investment banking

DealBook: Quarterly Profit Doubles at Goldman Sachs

July 16, 2013 by NewsMaker Leave a Comment

Brendan Smialowski/Agence France-Presse — Getty ImagesLloyd Blankfein, chief of Goldman Sachs, at the White House in February.

Goldman Sachs posted second-quarter profit on Tuesday that was twice what it reported in the period a year earlier, fueled by strong trading and investment banking results.

Net income was $1.93 billion, or $3.70 a share, compared with $962 million, or $1.78 a share, in the period a year earlier. It was also well ahead of analysts’ expectations of $2.82 a share, according to Thomson Reuters.

DealBook: JPMorgan Executives Come and Go as Vote Nears

April 30, 2013 by NewsMaker Leave a Comment

Clockwise from top left: James Staley, William Winters, Heidi Miller, Steven Black, Charles Scharf, Barry Zubrow, William Daley, Jay Mandelbaum, Frank Bisignano and Ina Drew.

10:35 a.m. | Updated

In the depths of the financial crisis, Jamie Dimon, the chief executive of JPMorgan, and his top lieutenants were hailed as “The Survivors” on a Fortune magazine cover. Today, of the 15 executives featured in that article, only three remain — and one of them has been demoted.

The most recent high-level exit at the bank — that of the co-chief operating officer, Frank J. Bisignano, regarded within JPMorgan as something of an operational wizard — has heightened worries about the persistent executive turnover at the bank and raised fresh questions about who is ready to succeed Mr. Dimon one day.

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For Mr. Dimon, who is 57, the latest departure comes at a precarious time, just weeks before the results are tallied on a shareholder vote on whether to split the roles of chairman and chief executive. Mr. Dimon currently holds both jobs. With voting now under way, the bank had hoped to keep a low profile, according to people briefed on the matter but not authorized to speak on the record.

In the last four years, Mr. Dimon’s inner circle has been winnowed by the departures of William Winters, Heidi Miller, Steven Black, Charles Scharf, William Daley and Jay Mandelbaum.

And while people close to the chief executive say he is not worried about the executive turnover, others wonder if the many reshufflings at the top point to a larger problem within the bank.

More changes in the executive suites could distract shareholders from the bank’s successes. Earlier this month, JPMorgan reported its 12th consecutive quarterly profit, bolstered by strong revenue from investment banking and mortgage-related businesses. JPMorgan executives are emphasizing the positives of the bank’s businesses in making their case to shareholders.

JPMorgan’s Trading Loss

Of the 15 leaders at JPMorgan profiled in a September 2008 article for Fortune magazine, only three remain with the bank.

Still, the turnover at the top is a reminder of unfinished business at JPMorgan as the bank wrestles with the fallout from a multibillion-dollar trading loss in 2012. A number of agencies, including the Federal Bureau of Investigation, the Securities and Exchange Commission and the Commodity Futures Trading Commission, are investigating the trading losses. The inquiries and the need to improve relations with regulators promise to be a burden for those executives staying on.

The losses, which stemmed from a soured bet on credit derivatives, prompted a number of the recent departures.

Shortly after the losses were announced in May 2012, Ina R. Drew, who headed the unit at the center of the trades, resigned. In January, JPMorgan produced a 129-page internal report that dissected the bad bet and offered a rare window into the factors that led to the risk breakdowns. Losses on the trades have swelled to more than $6 billion.

The trading missteps also ensnared Barry L. Zubrow, who was a chief risk officer at the bank during the time that the chief investment office was making riskier bets. He announced his departure from the bank in October.

The trading debacle, however, explains only part of the executive exodus. In January, James E. Staley, who was the former head of JPMorgan’s investment bank, announced he would leave to join a hedge fund.

Another executive, S. Todd Maclin, ceded his spot on JPMorgan’s management committee and moved to Texas, where he is chairman of the consumer and commercial bank. Within the bank, some executives disagree that Mr. Maclin was demoted, noting that the move to Texas was prompted by the executive. Before the transition, they say, Mr. Maclin groomed a successor and has since agreed to help the bank bolster its Texas business.

Mr. Dimon has struck a positive tone about the turnover, writing in his annual letter to shareholders that the changes are “not as pronounced” as they may appear. He added that the exits did not leave a leadership vacuum, in part because the vacancies were being filled by people who already had experience in the roles they were stepping into.

For example, Matthew E. Zames, who now becomes the bank’s sole chief operating officer, already shared the job with Mr. Bisignano.

Mr. Bisignano, whose departure was announced on Sunday, is leaving JPMorgan to become chief executive of First Data, a payment-processing firm. His is a particularly difficult loss for the bank, according to people briefed on the matter, because he was widely considered to be skilled at tackling thorny problems at a time when the bank has been faulted over weak oversight in places.

The most recent departures put a spotlight on a handful of possible successors to Mr. Dimon, including Mr. Zames. Mr. Dimon lauded Mr. Zames in a statement on Sunday, calling him a “proven business executive” who will “continue to have an important impact on our company.” Mr. Zames joined JPMorgan in 2004 from Credit Suisse.

Another potential executive to succeed Mr. Dimon is Michael J. Cavanagh, who held the chief financial officer post from 2004 to 2010. As part of the management overhaul in the wake of the trading losses, Mr. Cavanagh, like Mr. Zames, gained more power within the bank. He became the co-chief executive of the corporate and investment bank.

Mr. Cavanagh has a long history with JPMorgan’s chief executive. He was head of strategy and planning at Bank One, where he worked closely with Mr. Dimon.

Mr. Dimon appears unfazed by the steady stream of departures. At meetings inside the bank he has lauded the executive team that remains, and although the bank’s succession plans are not known, he has told people close to him that he is confident the bank will be in good hands when he does decide to leave.

JPMorgan shareholders are scheduled to meet on May 21. At that time the company will announce the results of a shareholder proposal calling for the separation of the roles of chairman and chief executive officer.

In recent years, pension funds and other shareholders have pushed companies to split these roles. Wall Street executives have largely scoffed at the idea, saying a powerful lead director is just as effective as a nonexecutive chairman. Goldman Sachs recently reached an agreement with a shareholder group to withdraw a resolution to split its chairman and chief executive jobs.

Such a vote is still advancing at JPMorgan, however, and last year a similar proposal was supported by 40 percent of the shares voted. Last year’s vote happened not long after JPMorgan first disclosed the trading losses to its investors, and in recent interviews, many shareholders said the news was so fresh at the time that it did not play a factor in how they voted.

The trading losses — and Congressional hearings and a Senate investigation that looked into them — are expected to play a much bigger role this time around.

As a result, JPMorgan has been working behind the scenes to avert losing the vote, calling a wide swath of shareholders to encourage them to cast a ballot. Some big shareholders are scheduled to meet with some directors on the bank’s board so they can air any concerns they might have.

Voting to split the roles would send a powerful message to the bank, but could have serious side effects, something shareholders must weigh. If the vote goes against the company and the board decides to split the role, Mr. Dimon might resign rather than see his powers reduced.

JPMorgan is owned by a wide array of shareholders, from big institutions like the Vanguard Group to mom-and-pop investors. Despite the concerns over the trading loss, the firm’s biggest shareholders, including the asset managers BlackRock and Vanguard, have a history of voting with management, suggesting that it is unlikely the proposal to split the top roles will carry the day.

Nonetheless, firms that advise shareholders on how to vote are expected to recommend again that JPMorgan separate the two top posts. While voting has already begun, most shareholders typically vote in the two weeks leading up to the annual meeting. One big JPMorgan shareholder who has yet to vote and is not authorized to speak on the record said he believed the vote would be close.

“There is so much attention on JPM’s situation that shareholders who might previously have voted to keep the roles together will this year think twice about it because there is bound to be increased scrutiny on how everyone votes,” the shareholder said.

A version of this article appeared in print on 04/30/2013, on page B1 of the NewYork edition with the headline: Another Executive Leaves JPMorgan, Raising Questions as Vote Nears.

Article source: http://dealbook.nytimes.com/2013/04/29/another-executive-leaves-jpmorgan-raising-questions-as-vote-nears/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: departures, investment banking, precarious time

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

April 3, 2013 by NewsMaker Leave a Comment

Dylan Martinez/ReutersRobert E. Diamond Jr., a former chief executive of Barclays, helped transform the British bank.

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 a report released on Wednesday.

The independent review, which was ordered by the bank’s top management in the wake of a rate-rigging scandal last year, highlighted an “at all costs” attitude, particularly within the firm’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.”

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

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

The report released on Wednesday said the push to increase profits across the British bank’s operations led to potentially risky behavior that had a direct effect on the firm’s overall 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 Libor.

The British 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 entire British banking sector to pay out billions of dollars collectively 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 controversial tax planning division and the elimination of 3,700 jobs, mostly in the firm’s unprofitable European retail and business banking unit.

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

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

Yet despite the move to improve how Barclays operates, it continues to experience 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 the bank’s 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

Filed Under: Global Business Tagged With: business purposes, investment banking, senior managers

DealBook: Societe Generale to Restructure After 4th-Quarter Loss

February 13, 2013 by NewsMaker Leave a Comment

Jacky Naegelen/ReutersThe headquarters of Société Générale in Paris.

5:05 a.m. | Updated

Paris – Société Générale, one of the largest French banks, posted a larger fourth-quarter loss on Wednesday than the market had expected and said it would restructure to cut costs and simplify operations.

The bank reported a net loss of 476 million euros ($640 million), compared with a profit of 100 million euros in the period a year earlier. Analysts surveyed by Reuters had expected a net loss of about 237 million euros.

Profit was hurt by a charge of 686 million euros as the bank revalued its own debt, an accounting obligation as the market for those securities improved. It also set aside 300 million euros as a provision against legal costs, and it wrote down 380 million euros of good will in its investment banking business, mostly on the Newedge Group, a brokerage in which it owns a 50 percent stake.

Excluding the one-time items, it said fourth-quarter net income would have been about 537 million euros.

Under Frédéric Oudéa, its chairman and chief executive, Société Générale has been working to emerge from the financial crisis as a leaner institution. It said that from mid-2011 to the end of 2012, it disposed of 16 billion euros of loan portfolio assets from the corporate and investment banking unit, and an additional 19 billion euros of other assets.

The bank’s restructuring, and an improvement in sentiment in the euro zone economy, have helped to restore its market standing. After a difficult 2011 that was marred by questions about Société Générale’s exposure to Greece, the bank’s shares have rallied, gaining 49 percent in the last year.

In a research note to investors, Andrew Lim, a banking analyst at Espirito Santo in London, said that while “management has dealt convincingly with concerns about weak capital adequacy and liquidity in 2012, Société Générale is still struggling to convince investors that it can achieve improved returns.”

Shares in Société Générale, based in Paris, fell 3.5 percent in morning trading on Wednesday.

Société Générale said on Wednesday that Philippe Heim would take over as chief financial officer. Mr. Heim succeeds Bertrand Badré, who is leaving to take a position as managing director for finance at the World Bank. The bank also said Jacques Ripoll, the bank’s asset management chief, “has decided to pursue his career outside the group.”

The restructuring measures announced on Wednesday aim to focus the bank on three core businesses: French retail banking; international retail banking and financial services; and corporate and investment banking and private banking.

The Société Générale group employs about 160,000 employees around the world, and it was not immediately clear if the announcement of a new organization meant the bank would follow the lead of other large global institutions with a round of layoffs.

“There will be review processes to define the target organizations for each entity in the weeks to come,” the bank said. “The organization proposals will be addressed in the framework of an enhanced employee dialogue in keeping with agreements with trade unions and the procedures for consulting with worker councils.”

Mr. Oudéa said in a statement that the purpose of the changes was “to make our organization more efficient and flexible.”

Société Générale said its Tier 1 capital ratio, a measure of the bank’s ability to withstand financial shocks, stood at 10.7 percent at the end of December, up 1.65 percentage points from a year earlier. The French firm said it expected to attain a Core Tier 1 capital target under the accounting rules known as the Basel III regime of 9 percent to 9.5 percent by the end of 2013.

The French bank published its latest results a little more than five years after Jérôme Kerviel, a trader in the bank’s equity derivatives business, built unauthorized positions that led to a 4.9 billion euro loss for Société Générale.

Mr. Kerviel’s conviction on charges of breach of trust and forgery was upheld in October by the Paris Court of Appeals. He also was ordered to serve a three-year prison term, pending appeal, and to repay the bank for the full amount of the 4.9 billion euro loss.

On Tuesday, Mr. Kerviel told the French radio station RTL that he was challenging the repayment order in a labor court, saying he had been ordered to pay without a third-party expert being allowed to study the damages. He added that he was suing Société Générale for an amount equivalent to the 4.9 billion euro trading loss.

Article source: http://dealbook.nytimes.com/2013/02/13/societe-generale-reports-loss-in-fourth-quarter/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: accounting obligation, andrew lim, investment banking

DealBook: BNP Third-Quarter Profit Doubles to Hit $1.7 Billion

November 8, 2012 by NewsMaker Leave a Comment

Mal Langsdon/ReutersBNP, based in Pairs, said it reached its capital target early.

PARIS — BNP Paribas, the largest French bank, said on Wednesday that its net income more than doubled in the third quarter, lifted by a strong performance in its investment banking unit.

Profit rose to 1.3 billion euros ($1.7 billion) in the three months that ended Sept. 30 from 541 million euros a year earlier. The corporate and investment banking unit posted a pretax profit of 732 million euros, up 7.3 percent, as the fixed-income and equity and advisory segments performed well.

The bank noted that results were flattered by comparison to the year-earlier period, when a sovereign debt crisis in Greece and other countries had a significant effect on results of European banks, as American money market funds reduced loans to the region.

DealBook: Barclays Names Chief Operating Officer

June 23, 2012 by NewsMaker Leave a Comment

LONDON – Barclays said on Friday that it had named its investment banking co-head, Jerry del Missier, to the newly created position of chief operating officer.

In the new role, Mr. del Missier will work with the heads of the bank’s different units to streamline and improve computer systems and operations, Barclays said in a statement. Rich Ricci, who ran Barclays’ investment banking unit with Mr. del Missier, will become sole head of the business.

The change comes as Barclays is seeking to reduce costs and comply with stricter financial regulation in Britain that forces banks to separate their investment banking operations more clearly from those businesses that hold retail deposits.

Robert E. Diamond, Jr., the chief executive of Barclays, said the appointment “brings even more management focus on accelerating” its priorities of improving its capital position and increasing returns.

Mr. del Missier said he was looking “to ensure that we continue to exceed our customers’ and clients’ expectations at every instance, while delivering on our commitments to our shareholders, regulators and broader stakeholders.”

Mr. del Missier joined Barclays in 1997. Before becoming co-head of the investment banking operation in 2010, Mr. del Missier was responsible for the unit’s technology and operations committee.

Article source: http://dealbook.nytimes.com/2012/06/22/barclays-names-chief-operating-officer/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: chief operating officer, investment banking, regulators

DealBook: Citigroup Profit and Revenue Decline for Quarter

January 17, 2012 by NewsMaker Leave a Comment

Andrey Rudakov/Bloomberg NewsVikram S. Pandit, chief of Citigroup.

Citigroup reported an 11 percent drop in quarterly earnings on Tuesday, well below the Wall Street consensus, and revenue fell 7 percent, underscoring the industry’s slump in investment banking and slow growth in lending.

The profit for the fourth quarter was $1.16 billion, or 38 cents a share. Analysts had been expecting earnings of 50 cents a share, according to Zacks Investment Research. For the year, the bank reported earnings of $11.3 billion, compared with $10.6 billion in 2010.

Results in the year-ago period, when Citigroup posted profit of $1.3 billion, or 43 cents a share, had been helped by sizable accounting gains on the value of Citigroup debt, which were mostly absent from the fourth-quarter results for 2011.

The capital markets unit, which includes helping companies raise money and make deals, was especially weak; revenue in the division fell 10 percent, to $3.2 billion.

For the full year, Citigroup reported net income was up 6 percent from 2010, one measure of progress in the company’s slow but steady recovery under its chief executive, Vikram S. Pandit, who has been trying to transform Citi from a sprawling but shaky global banking giant into a stronger, more nimble corporate lender.

In the wake of the financial crisis, Citigroup required a $45 billion bailout from Washington, and while that has been paid back, Mr. Pandit is still in the process of shedding assets and lightening the bank’s balance sheet.

Net credit losses in the fourth quarter declined 40 percent, to $4.1 billion, from the period a year earlier, a sign that consumer conditions appeared to be getting stronger.

Like other battered financial giants, including Bank of America, Citigroup’s shares have been surging recently on hopes that the financial crisis in Europe might be easing and the economic recovery in the United States is gaining steam. Since the end of November, Citigroup’s shares have risen from below $25 to just over $30.

Despite the optimism among investors, Mr. Pandit sounded a note of caution.

“The current environment is certainly challenging,” he said in a letter to employees. “We’ve shown that we can weather a tough environment without investors, regulators and other observers questioning our safety and soundness.”

Article source: http://feeds.nytimes.com/click.phdo?i=695846e45910e35ccf953050afe6632e

Filed Under: Business News Tagged With: 50 cents, investment banking, quarter results

DealBook: UBS Names Sergio Ermotti as Chief Executive

November 15, 2011 by NewsMaker Leave a Comment

Stefano Rellandini/ReutersSergio P. Ermotti joined UBS in April from the Italian bank UniCredit.

7:55 a.m. | Updated

LONDON – UBS said on Tuesday that Sergio P. Ermotti, who has run the Swiss bank on an interim basis since September, would become permanent chief executive and take the reins of a strategic restructuring.

Axel A. Weber, a former chief of the German central bank, will take over as chairman next year, a year earlier than planned, UBS said. The bank accelerated the leadership change to speed up implementation of a new investment banking strategy, which UBS is expected to present to investors on Thursday in New York.

“The bank has a lot of restructuring to do and as interim C.E.O. with a chairman on his way out there’s little you can actually do,” said Florian Esterer, a fund manager at Swisscanto Asset Management. “This way UBS can slowly start moving forward.”

Mr. Ermotti, a Swiss national, joined UBS as management board member responsible for Europe in April and was widely seen as a potential successor to the former chief executive, Oswald J. Grübel. Mr. Ermotti stepped into that role on an interim basis when Mr. Grübel resigned after the bank lost $2.3 billion in a rogue trading scandal at its London investment banking division.

The changes “will bring essential stability and clarity to UBS,” Kaspar Villiger, the current chairman, said in a statement. “It will enable the bank to master the many current economic challenges and regulatory changes facing it.” He said the decision to make Mr. Ermotti the permanent chief came after UBS “carried out an intensive evaluation of external and internal candidates.”

Some analysts expressed doubts that UBS could find an outside candidate willing to take on the challenges at the bank, which is facing large job and cost cuts and needs to restore investor confidence after the trading loss.

UBS shares fell 2.9 percent in Zurich trading on Tuesday.

In his first internal note to employees as chief executive, obtained by DealBook, Mr. Ermotti warned that the UBS culture must ensure events like the trading loss do not happen again.

“I want to make clear that no one’s personal interest nor any amount of revenue is worth more than the bank’s reputation,” he wrote in the note.

A former UBS trader, Kweku M. Adoboli, is scheduled to appear in a London court next week to face charges of fraud and false accounting. He has yet to enter a plea.

UBS said a new strategy, which is expected to include a smaller and less expensive investment banking operation and a greater focus on the more successful wealth management business, had been approved by the board.

The strategy was developed by Mr. Grübel and Carsten Kengeter, head of the investment banking unit, to help UBS remain profitable despite tougher capital requirements and uncertain financial markets. It is now Mr. Ermotti’s responsibility to put the plan into action, and he told employees on Tuesday that he “will not rest until we succeed.”

“I will execute our strategy, which plays to our many strengths,” Mr. Ermotti said in a statement. “This strategy will be centered on our leading wealth management businesses and our position as the strongest universal bank in Switzerland. A focused, less complex and less capital-intensive investment bank and our asset management business are also key elements for growing our wealth management franchise.”

Mr. Ermotti, 51, joined UBS in April from the Italian bank UniCredit, where he was deputy chief executive. He previously worked at Merrill Lynch, where he was a co-head of global equity markets. He started at the firm’s equity derivatives and capital markets divisions in 1987.

Mr. Weber’s appointment as chairman is subject to his election by shareholders at the annual meeting scheduled for May 3. Mr. Villiger, the current chairman, would not be a candidate for election at the meeting.

“I am proud of what we have achieved during a very difficult time in our bank’s history,” Mr. Villiger said.

Mr. Weber said he would head to Switzerland in February to oversee the handover. He also said he knew Mr. Ermotti personally from his time at the German central bank and that the two men had spoken often over the last few weeks.

Article source: http://feeds.nytimes.com/click.phdo?i=402ca799f9d93d417ae9e0e57278bec6

Filed Under: Business News Tagged With: investment banking, italian bank, swiss bank

DealBook: UBS and Deutsche Bank Results Underscore Anxiety Over Risk

July 27, 2011 by NewsMaker Leave a Comment

Kacper Pempel/Reuters

FRANKFURT — Two of Europe’s largest financial institutions delivered a reminder on Tuesday that investment banking remains a fickle source of revenue, as UBS issued a profit warning and Deutsche Bank reported earnings that were below expectations.

UBS, Switzerland’s biggest bank, warned that it would probably miss an earnings target set two years ago after its profit fell by half in the second quarter, in part because of a dismal performance at its investment banking unit. Deutsche Bank fared better, reporting a 6 percent increase in net profit that still missed forecasts. Revenue from trading fell because of uncertainty caused by Europe’s debt crisis, the bank said, while warning that profit from investment banking would fall short of targets.

The results may help reinforce Deutsche Bank’s decision on Monday to split its leadership between Anshu Jain, the head of its volatile investment banking business, and Jürgen Fitschen, a member of the management board with closer ties to the more stable retail banking business in Germany. They will succeed Josef Ackermann, who is expected to become chairman of Deutsche Bank’s supervisory board, in May.

While banks have experienced a recovery in investment banking profits since the financial crisis, they are under pressure by regulators to reduce risk, and they continue to face market turbulence caused by the European sovereign debt crisis and the budget deadlock in the United States. In addition, there are signs that growth is slowing in Europe.

Deutsche Bank has responded by putting more focus on its network of branches in Germany, while UBS is slashing costs.

“Banks’ returns have declined overall in the last 12 months, reflecting deleveraging and the actions being taken in advance of increased capital requirements,” Oswald J. Grübel, the chief executive of UBS, said in a statement.

UBS’s profit fell to 1 billion Swiss francs ($1.2 billion) in the three months through June, from 2 billion francs in the comparable quarter a year earlier, the company said. Pretax profit in the investment banking unit slumped to 376 million francs, from 1.3 billion francs in the same period last year.

UBS said in 2009 that it intended to reach a pretax profit of 15 billion francs by 2014. But Mr. Grübel said on Tuesday that goal “is unlikely to be achieved in the original time frame.”

Mr. Grübel added that UBS was “likely” to “book significant restructuring charges later this year” after a series of cost cuts.

Mr. Grübel has been focusing UBS on its main wealth management and investment banking activities to repair a bank that was among the hardest hit in the financial crisis.

But some analysts have recently started to doubt that Mr. Grübel’s plan would be enough. Its investment banking unit has continued to struggle, and the stricter capital requirements have hurt profitability.

A string of departures by bankers and lower appetite for risk among clients have hampered efforts to repair the unit.

UBS said Tuesday it plans to cut costs by as much as 2 billion francs over the next two to three years. At the same time, a decline in demand for its services because of a weaker economic outlook is expected to “constrain growth prospects.”

Deutsche Bank, the largest bank in Germany, said it increased revenue from noninvestment banking businesses such as retail banking, helping lift net profit to 1.2 billion euros ($1.7 billion). The numbers showed that Deutsche Bank was making progress in reducing its dependence on investment banking. Pretax profit in the corporate and investment bank was flat at 1.3 billion euros, while pretax profit from private clients and asset management more than doubled to 684 million euros, the bank said.

“Our efforts to recalibrate and rebalance our platform are paying off nicely,” Mr. Ackermann said in a statement.

Deutsche Bank said that Europe’s sovereign debt crisis has unsettled investors and led to lower sales and trading revenue, making it unlikely that the bank would meet its pretax profit goal for 2011 of 6.4 billion euros for the investment banking unit. However, the bank as a whole will still meet its full-year pretax target of 10 billion euros because of improved performance by the other units, Deutsche said.

Deutsche Bank also said it took a charge of 132 million euros to reflect the decline in value of its Greek bonds. It thus became one of the first European banks to recognize losses from Greece following a debt-relief agreement by European leaders.

“While the earnings environment remains tough for investment banks, Deutsche Bank has fared better than European peers and arguably faces lower short-term earnings risk,” Jon Peace, banking analyst at Nomura International, said in a note.

Late Monday, Deutsche Bank resolved a leadership crisis by saying that Mr. Jain and Mr. Fitschen will share chief executive duties. Mr. Ackermann, 63, has been chief executive since 2002.

Investors had favored Mr. Jain, 48, whose unit continues to supply by far the greatest share of profits, as chief executive. But Mr. Jain, a native of India who is not fluent in German, was regarded as not ready to assume the statesmanlike duties expected of the head of an institution that holds a prominent place in the nation’s identity.

Mr. Fitschen, 62, is expected to help overcome reservations by Deutsche Bank staff members about Mr. Jain.

Julia Werdigier reported from London.

Article source: http://feeds.nytimes.com/click.phdo?i=aa5049bc0a5be6b4e29327a0908b0510

Filed Under: Business News Tagged With: deadlock, investment banking, sovereign debt

DealBook: Martha Stewart Living Seeks Buyer or Partner

May 26, 2011 by NewsMaker Leave a Comment

Nick D./The Martha Stewart Show, via Associated PressMartha Stewart

8:15 p.m. | Updated

Martha Stewart is trying to cook up a deal.

Shares of Martha Stewart Living Omnimedia surged nearly 24 percent on Wednesday after the struggling media and merchandising company put itself in play, announcing that it had retained advisers to explore a sale of the company.

Blackstone Advisory Partners, the investment banking arm of the Blackstone Group, was hired to “review and respond” to investors who have expressed an interest in investing in the business. Still, people briefed on the matter say there are no offers on the table.

The decision to test the waters comes as Ms. Stewart, who turns 70 in August, is about to resume a more official role at the company. She will rejoin the company’s board after a five-year ban on her serving as an officer or director at a public company expires.

The Securities and Exchange Commission imposed the ban in August 2006 when it settled a civil case against Ms. Stewart, who was convicted in March of 2004 and was sentenced to prison for lying to federal investigators about a stock sale.

Any acquisition would have to go through Ms. Stewart, who founded the company in 1996 and now owns about half of its stock and 90 percent of its voting shares.

In a telephone interview, Ms. Stewart played down a possible sale and instead highlighted her company’s growth potential.

“The first priority is to reset the strategy,” she said. “Our brand is way, way stronger than the company is big.”

She said that she has also retained Alan D. Schwartz of Guggenheim Partners to weigh any potential opportunities alongside Blackstone. Mr. Schwartz, a prominent mergers-and-acquisitions banker, is the former chief executive of Bear Stearns.

The company, which has had considerable turnover in its executive suite over the last several years, appointed Lisa Gersh its president and chief operating officer on Wednesday. Ms. Gersh, a co-founder of Oxygen Media, a cable television channel aimed at women, is expected to assume the chief executive post within the next 12 to 20 months, the company said.

The chief executive job has been vacant since 2008, when Susan M. Lyne, a well-known media executive, left Martha Stewart to take the top job at the Gilt Group, a fast-growing online retailer.

Charles Koppelman, the company’s executive chairman, said Wednesday that the company had left the chief executive’s post open for Ms. Stewart “if and when she decided to return.”

Ms. Stewart said she had decided not to take the chief executive’s post because her television shows, cookbooks and public appearances as the face of the company would keep her plenty busy.

“I work seven days a week as it is,” Ms. Stewart said. “I can’t do it all.”

One possibility could be that Ms. Stewart would team up with a buyer and take her company private. Several bankers pointed to Hugh Hefner’s recent acquisition of Playboy as a possible blueprint. In March, Mr. Hefner and a private equity firm formed a partnership to purchase his company from shareholders for $200 million.

Another option would be to carve up Martha Stewart Living’s assets. Media companies could be interested in its magazine and television assets, while a licensing company could buy the Martha Stewart brand business. For instance, a company like the Iconix Brand Group, which owns such brands as Candie’s and Massimo and licenses them to manufacturers, might be interested in licensing the brand.

A buyer would be getting the company at a depressed price, even after Wednesday’s spike in the share price. Martha Stewart’s shares have dropped more than 70 percent over the last five years. Its market capitalization is $250 million.

Despite her past legal problems, Martha Stewart, both the woman and the brand, has shown some resiliency. She continues to play a leadership role at the company, which runs a panoply of businesses from magazines to television to Martha Stewart-branded merchandise.

Magazine and television revenue have been hurt by the downturn in advertising. Last year, “The Martha Stewart Show” moved to cable’s Hallmark Channel from syndication on NBC.

Its flagship magazine, Martha Stewart Living, recently named Pilar Guzmán as its new editor in chief. Ms. Guzmán previously ran Cookie, the now-defunct yet highly regarded magazine.

Martha Stewart has tried to make up for the decline in print media with an array of digital initiatives. During the Easter holiday, its Egg Dyeing 101 app for the iPhone became a top seller.

The company’s fastest-growing segment is its merchandising division, which generated $43 million in revenue in 2010. The company has had success placing the Martha Stewart brand on a variety of goods, like paint at Home Depot, bedding at Macy’s and dog shampoo at PetSmart. A partnership with Kmart, which sold “Martha Stewart Everyday” line of goods, expired last year.

The company’s retail and licensing partnerships could be the most desirable asset to a possible buyer with room to extend the Martha Stewart brand, especially internationally, say Wall Street analysts. “Merchandising is clearly what will drive value creation for this company,” said David B. Kestenbaum, an analyst with Morgan Joseph TriArtisan.

This post has been revised to reflect the following correction:

Correction: May 26, 2011

An earlier version of this article misstated when the S.E.C. imposed a five-year ban on Martha Stewart’s serving as an officer or director of a public company took effect. It was in August 2006, not in 2005.

Article source: http://feeds.nytimes.com/click.phdo?i=d42ac03435d8dd68496551959455b533

Filed Under: Business News Tagged With: investment banking, merchandising company, telephone interview