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DealBook: Barclays Sets Aside $1.6 Billion More for Legal Costs

February 5, 2013 by Leave a Comment

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

8:01 a.m. | Updated

LONDON – Barclays said on Tuesday that it had set aside an additional £1 billion ($1.6 billion) to cover legal costs related to its inappropriate selling of complex financial products to customers.

The announcement came as British politicians grilled senior Barclays executives, including the firm’s new chief Antony P. Jenkins, about the culture and past failures at the British bank.

Mr. Jenkins and the firm’s chairman, David Walker, told politicians on Tuesday that they were prioritizing ethics and reducing risky trading activity, adding that they would take responsibility if future problems were discovered at the bank.

The Barclays’ chief, who agreed to forgo his bonus in response to the series of scandals that have hit Barclays in recent years, said he would resign if another scandal was uncovered while he was leading the bank.

“The chief executive is responsible for what happens during their tenure and when incidents happen the price needs to be paid and I believe were I to find myself in that position I would do the right thing,” Mr. Jenkins said on Tuesday.

When politicians asked Mr. Jenkins if he was eradicating the culture that he inherited from his predecessor Robert E. Diamond Jr., Barclays’ new chief said he was indeed “shredding that legacy” of sometimes being “too self-centered and too aggressive.”

Barclays was the first to reach a settlement with American and British authorities last year related to the manipulation of the London interbank offered rate, or Libor. The benchmark rate underpins trillions of dollars worth of financial products worldwide, including complex derivatives and mortgages.

In its latest move to address past indiscretions, Barclays said on Tuesday it had set aside an additional £600 million for the inappropriate selling of loan insurance to consumers. In total, the bank has now made provisions of £2.6 billion to compensate affected customers, of which it had returned £1.6 billion by the end of last year, according to a statement from Barclays.

Other larger British banks, including HSBC, Royal Bank of Scotland and the Lloyds Banking Group, have all been forced to repay customers for inappropriately selling them insurance. Many customers were unaware they had been sold the financial products when they took out mortgages and loans, while others have struggled to make claims on the policies.

Barclays also said on Tuesday that it had set aside an additional £400 million for legal costs related to the sale of certain interest-rate hedging products to small businesses in Britain. Barclays now has made provisions totaling £850 million to compensate customers of these products, of which only £36 million had been paid out by the end of 2012.

Barclays is not the only British bank to face new legal problems because of the hedging products.

Last week, the Financial Services Authority, the country’s financial regulator, demanded that local financial institutions review all sales of such products after authorities found that more than 90 percent of a sample group of the instruments were sold improperly.

Barclays has been trying to rebuild its reputation since several of its senior executives, including Mr. Diamond, resigned in the wake of the Libor scandal last year.

The bank is to announce a major restructuring of its business units when it reports earnings on Feb. 12; steps could include the elimination of around 2,000 jobs in the firm’s investment banking division.

On Sunday, the bank’s chief financial officer, Christopher G. Lucas, and its general counsel, Mark Harding, said they would resign. Mr. Lucas is one of four current and former executives who are under investigation in connection with how Barclays tapped Qatari investors for new capital during the financial crisis.

The British bank said on Tuesday that it had appointed Diane de Saint Victor, currently general counsel of the Swiss engineering company ABB, as a new nonexecutive director.

Some of the British politicians, however, remained skeptical that Barclays would be able to overcome the series of lawbreaking that has been announced in recent months.

“It doesn’t really matter what the scandal is, Barclays seems to have a finger in it,” said Andrew Tyrie, a British lawmaker who is overseeing the parliamentary commission on banking standards, which is investigating misconduct in the country’s financial services sector.

Article source: http://dealbook.nytimes.com/2013/02/05/barclays-sets-aside-extra-1-6-billion-for-legal-costs/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Storm and Pension Costs Leave Verizon With Bigger Loss

January 22, 2013 by Leave a Comment

Verizon Communications is still adding plenty of customers and selling a lot of phones, but the impact from Hurricane Sandy and pension costs sank the company’s quarterly earnings.

The company on Tuesday reported a fourth-quarter loss of $4.22 billion, or $1.48 a share, more than double the loss a year ago. Damages from Hurricane Sandy cost 7 cents a share, and pension charges reduced earnings by $1.55 a share, Verizon said. Revenue climbed to $30.05 billion, a 5.7 percent increase compared with a year ago.

Analysts had expected adjusted earnings of 50 cents a share, compared to actual adjusted earnings of 45 cents a share, and revenue of $29.75 billion, according to Thomson Reuters.

“Verizon seized growth opportunities in the fourth quarter to cap a year of solid progress across the entire business,” said Lowell McAdam, chief executive of Verizon, in a statement. “We delivered a total return of 13.2 percent to shareholders in 2012, and we enter 2013 ready to accelerate the momentum we’ve achieved and create significant shareholder value in the years to come.”

The company, based in New York, said that its wireless business was growing. Over the quarter, it sold 9.8 million smartphones, compared with 7.7 million in the same quarter a year ago, and added 2.1 million contract subscribers, the most valuable type of customer, versus 1.2 million a year ago. The company said its new shared data plans helped increase the money it made from subscribers; average monthly revenue from each account grew 6.6 percent to $146.80.

Verizon Wireless, the largest American wireless carrier, is leading the race to build out its fourth-generation network, called LTE, which is faster and more efficient than its predecessor. The company has deployed LTE in 476 cities; ATT, the second-biggest American carrier, is in a distant second with 135 cities.

Article source: http://www.nytimes.com/2013/01/23/technology/storm-and-pension-costs-leave-verizon-with-bigger-loss.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Apple Disappoints Despite 54% Rise in Profit

October 19, 2011 by Leave a Comment

For any other big company, a 54 percent increase in profit and a 39 percent jump in revenue would be enviable. For Apple though, weak sales of its star product — the iPhone — were enough to overshadow everything else when it reported fourth-quarter results on Tuesday, sending the company’s shares tumbling nearly 7 percent in after-hours trading.

In a rare disappointment, the company missed Wall Street forecasts for its iPhone business. The company reported big increases in the sale of the iPad and of Mac computers, and even said the number of iPhones it sold in the quarter jumped 21 percent from a year ago. But investors fixated on a 16 percent decline in iPhone sales from the third quarter. Apple shares fell 7 percent after the release of the results at the close of normal trading hours.

Apple executives blamed the shortfall in iPhone sales on unusually heated rumors that the company would release a new phone in the fall, leading consumers to delay their purchases so they could get the latest version. That new phone — the iPhone 4S — did, indeed, come out earlier this month, to what Apple said was the best initial sales of any iPhone yet. But it was too late to benefit the fourth quarter, which ended Sept. 24.

Investors and analysts largely accepted Apple’s explanation, in part because of the sales of the iPhone 4S. Apple said that during the first weekend it was available, more than four million were sold, which is more than double the sales of its predecessor in the first days after its introduction.

Mark Moscowitz, an analyst at J.P. Morgan, said he and others on Wall Street “got too excited” in predicting blow-out iPhone sales, which should have been tempered by the increasing levels of speculation that Apple would come out with a new phone. While Apple has long had to contend with rumors about coming devices that can potentially freeze current product sales, analysts believe that customers have become more sophisticated about when Apple releases new devices, typically in the summer or early fall.

“Consumers are a lot smarter, and they’re going to wait,” said Mr. Moscowitz, who had estimated that Apple would sell 20.6 milion iPhones in the quarter. The company reported sales of 17.07 million iPhones.

David Rolfe, chief investment officer for Wedgewood Partners, a money management firm whose biggest holding is Apple, said the company’s financial forecast of $37 billion in revenue for the next quarter was strong enough that he thinks demand for the company’s products remains robust.

“There’s no way you get to $37 billion unless the iPad, iPhone and Mac franchises are really healthy,” Mr. Rolfe said.

Apple said its net profit for the quarter was $6.62 billion, or $7.05 a share, up from $4.31 billion a year ago, or $4.64 a share, a 54 percent increase. Revenue rose to $28.27 billion from $20.34 billion, a 39 percent increase. Those results were well ahead of the $5.50 a share in earnings and $25 billion in revenue that Apple had forecast for the fourth-quarter.

The period was Apple’s first officially under the leadership of Timothy D. Cook, who was named chief executive after Steven P. Jobs, Apple’s co-founder, resigned from the helm of the company on Aug. 24. Mr. Jobs died on Oct. 5 after a long battle with pancreatic cancer.

The death of Mr. Jobs has stirred deep emotions inside and outside Apple and raised concerns about whether the company can, in the long run, continue its remarkable streak of hits.

In a conference call with analysts, Mr. Cook said the “world has lost a visionary” with the death of Mr. Jobs. “That spirit will forever be the foundation for Apple, and we’re dedicated to continuing the amazing work he loved so much,” he said.

Despite the disappointing iPhone sales, Mr. Cook said he was confident that Apple would set “an all-time record” for iPhone sales in the current holiday quarter. He added that the company had a product pipeline that’s “unbelievable.”

Article source: http://www.nytimes.com/2011/10/19/technology/apple-disappoints-analysts-despite-54-rise-in-profit.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,