, Congressional hearing on Friday put JPMorgan in a tough position. While the investment bank has tried to distance itself from the trading debacle, the hearing, which follows a nine-month inquiry, is renewing the pressure on JPMorgan and its influential chief executive, Jamie Dimon.

During roughly four hours of testimony on Friday, Mr. Levin and a handful of colleagues questioned current and former executives about the bank’s risk management, oversight policies and pricing methods. The lawmakers took aim at JPMorgan for misleading investors and regulators about the disastrous bet, building off a scathing, 300-page Congressional report released on Thursday.

The executives floundered, at times, as they tried to counter the claims. They described efforts to reduce risk as the losses swelled, but indicated that such moves had been “undermined” by traders who deliberately undervalued bets to disguise the growing losses. Such testimony could provide fresh ammunition for the Securities and Exchange Commission, which is investigating the trading loss.

“We have made regrettable errors and overhauled our risk policies to correct these mistakes,” a bank spokeswoman said, “but senior JPMorgan executives always provided information to regulators and the public that they believed to be accurate.”

While Mr. Dimon was not present at the hearing, he was referred to repeatedly as lawmakers explored how JPMorgan had resisted regulators’ requests for information.

One episode emerged as emblematic: for a brief period in 2011, regulators stopped receiving profit and loss reports about the investment bank. Mr. Dimon, the executives explained, had ordered the information halted because of broad security concerns.

Senator John McCain, Republican of Arizona, challenged that decision. “Do we live in a world,” he asked, where “we just decide, well, because we’re concerned about something, we’re not going to comply with regulations?”

In an especially contentious exchange, Mr. Braunstein, a vice chairman of JPMorgan and its former chief financial officer, faced off with Mr. Levin over issues of disclosure. The senator questioned Mr. Braunstein’s statements on the April conference call, which indicated that the trading positions were made with the blessing of “risk management at the firmwide level” and were “transparent to regulators.” Those statements, Mr. Levin argued, painted an “inaccurate impression” about the nature of the trades and their risks.

Citing the bank’s internal testing of the portfolio at the time, Mr. Levin told Mr. Braunstein the characterization of the trades as a hedge was false. The testing, he said, had shown that the trades would not defray losses in the same manner as a hedge.

After unrelenting questioning, Mr. Braunstein conceded that, in contrast to his statements in April, regulators did not receive granular information about the trades “on a regular and recurring basis.” Even so, he maintained that his earlier statements were accurate based on the information at the time.

For Ina Drew, who resigned in May as the head of JPMorgan’s chief investment office, the group at the center of the problems, the hearing was the first opportunity to publicly defend her role in the troubled trades. While Ms. Drew acknowledged that “things went terribly wrong,” she directed virtually all of the blame at lower-level traders in London and other subordinates.

She returned to this defense throughout the hearing, deflecting culpability by faulting inaccurate information. In one bruising exchange, she was forced to explain why the bank stopped giving regulators profit and loss reports for the chief investment office during a critical period last year.

Ms. Drew responded that she had had no idea that the reports were not being provided to regulators. “If I had known,” she said, “I would have considered it the wrong thing to do.”

The senators also asked Ms. Drew why the bank had assured regulators in January 2012 that it was slashing the size of its positions when, in fact, it was expanding them. Ms. Drew maintained that there had been no deliberate duplicity. She said she had not been aware that the traders were increasing their bets.

The lawmakers pressed her similarly about why JPMorgan told regulators in April that the trading loss was roughly $580 million, when internal projections put the figure at more than $700 million. Ms. Drew reiterated that she had acted based on information that was correct to “the best of her knowledge.”

Such blame shifting prompted criticism by Mr. McCain, the subcommittee’s top Republican. “The traders seemed to have more responsibility and authority than the higher-up executives,” he said.

While Ms. Drew and Mr. Braunstein weathered the fiercest questioning, none of the executives were spared. Even Michael J. Cavanagh, co-head of the corporate and investment bank, who has emerged as a leading contender to succeed Mr. Dimon, came under fire.

Mr. Levin pushed Mr. Cavanagh to admit that the bank had altered its method for pricing trades to minimize losses. Mr. Cavanagh stood firm, arguing that the valuations were fair.

But Mr. Levin persisted, asking, “How do you possibly justify your process?” Was it a “coincidence,” he asked, that the models shifted just as losses on the trades were ballooning? At one point, he reminded Mr. Cavanagh that he was under oath.

He excoriated Peter Weiland, who used to be in charge of market risk for the chief investment unit, for censuring a JPMorgan analyst over an e-mail that outlined strategies for tweaking risk modeling. Mr. Levin pressed Mr. Weiland on his resistance to using e-mail, suggesting that the executive was trying to avoid creating a paper trail.

“Why hide it?” Mr. Levin asked. If JPMorgan’s dealings were appropriate, why shy away “from putting it in writing?”

Mr. Weiland responded that his objective was to prevent anyone from “misconstruing” the bank’s intentions.

Article source: http://dealbook.nytimes.com/2013/03/15/jpmorgan-executives-face-withering-questions-at-senate-hearing/?partner=rss&emc=rss

Putin Names Ally as Head of Russian Central Bank

MOSCOW — President Vladimir V. Putin on Tuesday nominated Elvira Nabiullina, a close political ally and his chief economic adviser, to become the new chairwoman of Russia’s central bank.

The nomination strongly signaled that the bank’s independence, like that of so many other institutions in Russia, may now be eclipsed by more direct Kremlin control over rate-setting policy. The step came despite a general consensus in economic circles that countries with independent central bankers tend to do better economically over the long term.

Ivan Tchakarov, the chief economist for Russia and the Commonwealth of Independent States at Renaissance, a Moscow investment bank, said investors were likely to react negatively to the appointment, which was announced after the market closed Tuesday in Moscow.

With much of the rest of the scaffolding of government, including Parliament and the judiciary, now under de facto control by the Kremlin, the succession struggle this winter with the looming resignation of Russia’s long-serving central banker, Sergei M. Ignatiev, became a fight for the continued independence of the bank.

“The central bank isn’t simply a commercial bank — it is above all the regulator of our financial system and the most powerful institution responsible for state economic policy,” Mr. Putin said in making the announcement, in comments carried by news agencies.

Supporters of a more independent institution had hoped a deputy bank chairman, Aleksei V. Ulyukayev, might take over as a candidate representing continuity and independence. But members of Mr. Putin’s economic team, including Ms. Nabiullina, have been openly pushing for lower rates that might stimulate faster growth.

Prime Minister Viktor Orban of Hungary recently made a similar move in naming his economics minister and political ally, Gyorgy Matolcsy, to head that country’s central bank.

Mr. Putin, speaking Tuesday at his country residence, Novo-Ogaryovo, suggested that there had been some compromise with supporters of the current bank leadership, a group seen as inflation hawks, by announcing that Mr. Ignatiev would remain as an adviser to Ms. Nabiullina.

In February, Prime Minister Dmitri A. Medvedev of Russia released an economic policy statement calling for an optimistic 5 percent annual growth in gross domestic product, up from 3.5 percent last year. At the same meeting, Mr. Putin obliquely criticized the central bank, formally known as the Bank of Russia, saying rates were not conducive to growth.

Mr. Tchakarov, the analyst, said the appointment could be a signal of higher inflation and a weaker ruble.

Ms. Nabiullina “is often seen as a close political ally of Putin,” Mr. Tchakarov said. “This will certainly be perceived by markets as a signal that the central bank of Russia in the future will be much more subject to pressure. This is a blow to the independence of the central bank.”

While a policy of lower rates might work to jump-start economic growth in large, stable economies like the United States or the European Union, the calculus is different in Russia, where lower interest rates cause currency traders to dump the ruble.

Just this cycle plagued Russia’s neighbor, Belarus, two years ago during a balance of payments crisis when the Belarusian currency, also called the ruble, collapsed.

Still, Belarus’ central bank on Tuesday cut its main interest rate to below the 30 percent that is generally considered necessary for banks and individuals to agree to hold their savings in the wobbly national currency.

This cut, to 28.5 percent, was against the advice of the International Monetary Fund. But the country’s authoritarian president, Aleksandr Lukashenko, had flatly threatened to fire the central bank leadership if they did not lower rates.

Article source: http://www.nytimes.com/2013/03/13/business/global/putin-names-ally-as-head-of-russian-central-bank.html?partner=rss&emc=rss

Investment Banking’s Uncertain Future at UBS

 Even before UBS, the giant Swiss bank, lost $2.3 billion in a rogue trading scandal five weeks ago, it was determined to shrink its investment banking operation to placate regulators and to improve profitability. 

 To give the bankers a flavor of what to expect at a firm whose focus was increasingly shifting toward the more profitable and less risky business of wealth management, their boss, Carsten Kengeter, had arranged for a special guest speaker: Jürg Zeltner, UBS’s head of wealth management.

 An enthusiastic Mr. Zeltner told the bankers that their division was still much needed even as it faced far-reaching cuts, according to a person who was present but declined to be named because the meeting was private. In fact, the key to improve UBS’s profitability and share price, the Swiss manager said, was to outsmart the competition by having investment bankers work closer with their colleagues in wealth management and share more clients.

 The abrupt resignation of Oswald J. Grübel as chief executive last month over the trading loss left the new investment banking strategy mainly in the hands of Mr. Zeltner and Mr. Kengeter, the head of investment banking, who came from Goldman Sachs three years ago. UBS’s interim chief executive, Sergio P. Ermotti, came to UBS only in April and it was unclear whether his role would be made permanent.

 “What they are trying to do has never been done before,” Christopher Wheeler, an analyst at Mediobanca, said. “They want to shrink the investment bank by choice, which means unwinding positions without loss and running down their books while keeping the morale among staff, and it’s unclear who’s running the shop.”

The sudden shift of UBS, long one of Europe’s major investment banks, is driven by a disappointing performance but also by demands from Swiss regulators and politicians to abandon riskier practices like proprietary trading and to buttress their operations with more capital.

Switzerland, which is not part of the European Union, already has stricter capital rules than the rest of the region, but European leaders are considering forcing banks to hold more reserves to cushion them in a crisis. UBS officials say they hope that their urgency to restructure could give it a head start against rivals like Deutsche Bank.

UBS is expected to reveal the investment banking plans to investors at the Waldorf-Astoria in New York on Nov. 17, but some analysts said the bank might present some details on Tuesday;, when it releases its third-quarter earnings figures.

The question is whether UBS can shrink the investment banking business enough to satisfy investors and Swiss regulators without disrupting its other operations, losing lucrative clients or costing too much. With a smaller investment bank, UBS expects earnings growth to come from attracting high-net-worth clients with services and products created by linking investment banking and wealth management closer together, especially in Asia. For example, UBS would help a family-owned business in Hong Kong sell shares on the stock market and then offer advice on how to manage the proceeds. 

“The increasingly close relationship we enjoy with wealth management allows its clients to more actively benefit from the full capabilities the investment bank offers,” Mr. Kengeter said in an interview this month. “In today’s market and regulatory environment, that proposition has never been more compelling.”

 Much is at stake for UBS, whose investors are slowly running out of patience after watching the bank stumble from one credibility crisis into another, forcing three chief executives out the door in five years.

 UBS is not alone among banks seeking to scale back their investment banking business at a time of declining trading revenue and stricter capital requirements. Goldman Sachs and Bank of America are also cutting thousands of jobs. But unlike them, UBS missed out on a fixed-income trading boom in 2009 that generated big profits on Wall Street because it was still repairing its troubled credit operation. 

Article source: http://feeds.nytimes.com/click.phdo?i=24dd960f91d4692dbd3949c07d2bed98

DealBook: Bank of America Loses Title as Biggest in U.S.

Brian T. Moynihan, chief of Bank of America.Jeffrey Camarati/Bloomberg NewsBrian T. Moynihan, Bank of America’s chief executive, is reversing the legacy of Ken Lewis, his empire-building predecessor.

For Bank of America, it is the end of an era.

With the bank shrinking its balance sheet and selling off assets, the company, based in Charlotte, N.C., surrendered its title as the country’s biggest bank Tuesday, another sign of how a money-losing giant assembled over decades is being reshaped into a smaller and, investors hope, more profitable institution.

Bank of America, with $2.22 trillion in assets reported Tuesday in its third-quarter earnings, is now second to JPMorgan Chase, which has $2.29 trillion assets. It also ranks second to JPMorgan Chase in terms of branches and total deposits.

Analysts said it was more evidence of how Bank of America’s chief executive, Brian T. Moynihan, is reversing the legacy of his controversial predecessor, Ken Lewis, an empire builder who craved being the biggest in United States banking and whose creation ultimately needed two federal bailouts to survive the financial crisis.

“There’s been a huge philosophical change in who they want to be,” said Mike Mayo, a veteran bank analyst with Crédit Agricole Securities. “This is a milestone that marks the end of a two-decade-long period during which they aspired and eventually became the largest bank.”

In today’s slow-growth economy, though, bigger is not necessarily better. And the challenges Bank of America still faces were evident in the numbers it released Tuesday.

Buoyed by one-time gains from accounting changes and asset sales, Bank of America reported a $6.23 billion profit for the third quarter, but the headline number camouflaged weak results in many of its businesses. Still, investors cheered the news, pushing the bank’s shares up 10 percent to $6.64 a share.

Although its investment bank, Bank of America Merrill Lynch, has been a crucial source of profit recently as other businesses like mortgage lending hemorrhaged money, the slow trading environment and financial uncertainty in Europe caused trading revenue to drop. The company’s global banking and markets revenue fell to $5.2 billion from $7 billion, and the unit reported a $302 million loss in the third quarter, a sharp contrast to the $1.46 billion gain a year ago.

Mr. Mayo estimated that the bank’s underlying core revenues dropped 17 percent, as other businesses like global commercial banking, card services and consumer real estate services also posted declines from a year ago. One exception was the company’s wealth management business, where revenue and net income both rose.

Still, the story behind the $6.23 billion profit was mostly a tale of one-time gains from accounting changes and asset sales, including $4.5 billion from positive adjustments to the value of its outstanding debt, a $1.7 billion accounting gain on the perceived riskiness of its debt and a pretax gain of $3.6 billion from the sale of half its stake in China Construction Bank.

“It’s not like 2007 or 2008 where there are losses that threaten the bank’s capital’s position,” said Christopher Kotowski, an analyst with Oppenheimer. “But nothing was particularly great and trading was very weak.”

Without the special items, Bank of America would have earned about $2.7 billion, which included pulling back $1.7 billion it had set aside, largely for borrowers who fail to pay their consumer and credit card loans.

Jason Goldberg, an analyst with Barclays Capital, counted 15 special items in the quarter, down from 16 in the second quarter but more than the 12 in the first quarter. “It’s a big company undergoing a transformation.”

The bank reported net income of 56 cents a share, compared with a loss of $7.3 billion or 77 cents a share in the year-earlier period. Analysts had been expecting the bank to earn 28 cents a share in the third quarter. Revenue rose to $28.7 billion from $26.9 billion, although that too was pumped by one-time gains.

For investors, the red ink flowing from Bank of America’s disastrous 2008 acquisition of Countrywide Financial, the subprime mortgage giant, remains the biggest worry. Both the federal government and private investors are seeking compensation for tens of billions of dollars in losses on securities backed by subprime mortgages.

Part of the reason investors breathed a sigh of relief Tuesday was that the red ink from subprime mortgages eased in the last quarter. Provisions for so-called put-backs, in which investors try to force the bank to buy back soured mortgages by arguing they were improperly originated and bundled into securities, fell to $278 million. In the second quarter, these provisions totaled a whopping $14 billion, including an $8 deal billion with investors that include the Federal Reserve Bank of New York. Litigation costs fell to $290 million from $1.5 billion in the second quarter.

In 2006, Bank of America surpassed Citigroup to become the biggest bank by market capitalization, an event that can be seen as a high-water mark of Mr. Lewis’s era. Today, its $67 billion market value lags Wells Fargo, JPMorgan Chase and Citigroup.

Bruce R. Thompson, the company’s chief financial officer, said he expected assets to keep shrinking in the coming months, as some loans come due and are not renewed and the company’s Canadian credit card business is sold in the fourth quarter.

“We’re not focused on the size of the balance sheet, what we’re focused on is getting the balance sheet that’s best for our customers and best for us,” he said.

In fact, while JPMorgan Chase and Citigroup showed slight growth in terms of total loans in the third quarter, Bank of America’s overall loan portfolio declined by about 0.9 percent compared with the second quarter, Mr. Goldberg noted.

The company’s headcount is also set to drop sharply from the 290,509 recorded during the third quarter. Roughly 2,000 employees were told last quarter their jobs were being eliminated, and 30,000 more are set to go over the next three years as part of Project New BAC, an efficiency initiative aimed at cutting $5 billion in expenses in its first phase.

Mr. Moynihan defended Bank of America’s controversial new $5-a-month debit card fee Tuesday, arguing that customers who bring more of their banking business to the company will be able to avoid it.

Article source: http://feeds.nytimes.com/click.phdo?i=3a19738d9d0fb55eedb0d539ee98f87f

Central Banks Act in Concert to Ease Fears on Europe Debt

The banks, in a coordinated action intended to restore market confidence, agreed to pump dollars into the European banking system in the first such show of force in more than a year.

The move, coming almost exactly three years after the collapse of the investment bank Lehman Brothers, sharply increased the value of shares in banks heavily exposed to debt from Greece and the other struggling members of the 17-nation euro zone.

The euro, which had been falling in recent days, rebounded, rising roughly 1 percent in European trading Thursday. But whether the central bank action would provide lasting relief remained to be seen.

The European Central Bank said it would allow banks to borrow dollars for up to three months, instead of just for one week as before. The E.C.B. said it was acting in cooperation with the Federal Reserve of the United States, the Bank of England, the Bank of Japan and the Swiss National Bank.

It was the first coordinated effort to provide dollars since May 2010, and seemed to go beyond just providing reassurance that European banks would not be cut off by U.S. lenders wary of their financial state. It also echoed a similar move undertaken just a few days after the Lehman Brothers bankruptcy nearly brought the world’s financial system to its knees.

The central banks seemed determined to demonstrate that they would not hesitate to deploy their combined weight to keep the European sovereign debt crisis from leading to a collapse of the euro zone.

“They are getting together and acting together,” Christine Lagarde, the president of the International Monetary Fund, said in Washington on Thursday. “To me, that is the most important message.”

But Ms. Lagarde also warned that policy makers had depleted their ammunition since the financial crisis of 2008, and suggested more action was needed.

“We have entered into a dangerous phase of the crisis,” she said. There is still a path to recovery, she said, but it is “a narrow one.”

The central bank action comes as European finance ministers and other key policy makers were gathering in Wroclaw, Poland, for meetings on Friday and Saturday. The U.S. Treasury secretary, Timothy F. Geithner, who was scheduled to attend, was expected to urge European officials to act more aggressively to contain the crisis, which has already begun to undercut growth in Europe.

An official forecast warned Thursday that growth in Europe would come “to a virtual standstill” toward the end of the year. The European Commission, the bloc’s executive, cut the growth forecast for the euro area to 0.2 percent for the third quarter and 0.1 percent in the fourth, down from 0.4 percent for both periods. It predicted, though, that Europe would just barely avoid a double-dip recession.

Analysts said they expected Mr. Geithner to press European ministers in Wroclaw to increase the resources available to their bailout fund for the euro zone countries. But among European leaders, and even within the E.C.B., deep disagreements exist over how to prevent the problems of Greece from undermining the common currency.

Members of the euro area are still struggling to ratify an expansion of the bailout fund that they agreed to in July. A further expansion of the fund has raised fears that the increased obligations could hurt some countries’ credit ratings.

“Part of the problem for policy makers is that they are still waiting for last big initiative to get off the ground,” said Peter Westaway, chief European economist in London for Nomura. “We’re all kind of on hold until then.”

Article source: http://www.nytimes.com/2011/09/16/business/global/borrowing-costs-stubbornly-high-at-spanish-auction.html?partner=rss&emc=rss

DealBook: Yahoo Is Said to Look to Allen & Co. for Strategic Options

2:47 p.m. | Updated

As it explores options for its future, Yahoo has hired Allen Company as its investment bank, according to a person briefed on the matter.

The move by Yahoo’s board follows its firing of Carol A. Bartz as chief executive, amid dissatisfaction over the onetime Internet giant’s business performance.

In its news release announcing Ms. Bartz’s ouster on Tuesday, Yahoo disclosed that its board had begun “a comprehensive strategic review” of its businesses. Within the language of the deal community, that phrase generally means possible acquisitions or asset divestitures — or possibly a sale of the whole company.

But people familiar with the board’s actions say that a sale of all of Yahoo is a “nonstarter.” What could be more likely are the sales of Yahoo’s Asian holdings or some of its communications services.

Helping to review those possibilities is Allen Company, the boutique known as a top consigliere to Internet and media companies. Among its current clients is AOL, itself the subject of takeover rumors.

The bank is also serving a lesser underwriting role for two forthcoming Internet initial public offerings, those of Groupon and Zynga.

Yahoo’s board may also look to hire additional bankers to work alongside Allen Company. Among the likely candidates is UBS, which is already advising Yahoo on a possible sale of its stake in Yahoo Japan. Another possible candidate is JPMorgan Chase, which could be brought in for its expertise in tech deals and its big balance sheet.

“Yahoo has been working with Allen Co. and UBS for some time,” a spokesman for the company’s board told DealBook in a statement.

The first task that Allen Co. may have to deal with is handling unsolicited deal inquiries. AOL’s chief executive, Tim Armstrong, has held discussions with Yahoo advisers about the company’s interest in merging, Bloomberg News reported on Friday.

A person close to Yahoo told DealBook that the company has no interest in merging with AOL, given that it’s another struggling Internet company.

Article source: http://feeds.nytimes.com/click.phdo?i=ccd6db0614662706b8c3f6000407b17b

DealBook: Citadel Looks to Sell Investment Bank, Shuts Down Equity Research

Kenneth Griffin, chief of Citadel.Jonathan Alcorn/Bloomberg NewsKenneth Griffin, chief of Citadel.

The Citadel Investment Group, the $11 billion Chicago-based hedge fund, is in talks to sell its investment bank just three years after its beginning, according to a person briefed on the matter.

The moves would bring to a close the ambitious, multimillion-dollar bet placed by the hedge fund, run by Kenneth C. Griffin, in the aftermath of the financial crisis, when banks looked weak. Citadel Securities will also be shutting down its equity research group, according to the person, who added that staff members would be laid off starting Thursday.

The investment banking unit will remain open as a buyer is sought.

Additional staff members would also be laid off, said the person, who spoke on condition of anonymity because the information was private. The rest of the securities unit, which includes a market-making business and sales and trading operation, will remain open.

Mr. Griffin’s vision was to create an investment banking unit to rival the titans of Wall Street – and indeed it drew bankers from top firms. But from the early stages, the effort was plagued by a stream of staff departures. Several top people left in what some described as a revolving door.

Citadel is shifting resources away from businesses that do not involve electronic trading, the person said.

Bloomberg News earlier reported Citadel’s plans.

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DealBook: Morgan Stanley’s Next No. 2, the Guessing Game

From left, Colm Kelleher and Paul J. Taubman, the co-presidents of institutional securities; and Gregory Fleming, the president of Morgan Stanley Smith Barney and Morgan Stanley Investment Management.Morgan Stanley, via Bloomberg News; Morgan Stanley; Andrew Harrer/Bloomberg NewsFrom left, Colm Kelleher and Paul J. Taubman, the co-presidents of institutional securities, and Gregory Fleming, the president of Morgan Stanley Smith Barney and Morgan Stanley Investment Management.

Wall Street has a new guessing game: whom will James P. Gorman choose to be his No. 2?

Mr. Gorman, the Australian-born chief executive of Morgan Stanley, is not expected to take over as chairman until early next year, after John J. Mack steps down.

But inside the investment bank, speculation is already swirling about the next president, a title now also held by Mr. Gorman. It is a crucial position, and the person filling it is usually seen as the heir apparent to the top spot.

While there are several long shots, the odds favor three senior executives. Insiders are betting on the co-presidents of institutional securities, Colm Kelleher and Paul J. Taubman, as well as Gregory J. Fleming, the president of Morgan Stanley Smith Barney and Morgan Stanley Investment Management.

They could be waiting a while to get the nod from Mr. Gorman. People close to the chief executive say he has no intention of filling the spot right away and could even wait years.

Mr. Gorman, 52, is still a young chief executive and does not see the need to publicly anoint a second in command, the people say. Choosing one would most likely ruffle the feathers of the executives passed over — a situation Mr. Gorman does not want so early in his tenure. By waiting to pick a president, Mr. Gorman can also monitor the performance of each deputy, keeping them in healthy competition with one another.

“It’s too early to give anyone that type of promotion,” said a UBS stock analyst, William Tanona. “Mr. Gorman needs to get some decent quarters behind him before doing anything like this. The company is going through a transition phase with new people, and there is still a lot to be worked out.”

It is not unusual for a Wall Street chief executive to keep the job empty. Jamie Dimon of JPMorgan Chase and Brian T. Moynihan at Bank of America both have several senior deputies but no president.

But a strong No. 2 can be useful. Goldman Sachs’s president, Gary D. Cohn, is often called to attend investment banking pitches and step in when the firm’s chief executive, Lloyd C. Blankfein, is busy.

The rumor mill at Morgan Stanley is starting in anticipation of a board meeting this month. The directors are scheduled to meet in Japan, where a top shareholder is based, to discuss management changes at the top. The current chairman, Mr. Mack, is widely expected to retire this year. If he does, it will pave the way for Mr. Gorman to step into the role.

Morgan Stanley has a deep bench of executives from which Mr. Gorman can pick a president — when he eventually does. Mr. Taubman and Mr. Kelleher, who have been running institutional securities since late 2009, are natural choices.

The two top executives played crucial roles in guiding the company through the financial crisis. Mr. Taubman, 50, helped secure a lifeline from the Japanese bank Mitsubishi in 2008 shortly after Lehman Brothers collapsed, and he is now focused on investment banking. Mr. Kelleher, 54, was Morgan Stanley’s chief financial officer during the rocky period. He is now charged with turning around sales and trading, a crucial unit that has not fully recovered from the depths of the disaster.

Both have long histories at Morgan Stanley, too. Mr. Taubman, who has been with the firm for 29 years, is one of the largest individual shareholders, with almost 1.1 million shares, valued at roughly $25 million. Mr. Kelleher, an outgoing Irishman who has eight siblings, is an accountant by trade, having worked at Arthur Andersen before joining Morgan Stanley in 1989.

As can be common with co-heads of a division, their professional relationship is tense, according to colleagues who spoke on condition of anonymity because they were not authorized to talk publicly. It is sometimes uncomfortable in meetings with the two executives, since it is readily apparent they do not get along, the colleagues say. Through a spokeswoman for the firm, Mr. Taubman and Mr. Kelleher declined to comment for this article.

The relative newcomer of the group, Mr. Fleming, 48, has known Mr. Gorman since their days working together at Merrill Lynch. Hired in late 2009 to run the firm’s asset management division, he quickly improved the group’s profitability, in part by selling noncore assets and cutting costs. This year, Mr. Gorman added the retail brokerage unit to his duties. Expanding the unit’s lower-risk, fee-based business is a crucial part of the firm’s broader strategy.

There are also dark-horse candidates to consider, like the chief financial officer, Ruth Porat, 53, and Jim Rosenthal, 58, head of corporate strategy. Both are senior executives and members of Mr. Gorman’s inner circle. Mr. Gorman could also look outside to fill out his corporate suite.

As is usually the case in these races, it is too early to call. Of course, that has never stopped Wall Street from talking.

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