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Sony Posts a Small Profit, Its First in 5 Years

May 10, 2013 by Leave a Comment

The Tokyo-based electronics and entertainment giant said that it had booked a net profit of 43 billion yen, or $435 million, in the financial year that ended March 31. That compares with a loss of 456.7 yen billion ($4.6 billion) a year earlier. Sales grew 4.7 percent to 6.8 trillion yen ($68.4 billion).

Sony said it expected net profit to increase 16 percent in the current year to 50 billion yen ($505 million). It projected that sales would rise 10 percent this year to 7.5 trillion yen after the company releases a new video game console, the PlayStation 4, during the holiday season and bolsters its smartphone offerings.

The weaker yen, which makes Japanese products more price-competitive in foreign markets, was especially pronounced in the fourth quarter, from January through March. Sony said net profit was 93.9 billion yen ($949 million), compared with a net loss of 255.2 billion yen ($2.6 billion) in the same quarter a year earlier.

Higher revenue from its financial services unit contributed significantly to full-year profits. Sony has also streamlined to claw its way back to profit, dissolving flat-panel television manufacturing ventures with Sharp and Samsung, shedding its chemical product business and selling off its office buildings, including its New York headquarters, for $1.1 billion.

“We set out this year with the aim of doing everything we can to get back in the black,” Masaru Kato, Sony’s chief financial officer, said in a conference call with analysts in Tokyo. “This year, we absolutely intend to make a profit in electronics.”

Kazuo Hirai, who took over as chief executive in April 2012, is trying to revive Sony’s electronics division, which continues to lose money. Last week, Sony announced that dozens of top executives had agreed to forgo bonuses after continued red ink in the unit.

Mr. Hirai faces a struggle. Once a consumer electronics powerhouse, Sony has in recent years been outshone by the likes of Apple and outgunned by the marketing and manufacturing prowess of Samsung.

Profits in the games division were lower last year after the disappointing performance of its PlayStation Vita hand-held machine, which made its debut in late 2011. Sony slashed the device’s price this year.

Though Sony booked an annual profit, its television business lost money for the eighth straight year, with sales slumping 30 percent from a year earlier. But its losses have been narrowing as Sony has outsourced its panel-making, falling by 137.9 billion yen ($1.4 billion) from a year earlier to 69.6 billion ($707 million). Sony said it expected to finally break even in televisions this year.

The company will be helped by a major decline in the value of the yen, part of the economic policy of Prime Minister Shinzo Abe of Japan. The weaker yen buttresses the bottom line of exporters like Sony by increasing the value of their overseas earnings. Sony said, however, that as its business became more global and the company incurred more of its costs in dollars, currency fluctuations would have less of an effect.

Sony also struggled in its digital camera and video business, hurt by a shrinking market for compact cameras and camcorders as more users chose to snap photographs and take video with their smartphones. However, Sony has found some success with high-end cameras with interchangeable lenses for photography buffs.

Sales in Sony’s film business grew 11 percent, thanks to blockbusters like the James Bond movie “Skyfall” and “The Amazing Spider-Man.” The sluggish market for packaged music continued to weigh on the music division, though hits like “Take Me Home” and “Up All Night” from the boy-band sensation One Direction helped stave off a sales decline.

Sony is still seeking to exploit the relationships between its hardware business and its vast catalog of music and films. Though its entertainment business has generated healthy profits, the company has yet to deliver on its long-promised strategy of leveraging that material to sell more electronics — for example, by offering exclusive content on Sony devices.

Article source: http://www.nytimes.com/2013/05/10/business/global/10iht-sony10.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

DealBook: Crédit Agricole Cites Write-Downs in Posting a Record Loss

February 21, 2013 by Leave a Comment

A branch of Credit Agricole in Marseille, France.Jean-Paul Pelissier/ReutersA branch of Credit Agricole in Marseille, France.

PARIS — Crédit Agricole, one of France’s biggest lenders, said on Wednesday that a series of write-downs and other charges contributed to its largest-ever annual loss.

The bank reported a net loss of 6.5 billion euros ($8.7 billion) for 2012. In the fourth quarter, the bank posted a net loss of about 4 billion euros, compared with a loss of about 3.1 billion euros in the period a year earlier. Revenue fell 23 percent, to 3.3 billion euros, in the three months ended Dec. 31.

Jon Peace, an analyst at Nomura International in London, described the fourth-quarter loss as “an even bigger kitchen sink” than that for which the market had been bracing, but said Crédit Agricole’s core French retail and asset management businesses had performed surprisingly well. There are “clear signs of improvement” in its finances, he wrote in a note.

“We are turning a page and will develop a new medium-term plan this year,” Jean-Paul Chifflet, the bank’s chief executive, said in a statement. “It will show that we are moving forward on solid foundations.”

After stripping out one-time costs, the bank said net income showed “the resilience of French retail banking and a good performance in savings management, the group’s core businesses.” The bank’s adjusted fourth-quarter net income was about 548 million euros, up 10 percent compared with the last three months of 2011.

Jean-Paul Chifflet, the chief executive of Crédit Agricole.Jacky Naegelen/ReutersJean-Paul Chifflet, the chief executive of Crédit Agricole.

Mr. Chifflet said in a conference call that the bank would not need to raise capital in the financial markets. Shares of Crédit Agricole rose 7.6 percent in afternoon trading in Paris on Wednesday.

The flood of red ink originated in good-will impairments of nearly 2.7 billion euros, losses linked to the sale of its C. A. Cheuvreux brokerage unit to Kepler. The charges take into account the decline in value of the unit.

The impairment comes as banks face pressure over good will.

Last month, the European Securities and Markets Authority called on companies to take a hard look at the value they assign to the assets on their balance sheets, particularly those they purchased in more favorable times. It warned that it would publicly identify those companies that failed to comply.

Crédit Agricole also booked a fourth-quarter charge of 706 million euros related to the sale last year of its Athens-based unit, Emporiki, to Alpha Bank, a write-down that it said left it with no residual exposure to Greece. But it said the French tax authorities had unexpectedly ordered it to pay a bill of 838 million euros on the disposal, causing its loss to grow.

Fourth-quarter results also were hurt by a charge of 541 million euros on the cost of revaluing the bank’s own debt.

Crédit Agricole, based in Paris, was caught flat-footed when the euro zone crisis caused a sharp fall in the value of assets in Greece, Italy and other struggling European countries.

Over the last few years, the bank has been streamlining its business and reducing its reliance on so-called peripheral European economies, as well as increasing its capital buffer.

Crédit Agricole said its core Tier 1 ratio, a measure of a bank’s ability to weather financial shocks, under the accounting rules known as Basel III, stood at 9.3 percent at the end of December, and that it hoped to exceed 10 percent by the end of 2013.

This post has been revised to reflect the following correction:

Correction: February 21, 2013

An earlier version of this article erroneously reported the size of the unexpected tax bill that Crédit Agricole bank had to pay on the disposal of its Greek unit, Emporiki. It was 838 million euros, not 132 million euros. The article also misstated the negative impact of that bill on the group’s fourth-quarter net income. It was 706 million euros, not 704 million euros.

Article source: http://dealbook.nytimes.com/2013/02/20/credit-agricole-posts-record-loss-on-write-downs/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

DealBook: JPMorgan Trading Loss May Reach $9 Billion

June 28, 2012 by Leave a Comment

Jamie Dimon, chief executive of JPMorgan Chase, discussed the trading losses last week before the House Financial Services Committee.Daniel Rosenbaum for The New York TimesJamie Dimon, chief executive of JPMorgan Chase, discussed the trading losses last week before the House Financial Services Committee.

Losses on JPMorgan Chase’s bungled trade could total as much as $9 billion, far exceeding earlier public estimates, according to people who have been briefed on the situation.

When Jamie Dimon, the bank’s chief executive, announced in May that the bank had lost $2 billion in a bet on credit derivatives, he estimated that losses could double within the next few quarters. But the red ink has been mounting in recent weeks, as the bank has been unwinding its positions, according to interviews with current and former traders and executives at the bank who asked not to be named because of investigations into the bank.

The bank’s exit from its money-losing trade is happening faster than many expected. JPMorgan previously said it hoped to clear its position by early next year; now it is already out of more than half of the trade and may be completely free this year.

As JPMorgan has moved rapidly to unwind the position — its most volatile assets in particular — internal models at the bank have recently projected losses of as much as $9 billion. In April, the bank generated an internal report that showed that the losses, assuming worst-case conditions, could reach $8 billion to $9 billion, according to a person who reviewed the report.

With much of the most volatile slice of the position sold, however, regulators are unsure how deep the reported losses will eventually be. Some expect that the red ink will not exceed $6 billion to $7 billion.

Nonetheless, the sharply higher loss totals will feed a debate over how strictly large financial institutions should be regulated and whether some of the behemoth banks are capitalizing on their status as too big to fail to make risky trades.

JPMorgan plans to disclose part of the total losses on the soured bet on July 13, when it reports second-quarter earnings. Despite the loss, the bank has said it will be solidly profitable for the quarter — no small achievement given that nervous markets and weak economies have sapped Wall Street’s main businesses. To put the size of the loss in perspective, JPMorgan logged a first-quarter profit of $5.4 billion.

More than profits are at stake. The growing fallout from the bank’s bad bet threatens to undercut the credibility of Mr. Dimon, who has been fighting major regulatory changes that could curtail the kind of risk-taking that led to the trading losses. The bank chief was considered a deft manager of risk after steering JPMorgan through the financial crisis in far better shape than its rivals.

“Essentially, JPMorgan has been operating a hedge fund with federal insured deposits within a bank,” said Mark Williams, a professor of finance at Boston University, who also served as a Federal Reserve bank examiner.

A spokesman for the bank declined to comment.

In its most basic form, the losing trade, made by the bank’s chief investment office in London, was an intricate position that included a bullish bet on an index of investment-grade corporate debt. That was later combined with a bearish wager on high-yield securities.

The chief investment office — which invests excess deposits for the bank and was created to hedge interest rate risk — brought in more than $4 billion in profits in the last three years, accounting for roughly 10 percent of the bank’s profit during that period.

In testimony before the House Financial Services Committee last week, Mr. Dimon said that the London unit had “embarked on a complex strategy” that exposed the bank to greater risks even though it had been intended to minimize them.

JPMorgan executives are briefed each morning on the size of the trading loss. The tally could shrink if the market moves in JPMorgan’s favor, the people briefed on the situation cautioned.

But hedge funds and other investors have seized on the bank’s distress, creating a rapid deterioration in the underlying positions held by the bank. Although Mr. Dimon has tried to conceal the intricacies of the bank’s soured bet, credit traders say the losses have still mounted.

While some hedge funds have compounded the bank’s woes, others have been finding it profitable to help JPMorgan get clear of the losing credit positions.

One such fund, Blue Mountain Capital Management, has been accumulating trades over the last couple of weeks that might help reduce the risk of the bets made by JPMorgan in a credit index, according to interviews with more than a dozen credit traders. The hedge fund is then selling those positions back to the bank. A Blue Mountain spokesman declined to comment.

As traders in JPMorgan’s London desk work to get out of the huge bet, which started generating erratic losses in late March, the traders based in New York are largely sitting idle, according to current traders in the unit.

“We are in a holding pattern,” said one current New York trader who asked not to be named.

Long before the losses started mounting, senior executives at the chief investment office in New York worried about the trades of Bruno Iksil, according to the current traders.

Now known as the London Whale for his outsize wagers in the credit markets, Mr. Iksil accumulated a number of trades in 2010 that were illiquid, which means it would take the bank more time to get out of them.

In 2010, a senior executive at the chief investment office compiled a detailed report that estimated how much money the bank stood to lose if it had to get out of all Mr. Iksil’s trades within 30 days. The senior executive recommended that JPMorgan consider putting aside reserves to deal with any losses that might stem from Mr. Iksil’s trades. It is not known how much was recommended as a reserve or whether Mr. Dimon saw the report, but the warning went unheeded.

The losses are the most embarrassing fumble for Mr. Dimon since he became chief executive in 2005.

In appearances before Congress, Mr. Dimon has taken pains to assure investors and lawmakers that the overall health of JPMorgan remained strong and that it had more than sufficient amounts of capital to weather any economic dislocation.

Even as he apologized for the trade, calling it “stupid,” Mr. Dimon emphasized to lawmakers that the loss was an “isolated incident.”

The Federal Reserve is currently poring over the bank’s trades to examine the scope of the growing losses and the original bet.

Article source: http://dealbook.nytimes.com/2012/06/28/jpmorgan-trading-loss-may-reach-9-billion/?partner=rss&emc=rss

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Treasury Now Sees Profit From Bailouts

March 31, 2011 by Leave a Comment

When it comes to calculating the bill for the government’s bailout of banks, insurers, automakers and the ailing housing market, the numbers have been all over the map.

But on Wednesday, Treasury officials laid claim to an eventual $23.6 billion gain for taxpayers on the entire rescue program, despite doubts from skeptics about just how Washington crunched the numbers.

Indeed, as late as Tuesday afternoon, accountants from Treasury and the Office of Management and Budget were at odds over how to calculate the gains the government made on once-troubled mortgage securities it acquired at the height of the financial crisis in 2008.

As a result, on Tuesday morning the Treasury estimated it would show a $100 billion profit but by late Tuesday that had been reduced to nearly $24 billion.

Even that is debatable, however, according to lawmakers like Representative Patrick T. McHenry, Republican of North Carolina, who is chairman of the House oversight committee’s bailout panel.

“The estimates have been consistently off and Treasury has consistently changed the metric for success,” Mr. McHenry said in an interview on Wednesday. “In the beginning, they weren’t touting payback — they touted effectiveness. Now, they are touting payback but ignoring the moral hazard this program has created.”

Treasury officials say they are actually being conservative in their profit projections. But even if that roughly $24 billion estimate proves too optimistic, the trend still represents a major turnabout from the river of red ink critics predicted. The administration itself projected a $100 billion loss only a year ago.

Why did the numbers move so wildly? For starters, asset prices improved as the economy rebounded. But some of the gains remain on paper, and profits that haven’t been booked have to be continually adjusted to reflect price swings in the market. Then there are the vagaries of government accounting, like how to properly value complex mortgage securities.

What is more, the government’s financial rescue remains a political hot potato, drawing criticism from the left and the right, but Obama administration officials are naturally eager to portray it as a success, especially with a budget deficit of $1.5 trillion expected in 2011.

“There is no historical precedent for a financial rescue this effective,” the Treasury secretary, Timothy F. Geithner, said in an interview Tuesday. “We are performing better than all expectations and ahead of the other countries caught up in the crisis.”

At a House Oversight subcommittee hearing on Wednesday, Treasury officials once again sparred with a government watchdog over the success of the financial rescue. In his testimony, Neil M. Barofsky, the special inspector general overseeing the bailout program, greeted the lower cost estimates as “good news,” but warned that the“most significant legacy may be the exacerbation of the problems posed by ‘too big to fail,’ particularly given the manner in which Treasury executed the bailout.”

On Wednesday, the Treasury said that KeyCorp and SunTrust Banks repaid their bailout funds, helping the government claim a $6 billion profit on the bailout program for banks. The Treasury projects it will receive another $14 billion as hundreds of smaller banks repay their bailout funds.

The Treasury is also claiming it will make a $12 billion profit when it winds down its 92 percent ownership stake in the American International Group later this year, although for now that is only on paper. It also assumes that large stake can be sold at current prices, even though unloading such a big position could depress its value.

Those gains could also disappear if several big losses materialize. The Treasury projects the bailouts of General Motors, Chrysler and Ally Financial could cost it about $15 billion, while losses from the government’s beleaguered mortgage modification programs, like HAMP, could wind up reaching $46 billion. (With only about $1 billion of HAMP funds disbursed so far, bailout watchers say the actual loses could be sharply lower.)

Still, the TARP bailout was only one part of the government’s rescue. Counting other federal aid programs allows the administration to radically reduce its overall cost of the effort.

As part of its analysis, the Treasury included in its profit estimates about $1.2 billion from fees it collected from federal guarantees on money market mutual funds during the crisis. It also included realized gains of $22.5 billion from a series of Federal Reserve emergency aid programs designed to get credit flowing again.

But the bulk of its gains come from a bounce-back in the value of more than $1.6 trillion in mortgage bonds and other debt that the government bought as the financial crisis worsened between 2008 and early 2010, in an effort to prop up the housing market. The Treasury has realized about $13.5 billion in income from interest payments of these bonds through the end of 2010, while the Federal Reserve has earned about $72.5 billion on a similar portfolio of securities backed by Fannie Mae and Freddie Mac. Treasury officials project they will collect at least another $16 billion over the next few years.

On Wednesday, the Federal Reserve Bank of New York rejected a $15.7 billion offer from A.I.G. to buy back mortgage securities owned by the government, underscoring Washington’s hard line in trying to maximize the value of its holdings.

Even as the Treasury collects income from the mortgage securities it owns, it is still pumping tens of billions into Fannie and Freddie, the government-controlled mortgage giants, to keep them afloat. Although the Treasury recently lowered its loss estimates, its analysis project that losses stemming from government’s support of the two companies could reach $73 billion over the next decade.

Article source: http://feeds.nytimes.com/click.phdo?i=db76e0132aacc44d2cefa7f5edea0d8a

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