December 13, 2019

DealBook: Facing New Legal Worry, Barclays Reports a Loss

A branch of Barclays in London. On Wednesday, the British bank posted a net loss of £106 million ($170 million) in its latest earnings report.Facundo Arrizabalaga/European Pressphoto AgencyA branch of Barclays in London. On Wednesday, the British bank posted a net loss of £106 million ($170 million) in its latest earnings report.

LONDON — The British bank Barclays disclosed on Wednesday that it faced two new investigations by American authorities, including one examining whether the company had violated anticorruption laws in its capital-raising efforts during the financial crisis. The news further hurt the share price as the bank reported weak third-quarter results.

The new joint investigation from the Justice Department and the Securities and Exchange Commission on the bank’s capital-raising efforts follows similar efforts by British regulators. The Federal Energy Regulatory Commission is also investigating the past energy trading activity in the bank’s American operations. The commission’s staff on Wednesday recommended taking action against the bank and levying a $470 million fine. Barclays, which has 30 days to respond to the commission, has said it would defend itself against the inquiry.

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The new legal woes, coming on the heels of a rate-rigging scandal that erupted this summer, complicate a difficult turnaround effort by the bank.

On Wednesday, Barclays posted a net loss of £106 million (about $170 million) in the three months ended Sept. 30, a steep drop from a £1.4 billion net profit it reported in the period a year earlier. The results were hurt by a charge on its own debt and provisions connected to the inappropriate sale of insurance to clients.

Libor Explained

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

“The last three months have been difficult for Barclays,” Antony P. Jenkins, the bank’s chief executive, said on a conference call with reporters.

Shares in Barclays fell 4.7 percent in trading on Wednesday in London.

Mr. Jenkins took over as chief executive from Robert E. Diamond Jr., who resigned in July after Barclays agreed to pay $450 million to settle charges that it had tried to manipulate a key benchmark, the London interbank offered rate, or Libor. In the aftermath, Mr. Jenkins promised to increase the focus on retail banking, shifting away from riskier activity in the firm’s investment banking unit.

Unlike the Royal Bank of Scotland Group and the Lloyds Banking Group, Barclays turned to sovereign wealth funds in Abu Dhabi and Qatar for new capital during the financial crisis. Barclays raised a total of $7.1 billion from Qatar in July and October 2008.

The bank disclosed this year that British authorities were investigating the legality of payments to Qatari investors in connection with the bank’s capital-raising. Barclays said on Wednesday that American regulators were also pursuing similar inquiries, adding that the bank was cooperating.

Despite its net loss, Barclays is making progress as its underlying businesses show signs of improvement. Excluding the adjustments, Barclays said pretax profit rose 29 percent, to £1.7 billion, in the third quarter.

In the face of continued market volatility, Barclays said pretax profit in its investment and corporate banking division more than doubled in the quarter, to just over £1 billion, on a strong performance in fixed income and equities. The European debt crisis, however, weighed on the bank’s retail and business banking franchise, where pretax profit fell 31 percent, to £794 million.

Ian Gordon, a banking analyst at Investec Securities in London, said the decline in revenue in the investment banking division raised some questions about the unit’s performance. He added, however, that Barclays was in a position to win market share, as competitors like UBS moved to reduce trading activity.

“As others pull back,” Mr. Gordon said, “there’s a potential to win a greater share of the piece.”

Barclays warned, however, that difficulties in Europe and uncertainty in global markets could weigh on future profitability. “We continue to be cautious about the environment in which we operate,” the bank said in a statement.

Given the challenging environment, Barclays is moving to insulate its businesses. The bank said it had reduced its presence in heavily indebted countries. The bank said it had cut its exposure to the sovereign debt of Spain, Italy, Portugal, Greece and Cyprus by 15 percent, to £4.8 billion.

It is also bolstering its capital to protect against potential losses. The bank’s core Tier 1 ratio, a measure of its ability to weather financial shocks, rose to 11.2 percent at the end of September from 10.9 percent at the end of the second quarter.


This post has been revised to reflect the following correction:

Correction: October 31, 2012

An earlier version of this article misstated the pretax profit Barclays attributed to its retail and business banking franchise. It was £794 million, not £794.

Article source: http://dealbook.nytimes.com/2012/10/31/barclays-reports-third-quarter-loss-on-credit-charges/?partner=rss&emc=rss

DealBook: Amid Fresh Legal Woes, Barclays Swings to a Loss

A branch of Barclays in London. On Wednesday, the British bank posted a net loss of £106 million ($170 million) in its latest earnings report.Facundo Arrizabalaga/European Pressphoto AgencyA branch of Barclays in London. On Wednesday, the British bank posted a net loss of £106 million ($170 million) in its latest earnings report.

LONDON – Barclays faces more legal trouble after the British bank disclosed two new investigations by American authorities, clouding the already weak third-quarter results.

The bank on Wednesday said the Justice Department and the Securities and Exchange Commission are investigating whether Barclays broke U.S. anti-corruption laws in its capital-raising efforts during the financial crisis. The inquiry follows similar efforts by British regulators.

The United States Federal Energy Regulatory Commission is also investigating the past energy trading activity in Barclays’ American operations. American authorities have until Oct. 31 to charge the British bank in the matter. Barclays said it would defend itself against any potential allegations stemming from the inquiry.

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The fresh legal woes, which follow the rate-rigging scandal that erupted this summer, complicate a difficult turnaround effort for Barclays.

On Wednesday, the British bank posted a net loss of £106 million ($170 million) in the three months ended Sept. 30, a steep drop from a £1.4 billion net profit it reported in the period a year earlier. The results were hit by a charge on its own debt and provisions connected to the inappropriate sale of insurance to clients.

Libor Explained

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

“The last three months have been difficult for Barclays,” said Antony P. Jenkins said on a conference call with reporters on Wednesday.

Shares in the British bank fell 3.8 percent in morning trading in London.

Mr. Jenkins took over as chief executive from Robert E. Diamond Jr., who resigned in July after Barclays agreed to pay $450 million to settle charges that it attempted to manipulate a key benchmark, the London interbank offered rate, or Libor. In the aftermath, Mr. Jenkins promised to increase the focus on retail banking, shifting away from riskier activity in the firm’s investment banking unit.

The new joint investigation from the Justice Department and S.E.C. relates to Barclays’ capital raising efforts during the recent financial crisis.

Unlike its peers, the Royal Bank of Scotland Group and the Lloyds Banking Group, the British bank turned to sovereign wealth funds in Abu Dhabi and Qatar for new cash. Barclays raised a total of $7.1 billion from Qatar in July and October 2008.

Earlier this year, the bank disclosed that British authorities were investigating the legality of payments to Qatari investors in connection to Barclays’ capital raising. The firm’s disclosure on Wednesday said U.S. regulators are also pursuing similar enquiries. Barclays said it was cooperating with the investigations.

Despite its overall net loss, Barclays is making progress as its underlying businesses show signs of improvement. Excluding the adjustments, Barclays said pretax profit rose 29 percent, to £1.7 billion, in the third quarter.

Amid the continued volatility in global financial markets, Barclays said pretax profit in its investment and corporate banking division more than doubled in the quarter, to just over £1 billion, because of a strong performance in fixed income and equities. The European debt crisis, however, weighed on Barclays’ retail and business banking franchise. Pretax profit in the group fell 31 percent, to £794 million.

Ian Gordon, a banking analyst at Investec Securities in London, said a fall in revenues at Barclays’ investment banking division during the third quarter had raised some questions about the unit’s performance, though the British bank was in a position to win market share as competitors, such as UBS which announced 10,000 layoffs on Tuesday, move to reduce their trading activity.

“As other pull back, there’s a potential to win a greater share of the piece,” Mr. Gordon said.

Barclays, however, warned that continued difficulties in Europe and uncertainty in global markets could weigh on future profitability. “We continue to be cautious about the environment in which we operate,” the bank said in a statement.

Given the challenging environment, Barclays is moving to insulate its businesses. The bank, which operates throughout the European Union, said it had reduce its presence in heavily indebted countries like Spain and Greece. The bank said it had cut its exposure to the sovereign debt of Spain, Italy, Portugal, Greece and Cyprus by 15 percent, to £4.8 billion.

It’s also bolstering its capital to protect against potential losses. The bank’s core Tier 1 ratio, a measure of its ability to weather financial shocks, rose to 11.2 percent at the end of September from 10.9 percent at the end of the second quarter.


This post has been revised to reflect the following correction:

Correction: October 31, 2012

An earlier version of this article misstated the pretax profit Barclays attributed to its retail and business banking franchise. It was £794 million, not £794.

Article source: http://dealbook.nytimes.com/2012/10/31/barclays-reports-third-quarter-loss-on-credit-charges/?partner=rss&emc=rss

Whirlpool to Cut 5,000 Jobs to Reduce Costs

The world’s biggest appliance maker also on Friday cut its 2011 earnings outlook drastically and reported third-quarter results that missed expectations, hurt by higher costs and a slowdown in emerging markets. Shares fell 12 percent in midday trading.

The company, whose brands include Maytag and KitchenAid, has, like other appliance makers, been squeezed by soft U.S. demand since the recession and rising costs for materials such as steel and copper. Due to its size, Whirlpool’s performance provides a window on the economy because it indicates whether consumers are comfortable spending on big-ticket items.

Whirlpool has raised prices to combat higher costs, but demand for items like refrigerators and washing machines remains tight. Whirlpool is also facing discount pressure from competitors.

To offset slowing North American sales, Whirlpool has turned to emerging markets. But the company said Friday that sales have slowed there, too. The company revised its demand forecast globally. It now expects demand to decline 3 percent to 5 percent in North America, in 2011, down from a 1 percent to 2 percent prior decline forecast.

It expects flat demand in Europe, the Middle East and Africa, from prior expectations of a 1 percent to 2 percent rise in demand.

In Latin America, it now expects demand to be flat to up 5 percent, from prior expectations of a 5 percent to 10 percent increase. And in Asia it expects demand to rise 2 percent to 4 percent from earlier expectations of a 4 percent to 6 percent increase.

Steep costs and the dour global economy are affecting the entire appliance industry. Swedish appliance maker Electrolux said Friday that its third-quarter net income fell 39 percent and also cut its forecast for demand in North American and Europe for the year.

Whirlpool jobs to be cut are mostly in North America and Europe. They include 1,200 salaried positions and the closing of the company’s Fort Smith, Ark., plant.

The Fort Smith plant shutdown will affect 884 hourly workers and 90 salaried employees. An additional 800 workers were on layoff from the factory and on a recall list.

Whirlpool will also relocate dishwasher production from Neunkirchen, Germany, to Poland in January 2012.

The company expects the moves will save $400 million by the end of 2013. They’ll cost $500 million in restructuring costs however, which will be recorded over the next three years, including a $105 million charge in the fourth quarter, $280 million charge in 2012 and $115 million charge in 2013.

Benton Harbor, Mich.-based Whirlpool’s third-quarter net income more than doubled to $177 million, or $2.27 per share, from $79 million, or $1.02 per share. Adjusted earnings of $2.35 per share fell short of analyst expectations for $2.73 per share.

Revenue rose 2 percent to $4.63 billion, short of expectations for $4.74 billion.

“Our results were negatively impacted by recessionary demand levels in developed countries, a slowdown in emerging markets and high levels of inflation in material costs,” CEO Jeff Fettig said.

Unit shipments fell in all regions except Asia, where they rose 4 percent.

In North America, revenue fell 2 percent to $2.4 billion, and in Latin America, revenue rose 8 percent to $1.2 billion.

The company now expects 2011 net income will be $4.75 to $5.25 per share. Its prior guidance was net income would be at the low end of a range between $7.25 and $8.25 per share.

Separately, Whirlpool has complained to authorities that some companies, including Samsung Electronics and LG Electronics, have been selling appliances at less than fair value in the U.S., a practice known as dumping. Whirlpool said the Commerce Department issued a preliminary determination that the companies are violating international trade laws. The investigation is ongoing.

Whirlpool’s stock fell $7.19, or 11.9 percent, to $53.28 in midday trading. The stock has already sunk 32 percent this year.

Article source: http://feeds.nytimes.com/click.phdo?i=421d5e9769e754aed133cde430a04b93

AT&T Reports Sluggish Quarter, Meeting Expectations

ATT, the nation’s biggest telecommunications company, reported third-quarter results Thursday that just met analysts’ expectations, amid growing competition from rival wireless carriers Verizon and Sprint. The company posted a profit of $3.6 billion, or 61 cents a share, compared with a profit of $12.3 billion, or $2.07 a share, during the same quarter a year earlier, although the 2010 figures were bolstered significantly by the sale of assets. Analysts had expected ATT to earn 61 cents a share.

The company said that it activated only 2.7 million iPhones during the quarter. That number is the lowest the company has reported in several quarters, signaling that ATT is beginning to feel the competitive threat of rival carriers who are now also selling the iPhone. In addition, many wireless customers were probably waiting for the release this month of the next-generation iPhone.

Investors seemed slightly disappointed by the earnings, as shared dipped 2 percent in pre-market trading. Analysts say that the wireless industry is struggling for growth amid growing saturation.

“This may be the new normal,” said Craig Moffett, an analyst with Sanford C. Bernstein who follows the telecommunications industry. “It looks more and more like ATT is going to have to depend on organic growth and unfortunately, there isn’t any. The wireless industry just isn’t a growth industry anymore.”

ATT said, however, that during the quarter it sold 4.8 million smartphones, which made up nearly two-thirds of all device sales during that period. The company also said that the sale of Android devices more than doubled year over year.

“Mobile broadband growth continues to be robust, execution was strong across the business, and we delivered another solid quarter,” said Randall L. Stephenson, the chairman and chief executive of the company, in the statement. “The next waves in the mobile Internet revolution represent tremendous growth potential, and we are laying the groundwork required for that future.”

The company said that it added 319,000 wireless customers during the quarter. The company has faced greater competition from rival carriers who are also selling portfolios of smartphones and mobile devices.

ATT’s operating revenue slipped to $31.48 billion during the quarter, compared with $31.58 billion a year ago. Analysts surveyed by Thomson Reuters had expected the company to report operating revenues of $31.60 billion.

The operator is still looking for regulatory approval to move forward in its acquisition of T-Mobile, although Mr. Moffett said it is looking more and more like that deal may disintegrate under government scrutiny.

Mr. Stephenson said that ATT was still working “toward a successful completion of our planned T-Mobile USA merger.”

Article source: http://feeds.nytimes.com/click.phdo?i=f173712974b234e0a9067996a6b9521e

Wall Street Banks Bracing for Drop in Trading Revenue

As if the troubles in Europe were not enough, two months of the most turbulent markets in decades are expected to seriously damp trading results for the nation’s largest banks.

In a bellwether for other large financial firms, JPMorgan Chase warned that third-quarter trading revenue was likely to fall about 8 percent from a year ago. Investment banking income is also expected to drop by one-third from a year earlier, as corporations get cold feet about acquisitions as well as stock and debt offerings.

“I think you can safely expect a decline in our markets revenue,” Jes Staley, the head of JPMorgan’s investment bank, said in remarks at the Barclays financial services conference on Tuesday.

There are still 13 trading days left in the third quarter ending Sept. 30, and Wall Street firms will not release their final numbers until the middle of next month. But a sharp fall-off in summer trading seems poised to weigh heavily on the banks’ earnings — and perhaps accelerate another round of layoffs expected in the coming months.

After helping lift Wall Street’s results during the financial crisis, trading revenue is projected to fall for a second straight quarter. On average, it is expected to be down by about 7 percent from a year ago, according to Credit Suisse research. Bank of America, Citigroup, Goldman Sachs and Morgan Stanley are also expected to have weak third-quarter results.

Investors shrugged off the latest bad news as shares of the biggest banks rose slightly on Tuesday in relatively calm trading. But bank stocks have been pummeled recently. The KBW index, a widely cited gauge of the banking sector, has fallen more than 28 percent since January.

Although Wall Street firms can land windfalls making speculative bets with the banks’ own capital, the bulk of their trading revenue comes from transactions made on behalf of clients.

But with the heightened volatility over the summer, many companies and investors remained on the sidelines — causing a significant slowdown in trading activity.

The lackluster trading results come at a bad time for the industry, when profits and revenues have slipped to the levels attained before the housing boom. Many are bracing for a slowdown in lending, as consumers grow nervous about their job prospects and businesses put off expansion plans. Banks still face an endless stream of legal headaches and litigation fees from the foreclosure mess.

In addition, new regulation has ratcheted up compliance costs and caused once-lucrative income streams, like debit card swipe fees and overdraft charges, to vanish. And all that is not counting the impact of the Federal Reserve’s pledge to keep interest rates low for the next two years — a move that will erode lending profit margins in the months ahead.

In anticipation of leaner times ahead, banks are looking to cut costs and streamline their operations. On Monday, Bank of America announced plans to cut about 30,000 jobs across the company, or nearly 10 percent of its work force. Citigroup, Goldman Sachs, Barclays, Credit Suisse and UBS are among the major Wall Street firms that have started laying off employees in the last few months.

JPMorgan’s investment bank is more than halfway through a five-year plan to save about $1.3 billion a year by consolidating its trading operations — a move that will involve shedding as many as 3,000 workers, some of whom will be employed elsewhere in the bank.

But so far, Mr. Staley said the bank does not anticipate a major round of layoffs beyond those previously announced. “We have had a very good first half of the year,” he said at a banking conference in Frankfurt last week. “We will see how this plays out.”

Still, the numbers at JPMorgan may foreshadow more pain ahead. JPMorgan was among the first major banks to sound the alarm bells over souring subprime mortgage loans in early 2007. In 2008, the bank flagged concerns about ballooning losses on its large portfolio of home equity loans ahead of many competitors and has moved quickly to shore up its reserves against legal claims stemming from the mortgage mess.

In his remarks, Mr. Staley said investors could expect equity and fixed income trading revenues to decline about 30 percent from the second quarter, putting them at about $3.85 billion. Investment banking fees are expected to fall to about $1 billion, down from $1.9 billion in the second quarter. He also said that the bank’s private equity business would face a “moderate loss” of about $100 million and that its asset management business would see trading-related declines.

Other banks may see a similar fall-off in trading. Citigroup, which has a giant fixed-income business, could see core trading revenue drop 47 percent from a year ago, according to Credit Suisse research. Overall trading revenue at Morgan Stanley is expected to fall about 1 percent from a year earlier, while revenue at Bank of America is expected to rise about 11 percent. Both banks had relatively weak third-quarter results in 2010.

Meanwhile, Goldman Sachs’s trading income is expected to fall about 7 percent from a year ago, according to Credit Suisse. But that may not represent the full extent of the declines it can expect.

Richard Staite, an analyst at Atlantic Equities, wrote in a recent report that the bank could face more than $3.2 billion in losses tied to its investment and lending businesses, which include private equity and other investments made with the bank’s own capital. That is because it must adjust its accounting to reflect the market’s recent round of wild swings.

Article source: http://feeds.nytimes.com/click.phdo?i=734924cc3bc9fe88f56215059e10a8e3