Sterling sinks to new lows The pound plunged to its lowest level against the dollar since 1985 on Wednesday amid uncertainty about the government's banking support package. Sterling slid another 1.6% against key UK trading partners, taking its losses since Friday to almost 6%. Against the dollar, the pound closed at $1.3733, down 11 cents this week. The decline came as figures showed that UK unemployment rose to a 10-year high of 6.1% in the three months to November (separate report here ), while government borrowing in the first nine months of the financial year almost doubled yoy to hit a record £71.2bn (see report). See this article online.
http://ftalphaville.ft.com/blog/2009/01/22/51496/economy-fears-spark-
| AIG starts $20bn auction of Asian unit AIG, the stricken insurance giant, on Wednesday kicked off the sale of its Asian life assurance unit – one of its most prized assets – in the hope of raising up to $20bn to help repay its $60bn US government loan. AIG sent the sales memorandum for American International Assurance with limited information to a group of selected potential bidders including China Life, the world's largest life assurer; HSBC; Prudential, the UK insurance group; and Prudential Financial of the US. ManuLife Financial, a leading US insurer, and Allianz of Germany have also requested information. First-round bids are due near the end of next month. AIG asked potential bidders to bid for 49% of AIA, but said it would look at offers for all of the unit. See this article online.
http://ftalphaville.ft.com/blog/2009/01/22/51512/aig-starts-20bn-auct
| Parsons takes over as Citi chair Dick Parsons, former chief executive of Time Warner, was on Wednesday night named to replace Sir Win Bischoff as chairman of Citigroup. Sir Win, a veteran British banker who took over only last year, had been expected to step down amid complaints from some directors and investors that he had not offered enough guidance to Vikram Pandit, chief executive. Parsons, who was Citi's lead director and has been on the board since 1996, immediately urged the Obama administration not to nationalise ailing US banks and instead to create a government-controlled "bad bank" to buy toxic assets. Read more on Parsons here. See this article online.
http://ftalphaville.ft.com/blog/2009/01/22/51511/parsons-takes-over-a
| Merrill delivered bonuses before BofA deal Merrill Lynch took the unusual step of accelerating bonus payments by a month last year, doling out billions of dollars to employees just three days before closing its sale to Bank of America. The timing is notable because the money was paid as Merrill's losses were mounting and Ken Lewis, BofA's chief executive, was seeking additional funds from the government's TARP scheme to help close the deal. Merrill and BofA shareholders voted to approve the takeover on Dec 5. Three days later, Merrill's compensation committee approved the bonuses, which were paid on Dec 29. In past years, Merrill had paid bonuses later – usually late January or early February. Nancy Bush, an analyst with NAB Research, described the size of the 2008 Merrill bonus payments as "ridiculous". See this article online.
http://ftalphaville.ft.com/blog/2009/01/22/51510/merrill-delivered-bo
| UK government hamstrung on Barclays A clause in the terms of the Abu Dhabi Royal Family's investment in Barclays, agreed last October, makes it practically impossible for the Government to take a meaningful stake in the bank, reports The Times. The news is likely to reignite controversy over the way that Barclays raised the money. Barclays shares fell another 9% on Wednesday, having collapsed by 35% at one point, amid speculation it is poised to raise more capital — either in the market or from the Government. But the small print in the deal, in which Barclays raised £7.3bn from Abu Dhabi and Qatar, means that if the bank raises fresh capital before end-June, the Middle Eastern investors would receive a greater number of shares for their original investment without paying more. See this article online.
http://ftalphaville.ft.com/blog/2009/01/22/51509/uk-government-hamstr
| JPMorgan, BofA CEOS buy shares The chief executives of Bank of America and JPMorgan bought some of their companies' stock in the last week, a sign of confidence in the struggling banking sector, reports Reuters. Ken Lewis, BofA's chief executive, spent about $1.2m on Tuesday to buy 200,000 common shares, four days after the largest US bank posted its first quarterly loss in 17 years. JPMorgan CEO Jamie Dimon spent about $11.5m on Friday to buy 500,000 shares, a day after the second-largest US bank said Q4 profit fell 76%. The purchases were disclosed in separate filings with the SEC, and in Lewis' case, triggered a broad rally in bank shares. See this article online.
http://ftalphaville.ft.com/blog/2009/01/22/51508/jpmorgan-bofa-ceos-b
| GM gains $5.4bn in federal aid General Motors said Wednesday it had received a delayed payment of $5.4bn under the emergency funding provided by the US government to keep it in business, reports Reuters. GM said late Tuesday that it would have run out of cash and faced bankruptcy if it had not been given the second loan tranche from the US government. The loan payout was the second in a total of $13.4bn pledged to GM by the US Treasury. GM has now received $9.4bn of that amount and expects to get a final $4bn payment on Feb 17 when it faces a deadline to submit a restructuring plan to Congress. See this article online.
http://ftalphaville.ft.com/blog/2009/01/22/51507/gm-gains-54bn-in-fed
| BlackRock profits fall 84% BlackRock, one of the world's biggest fund management companies, suffered an 84% annual drop in Q4 earnings, as investors pulled money from hedge funds and performance fees plunged. BlackRock, which is 49% owned by Merrill Lynch, said Wednesday its Q4 net income fell to $53m from $322.4m a year go. It was BlackRock's second consecutive quarter of falling profits. Performance fees also dropped by 84%, falling to $23.7m in the quarter compared with $152.7m last year. The results were due to steep declines in alternative investment products. Larry Fink, chief executive, noted that as property and private equity markets tended to lag public markets, further declines might be expected this year. See this article online.
http://ftalphaville.ft.com/blog/2009/01/22/51506/blackrock-profits-fa
| SocGen sees break-even in final quarter Société Générale, France's second biggest bank, sought to reassure markets saying in a trading update on Wednesday that it expected to have broken even in the last three months of 2008 and to make €2bn ($2.6bn) in full-year net profit. Although the guidance was below analysts' forecasts, it calmed fears of extraordinary Q4 losses and the shares bucked a downward trend in banking stocks, rising nearly 5% in afternoon Paris trading to €25.84. after falling 30% in the last two weeks. SocGen also said it would take €1.7bn from a second tranche of €10.5bn in state aid for French banks, which the government announced late Tuesday night. See this article online.
http://ftalphaville.ft.com/blog/2009/01/22/51505/socgen-sees-break-ev
| Cognetas in bank talks at portfolio companies Cognetas, the private equity group spun out of Electra three years ago, is in talks with lenders about restructuring the debts at four of its portfolio companies, after it lost control of two investments last year. The multiple setbacks could tarnish the UK-based group's reputation ahead of its next round of fundraising, which had been expected to start as early as this year. Cognetas declined to comment. But the FT has learnt that talks with lenders are underway at SGD, a French glassmaker; Covenant Healthcare, a UK plastic surgery group; Novus, a UK pub operator; and CPI, a French printer. See this article online.
http://ftalphaville.ft.com/blog/2009/01/22/51504/cognetas-in-bank-tal
| Tullow placing raises concerns Tullow Oil's successful £400m share placing in London on Wednesday raised concerns about bankers' increasing use of capital-raising structures that some shareholders say circumvent the rules protecting their rights. Tullow placed just over 9% of the group to fund investment in its oil discoveries and prospects in Africa. Some Tullow shareholders warned that while they backed the move, they would object if many other companies tried to use the same route. Tullow used a structure known as a "cash-box issue" without offering existing shareholders rights of first refusal. Lex says that with credit now on offer only to the strongest companies, rights issues, once a linchpin of UK equity fundraising, "are set for a blazing comeback". See this article online.
http://ftalphaville.ft.com/blog/2009/01/22/51503/tullow-placing-raise
| India's Larsen frontrunner for Satyam Indian engineering and construction firm Larsen & Toubro is likely to present a revival plan to the board of fraud-hit Satyam Computer Services, reports Reuters citing local media reports. Larsen was a front-runner for acquiring Satyam, and institutional investors in Satyam such as Life Insurance Corporation and ICICI Prudential Life Insurance were supporting its bid. Larsen, which holds about 4% in Satyam, did not rule out the possibility of an alliance with Satyam once the investigations into the company's accounts had been done See this article online.
http://ftalphaville.ft.com/blog/2009/01/22/51502/indias-larsen-frontr
| US Bancorp earnings down 65% Profits at US Bancorp fell by 65% in the fourth quarter, dragged down by credit and securities losses. Q4 net income for the Minnesota-based bank, the sixth largest US commercial bank, declined to $330m from $942m in the same period last year. Last quarter saw the bank's eighth consecutive fall in profits. Shares of US Bancorp plunged 14% to $13.16 in late morning trading on Wednesday. See this article online.
http://ftalphaville.ft.com/blog/2009/01/22/51501/us-bancorp-earnings-
| Geithner pledges 'dramatic' action In Categories: People Posted at 05:38 by Gwen Robinson The Obama administration will take action on a "dramatic scale" to revive credit markets and strengthen banks so they are able to lend, Treasury secretary-designate Tim Geithner said Wednesday. Testifying to the Senate committee considering his nomination, Geithner said the Obama team was working on a "comprehensive plan" which it hoped to unveil soon. He did not offer details, though implied the Obama team will collaborate with the Fed to provide finance for securitised markets on a much expanded scale, probably building on the existing model of the Term Asset-backed Securities Lending Facility. See this article online.
http://ftalphaville.ft.com/blog/2009/01/22/51500/geithner-pledges-dra
| Banks lobby for eastern Europe funds Leading international banks operating in central and eastern Europe have clubbed together to lobby the EU and the ECB to extend their anti-crisis policies to ease the credit crunch in the region. The group of nine, which wants action to ease liquidity shortages and revive lending, is urging Brussels and the ECB to extend support beyond the EU's new member states, such as Poland, to prospective members, such as Serbia, and to Ukraine, which has few prospects of joining the bloc soon. Herbert Stepic, chief executive of Raiffeisen International, the Austrian bank, who brought the group together, said any action to support banks should not be limited to western Europe. See this article online.
http://ftalphaville.ft.com/blog/2009/01/22/51499/banks-lobby-for-east
| Japan exports plunge record 35% Japan's exports plunged by a record in December, signaling companies will be forced to shut factory lines and fire more workers, driving the economy deeper into recession, reports Bloomberg. Exports plummeted 35% from a year earlier, the sharpest decline since 1980, the earliest year for which there is comparable data, the Finance Ministry said. The December drop eclipsed a record 26.7% decline set the previous month. Economists predicted a 30.3% contraction. Shipments to the US, China and Europe fell by the most ever, as the global recession dried up demand for Japanese cars and electronics. Toyota, Sony and Honda are shedding thousands of workers and closing production lines as profits and sales dwindle. See this article online.
http://ftalphaville.ft.com/blog/2009/01/22/51513/japan-exports-plunge
| RAB shakes up management A management reshuffle at RAB Capital will see a new chief investment officer and chief risk officer, after the UK hedge fund manager on Wednesday announced a sharp drop in assets under management and performance fees, following a year of poor fund performance and increase in investor redemptions. The 74% slide in assets under management was expected by the group, which also plans further writedowns for the 2008 financial year on both its portfolio of assets available for sale, as well as "certain strategic acquisitions", the value of which has recently fallen. RAB has not yet decided whether it will pay a final dividend. See this article online.
http://ftalphaville.ft.com/blog/2009/01/22/51498/rab-shakes-up-manage
| SEC accuses fund manager of $300m fraud The US SEC on Wednesday accused Arthur Nadel, a missing Florida-based hedge fund manager, of falsely overstating by about $300m the value of investments in six funds he advised. The actual value of the funds' assets is only about $506,000, according to the SEC's complaint, filed in Florida. Nadel also recently transferred $1.25m from two of the hedge funds to a secret bank account, the SEC alleged. The complaint comes a week after 76-year-old Nadel was reported missing. He left behind a suicide note but police later found his car at an airport and tracked calls from his mobile phone to various locations outside Florida. See this article online.
http://ftalphaville.ft.com/blog/2009/01/22/51497/sec-accuses-fund-man
| Overnight markets: Mostly up Asian stocks bucked their downward trend on Thursday, led by banks and drug companies, on optimism that governments worldwide will step up measures to ease the financial crisis and the global recession. The yen meanwhile rose against the dollar to as high as 87, the strongest level since July 1995, from 89.88 at the close of Tokyo stock trading on Wednesday Asian markets (Thurs)
05:28am GMT
Nikkei up 86.58 (1.1%) to 7,988.22
Topix up 4.75 (0.63%) 791.90
Hang Seng up 215.12 (1.71%) at 12,798.75 US markets (Wed)
DJIA up 279.01 (3.51%) at 8,228.10
Nasdaq up 66.21 (4.60%) at 1,507.07
S&P500 up 35.02 (4.35%) at 840.24 European markets (Wed)
FTSE100 down 31.52 (-0.77%) at8.228.10
Eurofirst 300 up 5.33 (-0.69%) at 769.15 Currencies
05:30 GMT
€/$ 1.3018 (1.2966)
$/¥ 89.13 (89.85)
£/$ 1.3929 (1.3948) Commodities
05:30 GMT
Brent Crude (Mar09) down $0.10 at $44.92
Light Crude (Mar09) up $0.06 at $43.61
100 Oz Gold (Feb09) up $3.50 at $853.60
Copper (Mar09) down 52.50 at $3,222.50 10-year government bond yields (%)
US 2.53 (2.41)
UK 3.43 (3.44)
Germany 2.99 (2.98)
Japan 1.23 (1.21) Sources: FT, Reuters See this article online.
http://ftalphaville.ft.com/blog/2009/01/22/51486/overnight-markets-mo
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